* Weak market could relax government opposition to cuts-PSA
* Morgan Stanley analysts cut 2013 EU car demand forecast
* Carmakers pin hopes on higher-margin sports cars, SUVs
By Laurence Frost
GENEVA, March 5 Europe's ailing car market has
weakened further in recent months; and with no signs of
recovery, some industry leaders hope governments will relax
their opposition to plant closures and job cuts needed to
At the Geneva car show on Tuesday, executives from top
players including Ford, Fiat, Daimler
and Renault warned that demand in Europe would stay
weak for years as governments drive through austerity measures.
"The European market is not in a condition we expected three
months ago," said Dieter Zetsche, chief executive of German
luxury carmaker Daimler, reflecting the industry's dismay at a
continued plunge in sales in the region.
"The sustained nature of the European market slump is
becoming pretty clear, and nobody now expects a return to
(pre-crisis) levels on any visible horizon," said Guillaume
Faury, strategy chief at France's PSA Peugeot Citroen.
"So there's going to be a kind of reckoning on European
production levels for the next five years, leading governments
to change their posture and encourage restructuring rather than
oppose it," he predicted.
New car sales in the 27-member European Union dropped 8.2
percent to a 17-year low in 2012 as consumer incomes were
squeezed by rising prices, subdued wages and austerity measures.
And hopes of a recovery this year have so far proved
misplaced, with new car registrations in Germany, previously a
bastion of stability, down more than 10 percent in February on a
year ago, while sales in France and Italy fell by about 12
percent and 17 percent respectively.
"I don't think any government in Europe will let a car
manufacturer fail (just as) the U.S. didn't," Renault's
chief executive Carlos Ghosn told reporters.
"GM and Chrysler were saved by the tremendous support of the
U.S. government for the same reason that anybody would do it in
Europe, which is to save jobs. Nobody on the right or the left
is going to allow all those jobs to go."
Carmakers have been battling to cut European production,
while also focusing on recovering demand in the United States
and robust growth in Asia, as well as pockets of outperformance
such as sports utility vehicles (SUVs) and high-end cars.
But their European restructuring efforts have often met with
opposition from governments worried about rising unemployment.
"I think there's a realisation that a long-term slump needs
long-term measures. We're already seeing the first signs of this
in France, where the need for restructuring has been understood
and accepted," Faury said, adding that the deterioration in the
German market could lead to a similar change in stance there.
But Fiat and Chrysler's chief executive Sergio Marchionne
fears that politics will interfere with any attempt to cut
excess production capacity in Europe.
"I think there's less than a 50 percent chance you'll see a
structural failure in Europe," he told reporters in Geneva.
"I think you'll see state intervention before that. I've
tried to argue against it, unsuccessfully. We've seen it happen
in 2008, 2009. Its a stop-gap measure in violation of EC rules
and creates an unlevel playing field."
Stephen Odell, head of Ford's European business, expects the
European car market to continue "running along the bottom" of
the U.S. carmaker's forecasts in the first half of this year and
said that he had little confidence in a quick recovery.
"Frankly, who knows what happens in the second half," he
said, adding that it could take four or five years for the
European market to recover to the 17 million to 18 million
vehicle sales range seen in 2007, before the global financial
German premium carmaker BMW similarly warned of a
long haul to recovery.
"We believe that the underlying problem in Europe, which is
mainly about debt, will persist for at least five more years,"
chief executive Norbert Reithofer said.
Morgan Stanley analysts on Tuesday cut their forecast for EU
car demand this year to a decline of 6 percent from a drop of 4
percent previously. They said weakness in southern European
markets such as Spain and Italy was spreading.
Business surveys showed France, Spain and Italy dragged the
euro zone into a deeper downturn in February.
Duncan Aldred, sales chief of General Motors' Opel brand,
said on Monday that European car sales could drop as much as 10
percent this year.
However, other carmakers remained reluctant to cut their
estimates so early in the year.
Italy's Fiat, for example, said it would stick to its
forecasts, though CEO Marchionne sounded downbeat.
"I don't see any glimmer of hope this year," he said,
referring to prospects for a European market recovery.
Fiat, like many rivals, is aiming to tap strong growth
globally at the premium end of the market. It is also looking at
possibly creating a new low-cost brand.
The Italian carmaker said it would start selling its Alfa
Romeo 4C two-seater model in Europe at the end of September with
a launch price of 60,000 euros ($78,000) in a bid to stoke
interest in the upmarket brand. A U.S. launch would follow
shortly afterwards, it added.
Ford aims to bring its EcoSport compact SUV to Europe later
this year, while BMW said it was optimistic that demand for
premium cars from the United States and China in particular
would continue to outweigh weakness in Europe.
"We're cautiously optimistic for this year," BMW's Reithofer
said, forecasting a 2 percent rise in the U.S. market and 8.5
percent growth in China versus a 2 percent drop in Europe.