automotive news europe march 2012

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>> INSIDE: TALK FROM THE TOPBentley CEO Wolfgang Duerheimer, Jaguar Land Rover CEO Ralf Speth and Mini boss Kay Segler

AUTOMOTIVE NEWS EUROPE

LETTER FROM THE EDITOR

Harald Hamprecht

Fire fightersThe hottest fires make the hardest steel, or so the saying goes. In real life, the economic crisis blazing through southern Europe is turning profits into ashes. It is estimated that nearly every European volume manufacturer had an operating loss in Europe last year. Peugeot, Citroen, Renault, Opel/Vauxhall and Fiat are doing all they can to try to defy the downturn (page 12) because no one wants to end up like Saab. To avoid getting into deeper trouble, those volume brands will need to address four key weaknesses. 1. Europe-centric: The five brands mentioned above are too dependent on Europe, where sales are expected to decline for the fifth consecutive year in 2012 (see chart). 2. Stuck in the middle: The Asian automakers, especially the Koreans, are attacking from below while premium manufacturers are pushing more and more product into the subcompact and compact segments. 3. Overcapacity: Automakers such as Renault, Peugeot, Fiat and Opel have either delayed needed restructuring of their manufacturing footprints or did not cut deep enough in the past. 4. Weak brand portfolio: European automakers must accept that one can only stretch an existing brand so far. For example, sister brands Citroen and Peugeot compete for the same customers and neither has a budget brand, like Renaults Dacia, nor a premium brand, like Volkswagens Audi, to generate profits. 2. Ford 4. Peugeot 5. Renault 6. Citroen 7. Audi 8. BMW 9. Fiat 10. Mercedes Total market

is Editor-in-Chief at Automotive News Europe. He can be reached at [email protected]

EUROPES TOP 10Western European passenger-car sales for top 10 brands

2012* 1. Volkswagen 1,415,041 975,356 971,257 859,356 810,403 675,714 647,652 643,652 628,181 586,298 12,482,075

2011 1,607,582 1,068,282 969,026 899,373 1,019,140 763,110 658,746 619,522 670,199 567,886 13,201,216

% CHG

-12 -9 0 -4 -20 -11 -2 4 -6 3 -5

3. Opel/Vauxhall

SOURCE: IHS AUTOMOTIVE; *FORECAST

THE EXCEPTIONThere is one volume automaker on the European battlefield that is an exception: Volkswagen. Last year, the longtime No. 1 automaker in Europe rose to No. 2 from third in global sales. Its impressive, but dont forget that the company was in rough waters when Bernd Pischetsrieder took over as group CEO from Ferdinand Piech in 2002. The companys profits plummeted in 2003 while the fifth-generation Golf disappointed and the Phaeton flagship flopped in 2004. In 2005, VW was shaken by a sleazy corruption affair. That same year, Wolfgang Bernhard joined VWs management board and helped end a dark period when production efficiency was a foreign concept at the company. By 2007, Martin Winterkorn took over and now VWs billions in operating profits make it the envy of the auto industry. But it wont be easy to maintain the momentum in a declining market, especially with the Golf, Europes top-selling car for the last four years, undergoing a model changeover. Another challenge is that the Up minicar is likely to steal sales away from the Polo subcompact.

pany quickly tumble back to the brink of failure. Besides, Marchionne has often over-promised and under-delivered. I am still waiting for the year when Lancia and Alfa Romeo will do as Marchionne predicted and each sell 300,000 cars a year. Marchionne is Mr. Big Picture. He says he is searching for a new partner to join the Fiat-Chrysler alliance so it can better compete against VW. Marchionne should get his business straightened out before he tries to create an even bigger conglomerate of struggling volume manufacturers. Coming back to hot fires and hard steel, my advice to European volume manufacturers is simple: Use the crisis. Develop a clear strategy and execute it to perfection. Improve quality and offer designs that make car buyers wallets jump out of their pockets. Speed up efforts to improve your cost-competitiveness. If your plants cannot become more efficient then fight through the political battles and shut them. Otherwise, massive structural costs will continue to devour your profits. Cooperate more! This would be much easier and more successful than organizing megamergers. In a nutshell, stand out or stand aside. Transform into the leanest, most innovative manufacturers in the world. Europes automotive brands have the heritage and people needed to achieve greatness. Of course, I am well aware that all of this it is easier said than done. But it is not impossible, as the revival of British luxury and premium brands shows (page 32). I hope you enjoy this issue.

FUMBLING FIATAt the other end of the spectrum is Fiat the biggest loser in 2011 among the major automakers with a European sales decrease of 17 percent. Fiat is getting stung by Italys sales slump. Its also hurt by an aging lineup that resulted from CEO Sergio Marchionnes decision to delay product launches during the Great Recession. In addition, Fiat is in the middle of the Chrysler merger, which Marchionne says is only about 20 percent finished. I am reluctant to praise the CEO too much. The man definitely revived Fiat. He also saved Chrysler from extinction, but there are others who once made the same claim Bob Lutz, Dieter Zetsche, Wolfgang Bernhard only to see the com-

MARCH 2012


3


INSIDE THIS ISSUE

www.autonewseurope.comJASON STEIN Publisher and Editorial Director +1 313 446 0376 [email protected] NINA SAUER Associate Publisher +49 89 381 517 400 [email protected] KEITH CRAIN Publishing Director PETER BROWN Group Publisher

contentsMARCH 2012 EDITION

22

3 Letter from the Editor

42 Surging Skoda

MARKETS6 Focus on FranceSales will slump, but no need to panic

Czech brand remains on record-breaking course

44 Module-maniaVW Group pushes production network to new heights

EDITORIALHARALD HAMPRECHT Editor-in-Chief +49 (0) 173 257 86 88 [email protected] DOUGLAS A. BOLDUC Managing Editor +49 (0) 171 424 6373 [email protected] PAUL McVEIGH Managing Editor +49 (0) 176 7835 3951 [email protected] LUCA CIFERRI Chief Correspondent +39 01196 91970 [email protected] STEVE MASSIE Design Director [email protected] Bruce Gain (France), Bertrand Gay (France), Nick Gibbs (UK), Stefan Grundhoff (Germany), Lois Hoyal (Germany), Yang Jian (China), David Jolley (Germany), Joaquim Oliveira (Portugal), David Sedgwick (U.S.), Sebastian Viehmann (Germany) Correspondents

8 Europeans gain in ChinaGermans lead; French, Fiat need to move faster

SUPPLIERS46 Inside actionSuppliers do more with less to create cutting-edge interiors

COVER STORY12 Defying the downturnHow Europeans plan to overcome tough times at home

48 Mobility 3.0New solutions for getting from A to B

50 Brave new worldHollywood fantasy comes closer to reality at CeBIT

NEW CARS21 Auto arrivalsSee which new models will debut in 2012

52 Car cutawaysWho has parts in the Citroen C4 and Toyota Yaris?

54 New frontierBrembo wins big by moving beyond supercars

ADVERTISINGEUROPENINA SAUER Director of Sales, Marketing and Events +49 (0) 89 381 517 400 [email protected] STEFANO DAMIANO Sales Manager + 31 (0) 299 769 110 [email protected] GEORGIA CHAPMAN Marketing and Events +49 (0) 176 2076 9139 [email protected]

USARICK GREER Sales Director +1 313 446 6050 [email protected]

A-Z of Geneva auto show debuts 22 Audi to Bertone A3 loses weight; car legend revived 23 BMW to Ferrari Swoopy 6-series sedan; 599 successor powers up 24 Ford to Mercedes Electrifying sports car; a cool A class 26 Mini to Peugeot Quirky subcompact; 208 pocket rocket 28 Geneva floor plan 30 Pininfarina to Skoda Zoe sparks EV market; Toledo lives again 31 Smart to Volvo An affordable hybrid; downsized Swedish luxury

DATA56 European sales figuresMarket analysis by model for 2011

RETAIL62 Second chanceUsed-car sales rescue automakers, dealers in hard times

HUMAN RESOURCES64 People on the moveNew faces in key management positions

KOREAJUNG-WON SUH Sinsegi Media Inc. +82 2 785 8222 [email protected]

OEM32 The British are backJLR, Mini, Rolls-Royce ready for another strong year

FINAL WORD66 Diversity Inc.Fiat-Chrysler has deep talent pool of future CEO candidates

CIRCULATIONLAUREN CIALELLA Circulation Manager +1 313 446 0490 [email protected]

34 Bentley charges aheadVW unit wants to more than double sales by 2017

SUBSCRIPTION SERVICESVertriebsunion Meynen GmbH & Co. KG +49 6123 9238 249 [email protected] Printed in Hanover, Germany, by BWH GmbHPublished by Crain Communications Inc. 1155 Gratiot Ave. Detroit MI 48207 USA All contents Copyright 2012. No part of this puiblication may be reproduced, stored in a retrieval system of transmitted in any form or by any means, electronic or mechanical, photocopying, recording or otherwise without the permission of the publisher. All rights reserved. Additional copies For additional copies +1 313 446 0490 [email protected]

