Automakers Cautiously Upbeat in Geneva as Europe Recovers

For Fiat SpA, PSA Peugeot Citroen, Volkswagen AG and others converging at the Geneva International Motor Show, what a difference a year makes.

Automakers today are showcasing their latest creations, including the Jeep Renegade and Audi TT, as the region’s market pulls out of a six-year slump, with the ACEA industry group predicting European deliveries will rise 2 percent in 2014.

Recovery in the auto industry comes as growth in the 18-nation euro area is set to gain 1.2 percent this year and economic confidence unexpectedly improved last month, while signs of a broader rebound include a 22 percent increase in global merger activity. Car sales across the region have risen for five consecutive months as the end of a record-long recession is prompting consumers to buy new vehicles.

“Last year we were cautious about the prospects in Europe, and this year it’s the opposite,” Christian Klingler, VW group’s sales chief, said at the Geneva event. “The mood is better, but the reality is we are still far from the peak.”

Carmakers have spent the year since the last Geneva show, when sales were still declining, working to consolidate holdings, cutting jobs and eliminating overcapacity. Fiat completed the purchase of Chrysler to create the world’s seventh-biggest automaker, Peugeot won needed investments from Dongfeng Motor Corp. and the French state and VW offered to buy the rest of Scania AB to fix its struggling heavy-truck unit.

Cutting Jobs

Peugeot, General Motors Co. and Ford Motor Co. are also closing five factories in the region and eliminating 20,000 jobs to streamline operations. Renault SA is cutting another 7,500 positions in France to lift profit.

“The confidence is starting to return,” Stephen Odell, Ford’s Europe chief, said on the sidelines of a Geneva event. “We’re on a reasonable path of moderate recovery.”

Shares of Fiat rose 4.1 percent to 7.71 euros as of 12 p.m. in Milan, leading the Stoxx 600 Automobiles & Parts Index higher. VW gained 2.6 percent and Renault added 2.7 percent.

The Geneva International Motor Show, which is open to the public March 6-16, is a way for carmakers to showcase vehicle design and expensive sports cars. VW’s Audi brand unveiled the remake of the iconic TT coupe last night. Today, Lamborghini is showing the Huracan, Ferrari debuts the California T and Bentley highlights the Continental GT Speed, making its fastest model even faster. Show organizers expect this year that 250 exhibitors will present more than 146 automotive premieres -- up from 133 in 2013.

‘Product Offensive’

Daimler AG Chief Executive Officer Dieter Zetsche, under pressure last year to improve sales at Mercedes-Benz, is also presenting a turnaround story. He’s now struggling to keep up with demand as customers snatch up new models such as the revamped flagship S-Class and CLA Coupe. The CEO has also joined with Renault to help cut development costs, especially at the Smart small-car brand.

“Here in Geneva, we will show you further proof that our product offensive is really just starting to take off,” Zetsche said late yesterday. “We are still not able to build as many cars as we could sell at Mercedes right now.”

Auto producers are beginning to sound upbeat as some euro-zone growth indicators show improvement. Gross domestic product climbed 0.3 percent in the fourth quarter, exceeding economist estimates and extending the euro area’s expansion to three quarters. Euro-area economic confidence unexpectedly rose in February while business confidence in Germany reached the strongest level in 2 1/2 years.

“Western Europe from an automotive point of view is really leveling out, and will come back,” Jaguar Land Rover CEO Ralf Speth told reporters. “In that context, I am cautiously optimistic.”

Slow Recovery

Still, the region’s sales are climbing gradually from a two-decade low, and executives aren’t forecasting a U.S.-style rebound in Europe. Deliveries in the region last year totaled 12.3 million autos.

Russia’s territorial dispute with neighboring Ukraine may also affect the Russian market where 2.78 million vehicles were sold last year. That leaves carmakers to count on the American and Chinese markets, the world’s two biggest, to help propel their global growth.

“If hostility breaks out in the East, this would undoubtedly affect western Europe,” Johan de Nysschen, head of Nissan Motor Co.’s Infiniti brand, said in an interview. “That could put a damping effect on what is already a very, very weak recovery in western Europe.”

U.S. Forecasts

Bayerische Motoren Werke AG, the world’s biggest maker of luxury autos, said today in Geneva it plans to sell more than 2 million cars and sport-utility vehicles this year as demand grows in China and the U.S. GM, Ford and Toyota Motor Corp. -- the three largest auto manufacturers in the U.S. by sales -- each predict the country’s auto deliveries will top 16 million in 2014 after growing by more than 1 million annually for the last four years. They totaled 15.6 million in 2013, the industry’s best annual result since 2007, according to researcher Autodata Corp.

“One big change is that last year, everybody had a very big question mark about when the decrease of the western European market would end,” said Didier Leroy, Toyota’s Europe chief. “Now, basically everybody agrees that the recovery already started in the second half of 2013. It will not be big like in the U.S. It will be a very, very slow recovery.”

Jeep Renegade

Fiat, which in January completed the purchase of a 41.5 percent stake in Chrysler that it didn’t already hold, is highlighting in Geneva the combined group’s potential with the new Jeep Renegade, a compact SUV that will be made in Italy and share underpinnings with the 500X, a crossover version of the trendy Fiat city car.

Peugeot, which agreed last month to sell stakes to Dongfeng and France to fund new models and expansion into growth markets, is displaying the Citroen C4 Cactus, an urban crossover. The manufacturer also got bragging rights at the show after the 308 hatchback yesterday beat six other vehicles, including electric autos from BMW and Tesla Motors Inc., to win Europe’s Car of the Year award.

CEO-designate Carlos Tavares is making his first auto show appearance with Peugeot to talk up the manufacturer’s models and begin spelling out his plans for returning Europe’s second-largest automaker to profit after two years of losses.

“The industry is in more robust shape than a year ago,” said Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg-Essen. “Cooperation projects like Peugeot and Dongfeng, Renault and Smart or Fiat and Chrysler will also start to reap benefits.”

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