Geneva’s Glamour Belies Region Still Shackled by Economic Crisis

GENEVA – European automakers took to the annual Geneva auto show with gusto, showing everything from fuel-sipping city cars to million-dollar sports coupes, but the event’s glamour belied an industry still struggling to unshackle itself from the 2009 global economic crisis.

According to WardsAuto data, automakers selling in Europe and Russia delivered 14.5 million new light vehicles last year, a flat year-over-year result leading most industry executives and analysts to call the end to a sales slide dating back to 2008.

“I am generally hopeful and generally optimistic,” Fiat Chrysler Automobiles CEO Sergio Marchionne says at the show.

General Motors President and Opel Chairman Dan Ammann adds, “There’s good momentum here.”

Erik Jonnaert, the new secretary-general of ACEA, tells WardsAuto ahead of the event, “We are really hopeful that we are going to see a continuing positive trend.”

The FCA stand at Europe’s perennially most fashionable show featured no fewer than seven new models, including a new Fiat Panda small CUV hitting the heart of the most popular segment in Europe. The trans-Atlantic automaker’s Jeep unit expands its presence there with the introduction of the Renegade 5-passenger CUV.

Rebounding German automaker Opel offers three world premieres targeting the traditional core segments in the region with a pair of Opel Adam city cars and an Astra C-car, each outfitted with all-new downsized and turbocharged powertrains.

Renault, one of the only profitable automakers outside Germany, shows the redesigned Twingo, a third-generation take on the automaker’s popular city car. A performance-oriented Clio super-minicar and a new twin-turbo diesel engine trimming fuel consumption 25% also bows at its stand.

Volkswagen, Europe’s largest seller and No.2 globally behind Toyota, shows a new line of its best-selling Polo B-cars, including a first-time model with a 3-cyl. turbocharged gasoline engine. The German automaker also pulls the cover of a T-ROC concept small CUV based on the Golf platform.

Loss-making PSA Peugeot Citroen, which recently received a €3 billion ($4.13 billion) lifeline from Chinese investor Dongfeng and the French government, offers a facelifted Citroen C1 city car from its joint venture with Toyota, a production model of its Citroen Cactus concept small SUV and an extended version of the Peugeot 308 estate car. The standard hatchback version of the 308 wins the show’s International Car of the Year award.

And as usual, there’s a raft of introductions from niche automakers who favor the show, and a swell of super sports cars such as the 650-hp McLaren 650 Spider and Coupe, the wedge-shaped 201-mph (324 km/h) Lamborghini Huracan, the limited-edition and €2.1 million ($3 million) Bugatti Veyron Grand Sport Vitesse Rembrandt Bugatti, and the fastest-ever Bentley Continental GT Speed.

Mood Mirrors 2012 Detroit Show

Altogether the Geneva show this year witnessed the world premieres of 41 production and concept cars from global manufacturers.

IHS Automotive analyst Stephanie Brinley says the show produced mostly standard fare, lacking a real showstopper on the innovation front.

“Not many surprises, nothing to take the industry in another direction,” she tells WardsAuto from the floor of the Palexpo exhibition center.

However, Brinley acknowledges a greater attention to infotainment systems from European automakers, which mirrors a trend in the U.S., and says most premieres were consistent with a trend in the region to expressive small cars and little CUVs.

The mood, she says, reflects the Detroit auto show of two years ago, when cautious optimism reigned.

“We’re seeing an expectation for things to get better, and certainly the product is there for when things do get better,” Brinley says.

IHS expects Europe to post a positive sales result this year, with deliveries rising upwards of 3.0%. A recovery would give automakers more room to maneuver, the consultant says in a research note this month on registration rates.

But the recent sales environment, which includes a surprising 8% surge in February to leave European Union deliveries up 6.6% in the first two months, comes on top of widespread discounting and against woefully poor year-ago numbers.

Marchionne warns that disintegration of sales since their peak in 2007 of 18.5 million units equates to the loss of nearly 12 assembly plants.

European automakers, however, have not fully rebalanced manufacturing capacity, despite assembly plant closures coming from General Motors, PSA, Ford and Fiat.

IHS estimates the region must axe 18 assembly plants to balance production with sales.

“I do not think this recovery will cure the underlying problem in Europe, which is the issue of matching demand with supply,” Marchionne says, warning troubles in Ukraine that have led to U.S. and EU sanctions against Russia also pose a risk.

“We lost $8 billion collectively in 2012 and the number is not materially different in 2013. GM lost money, Ford lost money, we lost money, PSA lost money,” he adds. “You can’t continue to do this forever. We cannot wait for the recovery of the marketplace” to adjust capacity.

Individual countries continue to operate independently, too, he argues, which will lead to a “dyslexic and uncoordinated” recovery.

“It would be much easier if the European Union were one market in the true sense of the word, where economic and fiscal policy was determined across all the member countries,” he says. “It is not that way. Not all countries are on the same page.”

The region’s insistence on a strong euro, which trades at 38% premium to the dollar, puts the region’s comeback in additional jeopardy, Marchionne says.

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