The car industry will be transformed by the current crisis, says former Birmingham Post reporter John Revill, who now writes for Automotive News Europe.
To say it’s been a tough year in the European car industry would an understatment. You know it is serious when the normally mild mannered Swedes are getting angry, and even the man who rescued Fiat is deeply pessimistic.
But that’s what happened last year when the financial crisis spilled over into the car industry.
Volvo and Saab were put up for sale, car sales went into meltdown, and the big three American car makers edged closer to collapse.
Even Japanese giant Toyota suffered – posting its first ever operating loss in 70 years.
Sergio Marchionne, the man who brought Fiat back from the dead, thinks the car industry will change rapidly in the next few years.
His view: there could be only six survivors in the global volume sector as falling new-car sales and rising financial losses lead to a wave of consolidation in the industry.
Mr Marchionne said: “This business is going to be completely different. It cannot continue as it did in the past. Independence in this business is no longer sustainable.
“The only way for companies to survive is if they make more than 5.5 million cars per year.”
At present, only five automakers - Toyota, General Motors, Volkswagen, Ford Motor and Renault-Nissan - have that kind of scale.
So what happened during 2008?
After a relatively positive start, new car sales collapsed across Europe in the second half of the year.
The Western European market was down 7.6 per cent in the year to November, but some countries were suffering much more than others.
Spain, heading towards a recession, saw car sales plunge 28.1 percent during 2008 - the country’s sharpest ever drop.
John Fleming, chairman of Ford of Europe, said the situation is as bad as he has ever known it. The speed the markets are going down unprecedented.
He said:”At the moment, based on what the economists are saying, we are unlikely to see any improvement during 2009. My expectation is that sometime during 2010 we could start to see an improvement.”
Ford of Europe remains profitable, but one of its main competitors - General Motors Europe - endured a bleak 2008.
The company’s Opel brand, which makes up about 80 percent of its volumes, saw its sales fall by 10.5 per cent during the year.
Its president, Carl-Peter Forster, announcing third quarter pretax losses of $1billion did not even attempt to put a positive spin on the situation.
He said: “Clearly this was a brutal quarter and to say I’m not satisfied with these results would be a monumental understatement.”
Mr Forster thinks the markets would recover, but it would take time.
He said: “Unfavourable exchange rates, high commodity prices and saturated western European markets, as well as the economic impact of the financial crisis in key Western European markets will persist for the near-term picture.”
Both GM Europe and Ford of Europe are also affected by the dire situation of their parent companies in the US - where GM and Chrysler were forced to go to Washington to ask for government funding.
Without it - they would have run out of money in a matter of weeks.
Ford, after mortgaging everything — plants, buildings, patents and trademarks, including the Blue Oval — for $23.4 billion in cash in 2006,said it didn’t need to borrow money from the US government.
But after selling Jaguar and Land Rover last year, it has now put Volvo up for sale.
In Sweden, the people of Gothenburg are furious with the way Ford has treated Volvo.
“Ford has not been a good owner,” said Vera Coutinho, who works at the Volvo factory near Gothenburg.
Another worker, Simon Kidane, said: “People just want Ford to go.”
The future looks even bleaker for Saab, which has also been put up for sale by GM after being lossmaking for most of the eight years it has been owned by the American giant.
The industry-wide sales collapse is expected to accelerate this year.
New-car sales in western Europe will fall by 15 percent or 2.1 million units in 2009 to 13.5 million, investment bankers Goldman Sachs said in December.
With an average car plant producing about 300,000 units a year, the decline is the same as the output of seven factories.
Consultants CSM Worldwide predicts Western European sales to fall by 8.7 per cent in 2008 to 13.47 million cars, and 14.7 per cent to 11.4 million cars in 2009.
The sales collapse could lead to mergers and create a very different industry.
There will likely be fewer car companies, the volumes will not there to support the economies of scale the companies need.
There will also be less diversity – the proliferation of different brands and models will be cut by carmakers who cannot afford to be so diverse.
There has been a series of temporary shutdowns of factories across Europe in the last few months, but this might not be enough.
Some analysts think up to five five factories could close in the next two or three years as a result of the downturn.
The auto industry will recover – people will still want cars in the next few years.
But it will look very different from what we have now.
