Geneva Shows Off Europe’s Best Cars, But Road to Recovery Still Bumpy

Europe is putting its best foot forward at this week’s annual Geneva international auto show, which opened to the media Tuesday.

The region’s first major auto show of the year is expected to offer a plethora of new-vehicle introductions that include an impressive array of hybrid and full-electric vehicles to meet new stringent emission standards.

Ford is increasing first-quarter production in Europe based on demand for its next-gen Fiesta and Ka small cars, and General Motors is mapping out a restructuring plan for its European Opel subsidiary that will depend less on loans from European governments than first thought.

But there are many speed bumps ahead for auto makers. Top of mind is the worry consumer demand will begin to fall big time as countries pull the plug on their scrappage incentive programs, particularly in Italy, Spain and the U.K.

Indeed, some estimates see sales falling in Europe by 2 million units this year.

Additionally, Europe – like the U.S. – has been slow to exit the global recession. Economic recovery in the European Union has slowed to a crawl, much of it due to weakness in Germany, which last year was the region’s powerhouse.

The falling euro and unrest among the EU’s 27-member states due to Greece’s fiscal-budget crisis threaten political and financial instability as the region struggles to support its one-currency-fits-all strategy. Some analysts worry the region will be the next global financial flashpoint.

Even with an 18% jump in new car sales for France in February, Renault chief Carlos Ghosn reportedly is forecasting as much as a 10% market contraction for Europe this year.

“The road to recovery remains stony,” Daimler Chairman Dieter Zetsche, who also heads up the ACEA European industry group, is quoted by the Associated Press as saying. “While the worst is hopefully behind us, the upswing is far from stable.”