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European auto sales struggle

10 percent, 1st-quarter decline extends 18-month trend

– Europe’s auto market is in freefall. Once the motor for Europe’s economy, the car industry has fallen victim to the region’s widening recession and soaring unemployment. Carmakers have suffered 18 straight months of declining sales as people worried that they might soon be out of a job put off making big purchases.

New car sales across Europe slid 10 percent in the first quarter of 2013 to 2.9 million, down from 3.3 million in 2012, the European automakers association ACEA reported from Brussels on Wednesday. Even in Germany, one of Europe’s strongest economies, new car sales plunged 13 percent during the first three months of the year.

Across the rest of Europe, the figures were just as disappointing. Most major markets saw double-digit contractions: down 11.5 percent in Spain, 13 percent in Italy and 14.6 percent in France.

The German fall – which was felt across the country’s domestic industry from Volkswagen to Mercedes – took analysts by surprise. The country, after all, was still prosperous.

“How can it be so bad when employment and economic growth remain solid?” said Max Warburton of Bernstein Research.

The answer lies in the demand-sapping problems of Europe’s debt crisis. The economy of the 27-country European Union is on the verge of a recession after it contracted 0.5 percent in the last quarter of 2012 while unemployment is at nearly 11 percent. This has drained consumers across the EU of any confidence to make big-ticket purchases.

Based on ACEA’s figures, Ian Fletcher, a London-based auto analyst with IHS, expects European sales to fall 3.3 percent overall this year to 11.8 million units.

By comparison, many expect U.S. sales to reach 15.5 million for 2013, while sales in China could top 20 million.

The declining car market in Europe has been weighing on global carmakers’ bottom lines. Last year, four of the biggest automakers based in Europe – Ford, PSA Peugeot, Fiat and General Motors – together posted operating losses of $7 billion for the region.

According to the ACEA, in the first three months of 2013, General Motors saw sales drop 13 percent. The automaker has a truck assembly plant in Allen County and a foundry in Defiance, Ohio.

PSA Peugeot sales were down 15 percent, Ford was down by 20 percent, Toyota 18 percent and Fiat 9 percent.

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