Automakers cautiously upbeat in Geneva as Europe recovers

By Korea Herald
  • Published : Mar 9, 2014 - 20:05
  • Updated : Mar 9, 2014 - 20:05
For Fiat SpA, PSA Peugeot Citroen, Volkswagen AG and others converging at the Geneva International Motor Show, what a difference a year makes.

Automakers are showcasing their latest creations, including the Jeep Renegade and Audi TT, as the region’s market pulls out of a six-year slump, with the ACEA industry group predicting European deliveries will rise 2 percent in 2014.

Recovery in the auto industry comes as growth in the 18-nation euro area is set to gain 1.2 percent this year and economic confidence unexpectedly improved last month, while signs of a broader rebound include a 22 percent increase in global merger activity. Car sales across the region have risen for five consecutive months as the end of a record-long recession is prompting consumers to buy new vehicles.

“Last year we were cautious about the prospects in Europe, and this year it’s the opposite,” Christian Klingler, VW group’s sales chief, said at the Geneva event. “The mood is better, but the reality is we are still far from the peak.”

Peugeot, General Motors Co. and Ford Motor Co. are also closing five factories in the region and eliminating 20,000 jobs to streamline operations. Renault SA is cutting another 7,500 positions in France to lift profit.

“The confidence is starting to return,” Stephen Odell, Ford’s Europe chief, said on the sidelines of a Geneva event. “We’re on a reasonable path of moderate recovery.”

The Geneva International Motor Show, which is open to the public March 6-16, is a way for carmakers to showcase vehicle design and expensive sports cars. VW’s Audi brand unveiled the remake of the iconic TT coupe last night. Today, Lamborghini is showing the Huracan, Ferrari debuts the California T and Bentley highlights the Continental GT Speed, making its fastest model even faster. Show organizers expect this year that 250 exhibitors will present more than 146 automotive premieres ― up from 133 in 2013.

Daimler AG Chief Executive Officer Dieter Zetsche, under pressure last year to improve sales at Mercedes-Benz, is also presenting a turnaround story. He’s now struggling to keep up with demand as customers snatch up new models such as the revamped flagship S-Class and CLA Coupe. The CEO has also joined with Renault to help cut development costs, especially at the Smart small-car brand.

“Here in Geneva, we will show you further proof that our product offensive is really just starting to take off,” Zetsche said late yesterday. “We are still not able to build as many cars as we could sell at Mercedes right now.”

Auto producers are beginning to sound upbeat as some eurozone growth indicators show improvement.

Gross domestic product climbed 0.3 percent in the fourth quarter, exceeding economist estimates and extending the euro area’s expansion to three quarters. Euro-area economic confidence unexpectedly rose in February while business confidence in Germany reached the strongest level in two and a half years.

“Western Europe from an automotive point of view is really leveling out, and will come back,” Jaguar Land Rover CEO Ralf Speth told reporters. “In that context, I am cautiously optimistic.”

Still, the region’s sales are climbing gradually from a two-decade low, and executives aren’t forecasting a U.S.-style rebound in Europe. Deliveries in the region last year totaled 12.3 million autos.

Russia’s territorial dispute with neighboring Ukraine may also affect the Russian market where 2.78 million vehicles were sold last year.

That leaves carmakers to count on the American and Chinese markets, the world’s two biggest, to help propel their global growth.

“If hostility breaks out in the East, this would undoubtedly affect western Europe,” Johan de Nysschen, head of Nissan Motor Co.’s Infiniti brand, said in an interview. “That could put a damping effect on what is already a very, very weak recovery in western Europe.”

Bayerische Motoren Werke AG, the world’s biggest maker of luxury autos, said today in Geneva it plans to sell more than 2 million cars and sport-utility vehicles this year as demand grows in China and the U.S. GM, Ford and Toyota Motor Corp. ― the three largest auto manufacturers in the U.S. by sales ― each predict the country’s auto deliveries will top 16 million in 2014 after growing by more than 1 million annually for the last four years. They totaled 15.6 million in 2013, the industry’s best annual result since 2007, according to researcher Autodata Corp.

“One big change is that last year, everybody had a very big question mark about when the decrease of the western European market would end,” said Didier Leroy, Toyota’s Europe chief. “Now, basically everybody agrees that the recovery already started in the second half of 2013. It will not be big like in the U.S. It will be a very, very slow recovery.”