36 Maximizing MiniBMW subsidiary will add models, dealers, output

37 Rolls keeps rollingCEO predicts strong year for ultraluxury brand

38 Ready to pounceJaguar Land Rover drives toward big sales gain

32iStockphoto.com MARCH 2012

39 Looking for a partnerAston Martin needs help to add SUV to lineup

40 Guide to assembly plantsWho makes what in Europe and Russia?

Cover image: iStockphoto.com/lucaciferri

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MARKETS

No Gallic panicFrench sales outlook poor for 2012 but not a crisisBERTRAND [email protected]

RENAULT, PEUGEOT SLIPVW and Nissan gained ground in 2011 while domestic brands slipped. Frances top 10 based on passenger-car sales; % change vs. 2010; % market share 1. Renault 2. Peugeot 3. Citroen 4. VW brand 5. Ford 6. Opel 7. Dacia 8. Nissan 9. Toyota 10. Audi 455,718 369,721 323,068 -9 20.7 -8 16.8 -2 14.7 7.4 5.2 4.3 4.0 3.3 3.1 2.7 100

Peugeot 508 and Renault Laguna account for just 30 percent of the segment. Most automakers expect slower sales to private buyers this year, so they are increasing their focus on the company car market. In 2011, private sales accounted for 61 percent of new-car volume. Company car sales were 19 percent while manufacturer/demonstration cars were 11 percent and short-term rental cars 9 percent. In the mid-sized segment French cars lose out on fleet sales because of their low residual values, which lead to a high monthly leasing rate. Companies can lease German luxury models for the same cost as an executive sedan from a French brand. For example, the residual values of the Renault Laguna and the Citroen C5 are 6 to 8 points lower than an Audi A4. Audi estimates that the total market for premium-car sales will grow by 4,000 units to 207,000 this year. Last year, Audis sales in France grew 16 percent to 58,960, a volume higher than Fiat brands sales, which declined 21 percent to 57,323, according to the industry association CCFA. BMW brand sales rose 1 percent to 46,305 while Mercedes-Benz brand fell 5 percent to 43,547. As a whole, the French market will continue to suffer this year from the aftereffect of the 2010 scrappage program, which encouraged private buyers to renew their cars earlier than planned. The euro zone debt crisis is also causing a lot of uncertainly. What really worries us is France, as were very sensitive to the French market, Renault CEO Carlos Ghosn told a French radio station in January when asked about Europes debt crisis.

T

he French auto market is forecast to drop by up to 8 percent in 2012. Industry executives are worried about this, but they are not panicking. Most automakers expect French new-car sales to be about 2 million passenger cars and 400,000 light commercial vehicles in 2012. This number does not show a crisis on the market, says Bernard Cambier, Renaults sales chief for France. We foresee a French passenger-car market 8 percent lower than last year, but we expect that the first quarter will be 17 percent down, he says. The market ended last year with sales of 2.2 million, a 2 percent decline from the year before but still an impressive figure because in 2010 buyers rushed to the dealerships to take advantage of government-funded scrappage incentives. Industry watchers say France is a typical mature market without any growth prospects and its true level without incentives or rebates is 2 million units. Two significant changes are reshaping the market. 1. Renault and PSA/Peugeot-Citroen are losing sales to ambitious foreign rivals. 2. The product mix is moving downward. Volkswagen Group, including its VW, Audi, Skoda and Seat brands, plans to nearly double French sales to 400,000 by 2018, says Marie-Christine Caubet, head of VW Group in France. Last year, VW Group sold 294,000 cars and light commercial vehicles in France with all its brands except Seat posting double-digit increases. The group will launch 30 new or updated vehicles in the next 15 months in France. The VW brand aims for a market share of 8 percent this year, up from 7.4 percent in 2011. Hyundai also has ambitious goals in the French market. The Korean brand wants to more than double its annual sales to 50,000 by 2015 from about 20,000 last year and to increase its market share to 5 percent in the long term from nearly 1 percent in 2011. We want to be the leading brand in customer satisfaction, adds Patrick Gourvennec, Hyundai Motor France managing director. Last year, Renault and PSA accounted for a little more than 56 percent of all cars sold in France, down 5 percent on the year

163,566 12 115,339 94,080 1 -1

88,979 -15 71,763 33 67,305 3

58,960 16 -2

Total market 2,204,065SOURCE: CCFA

before. Renault's market share, excluding Dacia, declined by 1.4 percentage points to a historic low of 20.7 percent. Sales were negatively affected because its bestselling model, the Clio subcompact, is nearing the end of its life cycle. The fourthgeneration Clio launches next year. PSA has a 31.4 percent market share for its two brands compared with 24.7 percent for Renault and Dacia. But the market share for PSAs top-selling brand, Peugeot, fell 1 percentage point in 2011 to 16.8 percent, mainly because its best seller, the 207 subcompact, is due to be replaced. The 208 launches in April.

SMALL IS THE NEW BIGSales of minicars (A segment) and subcompacts (B segment) are growing in France with the two segments now accounting for just over 50 percent of French new-car sales, up from 38 percent eight years ago. French brands still dominate minicar and subcompact sales, but they face a tougher challenges in the dynamic compact segment (C segment), where cars such as the VW Golf and Ford Focus are catching up fast on models such as the Renault Megane and Citroen C4. Compact sales now account for 40 percent of the market, compared with 35 percent eight years ago. Buyers have deserted French brands in the mid-sized segment (D segment). Aggregated sales of the Citroen C5,

Carlos Ghosn: Worried about sales in France.

6


MARCH 2012

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MARKETS

French brands, Fiat need to move faster to grow in the worlds biggest market

Germans to keep China edgeDAVID SEDGWICK & YANG [email protected]

CHINAS LEADERS2011 passenger-car sales by brand; % change vs. 2010; market share (includes JV sales) 1. VW 2. Toyota 3. Nissan 4. Hyundai 5. Buick 6. Honda 7. Chevrolet 8. Chery 9. BYD 10. Kia 1,720,000 883,000 835,217 770,705 645,537 617,764 595,068 556,235 448,500 432,518 +14 +4 +23 +4 +17 -5 +9 +3 -14 +29 13.2 6.8 6.4 5.9 4.9 4.7 4.6 4.3 3.4 3.3REUTERS

I

n China, there was a time when automakers could boost sales simply by introducing rebadged versions of their obsolescent platforms. In a market with so much pent-up demand, anything would sell. Those days are gone.

With sales of 14.5 million cars and light commercial vehicles up 5.1 percent over the previous year China remained the worlds largest automotive market in 2011, but the growth rate has slowed. Auto executives no longer are counting on the crazy gains of earlier years, which culminated with a 33 percent sales increase in 2010. LMC Automotive forecasts Chinas vehicle sales will rise about 9 percent this year, but the disparity between the strong and the weak brands is widening fast. Fiat and Renault will have to spend heavily to catch up to the German brands. But Volkswagen, BMW, Mercedes and Audi also are investing, and most industry analysts expect theyll stay on top. Heres a company-by-company overview of the European automakers prospects in China.

OTHER EUROPEANSAudi BMW* Citroen Skoda Mercedes Peugeot Volvo Land Rover Porsche Renault Jaguar Opel Bentley Fiat Maserati 313,000 232,586 230,634 220,100 193,339 173,803 47,140 36,087 24,340 24,275 5,976 4,864 1,780 1,354 780 +37 +38 +10 +16 +31 +12 +54 +54 +65 +65 +123 +51 NA +200 +100 2.4 1.8 1.8 1.7 1.5 1.3 0.4 0.3 0.2 0.2

THE KINGPINVolkswagen Group China CEO Karl-Thomas Neumann recently described VWs plan to build a new assembly plant in the city of Foshan in south Chinas Guangdong province its first in that region. Honda and Toyota dominate Chinas prosperous southeast, and Neumann is determined to break their grip. The new plant is part of VWs plan to spend 14 billion euros to boost production in China to 3 million units a year by 2014, up from 2.2 million units in 2011. VW is determined to keep growing in China, and the company is moving into new markets to do so not only in the south, but in Chinas less developed western region. Volkswagens joint ventures with Shanghai Automotive Industry Corp. and China FAW Group currently operate nine assembly plants. In addition to Foshan, VW will build a plant in the east China city of Yizheng. And VW has gotten government permission to build two additional plants in the east China city

**

Growth by VW, Mercedes, Audi and BMW is expected to maintain Germany as tops in China among Europes automakers.

