European Autos Fight Back, Detroit-Style Cuts Loom

Matt Clinch, special to

Leading car makers have released new models this week and are aggressively targeting the European market despite gloomy sales and factory closures due to the ongoing debt crisis in the region.


Honda , Ford and Jaguar Land Rover told CNBC that they were investing in major projects, concentrating on their brand and releasing new vehicles. September is seen as a key month for new releases in the European automobile industry.

“We’ve invested 267 million [pounds] ($337 million) in the last year in three major projects,” Dave Hodgetts, Managing Director of Honda UK told CNBC.

“We’ve got a good stable base in the U.K...but the European market is a little bit more difficult to judge. But we do think it’s stabilizing now and should return to growth next year.”

Challenging conditions in Europe were underlined by strategy consultants Roland Berger. Their recent data shows that as many as ten car factories in Western Europe could close in the next few years, leaving up to 80,000 people out of work.

They expect to see Europe's car sales decrease by about 6 percent in 2012 with the mid-range segment of the industry particularly affected, but foresee a recovery in the medium term.

“Apart from Volkswagen and Ford, other manufacturers are posting productivity rates in their plants that are unsustainable and the market will not recover," Roland Berger consultant Max Blanchet told French news agency AFP, referring to the carmakers General Motors , Opel , PSA Peugeot Citroen , Renault and Fiat .

He added that he expected the factories to close within two or three years.

In 2009, the U.S. government bailed out General Motors and Chrysler on condition they slash jobs drastically.

Ford Motors sees short-term hardship in the European market but predicts significant opportunity in the long term, with growth of 20 percent in the next five years and a production line of 23 million vehicles.

Alan Mulally, CEO of Ford told CNBC that the European market is still key.

“[Europe] is still a very, very significant market for us, nearly fourteen million units, clearly they’re going through a tremendous recession (explain this),” he said.

“We’re investing during the toughest of times so customers will have the vehicles that they really want and value as the economy starts to come back.”