Europe’s slow recovery triggers pessimistic expectations from carmakers image

During the 2013 IAA Frankfurt Motor Show, top executives of carmakers warned they need to close more factories and cut more jobs – as unemployment remained high and bank lending weak, any recovery in demand is likely to be long and slow.

According to bosses of automakers including Volkswagen, PSA Peugeot Citroen, and Ford Europe, the sales in Europe appear to be stabilizing after five years of decline. But recovery was not assured and likely to take years with the industry still needing to cut capacity to stop losses at some manufacturers and ease price pressures on all, they added.

VW chief Martin Winterkorn said the European industry could do with closing around 10 factories, although he stressed the German carmaker itself did not need to make cuts thanks to strong growth in the United States, China and Russia.

On the other hand, PSA Peugeot Citroen, incurred the wrath of French ministers and workers last year by scrapping a major factory and 8,000 jobs, said it would seek more capacity cutbacks from unions. The French, with almost no presence on the more robust luxury car segment is particularly vulnerable to weaker southern European markets than many rivals, and incurred losses of 5 billion euros last year. It now clings to life with a share issue and expecting a French government bailout.

Ford Europe boss Stephen Odell also cautioned any upturn in Europe was likely to be modest and take years. “Our view is that over the next five years we see a modest recovery, about 20% of the industry from the base,” he said in an interview.

On the other hand, Shares in VW, Europe’s biggest carmaker, and German rival BMW rose, as they pointed to robust demand elsewhere in the world. Daimler Chief Executive Dieter Zetsche also told Reuters he expected profit margins at the Mercedes-Benz luxury car business to improve further next year due to a rejuvenated model range.

Via Reuters