In China, there are more than 120 billionaires and about 670,000 millionaires. Until they are all driving the S class, we still have things to do.Dieter Zetsche Daimler CEO

Total passenger vehicles: 13,074,298 * Includes Mini, Rolls-Royce ** Less than 0.1%SOURCES: COMPANIES, LMC AUTOMOTIVE

of Ningbo and in northwest Chinas Xinjiang province. With all those plants, VW will have established itself in Chinas southeast, southwest, east, northeast and northwest regions. Only Toyota has a comparable geographical footprint. VW CEO Martin Winterkorn refers to China as the automakers second home market. The VW Group, which includes the Audi, Skoda, Seat, Bentley, Lamborghini and VW brands, sold 2.25 million vehicles in China

last year almost double its 1.15 million volume in Germany, which is now its second-largest market. Volkswagen also is expanding its product lineup. The companys Skoda brand enjoyed a successful launch in China in 2007, and last year Seat opened 15 dealerships in China. We will concentrate on the 10 to 15 most important metro areas, Seat CEO James Muir told Automotive News Europe. Volkswagens luxury brand, Audi, beganCHINA CONTINUED ON PAGE 10

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MARCH 2012

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MARKETS

CHINA CONTINUED FROM PAGE 8

building models in China in 1996, years before BMW and Mercedes-Benz did so. Audi was Chinas top luxury brand last year with sales of 313,000 units, up 37 percent over the previous year. The company wants to expand its product lineup by adding the Audi A3 and Q3. As Audi expands its lineup, it plans to double its production capacity in China to 700,000 units by 2015. To sell all those cars, it is expanding its network of 175 Chinese dealerships by 50 stores a year. We are currently opening a new dealership every week. So in three years, we could be at about 500 dealerships, Audi CEO Rupert Stadler said. Stadler predicted that Chinas luxury segment will continue to outgrow the rest of the market, but will not maintain the explosive growth rate of recent years. LMC Automotive has predicted that Chinas luxury market will expand about 16 percent this year, down from roughly 40 percent in 2011.

ly. This year, the plant will start producing the X1 crossover. The company also will expand production of its Da Dong assembly plant, also in Shenyang, to more than 100,000 units a year.

ufacturing plant in Chengdu in the third quarter of 2013 with a capacity of 150,000 units, and is considering a second Chinese assembly plant in the north China city of Daqing.

NO MORE TAXISIn China, PSA/Peugeot-Citroen is trying to reinvent itself. Two decades ago, the French automaker was known mostly for the red Citroen Fukang taxis that plied Beijings streets. PSA has updated its lineup, but the automaker sold only 404,437 units last year, according to LMC Automotive. PSAs market share of 3.1 percent was a fraction of Volkswagen brands 13.2 percent share. Now, PSA is counting on Citroens DS model lineup to upgrade its image and expand sales. In 2010, PSA formed a 5050 joint venture with Chongqing Changan Automobile to sell the DS line in China. This year, the partners will introduce the DS3, DS4 and DS5, which will be sold separately from other PSA models in a network of premium showrooms. At first, the vehicles will be imported into China. In 2013, the partners will produce the DS5 in the Shenzhen plant, which will have an initial capacity of 200,000 units. On top of [the DS5], we want to develop and build a flagship inspired by the Metropolis concept after 2013, PSA CEO Philippe Varin told Automotive News Europe. He added that PSA may also team with Changan to launch a brand focused on entry-level buyers. Theres more. PSA and its other Chinese joint venture partner, Dongfeng Motor Group, plan to spend 1.3 billion euros over the next five years to introduce 12 new models and build a third assembly plant in Wuhan. Varin said PSA wants to increase its annual capacity in Wuhan to 750,000 units. PSA is counting on its two joint ventures to generate a combined market share of 8 percent in China by 2020, which would be enough to vault it into the countrys top five automakers based on sales.

STARTING OVERIn China, Fiat Group still is recovering from the mistakes of the past. Its former joint venture partner, Nanjing Automobile, got into financial trouble and was acquired in 2007 by the Shanghai Automotive. Left without a Chinese partner, Fiat was forced to rely on imports, which drove up the price of its vehicles, hurting sales. In 2009, Fiat formed a 50-50 joint venture, Guanqi Fiat, with Guangzhou Automobile Industry Group. The partners are investing 600 million euros in their joint venture to build an assembly plant in the southern China city of Changsha. Initially it will produce 140,000 units annually, rising to 300,000 units annually by 2014. In July, the new plant will start producing the Dodge Dart, which will be rebadged as a Fiat sedan. Automotive News Europe has reported that the partnership will export the Chinese-built vehicles back to Europe. To re-establish the brand, Fiat also is importing a small number of 500s to China. But Lin Huaibin, a Shanghai-based analyst for IHS Automotive, is not optimistic about Fiats prospects. Fiat is a weak brand in the eyes of Chinese consumers, he said. Also, Fiats locally built compact car will encounter strong competition, since that segment is very crowded in China. GMs Germany subsidiary, Opel, also is weak in China, but there are no plans to change that. Opel sold about 5,000 vehicles in China in 2011 and expects to sell about 5,500 this year, Kevin Wale, head of GM China operations told Automotive News Europe. He added that GM has no plans to build Opels in China in the foreseeable future. The bottom line? Of the European automakers, only Volkswagen has the financial resources to battle GM for dominance of Chinas mass market. Likewise, Audi, BMW and Mercedes are likely to dominate Chinas luxury market for years to come. While PSA and Fiat are introducing new models and building new plants, its not clear that either has the financial resources to mount a serious challenge especially at a time when their European operations are under siege. For now, at least, the German automakers have a firm grip on Chinas fast-growing market.

THE CONTENDERSDaimler and BMW are challenging Audis grip on Chinas luxury market. Last year, Daimlers China sales jumped nearly 31 percent to 193,339 units. Daimler enjoyed strong demand for its locally built Mercedes C-class sedan and its stretched Mercedes E-class sedan. Now, Daimler is expanding its lineup. Its joint venture, Beijing Benz Automotive, launched production of the GLK crossover in December, part of an ambitious 2 billion euro expansion project. Daimler also plans to produce three compact car models in China starting in 2013, build four-cylinder engines and expand production of its C- and E-class sedans. Over the last few years, we have been catching up very quickly in China, Daimler CEO Dieter Zetsche said. In 2015, we expect sales of more than 300,000 units in China, of which two-thirds, or 200,000, will be produced locally. Zetsche added: We are continually in growth mode. In China, there are more than 120 billionaires and about 670,000 millionaires. Until they are all driving the S class, we still have things to do. Last year, overall China sales of the BMW and Mini brands jumped nearly 38 percent to 232,586 units. China has become BMWs third-largest market, and the company is investing 1 billion euros to expand production of its assembly plant in Shenyang to 200,000 units annual-

VOLVO GOES UPSCALELike PSA, Volvo is going upscale. After some gentle prodding from its new owner, Zhejiang Geely Holding Group, Volvo will upgrade its model lineup to compete with the German luxury brands. The company also hopes to sell 200,000 units annually in China by 2020 up from an expected 48,000 to 49,000 this year. China is key to Volvos plan to sell 800,000 units globally by 2020, up from 449,255 last year. To do so, it will open a new man-

Harald Hamprecht contributed

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COVER STORY

iStockphoto.com/lucaciferri

BY LUCA CIFERRI

Defying the downturnHow European automakers are bracing themselves for a tough 2012

E

uropes volume brands know they will face a tough 2012 and many are already taking action.

PSA/Peugeot Citroen will cut thousands of jobs to reduce costs by nearly 1 billion euros, Renault will slash dealers in the UK, Opel will undergo its second cost restructuring in two years, Fiat will again delay new product launches and Ford will cut production days at its Belgian car factory. Car manufacturers are making the moves to protect themselves from a looming recession that will make reaching European sales and overall profit goals very difficult. The brands most at risk from the downturn include Renault, Citroen and Opel, all of which relied on Europe for 52 percent or more of their total sales last year. The consensus is that European car sales will fall in 2012. The magnitude of the decline ranges from 7 percent to 2 percent

No one made money in Europe last year.Fiat-Chrysler CEO Sergio Marchionne

January. We are seeing some countries back in recession and others hovering around but not quite in recession. Said former General Motors Europe President Nick Reilly: Peugeot Citroen have said theyre going to have to lay off a lot of people and just about everyone is talking about overcapacity and difficulties. Four of Europes five major markets Italy, France, Spain and the UK are expected to be hit hard this year. They collectively represented 49 percent of European car sales in 2011. Carmakers have dealt with downturns before and they usually bounce back quite fast, Reilly told Automotive News Europe, but I dont think theyll bounce back very fast this time.

The industry also is keeping a close eye on Brussels as European Union leaders seek to stabilize the euro (see box, page 16). The future of the currency has been questioned because the financial markets have lost confidence in the ability of some key EU member states to fix their debt problems. European new-car sales also are being affected by falling consumer confidence, rising unemployment and tightening bank lending. Europe is a very challenging business environment at the moment and may stay challenging for some time, Ford Chief Financial Officer Lewis Booth told reporters in late

NO CASH FOR INCENTIVESAs seen during the last global economic downturn, drastic times require quick andEUROPE CONTINUED ON PAGE 13

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MARCH 2012


COVER STORY

EUROPE CONTINUED FROM PAGE 12

EUROPE-CENTRICWith Europe at risk of a recession in 2012, automakers heavily reliant on the region could be in store for tough year (2011 passenger-car sales below)EUROPE WORLD EUR. % SHARE

decisive actions, including production stoppages or slowdowns, staff cuts, retail network restructuring and new-product freezes. In 2009 and 2010, many European countries protected their struggling national automakers by offering billions of euros in cash incentives to get people to trade in their old cars for newer, smaller, more environmentally friendly models. Volume brands were the biggest beneficiaries of government-funded subsidies of up to 5,000 euros. The incentives were a blessing to automakers that did not move fast enough to balance their factories' output with demand, leaving them stuck with a huge inventory of vehicles, many of which they needed to deeply discount to move out of the showrooms. Today, however, many of the governments that offered incentives in 2009 and 2010 are in financial trouble. Austerity means the capacity to help the industry will be greatly diminished. Government funding for carmakers effectively bailed out the industry in 2009, Michael Tyndall, an auto analyst at Barclays Capital in London, said in a report. Said Jason Wakelam, leader of Pricewaterhouse-Coopers' UK Automotive Transaction Services: The key question for 2012 is to what extent the calls for consolidation in the sector will be realized.

