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Auto CEOs: 2014 will not be an easy year

Reported by Steve Sedgwick, Written by Holly Ellyatt
Tuesday, 10 Sep 2013 | 4:00 AM ET
Ford Europe CEO: We're running along the bottom
Tuesday, 10 Sep 2013 | 1:45 AM ET
Stephen Odell, CEO of Ford Europe, tells CNBC that it feels like they're running along the bottom of the downturn and a recovery should start soon.

Europe's auto industry may not return to growth until it undergoes even heavier restructuring similar to that undertaken in the U.S., the chief executives of European automotive companies told CNBC.

The chief executive of Ford Europe said that while there were green shoots in macro-economic data out of the euro zone, the region's industry could take a long time to recover as sales slumped to near 20-year lows.

"We're seeing that the industry is leveling off [and] we could see some kind of recovery – we're not seeing it yet -but it will be a long, slow recovery, starting sometime soon," Stephen Odell told CNBC at the Frankfurt Motor Show on Tuesday.

"From a Ford perspective, when we started to go into the recession our view was that it was going to be a deep one unfortunately proved correct, and it does feel like we're running along the bottom now."

While the U.S. auto industry had been restructured – involving massive job cuts and cutting production levels - the European industry was still suffering from over-capacity, Odell said. He justified Ford's decision to close car plants in the U.K. and Belgium.

In July, the U.S. car giant forecast a pre-tax loss in Europe of about $1.8 billion this year (the same as in 2012) but Odell said the company aimed to return to profit for its European unit by 2015 with the launch of new models.

Overall car sales in the region remain gloomy, however, as high unemployment and economic uncertainty weigh on consumer demand.

While car sales in June hit a 17-year low in Europe, in contrast the U.S. auto industry posted a 17 percent increase in sales in August - its strongest month since just before the start of the 2007-2009 recession.

Despite car plant closures in Europe and a reduction in supply, the under-utilization of plants still haunts Europe's carmakers, with more than half of the 160 car plants in Europe operating below 70 percent of total capacity in the first quarter of this year, according to analysis from auto forecasters IHS Automotive.

(Read more: Europe's automakers to lose billions in 2013: Moody's)

The chief financial officer of Volkswagen, the largest carmaker in Europe with brands such as Porsche and Audi, told CNBC that a recovery in the region's auto industry would not be forthcoming as long as the industry did not focus on cost-cutting and restructuring.

"In Europe we still have the issue of overcapacity and that's pushing on prices. We do see some bottoming out…but it's too early to say if we're moving in the right direction," Hans Dieter Pötsch told CNBC in Frankfurt on Monday.

(Read More: Why the UK's auto industry remains crisis free)

"It's not going to be easy to see growth coming along because we're still sitting in this debt situation in most of the countries at least, fiscal policies are tight so it will take quite a bit of time to get there. In the meantime, it's a challenging business…2014 will not be an easy year."

One chief executive was more optimistic, however, forecasting not only a rebound but a "record year" for the international car market in 2014 as long as consumers had faith in the recovery.

"We think that 2014 is going to be a record year for the industry," Carlos Ghosn, chief executive of the Renault-Nissan alliance, told CNBC.

"After four of five years of decline, we're happy to see the first rebound in Europe. I don't think the rebound is going to be strong yet, it may take some time because you need the consumer to gain confidence that all of the problems that Europe has been facing are behind it."

"The main engine of growth is going to come from that consumer confidence."

- By CNBC's Holly Ellyatt, follow her on Twitter @HollyEllyatt

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