European automotive industry “precarious” Many car companies shut down factories

The shrinking market, rising prices of raw materials, and the continued expansion of the sovereign debt crisis are just three major problems in the European automotive industry. They cannot be controlled and continue to deteriorate, leaving European cars once again in a “precarious” situation this summer.

On July 16, the second-largest automobile manufacturing brand in Europe, Citroën Group (hereinafter referred to as “PSA”), was hit again. The credit rating agency Moody’s Investors Service Company lowered the credit rating. Affected by this, the stock price fell on the same day. 8%. However, the impact of PSA is precisely a concentration in the European automotive industry. Opel, Mitsubishi, Fiat, and even Volkswagen and other car companies, European performance "red light" high hanging, which is suspended in the head of many car companies sword.

The analysis pointed out that the depth of the debt crisis in European countries and the macroeconomic downturn have a direct impact on the performance of the automotive market. This will be the biggest market adjustment for European major auto manufacturers since the 2008 financial crisis.

PSA is stuck in a financial quagmire According to the latest news, global sales of PSA fell by 13% in the first half of this year, and total sales of passenger cars and trucks fell to 1.62 million from 1.86 million in the same period last year. Among them, PSA in France, Spain and Italy, these traditional strong market sales decreased by 15%, while sales in Latin America also fell to 122,000 units, a drop of 21%.

In response to the deteriorating market, on July 12, PSA announced that by 2014 it will close a factory in the city of Onaysupouou in the province of Seine-Saint-Denis in southern Paris. More than 3,000 people will be laid off. In addition, at the Rennes plant in western France, more than 1,400 layoffs will be laid, and there will be 3,600 non-vehicle jobs, totaling 8,000 layoffs. It is understood that the Onaisupuwa plant mainly assembles the Citroen C3 model, while the Rennes plant mainly produces high-end models Peugeot 508 and Citroen C5.

PSA CEO Philip Varan said that PSA is now losing more than 200 million euros per month and it is impossible to make no change. If no measures are taken, the entire group will be put at risk.

However, the worsening financial situation has also attracted the attention of rating agencies. Moody's, a global credit rating agency, stated that PSA cannot effectively solve the problem of underutilization of production capacity in Europe and is facing huge operating pressures. The financial situation is already under the Ba1 credit rating and may deteriorate further. Its auto business may consume Huge amount of money, or will consider reducing the credit rating.

In fact, in order to cope with the declining market and reduce costs, PSA has been active since this year, but it has not been able to reverse the trend. This year, PSA has formed an alliance with GM. General Motors bought PSA's 7% stake and became the second largest single shareholder of PSA. Moreover, both parties hope to save hundreds of millions of dollars in cost and will cooperate with A0-class, B-class and SUV models.

In the face of continued deterioration, the French government is also unable to sit still. Reports have pointed out that France intends to stimulate the development of the auto market in order to boost the auto market, and it intends to stimulate the auto consumption plan again.

A number of car companies "scratch healing"

Today, looking at the entire European automotive market, PSA's deep financial quagmire is not a single case. Since the beginning of this year, due to the sluggish market, the European auto industry is once again stuck in the doldrums. A number of automakers have made adjustments to the market and tried to pass “scratch treatment”.

Among them, Mitsubishi Motors sold its Nedcar plant in the Netherlands at the price of “1” (abbreviation for Netherlands Car B.V.). According to Mitsubishi Motors’ announcement, Mitsubishi and the Dutch bus manufacturer VDL initially reached an agreement that the Nedcar plant will be sold to VDL for a nominal price of 1 Euro. VDL will guarantee the employment of 1,500 employees at the Nedcar plant.

According to the plan, both parties will sign a definitive agreement in August this year. The 85% shares owned by Mitsubishi Motors and Mitsubishi Motors Europe will hold 15% of the shares and will be owned by VDL at the end of December. The transaction also caused Mitsubishi Motors to lose 28 billion yen.

The Italian automaker Fiat Auto expects that the European auto market will continue to decline in the next two to three years. In order to reduce the regional output in Europe, it is considering closing another factory in Italy. According to statistics, Fiat’s operating losses in the European region reached 207 million euros in the first quarter, which is twice the same period last year.

In addition, on July 16th, General Motors’ Opel Automobile Lightning Replacement CEO, CEO of General Motors, suddenly appointed General Motors Vice President Steven Gage as interim CEO. Although Opel said that high-level changes did not change Opel's commitment to its revitalization plan. However, some analysts have pointed out that the general leadership has lost patience with European director Straak since January of this year, because with the fifth decline in sales in the European market, GM needs to see rapid changes.

The statistics on the European market will show that, in May of this year, European vehicles sold a total of 1.3 million vehicles, a decrease of 9.54% compared to 1.44 million last year. In the first five months of this year, a total of 6.409 million vehicles were sold, a decrease of 7.79% compared to 6.95 million vehicles in the same period last year. In Western Europe, sales were 12.21 million vehicles in May, down from 10.13 last year, and sales were 6.02 million in the first five months, down 8.53% year-on-year. Among them, in the entire EU-27 countries, positive growth in sales in the first five months was only positive growth in nine countries, most of which were Eastern European countries.

According to the latest data released by the European Association of Automobile Manufacturers (ACEA), due to the price cuts of German Volkswagen and Renault of France partially offsetting the European debt crisis and the impact of high unemployment, European registered car sales fell 1.7% in June compared to the same period last year. It reached the lowest level in eight months, reaching 1.25 million vehicles. In the first half of the year, automobile sales fell by 6.3% to 6.9 million vehicles.

From the perspective of various brands, sales of most European car companies have declined to varying degrees. Among them, Renault Automobile's global sales fell by 3.3% in the first half of the year, total light vehicle sales fell to 1.33 million, and European sales fell by 14.9% to 708,000 vehicles. In its largest single market, France, sales fell by 15.2% to 312,200 units, and its market share dropped by half a percentage point to 24.7%.

ACEA also pointed out in its recent report that the European automotive industry is expected to contract by 7% this year to the lowest level since 1995, a 21% reduction from the peak period of 2007.

Jerome Stoll, Renault’s vice president of automotive marketing, said that due to the acceleration of the European automobile market contraction this year, Renault has given up its sales growth target and will not be able to achieve the target of 3% to 4% growth this year.

The analysis pointed out that the continuous downturn of the European and American markets has exerted great pressure on production capacity. Coupled with the market downturn, European car companies will face enormous challenges.