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COMMENT: All these new niches could eat your kids' livelihoods

Franz W. Rother is Editor-in-Chief of Automobilwoche

You can feel how nervous auto industry bosses are. To boost flagging sales, the number of new niche models is growing without end. Every week marketing departments come up with new incentives to try and encourage people to buy new cars.

The strategy is having partial success. In June car sales grew four percent in Germany, six percent in France and 16 percent in Spain. The west European car market grew by 5.6 percent.

But that will not be enough to rescue sales for the whole of 2004.

Nearly all the German research institutes have revised downward s their sales forecasts for the German market. Even the notoriously optimistic VDA (German Automakers Association) cannot hide from the reality.

Who can dealers trust to help them? Some dealers are taking the initiative and offering early booking discounts for the new BMW 1 series two months before the model's launch.

Others are having great difficulty finding ways to sell all the different model varieties being offered by the manufacturers.

The research institute JATO Dynamics says Volkswagen Golf and Renault Megane have 200 variants between them. You can just imagine how difficult all these variants are making life for the service and spare parts branches.

The range of models on offer is getting ever wider and less transparent. Automakers open new niches and go further away from the established model types every year. There are now sportbacks, city coupes, microvans, and four-door coupes on the market.

So many new variants are being introduced that The Dictionary of Automobile Body Styles now has to be updated every six months.

The problem is that these new cars are offered in a stagnating market in western Europe. They succeed in boosting demand at the expense of cannibalizing their sister models.

Suppliers suffer the consequences with smaller bulk orders and demands for more specifications, making the manufacture of components increasingly uneconomic.

Automakers are also feeling the pinch. Even the Mercedes car group -- the "cash cow" of DaimlerChrysler -- has to cut costs. The company cannot afford to give its workers the extravagant pay and conditions negotiated 30 years ago.

Volkswagen is being hit even harder. The success of the Touran medium minivan is weakening sales of the Golf. Incentives to boost sales in Europe and price reductions in China's competitive market are making VW's profits melt like ice cream in the sun.

VW has already scrapped its C1 project for a car to fill the gap between the Passat and Phaeton. The future of the new Microbus and the Bugatti are also in doubt.

Manufacturers cannot now rule out the closure of production plants. That will hurt.

But automakers will have to take care with all this cost cutting that they do not create a wave of industrial action. Nobody can afford that at the moment.

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