‘Devastating’ crisis risk
March 17th, 2009 by Richard Aucock
CAR makers are hit ‘extremely hard’ by the financial crisis, reports influential European group the ACEA.
This means that ‘many manufacturers’ will become technically bankrupt.
Government and institutional help is thus vital, to stimulate new car demand and improve liquidity.
The findings were revealed in a new report on the state of the industry.
Effects of the credit crunch, it says, have hit the car industry in two ways – demand has plunged as customers can’t get credit, and it’s also harder for the car companies to finance daily operations.
In short, the credit crunch is the cause of the crisis.
This ‘devestating’ crisis puts the ‘engine’ of the European economy at risk. 1 in 10 jobs is directly or indirectly dependent on the automotive sector.
It represents 6.5 percent of TOTAL European GDP.
The ACEA also put into context what job losees at car makers mean – the multiplier effect of which will be worrying to car dealers:
1 job at a car maker ensures…
4 more jobs at suppliers…
… 5 more jobs in related sectors, including retail
The ACEA has thus demanded that demand for new cars is stimulated, with schemes such as new car scrappage schemes and fiscal incentives.
‘Governments collect 381 billion Euros in vehicle taxes and have a powerful instrument to influence the markets.’
Both the economy and the environment will benefit from this.
It’s a damming and worrying report, that doesn’t hold back. ‘Since the summer of 2008,’ says the ACEA, ‘sales decisively dropped through the floor… and crashed further in the final quarter of the year.’
3.5 million fewer vehicles was the trend rate in January 2009.
‘The crash in domestic vehicle sales and in key export markets has been so sharp, deep and synchronized globally that virtually every single vehicle manufacturer will see significant cash burn, estimated at between 18 billion Euros and 30 billion Euros in 2009.’
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