Gloom And Doom The Watchwords At Geneva

Sales prospects look dire, with Europe as a whole likely to see a fall approaching 10 per cent. Germany, the biggest market, faces a precipitous 30 per cent sales drop, as government scrapping subsidies come to an end.

The inevitable price wars will break out, as stocks build. Profitability, where it exists, will be under pressure. There were plenty of green machines on show in Geneva, reminding everybody that to meet tightened E.U. CO2 rules by 2015 the cost will be between €500 and €1,000 per car, according to Deutsche bank. If you assume the average cost at €800 a car, and multiply that by the size of the European market in a good year – say 16 million – that works out close to an extra €13 billion.

Anyone looking for light relief at the show should go to the Ferrari stand, which shows the 599 four-wheel drive supercar with a petrol/electric hybrid engine with electric motors to drive the front wheels. If that doesn’t save the planet, try the new “green” Porsche Cayennes, with hybrid or diesel power. The hybrid is said to return 193 grams per kilometer of CO2, that’s about 8.4 l/km or close to 30 miles per U.S. gallon. Nissan, after proving with the Qashqai, that if a car has quality it will sell despite a daft name, is pushing its luck with a smaller version called the Juke.

Chrysler Delta
The Fiat stand will feature a Chrysler Delta, a Lancia with a U.S. badge to remind us that the Italian company now controls the American outfit. Volvo will unveil its S60 saloon, and Audi will take the wraps off its new A1, set to steal sales from BMW’s Mini. Alfa has the new Giulietta, replacing the 147.

Leading the Asian onslaught, Kia of Korea has a new, racy looking Sportage compact SUV, and Suzuki, now allied with Germany’s VW, will show a plug-in hybrid version of its Swift. Mitsubishi of Japan, negotiating a merger with France’s Peugeot, introduces the ASX SUV.

The new BMW 5 isn’t green just yet; a hybrid engine, will have to wait for a year or two.

Dieter Zetsche, CEO of Daimler, and newly installed president of the European Car Manufacturers Association, known by its French acronym ACEA, isn’t very excited about 2010’s prospects.

CLS concept
“If the economy looks better in 2010, it’s only when compared with 2009. And that’s why it is so critically important not to endanger whatever little stabilization has been achieved,” Zetsche said at the annual ACEA reception in Brussels. Mercedes hasn’t much new at the show, and showed the new CLS concept, sporting Rising Car sculpture.

Credit Suisse analyst Arndt Ellinghorst said in a recent report that the net effect of too many stocks, not enough buyers, the ending of government scrapping schemes and falling residuals will be a €1 billion pricing hit across Europe.

But Bernstein Research’s Max Warburton isn’t dismayed. He reckons fundamentals at the mass car makers are improving and balance sheets recovering from the traumas of 2009.

“The state of balance sheets now is far superior to anything the market could have dreamed of twelve months ago. Renault and Peugeot of France and Fiat have all begun to pay down debt and look on track to make further reductions in 2010. The Germans avoided balance sheet destruction in the first place, especially BMW and look set to generate cash in 2010, (except for VW?),” he said.

“We are somewhere near the bottom and there is a very significant long-term upside to car sales, truck sales, mix and profitability. For long-run investors, we believe there is still plenty of opportunity in European autos,” Warburton said.

The Geneva Show opened to the public March 4 through March 14.