Bosch executive issues car industry warning

A SENIOR executive at Bosch, the world’s largest car parts supplier by sales, has warned that the European car industry must tackle its “damaging” overcapacity problems or risk becoming uncompetitive.

Comments by Bernd Bohr, head of automotive at the privatelyowned industrial conglomerate, mark a rare intervention by a German firm in the sensitive issue of what to do about a surfeit of car production capacity in Europe.

“Overcapacities in the car market are of course economically damaging to the industry,” he said in an interview ahead of the Paris motor show, which starts today. “Overcapacity saps the industry’s strength and ultimately competitiveness.”

He added: “It was a peculiarity of the 2008-09 crisis that practically no capacity was taken out of the market due to state intervention. The suppliers have already adjusted for the demands in Europe as we don’t get the kind of direct protection that the carmakers do.”

Mass market carmakers such as PSA Peugeot Citroën, Fiat, General Motors’ Opel-Vauxhall unit and Ford are facing falling sales and fierce price competition in Europe that has eroded profits and forced some to consider plant closures.

Carmakers are cutting production but so far there have been few firm decisions to shut plants. A call by Sergio Marchionne, Fiat chief executive and president of Acea, the European car industry association, for Brussels to lead efforts to find a common solution to the continent’s overcapacity met a cool response at the European Commission and in Germany.

Daimler, BMW and Volkswagen have escaped the worst of the sector’s problems because of their exposure to faster-growing international markets and a greater focus on higher-margin luxury vehicles. But now they too are facing tougher conditions.

Mr Bohr said Bosch was feeling the impact of those problems. “We had a good first quarter, and a half-decent second quarter but we now see a steady decline of orders from our customers,” he said. “It’s not yet a collapse, but rather 1 or 2 percentage points a month. So we assume the second half will be below the level of the first half.” – Copyright The Financial Times Limited 2012