Europe Due for Auto Industry Shakeout? : Autos: A French official says there may be only four European car makers in 10 years. But they would be well equipped to compete with the Japanese.
Speculation about the future of the European automobile industry swirled through France this week, with a government official telling reporters that mergers could result in there being only four car makers left on the continent by the end of the century.
The comment came at a time of growing concern among French and other mainly southern European leaders that their auto industries are not strong enough to meet a direct challenge by Japanese car makers after the European Community’s unified market takes effect at the end of 1992. Fears that Japanese industry will move into Europe the way it has in the United States have prompted a wave of anti-Japanese sentiment in Europe.
French government trade restrictions now allow Japan only 3% of the country’s auto sales and require large European-content percentages on Japanese cars made in Britain and other EC countries and sold in France. Similar restrictions exist in Italy.
These protective quotas will be lifted in 1992, permitting Japanese auto makers entry into some parts of continental Europe for the first time. Particularly in France, the specter of Japanese competition has sparked widespread fear that some European car makers will be unable to survive.
In hearings on the car quotas last week in Brussels, the French minister of European affairs, Edith Cresson, warned of a potential “cataclysm.”
“The final aim” of the Japanese, Cresson said, “is to conquer market share and then kill” domestic competition.
She urged her fellow Europeans to make an exception and exclude the Japanese from the market. “If we must open our borders,” she said, “it would kill our industry.”
This week there has been speculation about a merger of Peugeot, France’s No. 1 auto maker, with Fiat of Italy, a rumor that apparently had its genesis in the wake of an arrangement between France’s state-owned Renault and Volvo of Sweden. Renault and Volvo are not merging, but each is buying a major stake in the other and the companies plan extensive cooperation.
On Thursday, a high-ranking French government official added fuel to the discussion by saying that a Peugeot-Fiat merger would be a good idea, indicating that that would create an alliance large enough to compete effectively with the Japanese.
Jean-Paul Huchon, chief of staff to Prime Minister Michel Rocard, also told reporters that changes in the European auto industry could result in Renault-Volvo, Volkswagen, Daimler-Benz and Peugeot-Fiat being the only surviving European auto makers by the end of the century.
“As for the Peugeot group,” Huchon was quoted as saying, “it is probable that it will be in its interest to seek a deal with Fiat. That would be the most logical.”
A spokesman for the prime minister said Friday that Huchon’s comments were not meant to reflect the government’s position.
“He just gave his personal opinion,” spokesman Denis Delbourg said, “that if European auto makers want to be competitive with Japan in the future, it would be good to make alliances, such as one between Peugeot and Fiat.”
The French government, which pushed the arrangement between Renault and Volvo, has no direct control over the privately owned, family-controlled Peugeot group.
Peugeot denied Friday that it has any immediate interest in merging with Fiat, and company spokesman Hughes Dufour said Peugeot interpreted Huchon’s comments as a “personal opinion.”
“We don’t think it was an attempt by the government to interfere in our affairs or put any pressure on us,” Dufour said.
Peugeot’s statement said, “Peugeot is keen on internal growth and does not believe in the virtues of global alliances.” It went on to point out that a similar international arrangement with Chrysler in the late 1970s resulted in heavy losses.
A spokesman for Fiat in France, Mario Rispoli, said that although Peugeot and Fiat have joined forces in the past on certain projects, “there are no new negotiations in the works.”
“It’s always nice to be appreciated by the French government,” Rispoli added, “but the supposed marriage of the two companies is an old story.”
The Peugeot group, which makes Peugeot and Citroen models, is coming off a series of strong years. According to industry sources in Paris, the group is expected to register net earnings of more than 11 billion francs, or $2 billion, for 1989, an increase of more than 30% over 1988. Peugeot-Citroen accounts for 32% of all auto sales in France, compared to 29% for Renault.
Fiat dominates its home market in Italy, recording 60% of the auto sales in the country.
