Car makers battle to escape Europe's slow lane

Tue Mar 6, 2012 12:17pm EST
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By Andreas Cremer and Rhys Jones

GENEVA/LONDON (Reuters) - The differing fortunes of carmakers in Europe were on display at the Geneva Auto Show, with investment by Nissan and upbeat forecasts from BMW and Volkswagen, while Peugeot is selling its shares on the cheap to fund a tie-up with General Motors.

The European car industry seems to be reaching a tipping point, with a grinding price war underway in a withering market, combined with high overheads from excess manufacturing capacity.

But the pain is not being shared out equally. Demand for luxury cars is holding up better than the mass market and some automakers are proving more successful than others in tapping stronger demand from north America and emerging markets.

Japanese car maker Nissan Motor Co underscored its confidence on the first media day of the show on Tuesday, saying it would invest $200 million to build its new Invitation compact car from mid-2013 in Sunderland, northeast England, where its workforce will rise by 600 to 6,000.

Japan's No.2 automaker said the move, which will be supported by a $15 million loan from Britain, would create a total of 2,000 jobs at Nissan and its suppliers.

Meanwhile, Volkswagen AG threw out a challenge to the world's largest car makers by volume, General Motors and Toyota Motor Corp, as Chief Executive Martin Winterkorn said the German company was confident of achieving its long-term target of stealing the top spot after strong car deliveries at the start of the year.

And BMW said it expected group sales to grow this year, after a 14 percent year-on-year increase in February, with a young model range and growth in China and India offsetting a sluggish Europe.

PSA Peugeot Citroen, in contrast, highlighted the difficulties facing European-focused mass market automakers, as it unveiled a cut-price rights issue to fund the alliance with General Motors Co it needs to help it accelerate growth in new markets and cut costs on developing new models.   Continued...

Reporters are seen next to new SL model cars displayed on the Mercedes booth during the first media day of the Geneva Auto Show at the Palexpo in Geneva, March 6, 2012.            REUTERS/Denis Balibouse