Newspaper article International Herald Tribune

Gallic Shrug for Carmakers in France ; with Sales at the Lowest in 15 Years, Sector Weighs on Jobs and the Economy

Newspaper article International Herald Tribune

Gallic Shrug for Carmakers in France ; with Sales at the Lowest in 15 Years, Sector Weighs on Jobs and the Economy

Article excerpt

Vehicle sales in France last year sank to their lowest level in 15 years, and the economic downturn doesn't bode well for the industry.

Shoppers at the Citroen showroom on the Champs-Elysees were conspicuous mostly by their absence on a recent weekday. Earnest- looking employees outnumbered the lone visitor by at least 10 to 1. Two of the workers were busy refining their already considerable skills at an auto-racing video game.

Down the avenue at the Renault showroom, business was hardly brisker. Only at the nearby Mercedes-Benz showroom, displaying German automotive arts, was there much sign of life.

The dormant French dealerships signify the main problem facing this country's auto industry: Consumers in France do not seem very interested in French cars.

Esther Cintract, 40, a banker who takes the Metro to commute into Paris, owns a 10-year-old Citroen. For her next car, she said, she will look at switching to a German model: a Volkswagen, a BMW or a Mercedes.

In 2007, before the onset of the global financial crisis that morphed into the current economic slump in the euro zone, the overall E.U. market peaked at a little less than 16 million newly registered vehicles. Last year, the figure had fallen to a little more than 12 million, according to the European Automobile Manufacturers' Association.

In France, vehicle sales last year were the lowest in 15 years, falling to less than 1.9 million from a peak in 2009 of 2.3 million, according to Georges Dieng, an analyst at Natixis Securities. He noted that sales in 2009 had been stimulated by a cash-for-clunkers program introduced in December 2008 by the government of President Nicolas Sarkozy. Under the program, which lasted two years, car buyers received rebates of as much as EUR 1,000, or $1,350 at current exchange rates, if they traded in an older model.

But the subsequent downturn has left questions about when, and at what level, the automotive market will find a new bottom. One thing is clear: French automakers, like many European manufacturers, have more factory capacity and workers than they can profitably use, and may be in that situation for years to come.

That could especially be the case in France, where the streamlining plans announced so far by Renault and PSA Peugeot Citroen have been criticized by many analysts as insufficiently daring, even as the job-cutting elements of the plans encounter fierce resistance from workers and, in some cases, government officials.

It is a showdown that appears to be increasingly unrelated to the market's demands.

"I've never had a car," said Jean-Victor Mareschal, 30, who works at a bookstore in Paris. "I don't need one. I ride a bike, walk or take the Metro."

Philippe Houchois, head of European auto industry research at UBS in London, noted that most vehicle purchases in the developed world over the past five years had been to replace older cars, with only 2 percent of car sales in the United States and Europe representing net additions to those regions' consumer fleets. In emerging markets, by contrast, 70 percent of new-car sales represented additions to the total stock, Mr. Houchois said.

But even replacement demand is under threat in Europe. As the population ages, car owners drive less, reducing wear on their vehicles. And the cars of today last much longer than was the case just a few decades ago.

Generational change also bodes ill for the industry. Carmakers can be confident that many of those who adopt the car-based lifestyle early will stick with it for life. But the younger customers the industry covets are less interested in driving than they used to be -- particularly, it seems, in France and especially in trend-setting Paris.

"In my parents' generation, pretty much everyone drives," Mr. Mareschal said. "With my generation, it's a lot less important. I'm not anti-car, but it's something I just don't care about. …

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