Automaker chiefs urge end to European austerity
Marchionne, Ghosn, Winterkorn oppose deeper budget cuts
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Renault CEO Carlos Ghosn supports government incentives to promote sales |
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GENEVA (Bloomberg) -- Automakers, grappling with a sixth straight year of declining European deliveries, joined growing opposition to the region's austerity measures.
Fiat CEO Sergio Marchionne spoke out against deeper budget cuts in Europe at the Geneva auto show as Renault CEO Carlos Ghosn urged government spending to revive the region's anemic sales, which he forecast won't recover for another three years.
"At this point, austerity doesn't work. The impact on Italian consumers is catastrophic," Marchionne said on Tuesday at the show. "I understand austerity, but we can lose weight until we die."
Europe's sales declines will depend on how much state spending is cut, Ghosn told reporters in Geneva, adding that he supports government incentives on trade-ins of older cars to promote sales. "There is only the question: is it going to be bad or very bad?" Ghosn said of the region's market.
VW CEO Martin Winterkorn said: "It's about finding answers to the high youth unemployment in Europe and about a society that isn't drifting apart, but is in balance."
Daimler CEO Dieter Zetsche said the European market's two-month performance was worse than expected. Registrations in February dropped more than 10 percent from a year earlier in France and Germany, according to car-industry figures from those countries.
"Austerity without growth means only unemployment, taxation, burdens for everybody, no hope," Marco Tronchetti Provera, chairman of Italian tiremaker Pirelli said. The country's vote showed "we have to look also for growth, as unemployment is the real issue."
Cost reductions
Car-industry executives at the Geneva show outlined efforts to counter the European sales decline with spending cuts. Car discounting, which in Germany in 2012 was at the steepest level in two years, will probably extend into 2013.
"We're paying attention to everything when it comes to cost reduction," Jerome Stoll, Renault's sales chief, said. "I hope this price war ends soon, as it condemns the car industry. Those who are cheapest on the market will face bankruptcy."
Carmakers' incentives hurt earnings last year while failing to revive the market. PSA/Peugeot-Citroen reported a 576 million euro ($751 million) operating loss for 2012. Renault's automotive division and the European operations of Fiat, GM and Ford Motor Co. were also unprofitable last year.
Stephen Odell, Ford's Europe chief, said: "No one is immune to the competition levels out there. Last year, we made the conscious decision that our share would reduce from prior-year levels because we weren't going to chase business that didn't make sense."
PSA CEO Philippe Varin said he only favors targeted government incentives to replace aging diesel models. Varin said he's scaling back research and development spending by 600 million euros this year as the market continues to drop.
Marchionne said he does not support government intervention to boost the region's ailing auto market. "I prefer not to have incentivized items, I like natural demand," said Marchionne, who is the current head of the region's ACEA lobby group.
The economy of the 17 nations sharing the euro has been in a recession since the third quarter as governments in countries such as Italy, Spain and Greece battle a sovereign-debt crisis with spending reductions.
European Union finance ministers indicated this week that they may allow looser budget policies following a deadlocked election in Italy, protests across southern Europe against welfare-state cutbacks and French government resistance to spending reductions.
The European auto market contracted 7.8 percent to 12.5 million last year, a 17-year low. Spain's market, once the region's fifth-biggest, now lags behind Belgium, even though Spain has four times as many people.
Spain, France incentives
French Industry Minister Arnaud Montebourg said last weekend he favors car-scrapping incentives to revive the country's auto market and push people to buy more fuel-efficient models, as opposed to a proposal being discussed to raise the taxes on diesel fuel. The government isn't likely to make any decision on the matter yet this year, he said on Tuesday.
Spain's government is imposing its fifth package of austerity measures in a year, including a higher sales tax and cuts in unemployment benefits, public-sector jobs and wages. At the same time, the country has renewed an incentive program to lure consumers into trading in old cars.
Annual auto sales in the country are now 33 percent of what they were at the 2007 peak, James Muir, who runs Volkswagen Group's Seat brand, said.
"We understand why Spain is doing it right now. They have a very high level of unemployment," Susan Docherty, head of Chevrolet Europe, told reporters. "In the case of Spain right now, it's just getting people into the showroom."
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