VW says some automakers may go bankrupt without government help
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PARIS -- Volkswagen Chief Financial Officer Hans Dieter Poetsch said some European competitors are at risk of going out of business without financial assistance as the region's auto market sinks with no end in sight to the downfall.
"It is unclear if all carmakers will survive without governmental help," Poetsch said on the eve of the Paris auto show on Wednesday. "Carmakers in southern Europe that produce small cars will be especially affected."
As the show got underway on Thursday, French automaker executives were also pessimistic about the European market.
PSA/Peugeot-Citroen CEO Philippe Varin said rivals would soon be forced to follow PSA in closing factories and making big job cuts.
"Some of our competitors in Europe are losing even more money than us on every car they sell," Varin said. He described the European industry's situation as "untenable" in an interview with French newspaper Les Echos.
"We've laid out our plans, but other manufacturers will have to take similar steps. It's obvious that a certain number of plants will have to close," he said.
Renault CEO Carlos Ghosn said the automaker's goal to increase deliveries this year is strongly under pressure. "We see no improvement next year. The market will be at best stable, or more likely a little lower," Ghosn told investors on Wednesday.
Ghosn said he expects the auto market to shrink 13 percent in France and 7-8 percent in Europe this year - compared with previously forecast declines of 11 percent and 6-7 percent respectively.
Last week, Renault Chief Operating Officer Carlos Tavares said the carmaker does not intend to cut jobs or plants "at this stage." He said: "Our plants are in a difficult situation, which we are managing with temporary layoffs ... but the slump in Europe is likely to last."
PSA is shuttering its factory in Aulnay near Paris that builds the Citroen C3 subcompact and cutting more than 10 percent of its 100,000-strong domestic workforce in response to a sales collapse that has seen the automaker consume almost 200 million euros ($257 million) a month in cash.
"The biggest problem for the industry is the complete meltdown of pricing discipline," said Erich Hauser, a London-based analyst at Credit Suisse. The two automakers with the most stretched balance sheets are "clearly" Fiat and PSA," he said.
Worse before better
VW's Poetsch said European auto deliveries may get worse before it starts to improve, adding that the current market has never been more difficult to assess.
VW sales chief Christian Klingler said the pricing situation in the region is very tense and the company does not expect a significant rebound in the European auto market over the next 1-2 years. "We're bracing for more negative surprises in 2013, perhaps also in 2014," Klingler told reporters at the show.
Fiat CEO Sergio Marchionne, who currently heads the ACEA industry lobby group, has been urging his European counterparts to come up with a comprehensive plan to cut overcapacity throughout the region, a move resisted by VW and the other German carmakers.
Fiat is on track to lose 700 million euros ($900 million) in Europe this year and has cut investment spending by 500 million euros to preserve cash.
Bloomberg and Reuters contributed to this report
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