Carmakers feel the pinch as crisis pains Wall St
Europe's carmakers are cutting production and reporting falling sales in a clear sign that the global financial crisis is spreading from banks to other sectors of the economy.
By Agencies |
BERLIN: Europe's carmakers are cutting production and reporting falling sales in a clear sign that the global financial crisis is spreading from banks to other sectors of the economy.
On Wednesday BMW, the German luxury auto firm, said it had sold almost 15 percent fewer vehicles in September, a plunge that it blamed on the "increasingly challenging economic situation.
"The crisis in the financial markets is currently making consumers highly reluctant to purchase, especially in the United States," the Bavarian firm said. "The situation remains challenging. The recent escalation in the financial crisis is also affecting consumer confidence in the premium segment," it said.
The United States, BMW's largest market, saw deliveries fall by a quarter and by 30 percent for BMW-branded cars -- it also owns Mini and Rolls-Royce and makes motorbikes -- while in Western Europe, sales were off 17 percent.
The Munich-based firm, which has 17 production facilities in six countries, announced on Tuesday that it would produce between 20,000 and 25,000 vehicles less than originally planned this year.
"If we have to, we will cut it further," a BMW spokesman said. BMW is by no means alone, with other auto companies also feeling the pinch, not just makers of expensive vehicles like BMWs.
"The unstable economic environment has resulted in a very unpredictable situation and the downturn in the global car industry is more drastic than expected," he said. Ford said on Tuesday it would "reduce slightly" production at its Saarlouis plant, where it makes Focus, C-Max and Kuga cars, and lay off 200 temporary employees early.
Porsche is preparing to cut output too and although at Volkswagen the production lines were still running as normal its Skoda and Seat units have already announced reductions. Opel, a unit of General Motors, the world's biggest automaker, said on Tuesday that it was suspending production at two German factories, Bochum and Eisenach.
Opel wants to lower production by 40,000 vehicles by the end of the year and also wants to cut output at its other plants around Europe including in Spain, Poland and Britain, where it sells cars with the Vauxhall brand. "As a result of the financial crisis we have the situation where people are holding onto their money and are ordering fewer cars than normal," a spokesman for Opel told the media.
"Credit markets are practically frozen. Even healthy companies are having trouble finding financing," the Financial Times quoted Ghosn as saying. "This is leading to the fact that we have to be very cautious in the use of cash by slowing down investments, reducing inventories and activities. That means losses and this will add to the financial burden."
"As lending declines, everyone has less money to spend and this impacts the economy."
On Wednesday BMW, the German luxury auto firm, said it had sold almost 15 percent fewer vehicles in September, a plunge that it blamed on the "increasingly challenging economic situation.
"The crisis in the financial markets is currently making consumers highly reluctant to purchase, especially in the United States," the Bavarian firm said. "The situation remains challenging. The recent escalation in the financial crisis is also affecting consumer confidence in the premium segment," it said.
The United States, BMW's largest market, saw deliveries fall by a quarter and by 30 percent for BMW-branded cars -- it also owns Mini and Rolls-Royce and makes motorbikes -- while in Western Europe, sales were off 17 percent.
The Munich-based firm, which has 17 production facilities in six countries, announced on Tuesday that it would produce between 20,000 and 25,000 vehicles less than originally planned this year.
"If we have to, we will cut it further," a BMW spokesman said. BMW is by no means alone, with other auto companies also feeling the pinch, not just makers of expensive vehicles like BMWs.
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Sweden's Volvo, a unit of US auto giant Ford, said Wednesday it was cutting more than 3,000 jobs in Sweden and abroad in addition to 2,000 layoffs announced earlier this year. "These are difficult times for the car industry in general, including Volvo," Volvo's chief executive Stephen Odell said. "The unstable economic environment has resulted in a very unpredictable situation and the downturn in the global car industry is more drastic than expected," he said. Ford said on Tuesday it would "reduce slightly" production at its Saarlouis plant, where it makes Focus, C-Max and Kuga cars, and lay off 200 temporary employees early.
Porsche is preparing to cut output too and although at Volkswagen the production lines were still running as normal its Skoda and Seat units have already announced reductions. Opel, a unit of General Motors, the world's biggest automaker, said on Tuesday that it was suspending production at two German factories, Bochum and Eisenach.
Opel wants to lower production by 40,000 vehicles by the end of the year and also wants to cut output at its other plants around Europe including in Spain, Poland and Britain, where it sells cars with the Vauxhall brand. "As a result of the financial crisis we have the situation where people are holding onto their money and are ordering fewer cars than normal," a spokesman for Opel told the media.
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But life for carmakers is also being made harder by the fact that banks have become far less willing to lend money to buyers and to companies to help cover their day-to-day operations. According to Carlos Ghosn, chief executive of French carmaker Renault, companies are trapped in a vicious circle that could lead to a "prolonged and strong" recession. "Credit markets are practically frozen. Even healthy companies are having trouble finding financing," the Financial Times quoted Ghosn as saying. "This is leading to the fact that we have to be very cautious in the use of cash by slowing down investments, reducing inventories and activities. That means losses and this will add to the financial burden."
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"There is unprecedented turmoil in financial sectors and sooner or later, more pain will be felt in the real economy," Adam Cordery, a fund manager at investment company Schroders in London, told Dow Jones Newswires. "As lending declines, everyone has less money to spend and this impacts the economy."
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