With national economies looking shaky in western Europe, industry pundits are forecasting a flat new-car market or one that will be slightly down this year. The unknown factor, however, is the effect of a possible war against Iraq.
PSA/Peugeot-Citroen Chairman Jean Martin-Folz said the auto industry could be looking at a problem similar in proportion to the oil crisis of the 1970s, in a worst-case scenario.
"It is something of an unknown and like everyone else we are expecting the market to be flat or down by around 2 percent in 2003," Folz said. "But if the problem in the Gulf escalates there could be very serious repercussions in Europe."
Uncertainty among buyers and a shortage of oil could drive the market down dramatically, Folz added. During the last oil crisis three decades ago, Europe's new-car market dropped 13 percent.
But even with a fall of that magnitude, Folz said PSA was better positioned than most
carmakers to ride the storm because of its capacity utilization.
"Our plants are running on average at 117 percent of capacity which means we can reduce our manufacturing output without increasing the prices of our products," Folz said.
The tension in the Middle East could also affect vehicle shipments. Large vehicle-carrying ships have already been commissioned to carry military equipment and carriers from Japan and South Korea could be forced to take longer routes to Europe to avoid the troubles.