Automotive News Europe - March 2, 2009 - 7

March 2, 2009 www.autonewseurope.com · PAGE 7 16 European plants at risk As sales plummet, workers fear their jobs will die Luca Ciferri Automotive News Europe TURIN Automaker executives and union heads fear that a prolonged recession will force between 10 and 16 western European assembly plants to close within the next three years. Already, many plants have suffered controlled slowdowns, reductions in work force, or temporary shutdowns. But with little relief in sight to the fast decline of new-car sales, outright closures likely will be next. The global economic slowdown has drastically reduced demand for new cars. And those who want to buy cars are having trouble getting loans from reluctant banks. Investment bankers Goldman Sachs forecast that western Europe’s new-car sales will fall by more than 20 percent, to 10.7 million units this year. (See chart, right) “The auto sector’s addiction to volume growth and lack of historical consolidation means that it enters the current downturn with about 15 percent overcapacity,” said Arndt Ellinghorst, a London-based auto analyst with Credit Suisse. Much of that overcapacity is concentrated in countries with high labor costs, such as France, Germany and Italy. Despite those high costs, however, automakers in those three countries are less likely to close plants in their home markets due to severe political and social repercussions. That means the future of plants in countries such as the Netherlands, Spain and the UK is more in doubt. “We expect the crisis climate of 2009 to provide a window of opportunity for capacity elimination, most likely in Spain,” Ellinghorst said. Because of poor sales of the Modus and government pressure on Renault to produce more cars in France, workers at the factory in Valladolid, Spain, fear that they “don’t seem to have much of a future.” about PSA’s Villaverde plant because the models made there, the Citroen C3 and Peugeot 207 small cars, already are produced in France. If the volumes for those cars drop, production in Spain is redundant. Ellinghorst also expects Renault to close the Sandouville factory after the launch of the next Laguna uppermedium car, which would keep the plant alive until 2012 or 2013. In addition, PSA and Renault have taken billions in aid from the French government with the understanding that the automakers would aim to preserve or enhance their production footprints at home. If the Sandouville plant were to close, the French government likely would pressure production to move to another French location, rather than to central or eastern Europe. General Motors could close three or more European car plants this year, a person familiar with the matter told ANE last month. The factories most likely at risk are Antwerp, Belgium; Ellesmere Port, England; and at least one of the company’s three plants in Germany, likely Bochum, industry insiders say. The struggling carmaker wants to cut production by one-third to adapt operations to a shrinking western European car market. Waiting for a rebound W. Europe vehicle sales are expected to fall sharply and remain low until 2011 (figures in millions of units) 15 14 13 12 11 10 0 2006 2007 2008 2009 2010 2011 Sources: ACEA (2006-2008); Goldman Sachs estimates (2009-2011) Not-so-sweet 16 European car and light commercial vehicle plants facing uncertain futures Automaker Country Mirafiori (Turin), Italy 1. Fiat 2. Fiat Pomigliano d’Arco, Italy 3. Fiat Termini Imerese, Italy 4. Ford Southampton, England 5. GM Europe Antwerp, Belgium 6. GM Europe Ellesmere Port, England 7. GM Europe Bochum, Germany 8. GM Europe Zaragoza, Spain 9. GM/Renault Luton, England 10. LDV Birmingham, England 11. Mitsubishi Born, Netherlands 12. PSA Mangualde, Portugal 13. PSA Madrid-Villaverde, Spain 14. Renault Valladolid, Spain 15. Renault Flins, France 16. Renault Sandouville, France Sources: Unions, analysts, automakers Mitsubishi will decide next year whether to continue production at its plant in Born, Netherlands. The NedCar factory currently makes the Colt small car and the Outlander medium SUV. Both are due to be replaced in 2011. ‘We don’t have work’ Ellinghorst predicts three plants are candidates for closures: PSA/Peugeot-Citroen’s factory in Madrid-Villaverde, as well as Renault’s plants in Valladolid, Spain, and Sandouville, France. With demand down and no new car in the pipeline, Valladolid factory employees are worried that their plant faces the ax. About 75 Valladolid