Peugeot Citroën sales hit by falling demand in southern Europe

http://www.guardian.co.uk/business/2013/jan/09/peugeot-citroen-sales-falling-europe

Version 0 of 1.

A squeeze on car sales across southern Europe hit PSA Peugeot Citroën's global revenues last year, forcing the boss of the struggling French carmaker to admit that losses will continue to mount until at least 2015.

Peugeot recorded a 16.5% plunge in sales in 2012 following its worst European sales performance in years. A collapse in demand for new cars across Italy, Spain, Portugal and Greece sent sales into a downward spiral, according to the company's full-year figures.

The car market in France also suffered a steep decline in 2012 with sales down 13.9% from the already low levels experienced in 2011. The company, which is Europe's second largest carmaker, is being kept afloat by a series of multibillion euro loans from the French government, including a €7bn (£5.7bn) re-financing to bolster the unit that funds the company's dealer network and car loans. The deal is currently under review by the EU competition commissioner.

Job cuts of 10,000 are already going ahead to reduce costs and restrict the need for further loans from president François Hollande's cash-strapped government.

Analysts said carmakers have been battling a prolonged sales slump in Europe, where fallout from the eurozone crisis has hit consumer demand. Peugeot's sales outside the region have not increased fast enough to compensate.

The European car market is at its lowest in nearly two decades, and Peugeot's sales performance in the region in 2012 was the worst over the same period. The company forecast a further decline of up to 5% for the market this year.

"If this view of the world should turn out correct, we see little reason why the financial situation at PSA [Peugeot Citroën] should improve at all during the year," Credit Suisse analyst Erich Hauser told Reuters.

The group's global sales volume dropped to 2.97m vehicles in 2012 from 3.55m a year earlier, weighed down by a collapse in southern European demand, the company said.

"PSA Peugeot Citroën has felt the full force of the sustained decline in Europe's automobile markets," said brands chief Frederic Saint-Geours.

France, Spain, Italy and Portugal – the markets worst hit in Europe's sales slump – still account for more than half of Peugeot's regional business. Peugeot pledged to return its regional market share to 13%, after a 0.5-point slide to 12.7% last year and reiterated its goal of generating at least half of its sales outside Europe by 2015.