SEAT Moves Quickly to Cut Production in Face of Severe Downturn

MADRID – Auto makers here are being forced to admit they are knee-deep in an economic crisis that goes even beyond the recession of 1993, as new-vehicle sales fell 32.2% in September, a record for the month.

September marked the fifth straight month of decline and followed on the heels of a 41.0% plunge in August. Sales to date are off 22% from like-2007.

SEAT SA moved quickly today to react to the steep downturn, cutting its planned 2008 production 5%, or about 22,000 vehicles, in a broader move that will idle 750 workers for nine months beginning in November.

The auto maker also says it will stop production of its Altea, Leon and Toledo models for a total of 15 days and halt Ibiza production for five days in November-December. That will affect 3,950 additional workers.

Not only have retail sales slumped sharply, manufacturers also are seeing a drought in orders from rental agencies, which had been expected to provide the market with a much-needed shot in the arm.

Auto makers also were anticipating some help from dealers, which typically self-register a number of vehicles that later are moved to other markets and sold as discounted zero-mileage used cars.

That process always has been a big help to the Spanish manufacturers, because it allowed them to report higher sales to their parent companies in France, Germany and elsewhere.

The rental-car market in turn has aided local dealers in the past, providing them with an important source of second-hand vehicles that could be sold profitably.

Those two sales channels have acquired such an importance that Antonio Romero-Haupold, president of Faconauto, the Spanish federation of car dealers associations, says that taking into account both sales streams, the September drop in registrations probably was closer to 38%.

“In September, Spanish car dealers decided to stop the self-registrations in order to manage their inventories, strongly overloaded,” Romero-Haupold notes.

Some auto makers had announced cutbacks to rein in bulging inventories even before the September sales report. Among them are Ford Motor Co., which will idle 1,013 workers, and Adam Opel GmbH, cutting 600 jobs.

PSA Peugeot Citroen, which last week said it would cut 20,000 vehicles out of production at its plant in Vigo, hasn’t indicated how that might affect employment in Spain.

Renault SA and its Spanish works council currently are hammering out details of a plan to cut employment 10%. Renault’s strategic partner, Nissan Motor Co. Ltd., still has not said whether it will curtail production here.