The leaders of several automakers are hoping that European governments will loosen up their opposition to plant closures and job cuts required in order to restore profits. In the past few months, the auto market in Europe has declined further and there have been no signs of recovery. Last Tuesday at the Geneva car show, executives from the major automakers such as Ford, Fiat, Daimler and Renault cautioned that the demand in Europe will remain weak for many years as governments implement austerity measures.
Dieter Zetsche, Daimler’s chief executive, said that three months ago, they didn’t expect the European market to be at this rate of decline now.
Guillaume Faury, the strategy chief of PSA Peugeot Citroen, said that the market slump in Europe appears to be sustained and that no one expects sales to be back to pre-crisis levels in the foreseeable future. He also predicted that for the next five years, there will be a “kind of reckoning” on the production levels in Europe for the next five years.
He thinks that governments will have to modify their stand and encourage restructuring instead of resisting it. In the 27-member European Union, new-car sales fell by 8.2% in 2012, its lowest level in 17 years.
This was attributed to consumer incomes being affected by increasing prices, lowered wages, and austerity measures. Some had hoped that there will be a recovery this year. But even in Germany, new car registrations fell by over 10% in February compared to the previous year. Meanwhile, sales in France fell by 12% while Italy posted a 17% drop. When asked by reporters, Renault's chief executive Carlos Ghosn said that he’s confident that like the U.S., no European government will allow an automaker to fail.