Opel/Vauxhall Citroen Renault brand Peugeot Fiat brand VW brand Ford

989,261 770,726 1,004,920 911,703 682,140 1,684,150 1,077,759

1,132,000 1,243,000 1,918,212 1,888,200 1,485,000 5,090,000 *

87 62 52 48 46 33 *

* Ford declined to provide a breakdown of global car salesSOURCES: ACEA, COMPANIES

ing, with little improvement in 2013, Tyndall said in a report. The analyst said that VWs capacity usage rate is about 85 percent to 90 percent while Renault and Opel are closer to 60 percent and Fiat Auto is below 50 percent. Adam Jonas, an auto analyst at Morgan Stanley, said that Fiat, Opel, PSA and Renault would have to cut a combined 1.5 million units in capacity in the next two years to become profitable.

HOW DID WE GET HERE?Industry watchers say that one reason Europe-centric automakers are at risk is because most did not adapt their production footprint to the lower demand during the last downturn. Analysts estimate that Europe has 2 million to 5 million units of overcapacity. In 2007, about 16 million cars were sold in Europe while the 2012 total is likely to be below 13 million. The capacity issue [in Europe] was not addressed during the past recession, Ford of Europe CEO Stephen Odell told Automotive News Europe. I cant change other peoples capacity. I can only make sure I build the vehicles I have demand for. Since 2009, only two automaker plants have closed (Opels Antwerp, Belgium, factory and Fiats plant in Termini Imerese, Italy) while another is dormant (Saabs plant in Trollhaetten, Sweden) and two are set to stop production soon (Volvos plant in Uddevalla, Sweden in 2013; Mitsubishis factory in Born, Netherlands in 2012). Europe continues to have more capacity than demand, and the problem is expected to worsen. PwC figures show that by 2015 Europes 112 plants will have an installed capacity of 22.8 million units, up from 21.1 million from 113 plants in 2009 and almost half a million units more than the 22.4 million capacity from 117 plants in 2007. The utilization rate in 2015 is expected to be 82.4 percent compared with 80.9 percent in 2009 and 84 percent in 2007, according to PwC. An automaker typically needs at least 80 percent utilization for a plant to be profitable. Barclays Tyndall doesnt expect the average utilization rate at Europes car plants to come close to that number this year or next. At a 70 percent utilization rate on average in 2012, we expect the mass EU market to remain loss-mak-

OLD PROBLEMFiat-Chrysler CEO Sergio Marchionne has warned about the dangers of overcapacity for years. He spent much of 2010 and 2011 fighting Italian unions to create a more profitable system for making cars. A key move was the November closure of Fiats plant in Termini Imerese, where the company says it costs an additional 1,000 euros per unit to produce cars because of the high logistics cost associated with manufacturing on the island of Sicily. Opel, Fiat and PSA are considering more tough measures to cut capacity, including factory closures. Other European car plants at risk of closure include PSA's factories in Aulnay, near Paris, and Valenciennes, northern France; Fiat's Mirafiori plant in Turin; Opels German factory in Bochum and Ellesmere Port, England; and Mitsubishi's Dutch plant. Said Barclays Tyndall: For the likes of Fiat and Peugeot the misery in Europe continues to mount up. The solution as we see it is to reduce labor costs and capacity, but the social and political resistance to this has been substantial. Italy is scheduled to hold its general election in March 2013, but voting could be pushed forward to this summer because of the countrys political instability. Its unlikely that any restructuring announcements affecting France will come until after the countrys general election this spring. Its also unlikely the French state will sit back quietly if Renault or PSA attempt to close factories in France, despite French auto plants having the auto sectors third-highest labor costs afterEUROPE CONTINUED ON PAGE 14

REUTERS

Despite Opels closure of its plant in Antwerp, Belgium, analysts estimate that carmakers still have up to 5 million units of overcapacity in Europe.

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Germany and Belgium, according to data from the German auto industry association (VDA). A condition the French government placed on PSA and Renault when it gave each a 3 billion euro loan in 2009 was that they keep their local plants open. European governments and automakers maintain close ties because the industry is such a major employer. In Germany, one out of every five jobs is connected to the auto industry, in France, its one in 10. About 12 million families depend on automotive employment, with 2.3 million direct jobs, according to industry association ACEA.

How bad will it be?Estimates vary on how bad European car sales will be in 2012, but what is not being debated is that overall volume will decline for the fifth consecutive year. Europes car dealers association (CECRA) sees passenger-car sales falling 7 percent to about 12.6 million. PricewaterhouseCoopers predicts a 5 percent drop, taking Europes new-car volume to a little less than 12.9 million units. Barclays Capital sees sales falling to 12.75 million. RenaultNissan CEO Carlos Ghosn is more optimistic. He expects European volume down only 2 percent to 3 percent due to aggressive pricing on new cars. Regardless of the depth of the drop, Europe is at risk of being down by more than 3 million units compared with a peak of 16 million units sold in 2007.

GLOOMY OUTLOOKSA number of those jobs are at risk as companies try to cope with lower sales volumes. We anticipate that the steepest declines will be in France, Italy and the UK, said Falk Frey, a senior vice president at Moody's rating agency. Automakers in these countries will suffer most from the austerity measures initiated by their governments, as well as a continued challenging economic environment and the subsequent expected fall in consumer spending. The French auto market is forecast to drop by up to 8 percent to about 2 million passenger cars and 400,000 light commercial vehicles in 2012. Its a decline that many expected because scrapping incentives pulled forward car sales in the first quarter of 2011. This number does not show a crisis on the market, Bernard Cambier, Renaults sales chief for France, said in an interview. Cambier also expects first-quarter French sales to be down 17 percent (see story, page 6). Renault CEO Carlos Ghosn told French radio in January that the decline in France would be tough for everyone, not just for his brand, which has a 24.7 percent market share. Italian new-car sales are forecast to decline 9 percent to 1.6 million in 2012, according to the foreign automakers association, UNRAE. The last time Italian sales were below 1.65 million was 1984. The gloomy 2012 forecast follows an 11 percent decline last year to 1.75 million, which is a dramatic change from the peak of 2.5 million new cars sold in Italy in 2007. With its nearly 30 percent market share in Italy, Fiat stands to be hit the hardest by the countrys sales slump. In the UK, where 2012 sales are forecast to slip 6 percent to 1.83 million, automakers already are trying to protect themselves. Renault, Peugeot, Nissan, Mitsubishi and Subaru are cutting unprofitable model lines. Peugeot has stopped UK sales of the 4007 medium SUV; Nissan dropped the Murano large SUV; Mitusbishi halted sales of the Lancer compact; and Subaru stopped selling the Impreza compact. Renault will stop taking orders for five models the Espace large minivan, Modus small minivan, Laguna mid-sized car, Wind roadster and Kangoo van and cut its UK dealer network from 200 to 140 by 2013 to try to help its money-losing UK operations become profitable.

the quality and reliability of today's cars is superior to past models. In 2010, the average age of a car in Germany and France was 8.5 years, up from 7 years in 2000, according to Morgan Stanley. Unlike in the U.S., the average of the car park in most European countries is not old enough for pent-up replacement demand to offset the potential drop in sales caused by declining consumer confidence, Morgan Stanley analyst Laura Lembke said. She said that the average age of U.S. cars 9.5 years at the end of 2010 contributed to the countrys 10 percent increase in 2011 new-car sales to 12.8 million units. Another challenge facing volume brands is that premium automakers are entering their turf. BMWs Mini range and the 1 series, Audis A1 and A3 and Mercedes-Benz's new B class and forthcoming A class are targeting buyers who might have picked an Opel, Peugeot or Renault model in the past. The numbers speak for themselves. In 2011, premium and nearpremium brands increased European new-car sales 6.5 percent compared with a 2.8 percent decline for volume brands, according to ACEA. As a whole, the market declined 1.4 percent to about 13.6 million units. Volkswagen Group was able to buck this trend. Its three volume brands VW, Skoda and Seat all increased European sales last year. Much of the reason for this is that 2011 sales in Germany rose 8.8 percent to 3.2 million. The VW brand alone has a 21.6 percent share in Germany.

