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Old 09-10-2003, 07:39   #1 (permalink)
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E.U.:Tough European competition makes Frankfurt debut critical

Ford, GM rely on new models
By Christine Tierney / The Detroit News

FRANKFURT, Germany -- Hammered by increasingly fierce competition in the cutthroat European auto market, Ford Motor Co. and General Motors Corp. are counting on new models to speed up their sagging turnaround plans.

Ford stunned investors in July when it reported a second-quarter loss of $515 million in Europe, even though its European arm has pursued a rigorous restructuring since May 2000. David Thursfield, head of Ford's international operations, does not expect Ford of Europe to return to profitability until the fourth quarter, once its new C-Max compact minivan hits the market.

"The C-max is a great response to a part of the market we've never played in," Thursfield told reporters at the Frankfurt auto show Tuesday. "It will add considerably to our volumes in the fourth quarter, and that will help to improve results and bring Ford back to a profitable scenario."

Ford also unveiled a new concept vehicle -- the 2-door Visos sports coupe -- that will preview styling cues on the automaker's next generation of mid-size and large passenger cars for Europe.

Similarly, GM is counting on the stylish new Astra to bolster recovery efforts at its largest European marque -- Opel. With European car sales weakening this year and incentives rising, GM Europe is struggling. The unit, which includes Saab, lost $68 million in the first half, and the head of GM Europe, Mike Burns, said full-year results probably would come in toward the low end of forecasts -- between break-even and a $200 million loss.

Toyota Motor Co.p., however, announced new sales targets in Europe after beating its current objectives for 800,000 vehicle sales by 2005. "We will achieve sales of more than 800,000 in 2003, and the new goal is for 1.2 million units by 2010," said Takis Athanasopoulos, executive vice president at Toyota Motor Manufacturing Europe.

So far this year, Toyota's key models -- the Corolla, Avensis and RAV4 sport-utility -- have racked up double-digit sales gains, boosting the Japanese automaker's sales and market share in France and Germany, where industry-wide sales have been weak.

Both Ford and GM are targeting the compact vehicle segment with new models. It is the largest segment in Europe's auto market, accounting for 35 percent of total sales. But both companies face fierce competition. Volkswagen AG is rolling out the fifth-generation version of the iconic Golf, a longtime leader in the small vehicle market. Since 2000, Ford has spruced up its lineup in Europe, launching some 37 new and revamped models, but it has lagged rivals in developing a vehicle for the rapidly growing compact minivan segment.

France's Renault is rolling out a second-generation version of the Scenic, Europe's original and most popular compact minivan. Most other brands fighting it out in Europe market already have introduced their own versions, such as GM's slightly larger Zafira and Toyota's Yaris.

Despite the second-quarter setback, Ford officials said they were sticking with their European strategy, which is being used as a template for a North American rebound. Chief Operating Officer Nick Scheele said roughly half the quarterly loss could be attributed to nonrecurring items, such as inventory reductions. "We'd look at tactics from time to time, but we're not going to change the strategy," he said. "The European car market has been hugely competitive, and over the past two years, that has got even more intense."

Among moves under consideration, Ford will study incentives, adjust sales to fleets, reducing production shifts or plant overtime. "We would also look at some features that are standard, deleting this or that," Scheele said.

Tough market conditions also are spurring Opel to re-examine its Olympia recovery plan drafted in 2001. "We have to accelerate our efforts because the market's more difficult," said Opel boss Carl-Peter Forster. He said demand was not picking up in the second half of the year, as anticipated. "August was a difficult month. The second half won't be great for us."

Separately, Chrysler CEO Dieter Zetsche said Tuesday that the company does not plan new restructuring measures such as layoffs despite losing more than $1 billion in the second quarter, and will look to new models and productivity improvements to restore earnings.

Chrysler, like every car company, "needs ongoing significant gains in productivity," said Zetsche. But for the moment, he said, it does not need more of the job cuts that have marked its three-year restructuring.

Zetsche said further job cuts weren't in the pipeline, though they couldn't be ruled out further down the road given the difficult market environment in the United States.

(Photo)Design Head Chris Bird, left, and Vice President of Product Development Derrick Kuzak, show the Visos. Ford of Europe posted a second-quarter $515 million loss.
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