European auto executives held talks today with the European Commission, the European Union’s executive arm, to discuss ways to solve the region’s overcapacity problem and the slowing auto market.
The delegation included Fiat CEO Sergio Marchionne, Ford’s European chief Stephen Odell, Daimler CEO Dieter Zetsche and PSA Peugeot-Citroen boss Philippe Varin. The main issue raised in the discussions was the overcapacity in the region, which may rise 41 percent to 2.92 million vehicles next year, according to forecasts from IHS Automotive. Europe has a growing number of unsold cars as automakers are facing increased pressure from local governments not to reduce output and subsequently cut jobs.
“The global auto sector has been suffering for years from chronic overcapacity. In Europe, the situation has now reached suffocation point,” Marchionne said last week in London. Car demand in Europe may decline for the fifth consecutive year in 2012 to 12.9 million vehicles, down 1 percent from 2011 and 17 percent from the 2007 peak.
Meanwhile, production may decrease by 2.9 percent to 16.4 million vehicles, compared with a 1.8 percent rise in capacity to 19.3 million, IHS estimates. To overcome overcapacity, automakers are closing plants, like Fiat is doing with its Sicilian unit and like Opel did in 2010 with the Antwerp plant in Belgium.