VW PROFITABLE OR NOT?While VW Groups volume brands reported increased European sales in 2011, some question whether this resulted in a profit. No one made money in Europe last year, Fiat-Chysler CEO Sergio Marchionne said during an interview in January, adding that if someone said its brand did make a profit, he is just lying. Marchionne was so blunt because he feels that sales incentives offered last year were so high that it would have been impossible for any volume brand to have made money in Europe, but more on that later. When it comes to Marchionnes assessment about profitability, some disagree. VW is the only volume brand thatEUROPE CONTINUED ON PAGE 16

BETTER QUALITY, NEW RIVALSWhile many macroeconomic factors are affecting car sales, there is another reason why Europeans are not buying as often as they used to:Renault will stop sales of the Wind (shown) and four other models in the UK.

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COVER STORY

Euro scenariosDespite questions about the future of the euro, Audi CEO Rupert Stadler believes strongly that the 10-year-old currency must survive. We need a strong European economic region if we are to be competitive from a global perspective. There is no alternative to the euro, the CEO said in a statement recently. Others are not so sure whether the euro will be around to celebrate its 15th birthday. I think short term the euro will survive, Ford of Europe CEO Stephen Odell said, but, honestly, I do not know what could happen in 5 to 10 years. How much of an effect could Europes sovereign debt crisis and the possible collapse of the euro have on new-car sales? Analysts at PricewaterhouseCoopers see four possible scenarios. 1. Monetary expansion 13.5 million sales The European Central Bank gets approval to inject significant liquidity into vulnerable economies and banks. Recession is avoided; interest rates are kept low in the short term; inflation rises while the euro depreciates. 2. Greek exit 12.7 million sales Greece leaves the euro. The 16 remaining eurozone members seek to protect the currency through tough fiscal discipline and other measure to boost investor confidence, but the area still suffers a recession that lasts up to two years. 3. New currency bloc 12.4 million sales A Franco-German acknowledgement that the existing eurozone is unsustainable leads to the creation of a new, smaller and more tightly regulated currency bloc. The new bloc benefits from a boom in domestic demand. Economies that are excluded suffer a sharp currency depreciation and severe economic contraction. 4. Defaults 11.9 million sales A program of voluntary defaults is agreed on for the most indebted countries, which triggers a contractionary debt spiral and a prolonged recession, lasting between two and three years, and which results in a cumulative loss in gross domestic product of about 5 percent.

Ford will cut production days at its factory in Genk, Belgium, where it builds the Mondeo (shown), S-Max and Galaxy.EUROPE CONTINUED FROM PAGE 14

makes meaningful profits in Europe, a result which is a function of scale, a modest price premium and a sales mix that favors Germany, arguably the strongest economy in Europe, and the compact segment with the Golf and mid-sized cars with the Passat, Barclays Tyndall said in a report. Whether Tyndall or Marchionne is correct cant be proved because VW, like most automakers, does not provide detailed financial results for Europe or any of its sales regions. Another advantage that VW has is that it depended least of all the European automakers on Europe just a third of its global sales come from the region (see box, page 13). Arguably, the risks at VW are diminished by its diversification. It is Europes largest carmaker, but relies on Europe the least for sales, Tyndall said. This diversity helped VW's rise to No. 2 in global sales. The result has been huge profits, which are reinvested into product. Ford is the only automaker to report detailed financial results for Europe. In its Europe region, which includes Russia and Turkey, Ford increased 2011 unit sales 1.8 percent to 1.6 million units, but it swung into a $27 million pre-tax operating loss from a $182 million profit the year before. Ford is cutting production days at its plant in Genk, Belgium, because of anticipated lower new-car sales in Europe. The factory makes the Galaxy and S-Max large minivans and the midsized Mondeo. While GM does not provide detailed financial results per brand, it is estimated that Opel/Vauxhall has lost more than $13 billion since 1999. Fiat executives, meanwhile, admit that the automaker has been losing money in Europe for years, but the company had declined to provide detailed figures until recently. Fiats European auto unit lost 500 million euros in 2011, Marchionne said during a conference call in January.

There is no alternative to the euro."Audi CEO Rupert Stadler

UNSOLVED ISSUESEuropes volume automakers must take on some blame for the struggles they face now. Here is a breakdown of some of the problems. PSA has been slow to expand its presence outside Europe and now faces high investments costs in places such as China and Russia at the same time its core European market is declining. To cope with this, the automaker said in late 2011 it would need to cut 6,000 jobs in Europe, which would help reduce costs by 800 million euros. PSA blames the Europes difficult economic environment for its decision in

January to pull Peugeot brand from the Le Mans endurance racing series. The automaker said it wants to concentrate resources on sales performance in 2012. Morgan Stanley analyst Stuart Pearson thinks the move makes sense. Product momentum is slowing at PSA, with the Peugeot 208 the only major launch in 2012, whereas competitors are accelerating in the Band C-segments, Pearson said. Fiat is still trying to rebound from a big lack of new product. To cope with the last downturn, Fiat delayed a number of key models,EUROPE CONTINUED ON PAGE 18

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leaving it vulnerable as its aging models were forced to compete with all-new cars from rivals. Fiat will continue to suffering from the decision as the debuts of the next-generation Punto subcompact and Bravo compact have been pushed back to early 2014 from mid-2013. As production rates fall, Fiat will need to focus on cash preservation rather than investment, Pearson said. He thinks that Fiat has the liquidity and flexibility to survive another EU recession, but at the cost of a weaker product and technology portfolio. Fiat also has been hit hard by its late entry into fast-growing markets such as China, Russia and India. Opel spent years producing poor products and GMs decision to sell and then to retain the company dented the brands image, particularly in its home German market. It also has not expanded outside of Europe. Opel hopes that its new restructuring program will boost sales, cut costs and end its chronic financial losses. Opel, which cut 5,800 jobs in Europe last year, plans to axe several hundred product engineering posts at its headquarters in Ruesselsheim. In addition, Opel has halted plans to debut a new coupe in 2013. The automaker also is negotiating to have production of Chevrolets moved to it European plants from South Korea and aims to increase sales outside of Europe to 100,000 from 20,000 last year. For years, Renault models were criticized for their poor quality and reliability. New Renault Chief Operating Officer Carlos Tavares says that while quality has improved in the last seven years, it is likely to take a longer to change customer perception. One way he wants to improve Renaults financial performance is by closing the price gap it has with key competitors. He said that Renaults are currently priced 2 percent below Citroens, 5 percent less than Peugeots and 10 percent less than VW brand models. Renault also is hurt by its heavy reliance on Europe, which accounts for 52 percent of its sales, and its failure to set up manufacturing in China.

Analysts estimate that net pricing the vehicle transaction price after incentives are deducted decreased 1 percent last year and could decrease even more this year. Said Ford CFO Booth: Incentive spending is increasing in Europe and this is not healthy for the business. There were already signs in January that the price war was escalating. To lure minicar buyers in France, Chevrolet reduced the price of the Spark minicar by 3,000 euros to 5,900 euros. Citroen responded by slashing 2,360 euros from the C1s price, pushing it down to 6,990 euros. To stay competitive, VW had to offer a 1,400 euro discount on its new Up minicar, pushing the price down to 7,990 euros. In Italy, Chevrolets decision to reduce the Sparks price by 2,225 euros to 6,950 euros caused a chain reaction that resulted in Citroen slashing the C1s price by 2,300 euros and Fiat cutting the price of the previous-generation Panda by 2,600 euros. Not everyone is complaining about the price war. We believe the difficult situation will offer us an opportunity to expand our market share in Europe, Hyundai Chief Financial Officer Lee Won-hee said during an recent earnings conference. Hyundai outperformed the European market last year, with its sales up 12 percent to 398,129 units, and plans the brand to grow another 15 percent in 2012 to 465,000 vehicles.

TIGHTENING CREDITThe price of a new car becomes irrelevant if the buyer cant find a way to pay for it and getting a loan will be tougher this year. Morgan Stanley expects EU banks to cut lending by up to 2.5 trillion euros over the next 12-18 months. It is part of the fallout from recapitalizations resulting from the sovereign debt crisis. Morgan Stanley estimates that about 75 percent of all car sales in Europe involve some form of financing. Morgan Stanleys Lembke estimates that up to 35 percent of sales are handled by automakers finance arms and that third parties, mostly banks, take on 35 percent to 40 percent of the business. She said that the automaker that want to expand their finance divisions now will need a strong balance sheet, lots of liquidity and good access to credit markets. Only German automakers have enough liquidity to expand their financial arms, she said. This expansion is already happening. BMWs recently acquired Dutch lender INGs leasing business and VW announced recently itEUROPE CONTINUED ON PAGE 20

PRICE WARWinning the new-car pricing battle is never easy and it became harder in Europe last year. Declining sales forced automakers to use profit-diminishing incentives to lure buyers. Profitability on making cars has gone from poor to utterly dismal, with vicious pricing, said Max Warburton, an auto analyst at Bernstein Research in London.

