02 September 2012

Car Workers Told To Stay At Home

In Europe, car workers have a vacation in August, and usually return to meet orders and bolster supply. For some workers not this year. They are being told to continue their break and expect production cuts for the foreseeable future as well. This affects Peugeot, Citroen, Fiat, Renault Ford and General Motors plants. All these brands make volume brands, not premium marques.

The problem(s): The protracted Eurozone crisis is dampening demand, although the large markets of Germany, the UK and Russia are holding up quite well. So the real problem is over capacity, so that as soon as demand is soft, inventories grow and profits evaporate.

Why some makes are coping: Premium brands are selling well still. Plants that export a sizable amount of cars to areas outside of Europe are partially buffered. For example the Nissan Qashqai and Juke, Honda Civic Hatch and Toyota Avensis come to countries like Australia and NZ from the UK.

Any solutions?: A few factories should close, without government intervention and meddling. Can some production be sent outside of the Eurozone? The low Euro would certainly help, although it takes time develop export markets.

The reality: Europe should be moving away from so much dependence on cars anyway, to improve quality of life. Added to that, the days of constant improvement of living standards are over. Car makers, politicians and the public at large must accept that. Car makers need to meet demand and this will cost jobs. If that rather obvious reality is accepted and car makers can rationalise their businesses as they see fit, then the sooner it is done the better. Dilly dallying will weaken these companies in the meantime.

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