The fuel crisis and profit warnings from several companies are making the auto industry nervous.
Protests around Europe against high fuel prices not only had European consumers questioning their dependence on cars, they had analysts and industry executives wondering about the future.
The protests occurred against a backdrop of sluggish sales and the continued slide of the euro.
'The present tensions have got to disappear,' said Wolfgang Chur, board member of Robert Bosch GmbH responsible for automotive operations, regarding the fuel crisis. 'If the present situation continues, we have got to be concerned.'
The fuel price protests in countries like Belgium, France and the UK also interrupted production at several car factories last week. If that wasn't enough, dozens of European cities participated in 'car-free' days on September 22.
Several automotive companies, mainly suppliers, have issued profit warnings in recent week. Among then are Valeo and Michelin (See Page 3.) DaimlerChrysler shares fell to an all-time low last week based on analyst predictions that the company's Chrysler unit could lose between $300 million and $500 million in the third quarter.
New-car sales in western Europe were down 16 percent in July and down about 1 percent in August. Some analysts think higher fuel prices could hurt consumer confidence and slow sales in the fourth quarter.
'High fuel prices also tend to put pressure on the bigger-sized cars so customers are increasingly trading down to smaller cars,' said Gerhard Klein, chief strategist at Ford of Europe. 'Of course, smaller cars mean smaller profits.'
Analysts differed in their views. Gaetan Toulemonde, auto analyst with Deutsche Bank in Paris, is concerned that a continued rise in fuel prices could move the economy into a recession.
But Stephen Reitman, auto analyst for the London office of Merrill Lynch, said he believes the sales declines in Europe will moderate in the fourth quarter and that 2001 will see some positive growth.
Said Klein: 'I think the market will weaken somewhat but not very dramatically, a maximum of 2-3 percent weaker next year than this year. But it will still be a very good year from an industry standpoint unless something dramatic happens on either fuel prices or oil availability.'
Much depends on the German market, Europe's largest. Germany has been particularly weak this year.
Meanwhile, the euro has also continued its steady slide, with mixed effects on car firms.
'It continues to surprise us that the euro is not recovering,' said Klein. 'The fundamental macroeconomic data says Europe is in better shape than it has ever been.'
Because Ford is an American owned company and its profits are reported in dollars, the euro's weakness can hurt, said Klein.
But the euro's weakness helps other manufacturers.
'If you look at pure exporters like a BMW, for them at the moment it's like Christmas,' said Reitman. BMW has a 13-day supply in the USA compared to a 58-day industry average, he said.
Meanwhile, protests against high fuel prices across Europe closed some plants briefly last week and forced carmakers to reroute some shipments.
Ford lost two days production at its Genk, Belgium, factory and a single shift at Saarlouis, Germany, because of halted parts deliveries. Ford lost production of about 4,000 cars altogether
The NedCar factory in Born, Netherlands, lost a full shift because a shipment of fuel tanks was held up at the Belgian border just a couple of kilometers from the factory gates.
Volvo had to reroute shipments of cars and finished parts around protesters at the port in Gothenburg.
Stephane Farhi, Edmund Chew and Wim Oude Weernink contributed to this story.