ROUGH ROAD AHEADEuropes passenger-car sales are forecast to rebound starting in 2014; sales in thousands (000) 2007 France Germany Italy Spain UK Other 2,065 3,147 2,493 1,615 2,404 3,075 2008 2,050 3,090 2,162 1,161 2,132 2,966 13,561 1,179 14,717 2009 2,302 3,807 2,157 953 1,995 2,454 13,667 858 14,526 2010 2,252 2,916 1,960 982 2,031 2,836 12,982 804 13,786 2011 2,204 3,174 1,748 808 1,941 2,938 12,813 761 13,574 2012E 2,028 3,078 1,654 760 1,825 2,738 12,083 669 12,753 2013E 1,987 3,125 1,696 767 1,770 2,793 12,138 649 12,787 2014E 2,033 3,274 1,755 800 1,923 2,919 12,704 682 13,385 2015E 2,070 3,378 1,834 838 2,076 3,042 13,240 716 13,955

W. Europe 14,798 New EU Total 1,162 15,960

SOURCE: BARCLAYS CAPITAL

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Peugeot hopes the arrival of the new 208 will give it a sales boost in Europe.


will increase financial backing for its vehicles in Europe by a third. The automaker will finance or lease 40 percent of new VW Group models sold in Europe within four years compared with 30 percent in 2011, Frank Witter, the head of the manufacturer's financial unit, told Bloomberg in January. We can increase the penetration in the European markets, Witter said. In Germany, 54 percent of all Volkswagen group cars are financed or leased through us.

segments where profits are razor thin. Bernstein Research analyst Warburton likes with the idea, but sees obstacles. There are so many obstacles to full-blown mergers that the only way to save capital may be to share platforms, products and plants, he said. However, it doesn't really solve the capacity issue and OEM executives will be scared that it will jeopardize brands. Warburton believes automakers are most likely to continue cooperating on minicars successful examples of this trend include the PSA/ Toyota joint venture in Kolin, Czech Republic, to make the Citroen C1, Peugeot 107 and Toyota Aygo and Fiats deal to use its 500 platform as the basis to produce the Ford Ka. The question is whether the downturn will force automakers to deepen their relationships will rivals.

WILL THINGS GET BETTER?Forecasts show that it will take years before automakers will see rising demand within Europe. Barclays does not see a year-on-year increase until 2014, when new-car sales are expected to rise to 13.38 million. That total, however would be about 220,000 units below 2011s volume and 2.6 million under the 2007 peak. With demand muted, governmentfunded incentives unlikely and shutting plants probably out of the question, volume automakers will need to look at other options.

Rumors about a possible alliance between Fiat and PSA have been floating around since late 2008. Marchionne said his company was not Ford of Europe CEO Stephen Odell talking to PSA, but he did say it is open to add a third partner to the alliance to share investments and increase scale. PSA said it would be open to a tie-up with another large One possibility is to export more from Europe to increase plant utiEuropean carmaker, but that conditions were not yet right for such lization. German premium brands Audi, BMW and Mercedes have an alliance. PSAs new brand boss, Frederic Saint-Geours, was been so successful at this that each had to ask employees to quoted in media reports in January as saying that the French shorten their Christmas holiday breaks to meet rising global automaker was completely open to an alliance that boosts perdemand. What keeps volume brands from doing this are import formance while preserving its independence, but added that PSA duties ranging from 25 percent to 35 percent, which would make would need to find the right partner. their cars too expensive to compete against domestic brands. For mass OEMs, shipping cars from Europe to emerging markets is not, in general, a profitable solution, Barclays Tyndall said. Another way volume brands can boost capacity at European plants is to take on work from factories outside of Europe. Opel wants sister brand Chevrolet to transfer some production from South Korea to Europe. Some industry watchers dont like that idea. Making Chevrolets in Germany is not the way to go, Morgan Stanleys Jonas said. Such an arrangement appears to skirt the issue of excess capacity in the region and is a climb-down from what we had believed GM was prepared to do to achieve sustainable profitability for GM Europe. Another option is to set up new joint ventures to build passenger cars, which would reduce product investment costs and increase economies of scale. Fiats Marchionne is not only looking for ways to leverage brands within his alliance. He also has called for more cooperation between volume automakers on minicars and subcompacts, two

The capacity issue [in Europe] was not addressed during the past recession.

PRODUCT STILL KING?If product is still king, many European volume brands may defy the market downturn this year by launching new generations of their core models. In late January, Fiat began selling the new Panda. Fiat hopes the Panda will remain Europes best-selling minicar, a title the car has held since 2004. At the upcoming Geneva auto show, Peugeot will unveil its new 208 subcompact, which replaces the companys best seller, the 207, which in 2007 was also Europes No. 1 seller overall. At the Paris auto show in September, VW will unveil the seventh generation of its Golf compact. The Golf has been Europes No. 1 selling model for four consecutive years and seven times since 2000, according to data from JATO Dynamics. Said Fords Odell: At the end of the day, people with the best product are the ones to win in the market.

Bertrand Gay and Nick Gibbs contributed

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Class of 2012Automakers line up exciting new productsKey launches in segments from luxury cars to minicars make 2012 an exciting year for new products. Below we list whats coming to showrooms throughout the year. Launch dates are for Germany unless stated otherwise.

April:Porsche Boxster

MARCH BMW X6 face-lift Fiat Panda Hyundai i30 5 door Kia Optima Lexus GS Mercedes SL Porsche 911 Cabrio Seat Ibiza face-lift Subaru XV

AUGUST Audi A3 Hyundai Santa Fe replacement Mercedes G class face-lift VW Beetle Cabrio

SEPTEMBER BMW 1-series 3 door BMW 3-series wagon BMW M6 Coupe Ford B-Max Ford Focus Electric Kia Ceed wagon Kia Sorento face-lift Kia Optima hybrid Mercedes CLS Shooting Brake Opel Astra 5 door face-lift Opel Astra sedan

APRIL Citroen C4 Aircross Hyundai Genesis Coupe face-lift Mazda CX-5 Opel Combo Peugeot 208 Peugeot 4008 Porsche Boxster

COMPUTER-RENDERING: CHRISTIAN SCHULTE

Key battlesThe seventh-generation Volkswagen Golf (shown) arrives with a sportier look later this year, but Europes best-selling car faces increased competition from a fresh Hyundai i30 and a new Kia Ceed. The latest Audi A3 goes on sale in June but its lead in the entrypremium segment will be challenged by a new-look Mercedes A class with coupe styling and a fresh BMW 1 series. Among subcompacts, 2012 is the year of the French with the debut of the Peugeot 208. Toyota expands its hybrid offerings while Renault and Ford launch EVs.

MAY Audi A6 Allroad Audi A6 hybrid Dacia Lodgy Hyundai i20 face-lift Porsche Boxster Seat Mii Toyota Prius Plus Toyota Yaris hybrid VW Up 5 door

OCTOBERBMW 3-series hybrid Fiat 500L 5-seat (Italy) Honda CR-V Mercedes A class Mercedes GL Mitsubishi Colt replacement Renault Zoe Skoda Rapid Subaru BRZ Toyota GT-86 Volvo V60 plug-in hybrid

JUNE Audi A8 hybrid BMW 6-series Gran Coupe BMW 7-series face-lift Kia Cee'd 5 door Mercedes E300 Bluetec hybrid Mercedes GLK face-lift Renault Megane face-lift Skoda Citigo

NOVEMBER Audi R8 E-tron Honda CR-V Mazda6 Opel Mokka Renault Clio

DECEMBER Fiat 500L seven-seat (Italy) Hyundai i30 3 door Opel Junior Seat Leon Skoda Rapid VW Golf

June:BMW 6-Series Gran Coupe

JULY BMW 5-series hybrid Chevrolet Malibu Ford Kuga Hyundai i30 station wagon Lancia Flavia convertible Opel Astra OPC Toyota Prius plug-in hybrid Volvo V40

November:Opel Mokka

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>

MORE ON THE WEB: For the latest show news, go to our Geneva page at www.autonewseurope.com

Downsized dynamicGeneva show debuts showcase how automakers are using downsizing to their advantage

&

V

olume automakers and luxury brands will use the Geneva auto show to debut downsized cars that in many cases are lighter and use less fuel but still pack power and emotional appeal. This corresponds with a trend in which car buyers are opting for less expensive, more fuel-efficient models as economic hard times hit consumer spending. In the entry-premium segment, the new Audi A3 will meet a tougher challenge from a

Mercedes A class that ditches its boxy design for a sporty look. Both cars debut in Geneva and both will battle the BMW 1 series, which gets refreshed later this year. In Europes biggest segment subcompacts Peugeot will unveil the 208, a car that weighs less and is shorter than the 207 it replaces. Ford and Fiat will debut their latest entries in Europe's expanding small minivan segment. The two automakers take different

approaches to win customers. The Ford BMax has a pillarless design and rear sliding doors to make access to the cars cabin much easier for the target group of young families while Fiat hopes to harness the appeal of the 500 minicar with a larger fiveand seven-seat version of the retro-styled city car called the 500L. VW Group accelerates its aim of boosting its presence in the minicar segment, an area where the company has not yet been successful. Three of its brands, VW, Skoda and Seat, debut five-door versions of the groups new entry-level family.

