PARIS SHOW: Automaker execs fret over credit crunch

By just-auto.com editorial team | 3 October 2008

Strolling around the stands on the first of the Paris Auto Salon's two press days yesterday, it was soon obvious just one thing was taxing the minds of automaker executives: the credit crunch - and they don't see an end to it anytime soon.

Ford CEO Alan Mulally expects no recovery in the global car market until 2010, and - like GM Europe's chief in his keynote press conference speech - is urging governments and central banks to work together to bring back stability to the financial markets.

"2009 is not going to be better than 2008," Mullaly said. "We won't see a recovery until 2010. The downturn is longer and deeper than we foresaw a year ago.

"The problems of sub-prime and credit crunch are now all over the world. It is important that countries cooperate on fiscal and monetary policy to return stability to the financial system because that is key to turning the economy around."

Ford expects stagnation next year, even in the Russian car market - till now the fastest growing market in Europe and set to overtake Germany as the biggest in 2009 or 2010.

BMW CEO Norbert Reithofer said car sales would not recover until at least the middle of next year and threatened production cuts if buyers continue delaying purchases.

Renault boss Carlos Ghosn added that the slowdown may last two years. "We don't know if we're at the beginning of the end or the end of the beginning,'' he said.

Toyota Europe CEO Thierry Dombreval said it would be at least a year before the market turned around. He added: "Until June the market in Europe was flat but we have seen big downturns in Spain and Italy and there are now signs of a slow-down in the UK and Germany. September has not been good in any of the markets.

"Eastern Europe and Russia have been keeping sales up but these markets are also slowing. We expect sales in western Europe to be down 10% by the end of the year."

He said he was concerned about manufacturers offering discounts to kick-start sales but said Toyota would not get involved. "In the end that hurts the brands and the people buying our cars because it drives down second-hand values."

While recognising the market is falling, Ford UK is showing signs of optimism. Ford of Britain chairman Roelent de Waard said the domestic market share is holding strong at 15% and launching the new Fiesta and Ka this year is proving to be a product planning master stroke.

De Waard said: "We anticipated that people would be downsizing, but to be honest we had not foreseen the global financial crisis on this scale. We just happen to have the right products at the right time."

Mazda Europe sales chief Phil Waring was one of a number of senior executives who said many people in the European car business, especially at dealers, have not experienced a recession and don't know what to do.

"Cash management will be key," said Waring. "It's not lack of profit which will bring dealers down, it will be lack of cash."

Dealers need to look at every revenue stream in their business and make sure they maximise them, he said.

A premium brand dealer here in the UK recently told just-auto that cars were still selling but "we have to do a hard deal on every one. There's not much profit in it right now." He added that used cars were still selling well with margins better than new.