Europe car maker gloom spreads north

Economic gloom has translated into a slump in the region’s auto market,which continued unabated in September when new registrations shrank at the fastest pace in the past 12 months,leaving nearly all major marques nursing double-digit declines.

Quarterly results from Volkswagen,Mercedes-Benz parent Daimler and BMW may be overshadowed by bigger news on production capacity cuts from mass-market peers that need to cut costs to survive.

Ford will hold an emergency meeting with unions at a plant in Genk,Belgium,on Wednesday,stoking fears that the factory may be closed.

The U.S. carmaker is bracing for $1 billion of European losses this year.

General Motors and PSA Peugeot Citroen – Europe’s second-biggest carmaker after Volkswagen – are preparing to announce plans for shared purchasing and pooled production on some models as they look to squeeze more cost-savings out of their alliance.

Meanwhile,GM’s European Opel unit aims to finalize a deal to restructure the carmaker’s loss-making operations by Friday,five days before its U.S. parent posts third-quarter results.

MOMENT OF TRUTH

The moment of truth appears to be beckoning (for European car makers),said Metzler Bank analyst Juergen Pieper.

Germany’s carmakers have until now weathered the demand crisis better than European rivals,benefiting from a solid home market and demand for premium cars in China and the U.S.

But they are losing their edge as China’s growth slows and dwindling confidence keeps drivers out of German car showrooms.

Business sentiment in Germany,the region’s largest economy,dropped for a fifth straight month in September,raising fears of a recession.

Volkswagen,which has for months been stealing market share from struggling rivals Peugeot,Fiat and Renault ,but whose VW brand saw a double-digit sales decline in September,is seen posting its largest drop in quarterly earnings since the 2009 recession,a Reuters poll showed.

Third-quarter operating profit is expected to fall 18.7 percent to 2.35 billion euros ($3.06 billion),the average of 10 estimates showed. VW reports its results on Wednesday.

Daimler said on Sept. 20 that operating profit at Mercedes would drop this year,rather than match 2011 as previously forecast. The carmaker aims to cut annual costs by more than 1 billion euros under a new savings programme,which it may detail on Thursday when it releases results.

BMW,which posted its second-best quarterly operating profit ever between April and June,may buck the trend again when it publishes earnings on Nov. 6. Buoyed by stronger Chinese car sales than luxury rivals Audi and Mercedes,BMW is best-placed to post higher third-quarter operating earnings,London-based Credit Suisse said in a research note on Oct. 18.

JOB CUTS

By contrast,Fiat has put investments in Italy on hold pending an economic recovery,and has vowed not to close any of its five factories. The Italian manufacturer will report third-quarter results on Oct. 30,along with an update on its 2010-2014 business plan to reflect Europe’s car market slump.

Fiat may also release Italian investment plans on Oct. 30,union leaders have said,citing Chief Executive Sergio Marchionne.

Credit Suisse expects Peugeot,which plans to cut more than 10,000 domestic jobs and close a plant near Paris,to post a 7.3 percent drop in third-quarter sales to 12.47 billion euros.

The company may also provide an update on its cost-saving alliance with GM when it publishes sales on Wednesday.

French rival Renault’s third-quarter sales probably fell 1 percent to 9.64 billion euros,extending the year-to-date fall to 0.9 percent or 30.58 billion euros,Credit Suisse said.

Peugeot,Opel and Renault may be forced to cut production by as much as 20 percent this year compared with 2011 because they are overly reliant on austerity-hit western European markets,the bank said in its note.