Carmakers sound alarm at gloomy Paris show

By Marcel Michelson

PARIS (Reuters) - Top automakers including General Motors Corp (GM) and Ford warned of tough times as the Paris Auto Show opened on Thursday amid concerns that slowing demand could force production cuts and job losses.

Volkswagen's latest Golf and Toyota's new Avensis saloon for Europe headline the event, which opened under a cloud as makers struggle to attract buyers worried by slowing economies and as a global credit crisis hurts auto leasing.

Ford Motor Co Chief Executive Alan Mulally said he expected no recovery in the global car market until 2010 and urged governments and central banks to work together to bring stability back to the financial markets.

"2009 is not going to be better than 2008," Mulally told reporters at the show. "We won't see a recovery until 2010," he added, noting markets were down around the globe.

GM's chief operating officer, Fritz Henderson, warned of weakness to come in both the U.S. and western European markets.

"Certainly in the first half (of 2009) it's going to be weak," Henderson told reporters at the show, noting weakness in western Europe.

"We're all under some pressure for the next 12 to 24 months," he said.

Mitsuo Kinoshita, senior board member at Japan's Toyota Motor Corp, said the credit crunch was hurting consumer confidence and could force Toyota to review its global sales targets of 9.5 million vehicles in 2008 and 9.7 million for next year.

A source at Europe's biggest automaker, Volkswagen, told Reuters that the company faced tough times at Spanish unit Seat and while the company's overall targets remain intact, it may have to consider trimming output.

"If markets continue to develop in such a dramatic way then we have to consider reining in production," the source told Reuters at the show.

Volkswagen Chief Executive Martin Winterkorn told reporters that VW expects to be able to generate a small gain in unit sales and revenue next year despite turmoil on financial markets, while confirming VW's outlook for 2008.

He also said the company, which plans to start making cars at a U.S. plant in Tennessee, wants to benefit from government aid offered to U.S. makers.

"We will raise our hand when the time comes," Winterkorn said.

U.S. President George W. Bush on Tuesday signed into law a spending bill which included guarantees of $25 billion in low-interest loans for U.S. automakers Ford, GM and Chrysler LLC.

The aid comes as U.S. demand slumps and makers tool up for production of more fuel efficient and environmentally-friendly vehicles, including electric models.