VW's Winterkorn and Fiat's Marchionne emerge from a meeting aimed at resolving their mounting differences.
Few doubt the European automotive industry’s downward spiral will get worse before things start to improve. But there are growing concerns that the industry is compounding its own problem with “unsustainable” practices that conceal the depth of the downturn while running up losses that have already climbed into the billions of Euros.
And there are few signs that industry leaders – or government regulators – are ready to come together on a common solution that can resolve endemic problems, such as overcapacity, only made worse by the broader European economic meltdown.
“We are not very bullish about Europe next year,” said a glum Carlos Ghosn, CEO of the Renault-Nissan Alliance, during an appearance at the Paris Motor Show. “We do not see a rebound in Europe for several years.”
Exactly how far the market might sink remains one of the most worrisome questions and will likely not become apparent until countries like Greece and Spain can address their own economic problems. But Sue Docherty, the head of Chevrolet’s European operations, forecast the market will likely drop to somewhere between 14.0 million and 14.3 million in 2013 – a significant drop from the 17-million-plus numbers seen in the middle of the last decade.
And those figures could prove misleading if, as one senior industry official claims, some European automakers are taking steps to disguise the depth of their own decline.
While he declined to point a finger at specific competitors, Ford’s European sales and marketing director, Roelant de Waard, suggested there is a significant amount of “self-registration” underway, certain manufacturers encouraging their dealers to purchase the vehicles on their lots and then sell them as used – with the support of hefty factory subsidies – at a significant discout.
“It is a very aggressive environment and until either demand picks up or capacity is adjusted to the situation, it’s unlikely going to change,” de Waard told the Bloomberg news service, who estimated that as much as 30% of the vehicles registered in Germany for the first eight months of the year were “sold” using this process.
Ford did not aggressively play in that game, the executive indicated, perhaps as justification for the fact that the U.S.-based maker had the biggest decline in sales of all major manufacturers in Europe during the first half of 2012.
The debate over self-registration is just one of the issues creating growing frustration within the European automotive community. Indeed, things came close to boiling over last week when the industry trade group ACEA held a private meeting before the second press day at the Paris Motor Show. Going into the session there were worries that there might be a full-on battle between Volkswagen CEO Martin Winterkorn and his Fiat counterpart Sergio Marchionne.
VW has been accused of using the current Continental crisis as an opportunity to help drag down rivals even as it sets its own sights on becoming the world’s leading automaker. Chevrolet’s Docherty, for example, called “unsustainable” the hefty incentives VW has offered to prop up European sales. By some accounts those givebacks are reaching as high as 30% of the sticker price on some models.
Marchionne, for his part, accused VW of consciously triggering a “bloodbath.” Winterkorn has fired back on several occasions and through the company’s press office called for the Italian executive’s resignation as chairman of ACEA.
The two men emerged from the Friday meeting with tight-lipped smiles, but despite a handshake, few believe they’ve made peace. More significantly, there’s no sign that VW will support Marchionne’s call for industry-wide action that would include plant closings and other painful steps.
(For more on Friday’s meeting, Click Here.)
The alternatives are even more worrisome, analysts warn. General Motors is under growing pressure to rid itself of the floundering Opel brand, though GM officials have so far said that’s not an acceptable plan. PSA Peugeot Citroen appears ready to seek a French government bailout and some believe Fiat may seek help, as well, from Italy. Barring a miraculous turnaround in the European economy, 2013 could be a disastrous year.