March 5 - The prospects for Europe's ailing car market have got worse in recent months and demand is likely to remain shaky for at least five years as governments push through austerity measures to cut their debts, say industry leaders at the Geneva car show. Julian Satterthwaite reports.
It's Europe's best selling model and now the Volkswagen Golf has been named European Car of the Year at the Geneva motor show. It's another feather in the cap for the German auto giant, but it can't hide the fact that even the industry's biggest names now look vulnerable to the turmoil in Europe's car market. Figures out as the show began showed German new car sales down ten percent in February. Audi chief executive Rupert Stadler says there's now no prospect of an upturn this year: SOUNDBITE: Audi Chief Executive Officer, Rupert Stadler, saying (English): "Over the next 12 to 18 months, we will see very weak markets in Europe. I have no idea where (growth) impulses are supposed to come from." The problems would look less worrying if automakers could show they were tackling them. Renault hopes its workers will accept more flexibility in return for keeping factories open. But a deal is far from certain. General Motors can't figure out what to do with its lossmaking Opel unit either. And Peugeot keeps burning through its cash reserves. Automotive analyst Jay Nagley says overcapacity remains the big problem: SOUNDBITE: Redspy Managing Director, Jay Nagley, saying (English): "We had massive overcapacity going into the recession during the boom years. We've now lost millions of units of sales and only a few car factories have closed, or have had announcements of closures. So an awful lot more capacity has to be taken out, otherwise it's impossible to get to profitability in Europe." Booming demand from China is one consolation for European automakers. But even here the gains are far from evenly spread. Mercedes is struggling to keep up with German peers Audi and BMW, and chief executive Dieter Zetsche says this year's not off to a good start: SOUNDBITE: Daimler chairman and Mercedes chief executive, Dieter Zetsche, saying (English): "In China certainly in February we'll have a really tough month; to some extent because of the comparison for last year when there was no Chinese new year in February. But other than that we have addressed all the main issues, which is a new leadership." Chinese opportunity could also one day become Chinese threat. Brands like startup Qoros are part of a bigger-than-ever presence by Chinese automakers in Geneva. Right now they have no more than a toehold in European markets, but they're aiming big. And even the distant threat of new competition is the last thing Europe's automakers want to face in these troubled times.