UPDATE 4-March sales dash recovery hopes for European carmakers
* French car registrations fall 14.7 pct in Jan-March
* Spanish sales fall 13.9 percent in March
* Italian March car sales fall 4.9 pct
* German sales seen falling more than February - source (Adding Italian, comment on Italian car sales, US car sales)
By Jennifer Clark
MILAN, April 2 (Reuters) - European car sales shrank again in March, threatening more losses for carmakers in the region after a dismal 2012, figures and forecasts suggested on Tuesday.
The euro zone crisis has turned long-standing overcapacity into an urgent problem for mass-market manufacturers, although German automakers seen as having the most valuable brands are weathering the storm better than rivals.
Carmakers fearing European demand will stay weak for years are battling to cut production, their restructuring efforts often met with opposition from governments worried about rising unemployment.
Annual sales slumped 8.2 percent in Europe last year to a 17-year low of 12.05 million vehicles as consumers in recession-hit countries postponed purchases.
The March car sales figures suggest an even worse year for the industry. With euro zone unemployment at a record high, forecaster LMC Automotive sees this year's sales dropping 3.1 percent in Western Europe to 11.4 million vehicles.
PSA Peugeot Citroen of France lost 1.5 billion euros ($1.95 billion) at its autos division last year and is cutting more than 10,000 jobs. U.S. automakers are suffering deep losses in Europe and Ford is cutting capacity with three plant closures.
German carmakers Volkswagen, BMW and Mercedes have resisted the worst of the slump.
March was a particularly bad month for the sector because it contained fewer working days than a year ago, industry groups in France and Spain said.
French car sales fell 16.4 percent in March and 14.7 percent overall in the first quarter, according to figures published by the country's main auto industry body CCFA on Tuesday.
The March decline also reflected a smaller number of days than in the year-earlier period. Adjusted for these calendar effects, French car registrations fell 12.5 percent last month and 12 percent in the first quarter.
Spain is in its second recession in five years and sky-high unemployment and limited credit have hit car sales badly.
Spanish car sales fell 13.9 percent year-on-year in March, deeper than a 9.8 percent fall in February as a seasonal effect undermined a government subsidy scheme to stimulate the sector, car manufacturers association Anfac said on Monday.
"The company car sector continues to be very worrying and continues to register falls of over 20 percent," David Barrientos, head of communications for Anfac, said in a note.
THREAT FOR ITALY'S CAR INDUSTRY
Italian car sales fell 4.9 percent in March, a smaller decline than in recent months only because a strike by car haulers a year ago dragged down the figures for March 2012.
Filippo Pavan Bernacchi, Chairman of Italy's car dealers' association, said the figures put Italy on track for sales of 1.3 million cars this year.
That was "35 percent less than the 2 million cars considered to be the minimum survival level for Italy's automotive industry", he said.
But Fiat said sales of its volume brands Fiat, Lancia and Alfa Romeo rose 9.3 percent in the first quarter after it launched a larger version of its 500 minicar.
German March car sale figures due on Wednesday are also likely to show a fall. March is traditionally the strongest month of the year in terms of absolute registrations.
Two industry sources said two fewer working days versus last year's period meant that, if anything, the decline was likely to have deepened from February's 10.5 percent drop.
"We're looking at a double-digit drop at least, maybe around 15 or 16 percent for March," said one of the sources, who requested anonymity ahead of data on the world's fifth-largest car market.
"It's not that the fundamentals are bad, when you look at the forecasts from economic institutes for Germany. But the last few weeks in Cyprus make people feel insecure for the longer term, even if they themselves don't have any immediate fears about losing their jobs."
While Europe is stuck in the doldrums, sales in the U.S. and China, the world's two largest car markets, are growing.
Ford and Chrysler Group LLC reported slightly better-than-expected U.S. March sales on Tuesday, buoyed by greater demand for sport-utility vehicles and pick-up trucks, while General Motors Co. fell short of estimates. (Additional reporting by Astrid Wendlandt, Gilles Guillaume, Christiaan Hetzner, Sarah Morris, Manuel Ruiz; Editing by Tom Pfeiffer)