European automotive market will shrink for a fifth consecutive year in 2012 – Forecast image

The automobile industry and its suppliers are major providers of jobs in the European Union. However, the sector is undergoing considerable transformation and harmful restructuring exercises translating into tremendous pressures on workers and working conditions everywhere. The situation is in the red area in Europe.

Sales at shops in the 17 countries sharing the euro fell 1.0 percent in the month from March, the EU’s statistics office Eurostat said on Tuesday, tumbling 2.5 percent on an annual basis.

Competitive Automotive Regulatory System for the 21st Century forecasts that the European automotive market will shrink for a fifth consecutive year in 2012, Frankfurter Allgemeine Zeitung reported citing a Cars 21 strategy paper.

According to the report, some 12.4 million cars are likely to be sold in Europe this year — 3 million fewer than in 2007, the newspaper said.

Overcapacity in Western Europe may more than double to about 2 million vehicles in 2012 as sales fall for the fifth straight year, according to IHS Automotive.

“There’s a clear problem of excess of supply in Europe, which has worsened because of the economic downturn,” said Pierluigi Bellini, an analyst with IHS Automotive in Milan.

BMW, Toyota and PSA Peugeot Citroen (UG) are forecasting the region’s auto market will contract about 5 percent this year, the fifth consecutive annual decline.

European automakers will continue to weaken if they’re not allowed by governments in the region to restructure and cut jobs, Renault Chief Executive Officer Carlos Ghosn said at a recent automotive forum in New York.

European policymakers are desperate to reignite growth and EU leaders will meet for their fourth summit this year in Brussels at the end of June, but the reality is that foreign demand from emerging economies in Asia and Latin America offer the most hope for the euro zone’s economy.