Greece's debt default saga seems never-ending. And it is tempting to hope that it only matters to those suffering in Greece and the PIIGS countries (Portugal, Italy, Ireland, Greece, Spain).
But a look at auto sales trends since 2005 gives a different picture. As the chart shows, based on ACEA data, sales in the 5 PIIGS countries have seen a sharp decline since the crisis began:
• 4.8m autos were sold there in 2007, 31% of total EU sales (blue column)
• Only 2.9m were sold in 2011, a fall of 39%
• Italy's sales (green line) were down 30% to 1.7m
• Spain's (red) were down 50% to 0.8m
• Portugal's (orange) were down 24% to 0.2m
• Greece's (purple) were down 65% to 0.1m
• Ireland's (brown) were down 52% to 0.1m
It is also clear that further declines are inevitable, as earlier stimulus such as 'cash for clunkers' is replaced by austerity programmes. Those losing their jobs in the public sector, or seeing their pensions reduced, will suffer a permanent loss of purchasing power.
Even more worrying is that a vicious circle is now underway. Jobs are starting to go in the private sector within the PIIGS, and amongst EU companies who supply there, further damaging the sales outlook:
• Italian auto maker, Fiat, sold 928k cars in 2011, versus 1.2m in 2007
• France's PSA, the EU's 2nd largest manufacturer, sold 1.6m versus 1.9m
• Renault COO, Carlos Tavares, has suggested current price wars could lead to a major bankruptcy
• He added "you cannot continuously be in the red. Somebody some day has to pay for it."
Already PSA has announced 6000 job cuts, and said that production needs to be cut short-term to conserve cash-flow. Whilst
Fiat CEO Sergio Marchionne has warned that Europe needs to "cut 10% - 20% of its car manufacturing capacity".