Geneva Motor Show tries to drive away gloom

Keystone

A leaner, greener Geneva Motor Show opened on Thursday against an industry backdrop of grim sales figures, job losses, huge state aid and a cloudy future.

Despite hard times, the organisers are putting on a brave, glitzy face to dispel some of the gloom, and over the next ten days still expect some 700,000 car fans to check out the many new models on show.

Tyre manufacturer Michelin, and Chinese and South Korean firms BYD and SsangYong might be absent, and General Motors may have halved its display area, but the organisers are downplaying the impact of the economic crisis on the show.

“The storm affecting the industry passed close by Geneva,” Rolf Studer, general manager of the motor show, told swissinfo.

None of the major car firms have cancelled, unlike at the Detroit Motor Show in early January, where several firms dropped out, including Land Rover, Ferrari, Rolls Royce, Nissan, Suzuki and Porsche.

“All major firms are present here with magnificent stands. I think it is particularly important for the car industry to show customers what they are able to do even in a financial crisis.”

Because firms are ever more desperate to attract customers, and because so many ideas for new cars left the drawing board before the downturn really took hold, many new models – lavish and modest – will still be launched in Geneva.

The highlights of the 79th annual motor show include Volkwagen’s new Golf GTI and the first European unveiling of the third-generation Toyota Prius. Rolls Royce will introduce a new “compact car” for the rich and Bentley will present a supercar that can run on biofuel. Mercedez Benz will show off its new E class car and Renault will unveil its new Clio, Scenic and Grand Scenic models.

The show is also dedicating an entire pavilion to greener cars, not just those with lower fuel consumption but newer technologies, from hybrids to battery-operated cars.

Geneva remains attractive to many automakers, suppliers and design firms because it is held in neutral Switzerland, which does not have an automaker of its own to claim a home advantage. But this could be the last lavish motor show for years. Already, at least three manufacturers have said they will skip the Frankfurt show in September.

“Geneva is still the best show,” said Financial Times journalist Richard Milne. “But the industry is in flux and it’s a show where people are concentrating less on the cars.”

Slightly surreal

The contrast between the polish and bling on the stands in Geneva and the stark reality of the outside world is slightly surreal.

Carmakers are experiencing the worst slump in sales for 35 to 50 years, millions of jobs are under threat, several companies could go out of business and dozens of plants will close forever.

“The car industry is deeply worried as they now realise the extent of the problem but they don’t know when it’s going to be over and they have no idea what the future of the industry will look like,” said Milne.

Demand for new cars continues to plummet worldwide. In the United States sales fell 49 per cent at General Motors and 40 per cent at Ford in February, compared with a year earlier. Japan, home of the world’s biggest car-maker Toyota, as well as Honda and Nissan, reported a 32.4 per cent collapse in car sales in February – on top of a 28 per cent drop in January and the worst decline since 1974.

Toyota, which is marking the European launch of new versions of its Prius hybrid and Verso people carrier at Geneva, said it expects a 30 per cent drop in the overall European car market this year.

Despite the gloom, car executives are combative.

“This is a most severe downturn, but it isn’t the first or last,” Graham Smith, Senior Vice President for Toyota Motor Europe, told swissinfo. “The industry is down substantially so we have to adjust production globally, especially in Europe. We’re doing that in the most flexible way possible so that we are ready for the upturn.”

Throw a lifeline

At the same time, firms are continuing to call on governments for financial support.

Renault’s chief executive Carlos Ghosn warned in January that Europe’s car industry faces collapse without rapid intervention from European Union governments.

General Motors officials told journalists in Geneva on Tuesday that GM Europe – whose subsidiaries are Germany’s Adam Opel GmbH, Britain’s Vauxhall, and Sweden-based Saab – was negotiating with Spain, Britain and other European governments beyond Germany to get the $4.2 billion they say they need to keep operating.

But the same day OECD Chief Economist Klaus Schmidt-Hebbel said governments worldwide should resist the temptation to bail out car manufacturers, steel producers or any sector other than the systemically crucial finance industry.

This did not make economic sense because the industry had made too many cars for too long and would have to shrink in the years ahead, not because of recession but overcapacity, he said.

According to the auto consulting company CSM Worldwide, the global car industry has the capacity to make 94 million vehicles each year, which is about 34 million too many based on current sales.

The future looks very uncertain. Last December Fiat’s chief executive, Sergio Marchionne, indicated that there would be only half a dozen global manufacturers left within five years, while the French government is talking of six to eight.

swissinfo, Simon Bradley in Geneva

Key facts

On March 5, Swiss President Hans-Rudolf Merz opened the Geneva International Motor Show, which runs until March 15, and is expected to attract some 700,000 visitors.
Some 85 world and European premieres are announced, with 15 dedicated to electrical cars alone. Around 40 per cent of the visitors travel from outside Switzerland, with many from neighbouring Germany, France and Italy.
The organisers claim that the Geneva motor show generates SFr300 million ($254.3 million) in direct and indirect income.

Vehicle-related manufacturers in Switzerland

The 310 Swiss companies, employing 34,000 people, are mainly concentrated in the central area and the north and east.

The manufacturers supply not only parts but also assembly systems, and software for vehicle producers and for other suppliers. They generated SFr16 billion in 2008.

The sector has been particularly badly affected by the crisis and has already started to reduce staff levels.

Swiss firms also provide services such as consultancy, development and marketing.

Car sales

2009 (from a year earlier)
Europe: -27% (January)
US: -41% (February)
Japan: -32% (February)
Switzerland: -18% (January)

Car sales
2008 (compared with 2007)
US: -18%
Europe: -8%
Japan: -6%
Switzerland: +1.4%