PARKED CARS as far as the eye can see at the German port of Wilhelmshaven. Dubbed “the world’s largest car park” by Stern magazine, the sight at the auto export area would chill the heart of any car executive.
In the good old days, the shiny new models were gathered here until a ship came to take them to willing customers in the US. But no one is buying any more, the car park is reaching capacity and there’s nowhere to put the newer models.
German consultants Alixpartners presented its study of 45 car companies and 275 suppliers last last week under the biblical quotation: “Though I walk through the valley of darkness...”
“It’s the most dramatic situation the industry has experienced since the second World War,” said Vinzenz Schwegmann of Alixpartners, warning a return to normality is not likely until 2014.
The study makes for painful reading for industry executives, blaming them for most of the problems they now face. Cheap financing deals brought more new cars onto the market than would otherwise have been the case. As early as 2002 sales figures, with the help of cheap credit, had decoupled themselves from economic reality.
In addition, the companies were unable to shift fast enough from producing larger, more profitable cars to smaller models demanded by consumers.
“There was a kind of core belief in further growth and the expectation that one would simply ‘grow into’ the expanded capacity,” said Schwegmann. The economic downturn, he says, “brought some companies closer to the end of the cul-de-sac into which they had already turned”.
The situation in Germany is particularly critical. The slump has been cushioned by the state scrappage scheme. New car sales have jumped 26 per cent from last year as consumers brought forward car purchases, encouraged by a €2,500 trade-in bonus for cars nine years and older. With the fund almost exhausted, the industry is bracing itself for the worst.
Similar scrappage schemes elsewhere in Europe may take up some of the slack. But with most German car companies treading water, with employees working short time, 2010 is gearing up to be a black year.