Europe's auto capacity may be too high

June 14, 2012 at 4:56 PM
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DETROIT, June 14 (UPI) -- An auto industry expert said automakers in Europe need to reduce production capacity in order to stay competitive.

Richard Hanna, global automotive leader for PricewaterhouseCooper, said, "These factories are very capital-intensive. They need to be sweating to make money."

"We don't see, overall, the European market growing. You have to take some capacity out," he said.

Due to the great recession, U.S. automakers trimmed manufacturing capacity by about 5 million vehicles per year, Hanna said.

Automakers are now facing a serious economic downturn in Europe and a possible disruption of financial systems if Greece or any other nation leave the eurozone, the 17-country region that shares the euro as currency, The Detroit News reported Thursday.

"The current business environment in Europe is challenging and will require some tough decisions," said Ford Motor Co. spokesman Mark Truby.

"The industry still has not faced up to the overcapacity issues despite the severe economic issues since 2008," Truby said.

Chrysler and Fiat Chief Executive Officer Sergio Marchionne said all eyes on are the upcoming weekend election in Greece, which could decide the fate of the currency region.

"I think a lot depends now on what happens on June 17. I don't want to exaggerate the value of that vote, but it is going to be the catalyst for a variety of decisions," Marchionne said.

Quarterly statements outline the story that has automakers on edge in Europe.

Ford, for example, lost $149 million in Europe in the first three months of 2012, after posting a $293 million profit for the last quarter in 2011.

General Motors came out even January through March in Europe in 2011 and lost $300 million on the continent in the first quarter this year, the newspaper said.

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