Year in review 2008 - car industry crippled by financial crisis

With serious economic problems ahead, the car crisis has spread like wildfire across all Europe. Thus, in early December, France’s president Nicolas Sarkozy unveiled a 26 billion euros stimulus plan, 1.5 billion euros being directed toward car industry, a vital sector for French economy.

As a response to the negative effects of the crisis, Renault, France’s second biggest carmaker after PSA Peugeot Citroen, said in early December it would cut 6,000 jobs in Europe, 4.900 of them in France, and that it would temporarily shut down several production facilities for few weeks. Renault said it summoned its trade unions on December 3 in order to examine a plan to temporarily suspend activity in Spain, NewsIn informs.

French carmaker Peugeot said in late November it would axe 2,700 jobs as a response to financial downturn. Peugeot cut its 2008 profitability outlook, from 3.5% to 1.3% due to deepening deterioration of global car industry.

Additionally, Daimler Group said in November it would slash workforce at its German-based sites, due to the effects of financial crisis. A spokesperson said the company would reduce the number of its temporary workers and short-term contracts, declining to say how many workers would be affected by this decision. Daimler’s workforce in Germany accounts for 167,000 and 2,500 temporary workers.

As for Fiat group, insiders have often speculated on reorientation or sale of its car division as it is not a major player and it is not profitable enough to preserve its independency.
Sergio Marchionne, Fiat;s CEO said in an interview the company needed to find a partner to survive the meltdown triggered by the financial crisis as it is too small to overcome these gloomy time.

In order to counter the effects of the global crisis, the carmaker said it planned to idle all Italian-based production facilities between December 15 and January 11, forcing 48,000 workers to take temporary layoff.

In Germany, Volkswagen said it would shrink production at its German sites in Christmas time, as other competitors had previously announced.

Additionally, Czech car maker Skoda Auto, part of Volkswagen announced it would cut it work week to four days for the first half of 2009 citing dwindling demand in Western Europe. In the days the production will be shut, the workers will receive a 25% lower pay package.

US carmakers call for billion dollar aid
In United States, carmakers started the year on the right foot. In April, senior analyst of General Motors’ sales department forecasted the group’s global sales would rise by 4% in 2008, on increasing orders from emerging countries.
Nevertheless, the economic slowdown triggered by the credit crisis has crippled car industry, leading car sales to the bottom level. Declining sales forced large auto makers to cut workforce and to call upon state aid to avoid bankruptcy.

General Motors, Chrysler and Ford Motor Co felt the full-blown crisis.

At first, GM, Chrysler and Ford called upon 34 billion dollars bailout package a threefold higher amount than the one set forth in Energy Department program, worth 25 billion dollars, financed by White House designed to help the auto firms produce more fuel efficient vehicles.

Car sales have been seriously dented by tightened lending conditions and by economic slowdown. Overall, car sales in United States dropped 37% from a year earlier. Chrysler’s situation was even more serious, as the sales slid 47%.

Chrysler LLC said it would completely shut down car production in United States for at least a month in all its 30 facilities.

Chrysler is one of the biggest US car makers who decided to shut down activity in January. Additionally, General Motors announced it would cut production capacity by 30% in first quarter 2009, as a response to shaky market conditions. The measure will curb output by 250,000.

Ford representatives sought 9 billion dollars in a government credit line that the company would use to break-even in the coming years. Ford group is the least affected compared to the three large US auto makers.

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