General Motors and Ford are beginning to put the brakes on production at European factories as the credit crunch leads to a sharp drop-off in car sales
GENERAL MOTORS and Ford Motor will cut output in Europe, the US car makers announced yesterday, another sign that turmoil on financial markets is ruining consumers' appetite for big-ticket items such as cars.
GM has shut its Opel factory at Bochum, which makes the Astra and Zafira models as well as axles and gearboxes, until October 13th, an Opel spokesman said.
Another German plant in Eisenach, which makes the new Opel Corsa compact, will halt production from next Monday for three weeks, the spokesman said.
"The financial crisis has prompted people to hold on to their money and spend less on cars," the spokesman said, adding there were no plans for any mandatory redundancies at Opel.
Opel is negotiating with labour over scrapping an evening shift at its Spanish plant in Zaragoza for a year, adding GM planned to cut production in Britain as well.
Ford plans to rein in output at its German plant in Saarlouis and will this month terminate 204 temporary jobs that were supposed to run until year's end, a spokesman said.
He did not say how much volume would be reduced at the factory, which makes Focus, C-Max and Kuga models.
"We are watching the market closely and react very quickly," he said. It comes after car firms facing falling sales asked Brussels for a €40 billion loan package on Monday.
But the request from Acea, the European car makers' lobby group, for low-interest loans to help fund investment in lower-emission technology and incentives to scrap vehicles more than eight years old drew a cool response from policymakers.
The US Congress last month approved a $25 billion (€18 billion) loan package for green car investments, prompting European manufacturers to call for similar help from Brussels.
Incentives to scrap old vehicles introduced by EU states such as Spain and Italy have provided a short-term boost to car sales.
Acea said that replacing cars eight years old or more would have a "clear environmental benefit" by saving 20 megatonnes of carbon dioxide a year, or 4.5 per cent of total car emissions.
The European Commission declined to comment on the proposal, but an official, speaking anonymously, said the EU is "not a bank". The official took issue with the industry's numbers and said car makers were in lobbying mode after last month's European Parliament vote on carbon dioxide targets for cars.
Car makers are still smarting from parliament's decision to hold them to a four-year timetable of emissions cuts, which they say is unrealistic and will cost the industry jobs.
After seeing vehicle sales fall as petrol prices rose this year, car makers worry that collapsing consumer confidence could further imperil their businesses. "Car makers face increasingly hesitant consumers and call on governments to respond, stimulate the economy, relieve the credit crunch and restore consumer confidence," Acea said.
Car sales in western Europe fell 9.2 per cent in September to an annualised rate of 12.75 million, JD Power and Associates, the industry consultancy, said on Monday.
The soft-loan request from car makers comes at a time when corporate lobbies are citing the slowing economy and financial crisis as reasons to water down or delay environmental regulations. Britain's Society of Motor Manufacturers and Traders on Monday called on British prime minister Gordon Brown to ease CO2-based car taxes after news that UK car sales had slid 21.2 per cent in September.
The weight of those arguments could become clear today, when the European Parliament's environmental committee votes on proposals that form the pillars of the EU's efforts to claim global leadership in reducing greenhouse gas emissions.
The measures include expanding Europe's emissions trading scheme, accelerating the deployment of carbon capture and storage technology, and setting emissions levels for member states.
Reuters/FT Service