Credit crunch tops the Paris agenda

There was just one thing taxing the minds of car company executives at the Paris Motor Show, the credit crunch - and they don't see an end to it anytime soon.

Ford CEO Alan Mulally (pictured) expects no recovery in the global car market until 2010, urging governments and central banks to work together to bring back stability to the financial markets.

"2009 is not going to be better than 2008," Mullaly said. "We won't see a recovery until 2010. The downturn is longer and deeper than we foresaw a year ago.

"The problems of subprime and credit crunch are now all over the world. It is important that countries co-operate on fiscal and monetary policy to return stability to the financial system because that is key to turning the economy around."

Ford expects stagnation next year, even in the Russian car market - up until now the fastest growing market in Europe which had been set to overtake Germany as the biggest in 2009 or 2010.

BMW Chief Executive Officer Norbert Reithofer said car sales will not recover until at least the middle of next year and warned of production cuts if people continue to delay purchases. Renault boss Carlos Ghosn added that the slowdown may last two years.

``We don't know if we're at the beginning of the end or the end of the beginning,'' he said.

Toyota Europe's chief executive Thierry Dombreval said it would be at least a year before his company could see the market turning around. He added: "Until June the market in Europe was flat but we have seen big turn downs in Spain and Italy and there are now signs of a slow down in the UK and Germany. September has not been good in any of the markets.

"Eastern Europe and Russia have been keeping sales up but these markets are also slowing. We expect sales in western Europe to be down 10 percent by the end of the year."

He said he was concerned about manufacturers offering discounts to kick start sales but said Toyota would not get involved. "In the end that hurts the brands and the people buying our cars because it drives down second hand values."

While recognising the market is falling, Ford in the UK is showing signs of optimism. Ford of Britain chairman Roelent de Waard said that its domestic market share is holding strong at 15 percent and launching new Fiesta and Ka this year is proving to be a product planning master stroke.

De Waard said: "We anticipated that people would be downsizing, but to be honest we had not foreseen the global financial crisis on this scale. We just happen to have the right products at the right time."

Phil Waring, sales chief at Mazda Europe was one of a number of senior executives who told headlineauto that one of the problems they had identified was that there were a lot of people in the European car business, especially at dealer level, who have not experienced a recession and didn't know what to do.

"Cash management will be key," said Waring. "It's not lack of profit which will bring dealers down, it will be lack of cash."

Dealers need to look at every revenue stream in their business and make sure they maximize them, he said.