Bad signs for European car manufacturers

The recent days have seen a number of significant developments indicating just how serious the current economic problems are for the European automobile manufacturers. This is likely to impact on Formula 1 as the majority of the car makers in F1 are European-based.

The most significant development is the announcement that Peugeot is to begin offering zero percent financing and other incentives on some of its models. The company is offering free credit on the 307, 406, 607 and 807 models and one year's free insurance on the majority of its 206 models. This is designed to keep cars flowing through the showrooms but will reduce profits dramatically as has happened in the US. Several car companies have tens (and even hundreds) of thousands unsold cars in lots across Europe.

At the same time General Motors chairman Rick Wagoner says that the European markets cannot achieve long-term profitability if there continue to be six or seven manufacturers each with a relatively small percentage of the market because the vehicle platforms being built do not achieve the necessary economies of scale to generate healthy profits. The GM boss says that this can only be achieved if there are fewer but bigger car firms.

And from Germany comes news of Ford of Europe cancelling investment in new Focus facility at Genk in Belgium. This and the slimming down of Mondeo operations will result in 3000 job losses at the plant.

"The automotive market in Europe has deteriorated dramatically since only a year ago," said Lewis Booth, the new President of Ford Europe. "With lower industry outlooks, a larger number of competitors, and escalating marketing costs, we must concentrate on maximizing our product line-up while minimizing our spending. We need to adjust our business to new realities in the European industry. We are taking steps to accelerate cost reductions, while maintaining the new product momentum our business depends on."

Follow grandprixdotcom on Twitter

Print News Story