A number of European carmakers are facing the same problem: they have more facilities and employees churning out more cars than they can sell.
Automotive CEOs acknowledge the fact and understand that something needs to be done about it. Fiat’s Sergio Marchionne has often said that European carmakers must consolidate or risk going down and he is constantly trying to tie-up the Fiat-Chrysler group with another carmaker.
GM’s Dan Akerson has stated that he’s fed up with losing money with Opel and Vauxhall. However, the recently formed alliance with PSA Peugeot Citroen could provide a solution to this problem.
Renault, on the other hand, has halved its UK line-up due to poor sales. It’s CEO Carlos Ghosn is betting heavily on the French carmaker’s new range of electric vehicles, like the ZOE compact car unveiled in Geneva, to turn things around.
The situation looks a lot like the one faced by the U.S. automotive industry in 2008. The difference is that the federal government intervened providing GM and Chrysler with much-needed loans and helped them restructure by getting rid of their “bad” assets.
European governments are not inclined to follow the U.S. lead, as Swedish carmaker Saab found out the hard way.
Daniel Howes from the Detroit News sees it like this: “They all see the problem, but no one wants to be the poor fool to go first because they all know what would come next — and it wouldn’t be pleasant. Like the guy who says he needs to lose 50 pounds, they’ll get started later.”
What “would come next” is a painful restructuring process that would necessitate closing down plants and firing employees. Marchionne has already said that two of Fiat’s Italian factories are facing the axe if sales of the models that will be manufactured don’t take off in the U.S.
It’s not pretty, and European labor unions are not going down without a fight, even though Marchionne has warned them that “The world doesn’t care. The capital markets and the people that fund what we do look for the least amount of risk exposure.”
Howes says that stalling is only going to make things worse: “We’ve seen this movie before in Detroit, folks, and we know how it ends. The only question is whether the remake will be dubbed in French, Italian or German.”
Story References: Detnews
