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Business

Economic Crisis Hits European Carmakers

The ailing economy has less people buying cars -- a hard hit for Europe's large car making industry. While unsold cars block Germany's biggest car terminal, France's president promises help for his country's auto makers.

Cars parked on a lot

There are plenty of cars for sale, but no one can afford to buy them

European consumers are continuing to buy fewer cars, according to the European Automobile Manufacturers' Association ACEA.

"New passenger car registrations in Europe fell by 25.8 percent in November compared to the same month of last year, declining for the seventh month in a row, mirroring the financial and economic crises," the ACEA said in a statement on Tuesday, Dec. 16.

November new registrations totaled 932,537 cars, a decrease from over 1.2 million in November 2007. ACEA said there hadn't been such a notable decline since 1999.

Germany, Europe's largest automobile market, saw registrations down 17.7 percent to 233,722 units. All markets across the continent decreased except Finland, Poland and the Czech Republic.

"The new EU member states long showed more resilience, in relative terms, because of the greater number of first-time buyers as opposed to the replacement market of Western Europe," ACEA said.

Sarkozy pledges help

The French government has said it will take action to save the country's automobile industry. President Nicolas Sarkozy on Monday, Dec. 15, told leaders from the French car industry that he was prepared to provide additional aid to the struggling sector in the form of government loans and guarantees, his office said.

French President Nicolas Sarkozy

Sarkozy is intent on helping France's car industry

However, he made all government aid to the industry subject to agreement from France's fellow EU members and the European Commission.

But Sarkozy said carmakers and their suppliers would have to commit to preserving sites in France. Aid was dependent on "the renunciation of any policy of deliberately encouraging the outsourcing" of production, he said.

It was "incompatible with the closing of assembly factories in France," Sarkozy said.

Sarkozy's office said that senior executives from the two largest French carmakers, Renault and Peugeot Citroen, as well as representatives of the auto-equipment suppliers Michelin and Valeo took part in the meeting.

The worst is yet to come

In an interview published Monday in the French daily Le Figaro, Renault chief executive Carlos Ghosn said emergency government loans were necessary for the French car industry to survive the economic crisis.

"What we are demanding from the state is some reasonable financing, over two to three years, at interest rates between four and five percent," Ghosn said.

Two out of every three cars was purchased on credit, he said.

"If the finance crisis continues, you will see one producer after the other fail," Ghosn said.

Both Renault and Peugeot Citroen have shut some of their factories to cut production as demand for cars in Europe has plunged.

ACEA figures for November showed the registration of new private cars in France down by more than 14 percent. But, according to Ghosn, the worst of the crisis still lies ahead.

"We haven't touched bottom yet," Ghosn said.

Cars backlogged in Germany

The dramatic situation in the automobile industry has led to an excess of unsold cars at Europe's biggest car terminal in Bremerhaven. More than 90,000 vehicles are clogging the shipping terminal in the northern German port of Bremerhaven, waiting to find new owners.

Hundreds of cars in Bremerhaven's car terminal

Thousands of cars are waiting to be picked up in Bremerhaven

"We can't move the cars, work on them or deliver them until they find buyers," said Detthold Aden, head of the BLG Logistics Group, which operates the facility.

Roll-on roll-off vessels are delivering new cars that nobody wants. Instead of setting a turnover record, the terminal is rapidly becoming one of the world's largest parking lots.

When cars roll off ships like the "Danube Highway" or "Morning Champion" they come to a halt after just a few meters because there is no room for them on land. BLG has been forced to find extra space in the area of the port normally reserved for shipping containers. Other cars are temporarily stored on freight trains.

Ships normally jam-packed with vehicles destined for the United States are now leaving almost empty because of the dramatic downturn on the US car market.

The speed of the meltdown caught Bremerhaven by surprise. When automobile manufactures published details of their shrinking sales, many of the cars now languishing in the port were already on their way to Germany.

"It's a difficult situation, because many imported cars and those destined for export are still on their way here," said Aden.

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