Paris motor show opens to stalling European market

The Paris Motor Show opens with the automobile sector in crisis mode amid deep gloom over the future of the European market, key to the survival of several top manufacturers.

Paris motor show opens to stalling European market
Photo: Daniel Finnan

The continent's debt crisis and the ensuing sluggish growth has wreaked havoc on many automobile manufacturers and the outlook is gloomy for the year ahead.

The head of PSA Peugeot Citroen on Thursday forecast zero growth next year in the European market, which accounts for the bulk of its sales, while the head of Renault underscored the need for more competitivity to remain afloat.

"I don't think one can hope for an upturn next year," in Europe, said PSA Peugeot Citroen chief Philippe Varin, adding that growth would be "around
zero" or even "slightly negative."

Forecasting an 8.0% decline in the European market this year, Varin said the firm was making huge production losses.

"We have lost €350 per car in operational costs," Varin said, adding: "Some of our rivals have lost between 500 and 600 euros."

PSA Peugeot Citroen, the biggest French car maker and second-biggest in Europe after the German Volkswagen group, is set to close a landmark plant north of Paris and shed 8,000 jobs across France.

An expert appointed by the government concluded that the group must restructure urgently and tie up with a global group, saying its crisis was the result strategic errors over two decades, notably in not seizing opportunities offered by globalisation.

Renault chief Carlos Ghosn highlighted a dilemma for manufacturers of mid-level models in Europe, which are squeezed by a growing luxury segment dominated by German manufacturers and Asian firms cutting into their niche with cheaper models produced in eastern Europe.

"Today, the main subject for us, our main priority is our competitivity in France which is a question of survival," he said.

US automaker Ford has said it was planning to slash "several hundred" salaried positions from its workforce in Europe but that all the cuts would be voluntary.

Ford called the cuts part of an ongoing programme "to achieve greater efficiencies in all areas of the Ford of Europe business in the current business environment."

Ford currently employs about 66,000 workers in Europe, the largest proportion of them in Germany.

All the major automakers operating in Europe have been undertaking staff reductions to cope with the contracting European economy and a sizable production over capacity.

The ACEA European manufacturers association said that new car sales in the European Union were down 7.1% for the first eight months of 2012 compared with the same period in 2011.

Even Volkswagen, Europe's biggest carmaker whose launch of the new Golf VII is one of the star turns at the Mondial de l'Automobile 2012, has admitted taking a hit.

Since the start of September, the owner of 12 brands including VW, Seat, Skoda, Porsche and Audi, said it would have to make "adjustments" to sales in Europe "due to the persistent tensions in markets of Western Europe."

Greenpeace activists on Thursday hijacked a VW press conference at the Paris show, brandishing a banner that said "Volkswagen is choking us with smoke."

They also accused the auto giant "of throwing its weight to weaken future European legislation" on CO2 emission norms.

The other new models which are the highlights of the show are the Ford Mondeo, the Adam city runabout offered by Opel-Vauxhall and a new Jaguar F-type two-seater sports model.

South Korea's Kia is meanwhile offering a new people's carrier of which the British version will have seven seats. It will also showcase new versions of a cee'd family hatchback and a hybrid saloon.

The Paris Motor Show, held every two years, opens to the media on Thursday and to the public on Saturday.

Meanwhile, the French institute for oil and new energies (IFPEN), commenting on a wish by the French government for vehicles within 10 years capable of consuming only two litres (half a gallon) of fuel to cover 100 kilometres (62 miles), said that this was possible

It said that consumption by vehicles in Europe had been reduced by 10-15% over five years and could be reduced further by 40-50%.

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France ready to cut Renault stake to shore up Nissan partnership: minister

France is ready to consider cutting its stake in Renault in the interests of consolidating the automaker's alliance with Nissan, Finance Minister Bruno Le Maire said on Saturday.

France ready to cut Renault stake to shore up Nissan partnership: minister
A Renault employee works at the automaker's factory in Maubeuge, northern France. File photo: Ludovic MARIN / AFP
He was speaking in Japan after Italian-US carmaker Fiat Chrysler pulled the plug on its proposed merger with Renault, saying negotiations had become “unreasonable” due to political resistance in Paris.
In an interview with AFP on the sidelines of the G20 finance ministers meeting in Japan, Le Maire said Paris might consider reducing the state's 15-percent stake in Renault if it led to a “more solid” alliance between the Japanese and French firms.
“We can reduce the state's stake in Renault's capital. This is not a problem as long as, at the end of the process, we have a more solid auto sector and a more solid alliance between the two great car manufacturers Nissan and Renault,” he told AFP.
Last week, FCA stunned the auto world with a proposed “merger of equals” with Renault that would — together with Renault's Japanese partners Nissan and Mitsubishi Motors — create a car giant spanning the globe. The combined group would have been by far the world's biggest, with total sales of some 15 million vehicles, compared to both Volkswagen and Toyota, which sell around 10.6 million apiece.
But the deal collapsed suddenly on Thursday, with FCA laying the blame at the door of Paris. 
“It has become clear that the political conditions in France do not currently exist for such a combination to proceed successfully,” FCA said in a statement.
Le Maire said Renault should concentrate on forging closer ties with its Japanese partner Nissan before seeking other alliances.
Things need to be done “in the right order…. First the alliance (between Nissan and Renault) should be consolidated and then consolidation (more generally) and not one before the other.”
“Otherwise, everything risks collapsing like a house of cards,” he warned.
The minister said it would be up to the bosses of Renault and Nissan to decide how to push the alliance forward as ties between the two firms have been strained after the shock arrest of former boss Carlos Ghosn.
Renault is pushing for a full merger between the pair but there is deep scepticism of the plan at Nissan.
There were varied reactions from the French unions Saturday.
“The government is behaving like the agent of the big shareholders, favouring short-term profit to the detriment of the interests of the country,” said Fabien Gache, of the CGT union.
Cutting the state's share in Renault was abandoning its responsibility in the country's auto industry, he argued.
Franck Daout of the CFDT union said it backed a three-way alliance between Renault, Nissan and Japan's Mitsubishi — but not one between Nissan and Renault until the alliance had reached a “safe and sustainable maturity”.