The Nightmare Of The European Auto Industry
PSA Peugeot Citroën, whose February sales plunged 16.8%, re-announced at the Geneva auto show that it would solve its overcapacity over the next two years. But layoffs and plant closings become highly politicized. French Labor Minister Xavier Bertrand issued a stern warning to PSA CEO Philippe Varin when word of talks with GM leaked out: layoffs as part of the alliance would be out of the question. In November, President Nicolas Sarkozy summoned Varin and told him to reconsider laying off 6,800 workers. Layoffs will be even tougher to implement if socialist François Hollande wins the election.
Whatever their thinking was at the time, GM and PSA are now saying that Opel and PSA would each deal with its own overcapacity, and that plant closings weren’t part of the alliance, which would focus on saving money elsewhere. Chancellor Angela Merkel got personally involved in protecting Opel factories during the financial crisis and brokered the sale of Opel to keep GM from shutting it down. The deal fell apart, but the restructuring agreement survived and prevents GM from closing any plants until 2014.
Individual countries prevent layoffs, Marchionne said and added that the French government bailed out its automakers on condition that they wouldn’t close any factories, whereas in the US, the opposite happened: the government pushed GM and Chrysler to restructure during their bankruptcies as part of the bailout. So he appealed directly to the EU Commission to liberalize labor markets because individual countries wouldn’t do it.
Overcapacity pushes prices down, he said, and “that’s why almost no one is making money in Europe.” Alas, VW, BMW, and Daimler are basking in last year's record worldwide sales and profits. Even in Europe they weren’t faring too badly, with Daimler up so far this year and VW and BMW down a smidgen. Clearly, the situation is “horrible” for European automakers, but there are those that can get through it and those that can’t. And those that can’t—Fiat, PSA, Renault, Opel, and Ford—will have to restructure... or get bailed out again.
http://www.businessinsider.com/the-nightmare-of-the-european-auto-industry-2012-3
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