European carmakers see long road to recovery
By Andreas Cremer and Laurence Frost
FRANKFURT (Reuters) - Europe's car market is bottoming out after five years of falling demand, but high unemployment and weak bank lending suggest its recovery will be long and slow, executives at the Frankfurt car show said.
Automakers have been hammered by Europe's prolonged economic downturn, with sales falling sharply and profits suffering even more because of overcapacity.
But broad signs of stabilization - even in some of the region's hardest hit economies like Italy and Spain, where car sales have plunged some 50 percent since the 2008 financial crisis - are raising hopes that better times are on the way.
"The European market has bottomed out. It now appears to be stabilizing at a very low level," Volkswagen (VW) (VOWG_p.DE: Quote) sales chief Christian Klingler told Reuters, pointing to evidence from the group's order books and feedback from dealers.
"A recovery will take some time and depend on the economic and political environment," he cautioned. "Don't forget that unemployment is at the highest level in a long time. Banks don't always offer loans that are favorable to industry."
A bounce in exports and spending pulled the euro zone out of recession in the second quarter, in the first signs of revival after the bloc's longest slump.
But economists remain cautious. Unemployment is at a record high of 12.1 percent across the 17-country bloc and car sales fell in Germany, France, Italy and Spain in August, casting doubt over consumers' willingness to spend.
PSA Peugeot Citroen (PEUP.PA: Quote) chief executive Philippe Varin told reporters on Tuesday that orders had stabilized so far this month and predicted Europe would return to "slightly positive growth" in 2014. Continued...