Analysts expect Fiat and PSA Peugeot Citroen to report the biggest losses this year, as they heavily rely on the crisis hit European markets.
According to industry observers Europe’s new car sales is expected to fall in 2013 to levels not seen since the 1990s, and this will put enormous pressure on the automakers’ operating margins and revenues. Fiat will also be affected by the lack of new products as CEO Sergio Marchionne announced the company will postpone investments in new models to have enough cash to survive the debt crisis.
Although PSA regularly rolled out new models, this didn’t brought the company a significant benefit as the vehicles had to be offered with a big discount in order to be sold in the sluggish European market. In December Fitch warned that PSA and Fiat might see their credit ratings cut this year, as the agency doubts PSA will be able to break even in 2015.
“Fitch believes that these two companies are the most weakly positioned in Europe and that pressure is building on their current ratings,” the ratings agency said.
Fitch added that although Marchionne’s idea to sell higher value cars in order to boost profit margins is a good idea, the automaker will have to deal with a tough competition as other automakers are also relying on the same plan. According to Bernstein Research analysts automakers in Europe are expected to announce losses of 8 billion euro for 2012.
“We see little reason to believe that EU volumes will grow next year, which means that the spread between EU-focused and export-oriented original equipment manufacturers will only continue to widen,” said Erich Hauser, a London-based analyst at Credit Suisse.
Analysts expect the European austerity measures to last for three more years and even if governments manage to solve the debt crisis, auto sales in the already saturated European markets may never return to the good days before 2007.