General Motors and Ford Motor will cut output in Europe, the US automakers said on Tuesday, another sign turmoil on financial markets is ruining consumers' appetite for big-ticket items like cars. GM has shut its Opel factory at Bochum, which makes Astra and Zafira models as well as axles and gearboxes, for two weeks until October 13, an Opel spokesman said.
Another German plant in Eisenach, which makes the new Opel Corsa compact, will halt production from October 13 for three weeks, the spokesman said. "The financial crisis has prompted people to hold on to their money and spend less for 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 Zaragosa 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 terminate this month 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 that makes Focus, C-Max and Kuga models.
"We are watching the market closely and react very quickly," he said. The moved follow downbeat comments at last week's Paris car show by executives casting a wary eye on future demand. "Certainly in the first half (of 2009) it's going to be weak," GM Chief Operating Officer Fritz Henderson had said, warning of weakness to come in both the US and western European markets in the next 12 to 24 months.
Daimler's's premium Mercedes-Benz division, BMW and Volkswagen units Seat and Skoda have also been forced to cut output in the face of falling demand. Carmakers are bracing for tougher times as market sentiment turned sour, with economists chopping their growth forecasts for the eurozone and warning the effects of a financial turmoil are swiftly seeping into the manufacturing sector.
"The cutbacks are a logical reaction to the reduced outlook for the fourth quarter," said automotive analyst Albrecht Denninghoff of BHF-Bank. Denninghoff estimated that demand for cars in Europe would plunge 7 to 10 percent in the fourth quarter versus a year ago. "The recent fall in oil prices is a small support but only underscores the factor that demand overall in the economy will be weak," he added.
Oil- which rose to a record high of $147.27 a barrel in July - on Tuesday recouped some of Monday's losses, when it slipped $6 on concerns that oil demand could be eroded further. "It seems the surprising thing about this round of production cuts is that it is being done by the premium brands as well," Denninghoff said.
European carmakers' association ACEA said passenger car sales in the region fell 15 percent in August, citing a loss of consumer confidence and the continuing rises in petrol prices.
For the January-August period, unit sales were 3.9 percent lower than last year, ACEA said. German trade magazine Automobilwoche said at the weekend that Mercedes-Benz wants to cut production by another 35,000 units by year's end and would do this by extending the period of a scheduled Christmas break for workers. Mercedes declined comment. In August, Daimler announced it would cut production by around 45,000 cars this year by reducing the working shifts at most of plants.
Last year, Mercedes sold around 1.3 million cars. Volkswagen AG's Czech unit Skoda Auto, the biggest carmaker in that country by turnover, said on Monday it would halt production at all its plants for a week at the end of October because of poor demand in other European markets. The stoppage will cut production by about 13,000 cars. Skoda had earlier planned to halt work for two days including the October 28 national holiday but extended the stoppage. French car and tyre makers are also scaling back.
PSA Peugeot Citroen said at the end of September it is cutting production at its Mulhouse plant, where the Peugeot 206, 308 and Citroen C4 are assembled, for 11 days between the end of October and December. The site normally produces 1,599/day. Renault cut full-year sales targets to 3 million vehicles from 3.3 million vehicles in July. Michelin has cut production at US and European sites by around 10 percent on average since the summer in response to falling sales.
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