Overcapacity in Europe to persist for 3 years, say IHS analysts

Article by Anita Panait, on June 26, 2013

Excessive production capacity in Europe will continue to be the case for at least another three years, analysts at IHS Automotive disclosed to Automotive News Europe. According to Denis Schemoul , IHS Automotive's head of Europe vehicle production, they expect the overcapacity  situation to improve once production volumes have recovered, i.e. on the 2016 to 2017 period.

Carmakers are currently dealing with excessive capacity by shutting down their sites or shifting production to Europe from other parts of the world. According to IHS figures, over half of Europe's 160 vehicle sites operated below 70 percent of their total capacity in the first quarter of 2013.

In first three months of this year, 85 sites were operating at 70 percent or below, compared with 74 plants in the same period in 2012. A plant typically has to use around 75 percent to 80 percent of its total capacity to break even.

Philippe Jean, head of the automotive industry unit of the European Commission's Enterprise and Industry Directorate General, Automotive News Europe Congress last week that figures showed that the overcapacity problem is “more widespread than people thought,” adding that it is felt across Europe.

According to Jean, one solution would be to have strained plants keep paying workers while running the production line three out of every four weeks a month. He said plants could use the off week to “ensure they have better training and to have new technologies. Jean blamed the failure on "lack of consensus" among EU states and carmakers for the continued persistence of this overcapacity problem. [source: automotive news - sub. required]

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