AudiLighter A3 gets high-tech to fend off Mercedes A classAudi's key launch is the A3 but the A6 Allroad and A1 Quattro will also make their public debuts in Geneva. The new A3 is sleeker and lighter than the previous-generation model and it is the first Audi to have the brands new infotainment platform. Features include a plug-in module that enables hardware to be easily updated, a new MMI control panel with a handwriting recognition system that allows users to enter characters by finger movement and an optional 7-inch screen with 3-D graphics. Audi counts on the high-tech features, along with a better quality interior and a more fuel-efficient engine range, to help the A3 keep its lead in Europes entry-premium segment against the new Mercedes A class, which also debuts in Geneva, and a redesigned BMW 1 series that arrives later this year. The A3 will be offered in three-, five-door, sedan and convertible variants. The U.S. market only gets the sedan. The A3 is the first of about 40 vehicles to use parent VW Groups new MQB modular platform that will also underpin the new VW Golf. The third-generation A6 Allroad that debuts in Geneva has fuel economy improvements of up to 20 percent and is also 70kg lighter than the current model. The A1 Quattro adds a high-performance variant to the three-door hatchback and fivedoor Sportback in Audis entry-level range, which is aimed at younger buyers. Audi will also show a convertible version of the RS5, a high-performance version of the A5 with the same 4.2-liter V-8 engine as the RS5 coupe.

BertoneOne of Stile Bertones most famous cars, the legendary 1970 Lancia Stratos Zero, inspired a concept for a high-performance coupe that will be unveiled in Geneva to mark the Italian design houses centenary. The midengine concept is called Nuccio after Giuseppe Nuccio Bertone, who transformed the little-known family business into an Italian design icon during his 60-year leadership of the company. He died in 1997 at 83. Bertone design director Mike Robinson took inspiration from the Lancia Stratos Zero concept to create the Nuccio, which has innovations such as a tensile steel roof that offers high structural resistance at a low weight.

Bertone Nuccio

Legendary Lancia Stratos Zero inspires futuristic conceptThe rakish, 42-year-old Stratos Zero is still modern today in terms of design, but its only 830mm tall, making it almost impossible for a big man like Robinson to drive it. The Nuccio has a height of 1220mm. We decided to take one of the most spectacular concept cars in the history of the company and in the history of the automobile for that matter and create a futuristic interpretation of it, Robinson said. Previous attempts to make a modern interpretation of the Stratos Zero fell short of auto enthusiasts expectations. Robinson said. The problem with reinterpreting masterpieces is simple: If you come too close to the original, you've created zero added value, Robinson said. If you stray too far from the original, it ends up having nothing to do with the masterpiece.

Audi A6 Allroad

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BMWSleek but practical sedan targets Mercedes CLSWith the 6-series Gran Coupe, BMW enters the fast-growing niche for coupestyled four-door sedans. The Gran Coupe will rival the Mercedes-Benz CLS, Audi A7, Porsche Panamera and Aston Martin Rapide. BMW hopes the Gran Coupes sporty styling combined with practicality will win buyers. The car is 113mm longer than the 6-series coupe and has 4+1 seating with fold-down rear seats that boost cargo space to 1,265 liters from 460 liters. The

BMW 6-series Gran Coupe6-series Gran Coupe will start at almost 80,000 euros in Germany when it goes on sale shortly after its Geneva debut. The car will have the same engines and driver assistance systems and mobility services offered on the 6-series coupe and convertible versions and will be built alongside them as well as the 5- and 7-series models in BMW's factory in Dingolfing, Germany. BMW will also debut a 381-hp, 3.0-liter, sixcylinder super diesel with triple turbocharging that will be offered in the 5 series, X5 and X6 under the new M Performance label. The X6 also gets exterior styling changes and optional adaptive LED headlamps, which BMW says are a first in its segment.

ChevroletChevrolet will unveil a Cruze station wagon, a variant that the automaker hopes will boost the brands fleet sales in Europe, where wagons are popular company cars. The wagon will also get a 1.7-liter diesel engine with CO2 emissions below 119g/km. The powerplant also will be offered in the Cruze hatchback and sedan models in Europe. The wagon features a redesigned front end that will be rolled out across Cruze range. With sales of 48,564, the Cruze was Chevrolets No. 3 seller in Europe last year after the Spark and Aveo, according to JATO Dynamics.

CitroenThe C4 Aircross will give Citroen a compact SUV rival to the VW Tiguan, Hyundai ix35 and Ford Kuga. Like its sibling, the Peugeot 4008, the five-seat C4 Aircross is based on the Mitsubishi ASX. The C4 Aircross will be available with two- or four-wheel drive in some markets when it goes on sale in Europe this summer.

Citroen C4 Aircross

Dacia

FerrariThe Geneva debut of the 599 GTB Fiorano replacement will complete Ferrari's frenetic product renewal that helped the supercar brand to sell a record 7,195 cars last year. The twoseat coupe will have a 6.3-liter gasoline direct-injection V-12 engine with performance upgraded to 700 hp from 620 hp in the 599 it replaces. The supercar also gets a seven-speed dualclutch transmission to replace the 599s six-speed automated manual gearbox. The new model will be lighter to improve acceleration and reduce fuel consumption. It will cost slightly more than the 599 GTB F1, which in Italy starts at 260,000 euros. European deliveries begin in June and U.S. shipments by year end.

Dacias first minivan, the Lodgy, will be a low-priced competitor in Europes medium minivan segment, which is led by parent Renaults Scenic and Grand Scenic models. The Lodgy will be available as a five- or seven-seat vehicle when it goes on sale later this year, joining the Logan sedan,

Sandero hatchback and Duster SUV in Dacias expanding range. The name Lodgy is based on the English word lodge to convey the minivans ability to comfortably accommodate a family and its luggage. Dacia hopes the Lodgys low price and three-year warranty will attract budgetconscious families.

Fiat

The high-roofed 500L expands the retro-styled 500 range to four models. It will replace the Idea and Multipla models in Fiats lineup and will rival cars such as the Ford B-Max and Mini Countryman. Fiat said the 500L will be a distinctive alternative to cars with traditional designs in the minicar and subcompact segments. It has front-end styling inspired by the 500 hatchback but is taller, wider and longer and sits on a widened version of Fiats small vehicle architecture used by the Punto subcompact. Engines include Fiat's TwinAir turbocharged two-cylinder, 85-hp, 900cc gasoline unit, a 1.4liter gasoline engine with either 77 hp or 105 hp, and a 1-3-liter diesel with 75 hp or 95 hp. The 500L will be offered as a fiveand seven-seat model in Europe but as a five-seater only in the United States. European sales begin in the fourth quarter. U.S. exports begin early next year. Fiat relaunched the retro-styled 500 in 2007 with the 500 hatchback. A year later, the automaker added the Abarth performance version, followed by the 500C convertible in 2009.

Fiat 500L

MARCH 2012


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NEW CARS

FordB-Max targets young families with fresh pillarless designFord is replacing its slow-selling Fusion small minivan in Europe with the innovative B-Max, which has a pillarless design combined with rear sliding doors to make access to the cars cabin much easier for the target group of young families. The design may help Ford win new customers in a hard-fought segment led in Europe by the Opel/Vauxhall Meriva, which was the first model to bring rear-hinged doors to the segment. The B-Max is the first car to be built at Fords new Craiova plant in southwestern Romania. European sales start in September. Ford will not sell the model in the United States, where it says the minivan would be too expensive for its target buyers. The BMax will be offered with Fords new frugal three-cylinder 1.0-liter Ecoboost turbocharged gasoline engine, which debuted in the new Focus. Prices, specification and the full engine lineup will be announced at the Geneva show. Ford will also show the new Kuga medium

Ford B-MaxSUV. The model is similar to the U.S.-market Escape and improvements compared with the current Kuga include increased cargo space and more high-tech equipment, including remote trunk opening achieved by the driver making a kicking motion under the rear bumper.

HondaHonda will show a near-production concept of the European CR-V, which is due to arrive in dealerships toward the end of the year. The SUV is largely similar to the new CR-V that went on sale in the United States in December but Honda says it has changed the models ride and handling, and given it a better quality interior to cater to European tastes. The CR-V will be offered in Europe with Honda's new 1.6-liter diesel that also will be sold with the Civic compact and Jazz subcompact. Currently, Honda offers Europeans only a 2.2-liter diesel that is too large in a segment where most buyers want smaller diesels.

Kia Ceed

Kia

HyundaiHyundai will preview the next phase of its fluidic sculpture styling with the i-oniq concept car designed at the companys European r&d center in Ruesselsheim, Germany.

Kia has given the Ceed compact hatchback a new look and better-quality interior designed to take the car upscale. The secondgeneration Cee'd combines the styling typically found on a sporty coupe with the space and functionality of a five-door hatchback, Kia says. The five-door Ceed will go on sale in Europe in June as a rival to cars such as the Volkswagen Golf, Opel/Vauxhall Astra and Ford Focus. A Ceed station wagon will arrive in showrooms in September followed by a three-door hatchback early in 2013. A higher performance version is also being planned. The new Ceed family will continue to be built at the automakers Zilina, Slovakia, factory alongside the Sportage SUV and Venga compact minivan.

InfinitiInfiniti will unveil the Emerg-E concept for a lightweight plug-in hybrid sports car powered by an electric motor and a range-extending gasoline engine mounted in the middle of the vehicle to optimize handling and weight distribution. The concept will also reveal the brands new styling direction.

