Europe's auto industry sees unprecedented crisis following production losses

Brussels – Europe's automakers are calling for immediate support from the European Union and member states after suffering a production loss that could render companies short of cash in just weeks.

Industry association ACEA demanded "strong and coordinate action" to aid manufacturers, their suppliers and dealers who all face a "severe" financial hit.

"The effect of the coronavirus on the automobile industry is unprecedented," ACEA director general Eric-Mark Huitema said in a statement. "It is becoming increasingly clear that Covid-19 has led to the worst crisis ever to impact the automotive sector."

EU-wide production losses from factory shutdowns amount to 1.23 million vehicles so far, with some 1.11 million workers affected, not including the supply chain, ACEA said. The wider sector provides jobs for 13.8 million people across the European Union, ACEA said.

Huitema spoke of "grave consequences" for the industry going far beyond what can currently be forecast.

As a result, he said an urgent dialogue was needed with EU Commission President Ursula von der Leyen.

"Firstly, to take concrete measures to avoid irreversible and fundamental damage to the sector with a permanent loss of jobs, capacity, innovation and research capability," he said. "Secondly, we believe that Europe should prepare to stimulate the recovery of our sector, which will be a key contributor to the accelerated recovery of the European economy at large."

Recently, the ACEA together with the European industry associations for suppliers, dealers and tire makers, wrote that "several companies could face (cash) shortages within a matter of weeks" and called on the EU to delay compliance of important regulatory targets as the crisis has presented unforeseen obstacles.

"We believe therefore that some adjustment would need to be made to the timing of these laws," the organizations said in a statement.

Damage piles up

The damage to the European car industry from the coronavirus pandemic is piling up, after French auto sales plunged in March and a major parts supplier, Continental, scrapped its outlook.

French registrations dropped 72% compared to March 2019. Separately, Germany’s Continental withdrew financial guidance for the year and said more than 40% of its plants have shut.

“It is very likely that new car and trucks sales will have to take the biggest hit since 1945,” said Juergen Pieper, analyst at Bankhaus Metzler.

“April will also be very difficult because populations will remain confined in many countries,” Jacques Aschenbroich, CEO of French supplier Valeo, said on BFM Business radio. “We must be prepared for a very, very difficult next few months.”

Continental said about 30,000 employees, or half its local workforce, have been registered for state wage support and shorter working hours. In scrapping its outlook, the company followed a spectrum of firms across Europe who have said the outbreak makes it nearly impossible to predict revenue.

Valeo is slashing investment and costs as well as putting staff -- including development engineers -- on partial unemployment, Aschenbroich said. “Most of our clients are slowing development of new vehicles so our teams are as well,” he said. “The turnaround will come, maybe later this month, but we just don’t know.”

Swedish car registrations fell 8.6% in March, industry organization BIL Sweden said. The drop was not related to the pandemic as the cars were mostly ordered several months earlier.

“We can expect a coronavirus effect on new registrations in the coming months,” said Mattias Bergman, head of BIL Sweden.

Reuters and Bloomberg contributed to this report