Dark days ahead for European car manufacturing
ANALYSIS:As HG Wells might have put it, the great disillusionment has begun. Not invaders from Mars, but the massive and possibly irrevocable restructuring of the European car industry. Jobs are being shed and vast factories are being earmarked for closure as continental car makers desperately try to adjust to the harsh economic realities of the past four years.
Car sales in Europe are about to reach a 17-year low and that simple fact is about to cost an horrific number of people their jobs and Europe much of its skilled labour and manufacturing capacity.
To blame all of this on the current financial crisis would be to partly miss the point though. The key issue here is over-capacity; the fact that there are too many factories turning out too many cars for too few buyers, or at least with the capacity to do so. Factories running at less than around 80 per cent of their designed capacity are losing money, and many European plants are currently at 60 per cent or even lower.
This is not a new problem. It has bedeviled the European car industry for well over a decade now, but until 2008, there was always just enough vim and vigour in the market to allow car makers to paper over the cracks.
Not any more. PSA Peugeot Citroen has already announced one factory closure (Aulnay, near Paris) and around 10,000 job cuts (on top of cuts already made since 2008), while this past week, Ford announced that around 6,500 of its European jobs would have to go, including the closure of factories in Genk, Belgium, Southampton, UK, and part of the vast Dagenham plant near London. Fiat and Opel are both gearing up for further cuts and even Mercedes-Benz has embarked on a round of cost-cutting to shore up its profit margins. For those of us who remember the disappearance of Fiat from the Kylemore Road in Dublin, of Renault from Wexford and of Ford from Cork, history is repeating itself, but this time on a vast and more terrifying scale.
For those who worked in the sprawling US car industry in the 1970s in Detroit, all of this will have a familiar ring to it. Detroit, Motown itself, was once the bustling hub of GM, Ford and Chrysler in their full pomp. But three decades of oil crises, Reagan-omics, recession, dot-com-bubble, 9/11 and global financial meltdown has reduced the Big Three to shadows of their former selves, and Detroit itself is a virtual ghost town in places, and frequently a no-go area for the police.
“I don’t think that has to happen here, but certainly it’s a possibility,” says Dr Mia Grey, an economic geographer from Cambridge University.