March 28, 2024

Off the Charts: New-Car Salesmen Are Lonely in Europe

The European Automobile Manufacturers’ Association reported this week that new-car registrations in the European Union were down 6 percent in June compared with those in the month a year earlier and were running at their slowest pace since 1996.

Even in Germany, whose economy has been stronger than those of most of its European brethren, sales were the lowest for any June since the country was unified in 1990.

The lone bright spot was Britain, where June sales were up 13 percent from a year earlier. Retail sales in general have been surprisingly strong in Britain in recent months, and, as can be seen from the accompanying charts, in the last 12 months its new-car registrations were 9 percent higher than in the previous 12 months, making it one of only three European countries shown to have posted an increase.

At the same time, auto sales have been on the rise in the United States and were higher in the last 12 months than at any time since 2008.

New-car sales have long been a reliable economic indicator, one that falls sharply when recessions start and then rises rapidly when economies recover. That is largely because car purchases can often be postponed if buyers are worried, creating pent-up demand when recessions end.

In some of the European countries struggling the most, where an end to the recession appears to be far-off, new-car sales have been falling steadily for years as those who absolutely must buy a car choose a used one instead. In some countries, there is an active business importing used cars from more prosperous nations.

The charts show the level of sales in the last 12 months compared with those for the calendar year 2006, before the credit crisis led to the Great Recession. In a handful of countries, sales are higher now, and in the United States the decline is only 5 percent.

But in the euro zone as a whole, sales are 28 percent below the 2006 level. In Spain, Greece, Portugal and Ireland, sales are down by at least 50 percent, and in most of those countries there is no sign of recovery. Outside the euro zone, sales in Romania and Hungary are also far below the 2006 level.

In the early days of the credit crisis, new-car sales held up better in Europe than in the United States, and more generous “cash for clunkers” incentives ignited a rebound in 2010. But since then, weakening European economies have led to new declines that show no sign of ending.

One of the sharpest declines is in the Netherlands, which has fallen into a new recession amid rising unemployment and falling consumer confidence. June new-car registrations were less than half the level of the previous June, and sales in the last 12 months are down nearly a third compared with those in the period a year earlier.

The charts reflect sales of passenger cars only, excluding sales of light trucks, a category that includes sport utility vehicles and minivans, vehicles that are less likely to be used for business in the United States than in Europe. If those vehicles were included, the performance of both the European and American markets would appear to be a little worse, but the trends would be similar.

Floyd Norris comments on finance and the economy at nytimes.com/economix.

Article source: http://www.nytimes.com/2013/07/20/business/economy/new-car-salesmen-are-lonely-in-europe.html?partner=rss&emc=rss

French Government Considers Taking Stake in Peugeot Citroen

Speaking Friday morning on RMC radio and BFM television, Budget Minister Jérôme Cahuzac said the company “cannot and must not disappear, we have to do whatever is necessary to support it,” possibly with the government’s strategic investment fund.

The company, maker of the Peugeot and Citroën brands, said late Thursday that it was marking down those assets by about €3.9 billion, or $5.2 billion, to reflect “the impact on the group of the deterioration of the European market.” That, and an additional €243 million write-down for what the company called “onerous contracts, will have a direct impact on the bottom line when it reports 2012 results on Wednesday.

The company had valued the automotive assets on its books at €14.5 billion at the end of June. It said the write-downs would “not involve any cash-out, nor will it affect either the group’s liquidity or its solvency.” Nor is it related to goodwill, or the value of intangible assets such as the company’s brand.

Rather, the accounting measure reflects an acknowledgement of “the deterioration of the European market, which is likely to remain at 2012 levels for the foreseeable future.”

Shares of Peugeot Citroën were up 18 cents at €6.05 in early trading in Paris.

Even before the new write-offs announced Thursday, analysts surveyed by Reuters had been expecting a 2012 net loss of about €1.52 billion for the year.

The car market in the 27-nation European Union last year shrank by 8.2 percent from 2011, according to the European Automobile Manufacturers’ Association, bringing new car demand to just over 12 million units, the lowest since 1995.

PSA Peugeot Citroën did worse than the overall market, with deliveries declining 13 percent. The company, the second-largest E.U. carmaker after Volkswagen, is pressured more than many of its rivals by its dependence on European market.

It has already announced plans to close a plant in Aulnay-sous-Bois, near Paris, and hopes to cut 11,200 jobs from its French work force of roughly 97,000 people, mainly by offering early retirement and buyouts. Those restructuring plans were put on hold last week, when a French court ruled that the company had not adequately discussed its plans with workers at an affiliate.

Peugeot also sold a 7 percent stake to General Motors last year; it and the American automaker, which is struggling to turn around its own European unit, Adam Opel, have agreed to cooperate loosely on logistics and on some vehicle projects.

Libération, a French daily, reported Friday without identifying its source that the French government, which owns just over 15 percent of Peugeot’s French rival, Renault, was considering its options regarding Peugeot and might take a stake “as a last resort.” Last autumn, the state extended credit guarantees worth €7 billion to the company’s finance unit, to ensure that potential buyers could still get loans at competitive rates as the company’s own deteriorating balance sheet weighed on its ability to tap investors.

Asked Friday about the possibility that the government would become a shareholder, Pierre-Olivier Salmon, a company spokesman, declined to comment.

PSA Peugeot Citroën said the €3.9 billion depreciation charge included a write-off of about €3 billion on automotive division assets for 2012, as well as an €879 million markdown in the net value of deferred taxes.

The company said there would be another €855 million in write-downs for 2012, including €612 million it has already announced. Taken together, it emphasized, the charges will contribute to PSA Peugeot Citroën’s 2012 net loss “but do not affect its solvency nor its liquidity. The depreciation of these assets has no impact on cash.”

It also said it expected to meet its 2012 target for net debt of roughly €3 billion.

Article source: http://www.nytimes.com/2013/02/09/business/global/peugeot-citroen-takes-5-2-billion-writedown.html?partner=rss&emc=rss