Will 2010 be Europe's horror year?

If you thought 2009 was a bad year for the European auto industry, 2010 could be much worse, according to many auto executives and analysts.

Industry experts agree that new-car sales in western Europe will fall by at least 1 million this year compared with 2009.

A hangover from generous scrappage incentives, which encouraged people to buy cars in 2009 that they had planned to purchase in 2010, will be one of the main reasons for lackluster sales.

Whether economic recovery and an improvement in consumer and corporate confidence will be sustained also add to uncertainty, says Emmanuel Bulle, a senior director in Fitch's European Corporates group.

According to Moody's credit rating agency, European volume manufacturers such as Volkswagen, PSA/Peugeot-Citroen, Renault and Fiat face a bigger challenge than premium carmakers in maintaining sales in 2010 because they benefited most from scrapping schemes in key western European countries in 2009.

Among executives and forecasters Fiat CEO Sergio Marchionne, Goldman Sachs and J.D. Power Automotive Forecasting have the lowest predictions for 2010 sales.

Marchionne expects west European passenger car sales will decline to 12 million in 2010 from 13.5 million in 2009. Goldman Sachs forecasts that West European sales will drop to 12.1 million from 13.1 million in 2009 while J.D. Power sees volume falling to 12.15 million from 13.55 million in 2009.

Automotive academic Ferdinand Dudenhoeffer of the University of Duisburg-Essen in Germany and Moody's are slightly more optimistic. Dudenhoeffer reckons sales will drop to 12.6 million from 13.6 million in 2009. Moody's anticipates that 2010 sales will fall by 9.5 percent to 12.7 million.

Moody's expects car sales in France, Italy and the UK to fall 5 percent each in 2010, while Germany, whose popular scrapping scheme ran out in September, will drop 25 percent.

European auto executives are bracing themselves for a tough year.

Ford of Europe CEO John Fleming says the market should recover sometime in 2010 or 2011, but the fade-out of scrapping incentive schemes in European countries during 2010 makes it difficult to exactly estimate European demand.

Opel CEO Nick Reilly says it will take a "very long time" for the European market to recover to its recent level of 16 million annual sales.

For Lamborghini CEO Stephan Winkelmann there is one constant theme to be aware of when considering predictions: "Everything you see has been much worse than forecast."

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