LUCA CIFERRI

Europe: Bad and getting worse

Automotive News Europe | February 1, 2013 06:01 CET

Fiat and Ford lost a combined 2 billion euros in Europe last year and both automakers expect this year to be even tougher. Ford predicts its 2013 European loss will rise to $2 billion while Fiat CEO Sergio Marchionne says that Europe "perhaps has not yet hit bottom."

We need to brace ourselves for more bad news. Struggling automakers General Motors Europe, Renault and PSA/Peugeot Citroen are unlikely to give much hope when they report their 2012 financials and provide their outlooks for Europe.

While no one foresaw a turnaround for Europe this year, the new predictions are worrying. The consensus among automaker executives and industry watchers is that drastic changes are needed to end the five-year sales slump.

Renault-Nissan CEO Carlos Ghosn said this week that Europe will only return to growth by 2020 if countries such as France, Spain and Italy take action to reform their inflexible labor laws like Germany did in the early part of the decade.

Fitch Ratings said that a recovery in new-car sales in Europe back to pre-crisis levels could take until the end of the decade -- if it can be achieved at all.

Fitch said cyclical factors, including weak consumer and corporate confidence, high unemployment and tighter credit conditions, are keeping buyers out of showrooms. And the people that do go car shopping get discounts of 20 percent on average. This means many automakers are selling at a loss, which ravages their profitability.

Even the powerful Volkswagen Group is feeling the effects of the European downturn. VW will temporarily halt Passat production in Germany for four days in February and March.

Luca Ciferri is Editor-in-Chief of Automotive News Europe.Luca Ciferri is Editor-in-Chief of Automotive News Europe.

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