Europe’s carmakers more exposed than US

In 2008-9 US and Canadian taxpayers had to pour about $60bn into rescuing General Motors, Chrysler, and some of the carmakers’ financing operations and suppliers. France gave PSA Peugeot Citroën, Renault, and suppliers emergency loans worth €6.5bn.

Other governments, including Germany, Italy, the UK, and South Korea, funnelled billions of euros more into scrappage programmes to stimulate car sales.

In the US Treasury-led bail-out of GM and Chrysler, the two carmakers were forced to close plants and cut tens of thousands of jobs to become leaner businesses able to break even if car sales remained very low.

In Europe, aid was designed with protecting jobs as a priority. While Peugeot, Renault, Fiat, and other producers took steps to create leaner operations, few car plants closed, and the continent’s industry still has too much capacity.

That could leave Europe’s car industry more exposed than America’s if the market volatility translates into a fresh downturn. “Scrapping programmes will unlikely be available this time,” says Arndt Ellinghorst, head of European automotive research at Credit Suisse.

But the autumn will probably be a challenging season for America’s GM, Ford Motor, and Chrysler too.

Analysts expect competition in North America to heat up as Japan’s Toyota, Honda and Nissan offer higher incentives to recover the market share they lost during the earthquake-related supply disruptions earlier this year.

Honda’s incentive spending was up 37 per cent month on month in July, and Toyota’s was 26 per cent higher, according to Edmunds.com, an online car-pricing service.

The Detroit carmakers have vowed not to pile on incentives to promote sales, as was their custom before the 2009 crisis. However, they are unlikely to sit idly by if buyers start flocking to their Asian and European rivals.