workers held a loud protest outside Renault headquarters on the day the company presented its 2008 financial results. “We don’t have any work and we don’t seem to have much of a future,” a Spanish worker told Automotive News Europe. “Without a new car, we could be dead.” The plant makes the Modus small minivan and the Clio small car. It is at risk because the Modus has not met expectations, and Clio production could be relocated to France. Credit Suisse is likewise pessimistic Striking in support The threatened closures do not only impact automakers under profit pressure. Despite posting profits for 2008, some of Fiat Auto’s plants in Italy might also close. Fiat CEO Sergio Marchionne noted that Fiat’s plant in Tychy, Poland, built more than 450,000 units last year, while its five auto plants in Italy made a combined 650,000 units. On February 27, all metalworker companies near Naples went on strike for four hours to support the future of Alfa Romeo’s Pomigliano d’Arco plant, which makes the Alfa 147, 159 and GT coupe. The plant has been stopped for 19 weeks since September and its future is at risk, union leaders say. Fiat will not replace the GT and will build the 147 replacement in Cassino, Italy, along with the Lancia Delta and Fiat Bravo and Croma. Italian unions leaders fear Fiat could make its second bid since 2002 ‘Brink of collapse’ UK van maker LDV, owned by Russia’s GAZ group, is considered at risk of closing its Birmingham plant. There has been speculation in the UK press that LDV was the automaker reported as being “on the brink of collapse” by Derek Simpson, general secretary of the Unite union. Other reports suggest it is GM Europe’s plant at Ellesmere Port. Simpson has refused to confirm which plant he was referring to. to close its plants in Termini Imerese and Mirafiori. Termini’s location on the island of Sicily means logistics costs are ¤600 to ¤1,000 per unit more than if Fiat made the Lancia Ypsilon elsewhere. The Mirafiori complex, in the heart of Turin, is burdened with expensive and outdated heating and power generation systems, and has had its 450,000-units capacity more than halved. When asked for a comment about Fiat’s western European plants, company CEO Marchionne told analysts: “I think that we will continue to [temporarily] shut down plants and that will deal with [our] inventory issue We should address the issue of our manufacturing footprint in Italy soon.” Lawrence J. Speer, John Revill, Tony Lewin and Wim Oude Weernink contributed. Daimler to cut ‘a couple billion’ in costs Hurtej Kaur Automotive News Europe STUTTGART Daimler plans to create cost savings of “a couple of billion euros” this year through a range of cutbacks. According to spokesman Thomas Froehlich, the automaker is taking a number of steps to cut costs. Negotiating contracts with energy suppliers. Working shorter hours in the passenger-car and van divisions. Some 50,000 blue-collar Daimler-employed workers are affected. Reducing the number speculation that the auof temporary assembly tomaker planned to save line agency workers. ¤1.6 billion, an amount This will affect all of reported by German Daimler’s 14 producnewspaper the Stuttgarter Zeitung. tion plants in Germany. Reducing reliance on Daimler also anexternal contractors, nounced that it will invest such as legal advisors ¤10 billion in r&d in 2009 and business manageand 2010 combined. Last Uebber sees “further ment consultants. year, its total investment Waiving salary increas- burdens on earnings.” was ¤4.4 billion, up from es for the board of man¤4.1 billion in 2007. agement and senior executives. Despite its current batch of cost-savDaimler’s disclosure at the compa- ing programs, Daimler has not been ny’s annual earnings meeting ends immune to the global financial crisis. Group earnings before interest and taxes fell to ¤2.7 billion, compared with ¤8.7 billion in 2007. Net profit fell to ¤1.4 billion from ¤4.0 billion in 2007. This was in part due to the effect of Chrysler on Daimler’s books, which reduced earnings by ¤3.2 billion. Daimler’s cost-cutting program for its Mercedes-Benz Cars division, known as CORE (Costs down, Revenue up, Execution), has already put a dent in the expenses side of the ledger. The initiative has involved more than 43,000 measures, from travel to computing services costs, ANE and has saved ¤7.1 billion.

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Automotive News Europe - March 2, 2009

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