GENEVA 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 restore profits.
At the Geneva car show on Tuesday, executives from top players including Ford (F.N), Fiat FIA.MI, Daimler (DAIGn.DE) and Renault (RENA.PA) warned 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 (PEUP.PA).
"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.
Hopes of a recovery this year have so far proved misplaced.
New car registrations in Germany, previously a bastion of stability, slumped more than 10 percent in February, while those in France and Italy fell by around 12 percent and 17 percent, respectively.
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 realization 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 signs of deterioration in the German market could lead to a similar change in stance there.
Stephen Odell, head of Ford's European business, forecast the European car market would continue "running along the bottom" of the U.S. carmaker's forecasts in the first half of this year, and had little confidence in a quick recovery.
"Frankly, who knows what happens in the second half," he said, adding 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 crisis.
German premium carmaker BMW (BMWG.DE) 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 keep its forecasts, although Chief Executive Sergio 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 CEO 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.
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(Additional reporting by Deepa Seetharaman, Andreas Cremer, Jennifer Clark and Christiaan Hetzner; Writing by Mark Potter; editing by Erica Billingham and Jason Neely)