Carmakers fear European recovery could take years

Tue Mar 5, 2013 3:29pm 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 that 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.

And hopes of a recovery this year have so far proved misplaced, with new car registrations in Germany, previously a bastion of stability, down more than 10 percent in February on a year ago, while sales in France and Italy fell by about 12 percent and 17 percent respectively.

"I don't think any government in Europe will let a car manufacturer fail (just as) the U.S. didn't," Renault's (RENA.PA: Quote) chief executive Carlos Ghosn told reporters.   Continued...

 
Daimler AG Chief Executive Dieter Zetsche answers a reporter questions after the presentation of the new cars during the first media day of the 83rd Geneva Car Show at the Palexpo Arena in Geneva March 5, 2013. REUTERS/Denis Balibouse