Sinking Sales, Overcapacity Challenged European Industry in 2012

European auto makers come off a sluggish 2011 with expectations for additional declines in 2012. The market would not disappoint, as light-vehicle sales through the first seven months slide 4.8% from year-ago’s already depressed levels. 

PSA Peugeot Citroen looks to stem declining market share, naming its experienced chief financial officer, Frederic Saint-Geours, as head of brand development in January. He replaces Jean-Marc Gales, who leaves the company in March. PSA follows with announcement of a €1 billion ($1.3 billion) cost-cutting plan due to sagging earnings. 

Renault CEO Carlos Ghosn is in a good mood in February, chiefly because growing sales internationally have helped offset declining market share in Europe, improving the auto maker’s cash flow. He predicts more gains on tap for 2013, forecasting group sales to rise 11%. 

In February, PSA and General Motors announce a blockbuster collaboration, combining some purchasing and, potentially, product development. GM agrees to take a 7% stake in PSA, a money-losing proposition it would write off its books later in 2012.Few details of the product-development tie-up would be pinned down as the year wore on, although dual-clutch transmissions and small and midsize cars were among programs being considered. The purchasing tie-up was expected to save the companies a combined $2 billion annually within five years. 

The deal with GM causes PSA to scale back joint development with Ford. Although the two will continue to work on 1.4L and 1.6L diesels, they now agree to pursue their own 2.0L, 2.2L and V-6 variants separately. 

Midyear, a rift between Fiat CEO Sergio Marchionne and Volkswagen executives breaks wide open over excess capacity in Europe. Marchionne, the year’s titular head of the European auto makers group, the ACEA, calls on the European Union to step in and broker plant closings industry-wide so that no one auto maker or country pays too steep a price in the capacity cuts. In particular, he points a finger at Germany, which he says hasn’t closed a plant since WW II.VW officials argue that supply and demand should settle the overcapacity score. The spat culminates in a Paris show board meeting of the ACEA. VW agrees to keep quiet, and Marchionne is told to stop pushing his proposal for an industry-driven solution. 

Adam Opel reveals plans to close its Bochum, Germany, plant. The facility, which employs 3,100 workers, builds the Zafira multipurpose vehicle. No new product has been earmarked for the plant beyond 2016, the expected closing date. As of October, the auto maker remained in negotiations with its labor unions over a definitive wind-down plan. 

CEO Stefan Jacoby assures first-half losses totaling SEK2.27 billion ($338 million) won’t deter Volvo Car from its 5-year, $11 billion investment plan that includes two new factories in China. 

Overcapacity issues aside, reports surface in mid-August that Mercedes-Benz is eying a doubling of production in Hungary to 300,000 vehicles annually by 2015. In addition to its B-Class model, Mercedes plans to produce its CLA compact, known as the baby CLS, at its Keckskemet facility. 

A report commissioned by French Industry Minister Arnaud Montebourg and issued in September backs PSA Peugeot Citroen’s controversial decision to close an assembly plant in Aulnay-sous-Bois near Paris and eliminate some 8,000 jobs in France. Unions would continue to protest the plan as the year wound down. 

The first car to win the “Origine France Garantie,” or made in France, label: a Toyota Yaris. Manufactured in Valenciennes, the Yaris has 54.4% value-added content coming from the country. There are other vehicles believed to be more French, but Toyota is first to seek the official certification. 

As of September, Ford still isn’t saying whether it will close any European assembly plants as a way to improve its financial standing. But CEO Alan Mulally and European head Stephen Odell tell the media 15 global vehicles will be launched in Europe within five years, as part of the auto maker’s money-saving One Ford strategy.The lineup includes the next-generation Fiesta, which is slated to bow in Europe by year’s end, and the Mondeo sedan, a twin of the Fusion sold in the U.S. Also on tap is the Kuga cross/utility vehicle, now a clone of the Escape marketed in North America. Ford even plans to bring its iconic Mustang to Europe, likely the next-generation car that’s still a couple years away. 

