VW: Some European automakers may go bankrupt without government aid
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Volkswagen doesn't see a significant rebound in the European auto market over the next 1 to 2 years, group sales chief Christian Klingler said. |
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PARIS -- Volkswagen Chief Financial Officer Hans Dieter Poetsch said some European competitors are at risk of going out of business without financial assistance as the region's auto market sinks with no end in sight to the downfall.
"It is unclear if all carmakers will survive without governmental help," Poetsch said on the eve of the Paris auto show on Wednesday. "Carmakers in southern Europe that produce small cars will be especially affected."
Volkswagen doesn't expect a significant rebound in the European auto market over the next 1 to 2 years, group sales chief Christian Klingler told reporters at a round table at the Paris auto show on Wednesday.
"We're bracing for more negative surprises in 2013, perhaps also in 2014," Klingler said.
As the show got underway on Thursday, French automaker executives were also pessimistic about the European market.
PSA/Peugeot-Citroen CEO Philippe Varin said rivals would soon be forced to follow PSA in closing factories and making big job cuts.
"Some of our competitors in Europe are losing even more money than us on every car they sell," Varin said. He described the European industry's situation as "untenable" in an interview with French newspaper Les Echos.
"We've laid out our plans, but other manufacturers will have to take similar steps. It's obvious that a certain number of plants will have to close," he said.
Europe's two largest automakers said there's intense downward pressure on prices in the region and predicted that sales, which may reach a 17-year low in 2012, won't recover next year.
Dealers in Germany, the region's biggest economy, offered discounts on average of 12.1 percent off the sticker price last month, the highest rate in more than a year, according to industry publication Autohaus PulsSchlag.
"The biggest problem for the industry is the complete meltdown of pricing discipline," Erich Hauser, a London-based analyst at Credit Suisse, said by phone.
The ACEA trade group for carmakers in Europe is forecasting that car sales in the region this year will be at the lowest level since 1995. With incentives at current levels in response to the contraction, "no one can make money," Susan Docherty, head of General Motors Co.'s Chevrolet brand in Europe, told reporters today at the Paris show.
VW said Sept. 25 that it's also facing a tougher second six months of the year. European auto deliveries may get worse before improving, CFO Poetsch said, adding that the current market has never been more difficult to assess.
"It would be a great success if this year we match last year's operating profit," Poetsch said. "At the moment it looks reasonably well."
Renault CEO Carlos Ghosn said the automaker's goal to increase deliveries this year is strongly under pressure. "We see no improvement next year. The market will be at best stable, or more likely a little lower," Ghosn told investors on Wednesday.
"The two guys with the most stretched balance sheets are clearly Fiat and Peugeot," Credit Suisse analyst Hauser said.
Fiat closed a plant at the end of 2011. GM, which has an alliance with Peugeot, is looking at shutting a factory in Germany. Seoul-based Hyundai Motor Co., the fastest growing mass-market auto group in Europe, is holding off on major expansion in the region to focus on lifting profit and retaining customers, its top executive in the region said.
Fiat CEO Sergio Marchionne said today at the Paris show that Fiat, which controls Chrysler Group LLC, hasn't been able to find a partner in Europe because of labor disputes. The carmaker isn't seeking aid from Italy or the European Union, Marchionne told journalists.
"Without Chrysler, we would have gone through hell" because of losses in Europe, Marchionne said.
Marchionne, who currently heads the ACEA, has been urging his European counterparts to come up with a comprehensive plan to cut overcapacity throughout the region, a move resisted by VW and the other German carmakers.
Fiat is on track to lose 700 million euros in Europe this year and has cut investment spending by 500 million euros to preserve cash.
Ghosn said he expects the auto market to shrink 13 percent in France and 7-8 percent in Europe this year - compared with previously forecast declines of 11 percent and 6-7 percent respectively.
Last week, Renault Chief Operating Officer Carlos Tavares said the carmaker does not intend to cut jobs or plants "at this stage." He said: "Our plants are in a difficult situation, which we are managing with temporary layoffs ... but the slump in Europe is likely to last."
PSA is shuttering its factory in Aulnay near Paris that builds the Citroen C3 subcompact and cutting more than 10 percent of its 100,000-strong domestic workforce in response to a sales collapse that has seen the automaker consume almost 200 million euros ($257 million) a month in cash.
"The biggest problem for the industry is the complete meltdown of pricing discipline," said Erich Hauser, a London-based analyst at Credit Suisse. The two automakers with the most stretched balance sheets are "clearly" Fiat and PSA," he said.
Worse before better
VW's Poetsch said European auto deliveries may get worse before it starts to improve, adding that the current market has never been more difficult to assess.
VW sales chief Christian Klingler said the pricing situation in the region is very tense and the company does not expect a significant rebound in the European auto market over the next 1-2 years. "We're bracing for more negative surprises in 2013, perhaps also in 2014," Klingler told reporters at the show.
Fiat CEO Sergio Marchionne, who currently heads the ACEA industry lobby group, has been urging his European counterparts to come up with a comprehensive plan to cut overcapacity throughout the region, a move resisted by VW and the other German carmakers.
Fiat is on track to lose 700 million euros ($900 million) in Europe this year and has cut investment spending by 500 million euros to preserve cash.
Bloomberg and Reuters contributed to this report
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