Mercedes-BenzMercedes-Benz has given the new A class a sporty styling to win more young buyers to the brand, ditching the boxy shape of the previous-generation car. The automakers design boss, Gorden Wagener, calls the redesigned car the coolest Mercedes in a long time and the company hopes the A class will be a stronger rival to the Audi A3 and BMW 1 series in the entry-premium segment. Because European buyers are downsizing in increasing numbers, even in the premium segment, the new A class will be a key car for Mercedes in its bid to retake the luxury car lead from BMW. It is based on the new Mercedes Frontwheel Architecture (MFA) that also underpins the new B class, which was unveiled at the 2011 Frankfurt auto show and retains its minivan-like design. Mercedes will launch other small cars on the platform including the CLC sedan and GLC SUV. The A class will launch in Europe in October as a five-door model. A three-door variant arrives in 2013.

JaguarJaguar will unveil a station wagon version of the XF called the XF Sportbrake. The car will compete against models such as the Audi A6 Avant, BMW 5 series Touring and Mercedes E-class wagon.

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MARCH 2012

TURNING HEADS

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NEW CARS

Mini

Mini will unveil the Clubvan concept, which previews a delivery van that may join the BMW brands expanding lineup. The Clubvan is based on the Clubman station wagon. A production version would be aimed at companies such as courier and home delivery services looking for a trendy van to improve their image. Mini boss Kay Segler has said he wants to expand the brand's lineup by the end of the decade to 10 by adding four variants (see story, page 36). Mini Clubvan

MitsubishiMitsubishi will unveil the new Outlander with a design that reflects the automaker's shift to a friendlier look. The SUV will also highlight the brands increasing emphasis on more environmentally friendly technologies. The new Outlander is set to launch in Europe in November. The SUV will be available as a plug-in hybrid in Europe in 2013. Mitsubishi has said it wants electric and plug-in hybrid vehicles to account for 20 percent of its sales by 2020.

Nissan

Concept previews fresh approach for subcompactsWith the Qashqai and Juke, Nissan introduced quirky design to SUV-styled crossovers. Now the automaker plans to do the same with the replacement for its dulllooking Note minivan. The Invitation concept previews the Notes successor and brings fresh style, innovation and excitement to the mainstream market, Nissan said. The production version of the Invitation will launch in Europe next year. Nissan said the new car will be more of a rival

to traditional hatchbacks in the subcompact segment. The Invitation is designed to achieve high fuel economy along with dynamic performance, as well as provide plenty of interior room. The concept also showcases Nissans latest thinking in terms of lightweight construction and advanced engine design. The Invitation is one of two global concept debuts for Nissan at the Geneva show. Details of the second concept will be disclosed at the show, Nissan said. Reports say the second concept could preview the next Qashqai.

Nissan Invitation

OpelWith the Mokka, Opel will be the first German automaker to launch a contender in the growing small SUV segment. The Mokka will go on sale in Europe at the end of the year and compete against vehicles such as the Dacia Duster, Suzuki SX4 and Fiat Sedici. Opel says the Mokka will introduce class-leading technologies to the segment. The car will be offered with driver assistance systems based on the Opel Eye front-camera system, which has functions including lane-departure warning and traffic sign recognition, as well as a rearview camera. The five-seat, 4280mm long Mokka shares its platform with the U.S.-market Buick Encore. The Mokka will be offered with front- or all-wheel drive, a choice of two gasoline engines or a diesel. Also debuting is the Astra OPC, the most powerful Astra variant with a 280hp, 2.0-liter gasoline engine and a top speed of 250kph. Vauxhalls version is called the Astra VXR. Opel will also show the RAD e study for an electric bicycle designed to tap into a growing niche and also serve as a reminder of the brands early history as a cycle manufacturer during its 150th anniversary year.

Peugeot

Peugeot says it carried out its most ambitious specification overhaul ever to develop the 208, which replaces the brands best seller, the 207. The new subcompact is 110kg lighter on average compared with the 207. It is also 70mm shorter and 10mm lower to the ground but has 50mm more legroom for rear passengers and 15 liters more trunk space at 285 liters. The interior is also upgraded with an instrument panel and large touchscreen display positioned around a small steering wheel. The changes are designed to make the car more driver-focused. The 208 will be offered with new 1.0and 1.2-liter three-cylinder gasoline engines. The 1.0-liter unit has CO2 emissions of 99g/km and fuel economy of 4.3l/100km. There are five diesel engines options, including four with stop-start technology, offerPeugeot 208 ing CO2 emissions ranging from 87g/km (3.4 l/100 km) to 99g/km. On average, the 208 range has CO2 emissions 34g/km lower than the 207. The 208 will have three- and five-door versions and will be launched in Europe starting in April. Two concepts based on the 208 will also be shown: The 208 XY Concept showcases a car for urban professionals looking for refinement and distinctive values while the 208 GTI Concept aims to revive the sporty performance of the 205 GTI from the 1980s. Peugeot will also show the 4008 compact SUV. The car is a sister model to the Citroen C4 Aircross that also debuts in Geneva.

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NEW CARS

GENEVA 2012Finding your way around the show

GRAPHIC: GENEVA PALEXPO

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PininfarinaPininfarina will unveil the Cambiano, a four-seat plug-in hybrid with a diesel-powered range-extender. The 5000mm-long coupe concept has an electric motor for each wheel, each delivering 60kW (80 hp) with peak power of 150kW (201 hp) for short periods. A small turbine fueled by diesel recharges the batteries or drives the wheels. The drivetrain offers supercar performance with CO2 emissions of just 45g/km. The Cambiano has a top speed of 250kph with short-time peaks at 275kph, acceleration from 0 to 100kph in 4.2 seconds. Pininfarina says the car has an 800km range including 205km in pure electric mode. The Cambiano has a single long door on the drivers side and two doors on the passenger side, including a rear-hinged rear door. It has no B-pillar.

Pininfarina Cambiano

PorscheThe third-generation Boxster is lighter and more fuel efficient than the car it replaces. It also has a more cab-forward stance with the windscreen shifting forward, as well as heavily sculptured flanks, which now feature longer doors and larger wheelarches. The mid-engine roadster gets a lightweight aluminum body and two heavily upgraded versions of the carmakers horizontally opposed six-cylinder engines, which now have direct injection, slight gains in power and new fuel-saving features. A longer wheelbase and wider tracks provide the basis for a roomier interior that takes its cues from that of the new 911. The Boxster will go on sale April 14. Prices in Germany start at 48,291 euros.

Renault Megane

RenaultZoe accelerates EV ambitionsRenault is betting heavily that electric cars will take off in a big way and the Geneva debuts of the Zoe subcompact and Twizy two-seater production models mark the latest phase in the automakers ambitious plans for battery-powered mobility. The five-seat Zoe will become Renault's volume EV with

SkodaAfter launching the three-door Citigo in the Czech Republic late last year, Skoda will debut the five-door version in Geneva ahead of its market launch in May. The Citigo is Skodas sixth model and its first minicar. Its priced below the VW Up, its sister model, but offers the same three-cylinder, 1.0-liter gasoline engine, along with optional high-tech features such as a removable navigation and infotainment system and VWs low-speed collision avoidance system. In keeping with its Simply Clever marketing slogan, Skoda has given the Citigo some small but useful features such as a bag hook on the glove compartment, a photo and document holder and a range of net holders. The car is the first Skoda to have a side airbag that protects the heads of the driver and the front seat passenger. It's also the brand's first production car to have Skodas new logo on the front.

annual sales expected to be about 150,000. The Zoe joins the electric versions of the Fluence sedan and Kangoo car-derived van that are already on sale. The scooter-style Twizy aims to fill a niche for a small vehicle that will provide mobility in crowded cities. Renault will also show a face-lifted Megane compact with more fuel-efficient engines. Renault says the Megane's updated 1.5-liter diesel is 15 percent more efficient with fuel-consumption of 3.5l/100km and CO2 emissions of 90g/km.

SeatA Toledo concept, the Mii five-door minicar and a facelifted Ibiza are Seats Geneva debuts. The models are part of the brand's product offensive to increase annual sales to 800,000 by 2018 from 350,000 in 2011. The Toledo will be Seat Ibiza shown as a five-door sedan concept previewing a production version that will three-door on the market. Seat says revive a model that Seat stopped sellthe Miis angular front end gives it a ing in 2009. Reports say the Toledo sporty look that distinguishes the car was jointly developed with Skoda from its siblings, the VW Up and Skoda and is Seats version of the Skoda Citigo. The Ibiza gets a mid-life face-lift MissionL concept sedan, which aimed at further boosting the car's was unveiled at the 2011 popularity with young buyers. It has a Frankfurt auto show. fresh front end that has a larger trapezoidal grille as its centerpiece. Seat The Mii will be shown in Geneva as says the styling will appear on future a five-door model that will join the models.

Skoda Citigo

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By Paul McVeigh with contributions from Douglas A. Bolduc, Luca Ciferri, Bertran

automotive news europe march 2012

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