An auto glut in Europe is forcing Volkswagen AG, Fiat SpA and PSA Peugeot Citroen to accelerate overseas expansion to make up for declining prospects at home.
Excess production capacity in the European Union amounts to 6.5 million vehicles, according to Calum MacRae, an analyst at PricewaterhouseCoopers. Western European deliveries reached about 15 million last year, so that's a surplus equal to almost half the market. GM Europe President Nick Reilly says sales may slump this year by at least 1.6 million vehicles.
"I don't think it's going to be a good year," Reilly said yesterday at the Detroit auto show. Sales in western Europe probably will remain "below levels of 2008 for three years."
GM's Opel division is considering expanding beyond Europe, Reilly said. Volkswagen, the region's leader, is building its first factory in the U.S. in more than two decades and agreed last month to spend about $2.5 billion for a stake in Japan's Suzuki Motor Corp. to gain a stronghold in India. Peugeot, Europe's No. 2, is weighing a tie-up with Tokyo-based Mitsubishi Motors Corp., while Fiat is developing cars with Chrysler.
"Europe appears to be a fairly saturated market," Christian Klingler, Volkswagen's sales chief, said in an interview at the Detroit show. "The more dynamic growth forces are unfolding in other parts of the world, for instance China, Brazil or India."
Fiat rose 6 cents, or 0.6 percent, to 10.75 euros in Milan trading today. The stock has doubled in the past 12 months. Peugeot increased 0.6 percent to 26.13 euros in Paris. Volkswagen's preferred shares fell 2.6 percent to 63.50 euros in Frankfurt, paring the one-year increase to 65 percent.
European Contraction
Deliveries in Europe will probably decline by 1.4 million vehicles this year as government sales incentives end, according to IHS Global Insight. That 8.5 percent slump may contrast with 2 percent global growth, the research firm forecasts.
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