Europe’s carmakers trim production plans

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Europe’s carmakers trim production plans

Post  Administrator on Mon Oct 17, 2011 9:27 am

Several carmakers are cutting back production or overtime work at their European plants because of weakening market demand – a further indication that the debt crisis is beginning to hit the real economy.

PSA Peugeot Citroen, Renault, General Motors and Ford Motor have all scheduled some non-production days at their European plants this quarter in order to keep inventories tight, amid expectations that the continent’s car market will shrink again in 2012.

Data on European car sales due out this week are likely to show that they were flat in September. JD Power, the consultancy, estimates that the west European market grew by 0.4 per cent year on year in September.

Analysts are not predicting for this year or 2012 the double-digit drops seen in some car markets after the collapse of Lehman Brothers in 2008, which paralysed bank lending and caused consumer confidence to wither.

However, industry forecasters who had counted on a recovery in western Europe’s car market next year now say it will contract.

“Problems in the wider economy are impacting potential car buyers’ decisions as to whether to buy a car now, or maybe hold off until their job is a bit more secure and the economy is improving,” said JD Power analyst Jonathon Poskitt.

Ford has scheduled several non-production days this quarter for its Belgian plant in Genk. The US carmaker, says that while demand for cars such as its new Focus model is strong, “the overall car market in Europe remains soft”.

France’s PSA Peugeot Citroen and Renault both scheduled some down days at selected plants this month.

General Motors has scheduled about 60 non-working days at Opel-Vauxhall’s plant in Zaragoza, Spain, through to the end of 2012 and about 20 in Eisenach, Germany, to the end of this year. GM says the reduced days reflect both the slower market and its need to bridge a gap until late next year, when it begins producing a new small car in Eisenach.

Japan’s Toyota and Honda are still ramping up production in Europe as they recover from the supply disruption of this year’s earthquake.

However, Toyota, says that it is “being more cautious than before” because of market conditions, and so has cancelled weekend work and reduced overtime.

Premium carmakers including Britain’s Jaguar Land Rover and Bentley also say they have no plans to cut production as they continue to report record global sales.

However, IHS Automotive warned last week that because of the negative economic data from the Eurozone and the US, premium carmakers’ sustained growth “can no longer be assured”.

Producers are taking some comfort from the fact that European car sales are now running at such a low rate, especially in hard-hit markets such as Spain, that they cannot fall as steeply as they did in 2008-09, even if the economy contracts sharply.

Spain’s car market is running at about 800,000 units a year – half the 1.6m recorded in 2007 – and Italy’s at about 1.75m, compared with 2.3m before the recession, JD Power says.

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