In Europe, as the economic crisis deepens, Volkswagen has said that some automakers might go bankrupt unless they receive some form of government financial aid. VW’s chief financial officer, Hans Dieter Poetsch made the comments during a conference prior to this year’s Paris Motor Show. “It is unclear if all carmakers will survive without government help,” Poetsch said, “carmakers in southern Europe that produce small cars will be especially affected.”
The group’s sales chief, Christian Klinger said he doesn’t expect to see a recovery in the European vehicle market for two years, though some analysts believe that the heart of the problem lies with overcapacity and automakers essentially engaged in price wars.
“The biggest problem for the industry is the complete meltdown of pricing discipline,” said Eric Hauser, an analyst with Credit Suisse, during a phone interview with Automotive News.
Although some automakers, notably Peugeot and Opel have been struggling, forcing plant closures and the laying off of workers, others could soon find themselves in a similar position.
Susan Docherty, managing director of Chevrolet’s operations in Europe said that given the current incentive levels and the contraction of the market “no one can make money.”
Yet while some automakers are losing market share, VW has been gaining. This has led to growing tensions between the German giant and Italy’s Fiat SpA, run by Sergio Marchionne, who also heads up Chrysler. Marchionne, who is current president of the ACEA (Association des Constructeurs Européens d’Automobiles), which represents the interests of European auto manufacturers, says capacity needs to be cut across Europe, actions that so far have been strongly resisted by VW and other German carmakers.
In fact, the overcapacity issue had created tensions between Fiat and VW, with Marchionne blaming Wolfsburg’s pricing strategy for creating “a bloodbath” in Europe. VW retorted, declaring that Marchionne was not qualified to head the ACEA and should step down, threatening to withdraw from the association if action wasn’t taken.
As a result Marchionne issued a challenge to VW’s chief executive Martin Winterkorn, asking him to show up on the Fiat stand at the Paris Motor Show late last week about these issues. Winterkorn did indeed show and the two men appeared to resolved their dispute, shaking hands and saying they were “good friends.” As a result of the entente cordiale, Marchionne will continue as head of the ACEA, though he said afterwards that even though individual members have decided to address the overcapacity issue on their own, the situation in Europe remains “unpleasant” and at some point the industry, collectively will still have to deal with the problem.
