Weekend Economists Clean Out Davy Jones' Locker, March 2-4, 2012

[Demeter]

16. Wolf Richter: Deep Trouble at the Core of the Eurozone

http://www.nakedcapitalism.com/2012/03/wolf-richter-deep-trouble-at-the-core-of-the-eurozone.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29

In France, new vehicle registrations have been plunging. Already down 17.8% in December and 20.7% in January compared to prior year, they sank 20.2% in February. Year to date, the results were even worse than they appear. With 43 selling days in 2012, against 41 in 2011, sales per selling day were down 24.2%. French automakers suffered the most. In February, PSA Peugeot Citroën was down 29.2% and Renault 28.5%.

Last year, the prime à la casse—the cash-for-clunkers à la Française—was doping sales through March 31, 2011. The CCFA (Comité des Constructeurs Français d’Automobile) expects the nosedive to accelerate next month. It also estimates that sales for the entire year will decline by 7-10%, which may be a tad optimistic, given the headwinds France faces.

Layoffs and plant closings will be tough to undertake during the election, as they become highly politicized. Labor Minister Xavier Bertrand issued a stern warning to Philippe Varin, CEO of PSA; layoffs as part of its alliance with GM would be out of the question. Already in November, Varin was summoned by President Nicolas Sarkozy and told to reconsider laying off 6,800 workers.

And layoffs might even be tougher to undertake after the election if socialist François Hollande wins. Last quarter, the French economy lost 31,900 jobs, the first quarterly job losses in two years, and unemployment rose to 9.8%. These trends will put immense pressure on Hollande to do something visible. And for auto manufacturers, it will mean even greater difficulties....

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