Updating European Auto Industry Woes

Europe has enormous financial issues, as we know. It's entering into another recession now. And perhaps a severe one. We know that, too.

And while unemployment on the continent is already too high, Europe's auto makers, huge employers, are struggling big time. So just how bad is it?

Industrial Production Falls Across Europe has today's update on what's NOT going on across the pond. Both economic growth and employment growth are lacking big time and will be for some time to come:

"Industrial production fell sharply in a number of European nations during September, an indication that the continent's economy is on the brink of a sharp downturn. . . .

Figures also released Friday showed . . . Hungary output dropped by 3.8%, despite a pickup in the manufacture of automobiles.

But in the auto sector more generally, 2012 is likely to be a very weak year, and 2013 is unlikely to be much better.

ACEA, the European auto makers' associations, expects new-car registrations in the region to decline by between 8%-10% this year compared with 2011, with sales at their lowest levels since the early 1990s, leaving the industry awash with spare capacity.

Italy's Fiat has warned that sales may not recover until early 2014. Ford Motor Co., Peugeot-Citroën,  and General Motors Co. are all planning to reduce capacity. Ford is shutting one factory in Belgium and two in the U.K., Peugeot plans to halt output at a plant in France in 2014 and GM's Opel unit is in talks about closing a factory in Germany from 2016.

The European auto industry is one of the largest employers in Europe with about two million direct jobs and another 10 million in related manufacturing including other sectors such as steel, chemical and textiles. Auto makers produce more than 17 million cars, trucks, vans and buses in Europe annually, which is roughly 24% of global vehicle production, according to data from industry association ACEA.

The European Commission plans to bring together auto makers, trade union representatives and industry ministers by the end of November to discuss measures to tackle the deepening crisis in the region's car industry and take coordinated action to improve competitiveness."

SUMMING UP 

European countries and auto makers are between the proverbial rock and a hard place.

Debts are high, demand is low and capacity is excessive.

Consumers are both broke and scared.

So are many European nations.

We'll stay tuned, but there's no government knows best way out of this mess.

I sure hope American politicians are paying attention to what happens when problems are ignored until they are out of control and creditors refuse to keep kicking the can down the road. 

European auto makers have simply run out of road.

Thanks. Bob.