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Europe’s Car Manufacturers Prepare For Rocky 2012

Production Slashed At Fiat, Sales Projections Under Pressure Elsewhere

“There is no doubt that the market will be declining next year in Europe. The only question is how big of a decline” – Ghosn

Europe’s car makers are hunkering down to protect themselves from the eurozone financial crisis by slashing production schedules as they face up to falling sales prospects for 2012.

Only last September, the sales outlook for 2012 looked like a small decline at worst, stagnation at best. But the gathering storm over the future of the eurozone has punched a hole in the outlook as frightened consumers shut their wallets and wait for better weather.

“We were taken by surprise by the downturn, and we need to protect our breakeven point,” Duncan Aldred, Managing Director of GM Europe’s Vauxhall told a media briefing in London.

As recently as six weeks ago, GM Europe was predicting breakeven for 2011 and a small profit in 2012. Investment bankers now expect a $600 million loss in 2011 for GM Europe, rising to $1 billion in 2012 (see below).

“(overall market) sales across Europe will be about 300,000 lower in 2012, but could be up to one million down in a worst case scenario,” Aldred said.

Fiat will produce 300,000 fewer cars than originally planned next year in Europe, according to a report by Automotive News Europe. The magazine, quoting an Italian web site, said Fiat expects to make one million cars in 2012, down from the original plan for 1.3 million, and 13 per cent less than the 1.15 million it aimed to make in 2011.

Renault CEO Carlos Ghosn was also in doom and gloom mode.

“There is no doubt that the market will be declining next year in Europe. The only question is how big of a decline,” Ghosn said.

Bank of America Merrill Lynch said overall car and light commercial vehicle sales next year will decline 2.1 per cent to 13.8 million, while other investment banks think at least a five per cent decline is likely.

Neil Winton – December 1, 2011

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