European politicians should act immediately to restore consumer confidence affecting the auto industry and clarify CO2 policy, General Motors' top executive for the region said at the Paris motor show on Thursday.

Automakers have gathered in Paris "against the backdrop of what has been an unprecedented set of economic challenges," Carl-Peter Forster, president of General Motors Europe, told a press conference as GM unveiled new concept and production cars, including the keenly-awaited Chevrolet Volt.

"We are making good on our promise to expand our portfolio in Europe, differentiate our brands and leverage this breadth of offerings to appeal to diverse customer groups and market requirements," Forster said.

"In Germany, 10 to 15% of the cars are more than eight years old. We know there is pent-up demand for our Opel products.  And we have local initiatives in place to spur cash sales. But our efforts are being stifled by a serious cash shortage."

He said the auto industry needs help "from political leaders to turn the situation around. At the EU level, and within the political leadership of individual countries, action must be taken to stimulate the economy, relieve the credit crunch and restore consumer confidence. Only then will consumers have the means - and the confidence - to invest in a new automobile".

Forster noted that the economic downturn in the North American car and truck market had now spread to western Europe, as a result of surging oil and commodity prices, which have triggered a strong inflationary trend.

"You have seen the grim numbers reported recently.  Registrations in western Europe were down 16.7% in August compared to the same month last year.

"Spain, Italy, the UK, and Ireland are especially vulnerable to the risk of recession due to the ongoing credit crunch. The tight credit situation has been compounded by price corrections in the housing market. This, of course, puts added pressure on car volumes and pricing in local markets."

He said unfavourable currency rates, primarily the deteriorating value of the British pound, compared to the euro, are hurting sales.

"We actually sell more vehicles in the UK than we build there, and the weak buying power of the pound has put a new car purchase beyond the reach of many people who might otherwise be in the market right now."

High commodity prices for metals and oil are affecting "every aspect of our business as new car manufacturers, as marketers and as retailers. And it's even more painful for our would-be customers, for whom the soaring price of oil has created a real cost-of-living crisis that strikes at the heart of the middle class."

Year to date sales to the end of August in the UK were down 3.3%, Ireland was off 19%, Sweden down 9.7%, Italy off 12% and Spain down 22.6%.

"Spain is especially suffering - not only from the housing crisis - but also because of new CO2 regulation that has driven a sudden market shift toward low-emission vehicles," Forster said.

In Germany, over the last eight years, the cost of driving a car hasincreased more than the average rise in consumer prices, due primarily to increasing fuel prices - 42.5% for high-octane petrol and 76% for diesel.

"That's a 76% increase for the price of diesel versus 12% for the price of a car," Forster noted.

He said weak sales had already prompted plant closings and cutbacks by automakers and suppliers.

"And I'm afraid there will be many more announcements in the weeks ahead. We at GM Europe are doing everything that we can to manage this down period.

"But for any of us to succeed, we must have customers who are willing and able to purchase new automobiles.  Frankly, until consumer confidence returns, the automobile market cannot regain its momentum.

"Another uncertainty that is undermining consumer confidence and purchase intentions is the lack of clarity on CO2 policy. Stated plainly, we need action on a reasonable, results-focused, pan-European CO2 policy. Now."

Forster said GM Europe was committed to working with policy makers to support EU strategies that will quickly reduce the impact of CO2 emissions from cars.

"However, for any policy to be successful, it must enable the design and manufacture of cars that are both desirable and affordable. This is the only way we will achieve the near-term volume sales required to replace the older, high-emission vehicles currently on our roadways.

"If the CO2 policy slows or even kills demand for new vehicles, the policy actions will have failed completely by leaving the older, higher-polluting cars on the road. 

"If we consider CO2 policies from this practical, results-focused perspective, it becomes clear that a successful strategy will be one that is viable for manufacturers proportional with other sectors and supported by the necessary fuel, infrastructure and taxation policies."

He said European Union leaders must devise policies that must include a reasonable, phased-in compliance schedule as the auto industry needs sufficient lead-time to bring new technologies to market. Most of the models that will be sold in 2012 are those that have recently been introduced, or are already advanced in their product development cycle.

"We need a phase-in period from 2012 to 2015 so that we can adjust our products to meet the new CO2 requirements, working within the product development cycles to make the necessary changes in a way that is most affordable for consumers."

CO2 policy should serve to stimulate the early commercialisation of breakthrough technologies, such as extended-range electric vehicles.

"We believe that the necessary incentives should come in the form of 'super-credits' - in which vehicles rated under 50g count five times when calculating the manufacturer's CO2 compliance rating."

Plugging one of his company's Paris show new models, Forster said extended-range vehicles like the Chevrolet Volt offer ultra-low emission technology on a platform that is appealing to the bulk of car buyers.

"Given the high initial cost of these new technologies, super-credits would serve as a strong encouragement to automakers to get these technologies out of the labs and onto the roads as soon as possible. We were pleased that the environment committee of the European Parliament voted for innovation in Europe when they supported super-credits last week," he said.

He added that national governments should provide tax breaks for customers, to encourage them to purchase innovative technologies.

CO2 policy must also include a comprehensive, easy-to-execute plan to quickly expand the availability of biofuels, Forster added.

"We know that biofuels such as E85 can reduce CO2 emissions by as much as 70% on a source-to-wheels basis. And biogas can achieve net-zero CO2 source-to-wheels. The vehicle technologies to run on these fuels is proven, and cost-effective.

"With a policy to rapidly expand the availability of biofuels, we could see immediate and dramatic CO2 reductions.

That's why we believe that CO2 policy must ensure pan-European availability of biofuels - E85 as well as low blends - and give credit to automakers for making these technologies available."

He said GME welcomed the 10% binding renewable energy target in transport fuels by 2020 as it would support the wide-range of technologies GM is working on, such as E85 flexfuel vehicles, extended range electric vehicles and hydrogen fuel cell vehicles.

"Again, we need a policy that creates concrete action now to make E85 and CNG from biogas widely available. With this kind of comprehensive CO2 policy in place, there is no reason why we can't make quick and meaningful progress to reduce exhaust emissions."