Carmakers’ dilemma: too many plants, too few buyers

Peugeot’s 8,000 job cuts and closure of a plant near Paris comes as cash strapped Europeans buy fewer new cars and the region’s manufacturers ponder what to do about their surplus of factories with too much capacity.

In addition, unemployment is highest among young people – under 25-year-olds – which means a lost generation of drivers.

In France deliveries of cars and light vans fell by 0.9 percent in June after a 17 percent plunge in May.

In the first half of the year Peugeot Citroen was hit hard with a 13 percent slump in deliveries.

Fellow French carmaker Renault’s sales slipped by 3.3 percent, while Germany’s Volkswagen increased its market share in France and overall sales rose 10.2 percent.

Analyst Brenda Kelly with CMC Markets blamed austerity: “You’re seeing the effect (of austerity measures) on the private sector at the moment, and of course, as the demand for these goods (cars) goes down, so there will be an effect on the employment levels. So you would expect to see unemployment in France rise somewhat over the next quarter or so.”

Around Europe carmakers say they need help from governments to reduce their overcapacity.

It is estimated more than a third of the region’s factories are not using enough of their capacity to be profitable so the industry expects more layoffs and plant closures.

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