Europe: Sales slump hunts for recovery

While it's not quite kill or be killed, the Western European car market is one of the toughest to survive on a good day, and it gets even worse when vehicle sales take a nosedive.

That's why when early this year experts began predicting a wheezing market for the U.S., industry observers in Europe caught the fever and began viewing their market with a jaundiced eye.

As first-quarter results came rolling in, it appeared the tribal naysayers had won. Vehicle sales declined 5.19% for the first three months of the year compared to first-quarter 2000, with some companies sliding as much as 34% in the total market and plunging more than 60% in several countries.

But it appears the industry soon will regain some momentum. A recent report from J.D. Power-LMC says that even though results look bad now, couching it in terms of a “modest recession,” sales will heat up by year's end, racking up 14.8 million total units — off 1% from last year — with recovery kicking in during 2002 and a modest gain in 2003.

Germany holds the key. The region's largest market, accounting for one-quarter of vehicle sales, is expected to recover from last year's 11% slump and see 3.5 million car sales this year. A strong ending also is expected in Italy, where sales slid 4.14% in the first three months. They are expected to rebound during the second half, as leaded gas is phased out by the end of the year, says Paolo Cantarella, chief executive of Fiat SpA.

There is some good news, as at least one automaker wins an immunity challenge. Despite a total sales slump of 3.31% in the first quarter, General Motors Corp.'s Opel/Vauxhall's market share still managed to inch up from 9.58% to 9.77%. March delivered a strong punch, from 9.80% to 10.13%. If the company can stay the course, it could end up one of the region's biggest winners.

Japanese automakers in the U.K., stymied by a weak euro and strong pound, seem certain to be voted the market's biggest losers. Total share has dropped from 12.06% in first quarter 2000 to 10.91% this year, as unfavorable exchange rates make their products less competitive.