Carmakers fear European recovery could take years

Tue Mar 5, 2013 10:28am EST
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By Laurence Frost

GENEVA (Reuters) - Europe's ailing car market has weakened further in recent months and with no signs of recovery, some industry leaders hope governments will relax their opposition to plant closures and job cuts needed to restore profits.

At the Geneva car show on Tuesday, executives from top players including Ford (F.N: Quote), Fiat FIA.MI, Daimler (DAIGn.DE: Quote) and Renault (RENA.PA: Quote) warned demand in Europe would stay weak for years as governments drive through austerity measures.

"The European market is not in a condition we expected three months ago," said Dieter Zetsche, chief executive of German luxury carmaker Daimler, reflecting the industry's dismay at a continued plunge in sales in the region.

"The sustained nature of the European market slump is becoming pretty clear, and nobody now expects a return to (pre-crisis) levels on any visible horizon," said Guillaume Faury, strategy chief at France's PSA Peugeot Citroen (PEUP.PA: Quote).

"So there's going to be a kind of reckoning on European production levels for the next five years, leading governments to change their posture and encourage restructuring rather than oppose it," he predicted.

New car sales in the 27-member European Union dropped 8.2 percent to a 17-year low in 2012 as consumer incomes were squeezed by rising prices, subdued wages and austerity measures.

Hopes of a recovery this year have so far proved misplaced.

New car registrations in Germany, previously a bastion of stability, slumped more than 10 percent in February, while those in France and Italy fell by around 12 percent and 17 percent, respectively.   Continued...

A staff cleans cars on the Audi stand ahead of the 83rd Geneva Car Show at the Palexpo Arena in Geneva March 4, 2013. The Geneva Motor Show will take place from March 7 to 17, 2013. REUTERS/Denis Balibouse