Hope For 2010 Rally Fades, But France Aid Limits Damage There.
Fiat’s Marchionne Sees Chance Of Huge Corporate Shakeout.
Merrill Lynch Though Has Some Optimistic Thoughts for 2009 .
Next year looks like being torrid for European car sales, with the possibility that some major players might be taken over or lesser mortals expire completely, according to investors.
And it doesn’t help having to figure out the implications of one or more bankruptcies in Detroit.
The industry faces a bleak 2009, with the likelihood of a revival in 2010 fading.
“Weak GDP growth and the international financial crisis have had, and will continue to have, a significant impact on the European auto industry. In particular, we expect sales in western Europe to decline by between 12 and 15 per cent in 2009 and caution that these forecasts may be revised down further in future due to the ongoing deterioration of the economic environment and consumer’s reaction to the weakening economy,” said Emmanuel Bulle, senior director of ratings agency Fitch.
In 2008, car sales in Western Europe were about 8.3 per cent down on 2007 over the first 11 months of the year, and heading for a final figure of 13.58 million, according to automotive forecaster J.D.Power. But sales towards the end of the year were picking up negative momentum, falling 25 per cent in November. Sales in Spain dived 50 per cent in November, in Britain by 37 per cent, and Germany by 18 per cent. J.D.Power reckons sales will fall another 11.6 per cent in 2009 to 12 million. It had no word on the possibilities for 2010.
Sales in France were in better shape than most, “only” down 14 per cent in the month. Next year French sales will fall about 5 per cent, according to J.D.Power. Renault-Nissan CEO Carlos Ghosn said this is because of French President Nicholas Sarkozy’s plan to offer incentives to buyers who replace 10-year old cars with new ones which produce carbon dioxide emissions of less than 160 g/km.
Fitch Ratings Bulle has bad vibes about 2010.
“As a result, (of the worsening economy) the agency also considers a sales rebound unlikely in 2010,” Paris-based Bulle said.
Carmakers’ profits will also suffer because of the need for huge investment to meet the new E.U. CO2 standards, as well as having to provide financial support for ailing dealers and suppliers, Bulle said.
The financing needs of car buyers are also a source of worry, as banks across Europe remain fearful of lending money at anything like the rate which fuelled the long consumer boom.
All this has plunged Fiat CEO Sergio Marchionne into a gloomy mood.
“I have totally revised what I will do in the first part of 2009. We’re just going to slam the brakes on, use as many temporary layoffs as needed, but everything back to essentials. I am going to have one week of production between now and the beginning of January. After that we’re in the dark because I have no idea what demand will be. None,” Marchionne told Automotive News Europe in an interview.
His overall predictions seemed to exclude a future for Fiat too. Fiat also owns sporty brands Alfa Romeo and Lancia, and supercar manufacturers Ferrari and Maserati.
“You need at least 5.5 million to 6 million cars (a year) to have a chance of making money,” Marchionne said.
Fiat’s annual output is less than half that.
“Maybe I’m completely wrong. But today my gut instinct is to be truly Draconian. By the time we finish with this, in the next 24 months, as far as mass-producers are concerned, we’re going to end up with one American house, one German of size; one European-Japanese, probably with a significant extension in the U.S; one in Japan; one in China and one other potential European player,” he said.
This seems not only to exclude either GM or Ford and Fiat, but Honda and Peugeot too, and would mean either BMW or Mercedes losing their independence. Things are bad, but surely not that bad for the big players. It remains to be seen if the likes of Saab and Volvo of Sweden, subsidiaries of GM and Ford respectively, can hang on in there. Land Rover Jaguar, cleverly dumped by Ford earlier this year, is also under pressure. VW’s Spanish subsidiary SEAT has been losing money.
There are though some, relatively, positive voices out there.
Harald Hendriksen, London-based auto analyst with Merrill Lynch, said car sales will stabilize after falling not much more than 5 per cent next year.
Yes, the current quarter is likely to see big losses for all manufacturers. Next year, all save German giant Volkswagen will see profits halved. But think of these good things.
“Commodity prices have fallen from a record high of $2,700 per vehicle to just over $1,500, a saving of $1,200 per vehicle, of $23.5 billion (of costs) from peak for European manufacturers. The dollar and yen export margin benefit of $6.5 billion further mitigates 2009’s revenues,” Hendriksen said.
“Central banks are stimulating consumers like never before. Real interest rates are negative. Taxes are being reduced. Governments are embarking on huge spending plans to stimulate GDP growth. This normally stabilizes the market,” he said.
Neil Winton – December 15, 2008
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