Fiat’s Ferrari exoticar arm reports record first-half results that netted it a profit of €100.8 million ($129.8 million) on €1.21 billion ($1.56 billion) in revenue, with unit sales reaching 3,666 cars. Its net-cash position reached an all-time high €895 million ($1.2 billion). First-half sales in the U.S. rose 17%, while deliveries in the U.K. zoomed 43%. Chairman Luca di Montezemolo characterizes the results as “a reward for our constant and significant investment in technological innovation.” 

Word leaks just ahead of fall’s Paris auto show Opel will cut 1,000 administrative jobs, about 30% of the total number of positions at its Russelsheim headquarters. The reductions reportedly were to be made through attrition, with no layoffs planned.Speaking to reporters at the Paris show, Opel’s top engineer, Mike Abelson says the cutbacks won’t affect engineering, nor are the company’s cost-reduction efforts jeopardizing product development. “With the company’s support, we’ve absolutely protected the new-product programs,” he says. Opel promises to deliver 23 new or revised models and 13 new powertrains by 2016. 

French upstart Exagon Motors unveils a new, ultra-luxury hybrid-electric vehicle at the Paris auto show in late September. Called the Furtive eGT, the car is set to retail for €400,000 ($516,000) and features a customizable leather interior, extensive use of carbon fiber in the body and chassis and two electric motors. A range-extending internal-combustion engine is optional, turning the EV into a hybrid. 

The European market malaise finally begins to hit Volkswagen as the year winds down, forcing the auto maker to cut production of its Passat model in Germany in October and reduce overall vehicle production by 300,000 units through the remainder of 2012. Reports indicate VW will end the year having produced 9.4 million vehicles, down from the 9.7 million-unit target set when 2012 began. It also is forced to revise its sales forecast for the year, trimming expectations by some 140,000 vehicles. 

The slump plaguing most of the continent’s volume-car producers appears to dodge Mercedes-Benz, which posts sales records in September, exhibiting “strong growth” in Western Europe. Its 964,926 deliveries in January-September is a new 9-month high for the auto maker. “We are still on track to achieve a new sales record for the year as a whole,” declares sales head Joachim Schmidt. 

Markets may be slumping, but auto makers still bring out the new hardware at the Paris auto show that opens in late September. Among the world debuts are the Jaguar F-Type roadster; Opel Adam small car; Mazda6 wagon; 3-cyl.-equipped, front-drive BMW Concept Active Tourer; Mercedes electric-drive B-Class; McLaren P1; Mini Paceman; Porsche Panamera Sport Turismo; Toyota Auris; and Volkswagen Golf. 

Although Renault vows to continue the fight, other auto makers signal they are backing down their expectations for EV sales in Europe. Both Volkswagen and Toyota say they’ll put more marketing and development muscle behind hybrid technology than EVs, because cost and range anxiety continue to be deal-breakers for most car buyers.VW CEO Martin Winterkorn tells reporters in late September, “There will be, for a long time to come, no alternative to the internal-combustion engine. We had a realistic view of (EV) technology all along.” 

Volvo reveals in late September that it has sold out of its V60 plug-in hybrid before the car has even reached showrooms. Billed as the world’s first diesel hybrid, Volvo limits ’13 model production to just 1,000 units. Production is set to increase to 5,000 units for ’14. 

Russian new-vehicle sales continue to set the pace in the region. With deliveries up 14.5% through August, the market is seen as replacing Germany as No.1 in Europe by 2014. “This market is huge and we see no reason why it shouldn’t keep growing,” Denis Le Vot, chief operating officer of Renault’s Russian arm, tells The Wall Street Journal on the sidelines of the Moscow auto show. Several auto makers launch or announce plans to expand assembly operations in the country, including Mazda, Toyota, General Motors and Volkswagen. 

Ford fails to allay concerns of workers in Belgium, who fear the auto maker’s Genk factory could be on the chopping block. “We asked about the rumors,” a union official is quoted as saying following a meeting with Ford of Europe CEO Stephen Odell. “They said they could neither confirm nor deny them.”