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GERMANY: Diesel boom creates petrol engine overcapacity - Fiat-GM closing plants

By just-auto.com editorial team | 18 October 2004

Automakers and suppliers are scrambling to build enough diesel engines to meet voracious European demand. But they have found few solutions for the enormous unused capacity for petrol engines, reports Automotive News Europe.

Europe's huge swing away from petrol-powered cars toward diesel vehicles - from a third of the market in 2000 to a projected one-half next year - would mean petrol engines would lose 3.6 million units of volume in five years.

Most automakers are adjusting to rising demand for the oil-burning engines, especially European-based automakers with diesel expertise. Volkswagen, PSA/Peugeot-Citroen and Renault sell more diesel cars than petrol units and have used diesels to help defend their European sales against encroaching Asian brands slow to offer modern diesels.

Unused petrol engine capacity cannot be converted quickly or cheaply to diesel production, said John Lawson, managing director of the automotive sector for Citigroup Smith Barney in London.

"There's no cheap, easy solution available," said Lawson.

Supplier sources said retooling a 150,000-unit a year engine line from petrol to diesel costs €150 million and takes two years.

Engine-oriented suppliers such as Robert Bosch and Siemens VDO have expanded production and added shifts as diesel car sales jumped two million units since 2000 to a projected 6.7 million this year.

But automakers have reacted slowly to idled petrol engine production.

Fiat-GM Powertrain has been the only engine maker to actually close petrol engine plants. The Italian arm of the General Motors-Fiat joint venture said last month it will close two Italian petrol engine plants: Mirafiori and the Alfa Romeo V6 line in Arese, axing 400 jobs in total.

Fiat-GM also laid off 300 workers at Termoli, which makes the FIRE small petrol engine family.

The GM side of Fiat-GM Powertrain will halt petrol engine production at Kaiserlautern, Germany, as part of GM Europe's sweeping cost-cutting moves announced last week, supplier sources say.