European car industry 'faces collapse'

Europe's car industry faces collapse without rapid intervention from EU governments, Carlos Ghosn, Renault's chief executive, warned today. Ghosn, president of the pan-European carmakers' body ACEA, pointed to a "brutal" collapse in sales and squeeze on credit. His comments, at a Paris summit with French ministers, came as the government of Nicholas Sarkozy prepared to inject capital into both Renault and Peugeot Citroen on top of the €1bn in loan guarantees given to their finance arms. Separately, BMW, the German premium car group, confirmed it was considering tapping Berlin's €500bn bank liquidity package for its own finance/leasing arm. And Fiat said it could take a stake in Chrysler, the most vulnerable of America's big three car makers, via a joint venture to make common models and help the US company adapt to demand for more "green" models. The stake could be as much as 35%. Sergio Marchionne, Fiat's chief executive, has already indicated there will be only half a dozen global auto-manufacturers left within five years, while the French government is talking of six to eight. Ghosn's intervention is the most dramatic plea from Europe's auto industry for aid to match that given to General Motors and Chrysler, with Ford waiting in the wings. ACEA wants €40bn in support; the European Investment Bank, the EU's in-house lender, has made €10bn available over the next two years in soft loans, primarily to switch to new, green technologies. French car sales held up last year, partly because of bonuses to switch to more fuel-efficient models and scrap old cars, but began to fall off a cliff towards the end of the year. The EU industry fears overall sales could collapse by 20% this year.