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Europe's car makers warn weak recovery means more cuts

Europe's car makers warn weak recovery means more cuts
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As the Frankfurt motor show opened European car makers were gloomy saying they will need to close more factories and cut more jobs.

The bosses of some of the biggest manufacturers said sales in Europe appeared to be stabilising after five years of decline, but they also warned any recovery in demand is likely to be long and slow in a region where unemployment is high and bank lending weak.

European Union sales are way down from their 2007 peak of about 16 million vehicles. Last year they slid to 12 million and in the first half of this year 6.2 million were sold.

Ferdinand Dudenhöffer, from the Centre for Automotive Research at the University of Duisburg-Essen said: “In the car industry, we have two worlds; on the one hand Europe, which is a catastrophe, and [on the other], the rest of the world where it looks much better. What is on show here will not turn the market around in Europe. Electric cars are being sold in only small numbers, so you can’t expect a big push from them. The smaller sports utility vehicles are getting buyers, but these are models which are already well known and that’s not going to make a big difference.”

With no boost from the green side of the business, the manufacturers say it is likely to take years for a recovery.

But many need to cut capacity right now to staunch their losses.

Despite signs of improvement in the eurozone economy, car sales fell in Germany, France, Italy and Spain in August.

BMW’s boss Norbert Reithofer said he does not see a light at the end of the tunnel this year, in Europe, while VW’s chief Martin Winterkorn said as many as ten European factories need to close although he stressed his company did not need to make cuts thanks to strong growth in the United States, China and Russia.

The head of Ford Europe, Stephen Odell, was cautious about any upturn: “Our view is that over the next five years we see a modest recovery, about 20 percent of the industry from the base.”

Under particular pressure is Peugeot, which lost five billion euros last year and is more exposed to weaker southern European markets than many rivals.

Its CEO, Philippe Varin, said shutting down more production lines was “exactly the discussion we are having”, but added he would present cutbacks to unions before announcing details.

Varin said Peugeot’s orders had stabilised so far this month and predicted Europe would return to “slightly positive growth” in 2014.