International Motor Show To Open

LONDON AP reports that chilled by a slump in European car sales last year, automakers hope to fan the embers of consumer demand with a parade of new models at the International Motor Show that open this week in Geneva, Switzerland.

Volkswagen AG, eponymous maker of Germany's "People's Car," will take unabashed aim at upscale motorists with its first luxury model, the Phaeton saloon. Ford Motor Co. is targeting families on the go with a hybrid "urban activity vehicle" called Fusion, while General Motors Corp., the world's No. 1 carmaker, plans to unveil a redesigned version of its popular Opel Vectra together with a concept van that runs on natural gas.

But splashy debuts and corporate hype won't ease the auto industry's anxiety about its prospects in Europe's mature and highly fragmented car market.

Ford, General Motors and DaimlerChrylser AG among others have already begun slashing operating costs and employee numbers to try to adjust to the squeeze in global sales. Production volumes for Volkswagen fell by 1 percent last year, and France's Renault reported a 77 percent drop in its annual operating profit.

Italy's Fiat SpA, and Swedish truck and bus maker Volvo posted losses, respectively, of $387 million and $138 million in 2001, after both turned a profit the year before.

Carmakers will be hoping to recover some of their lost momentum at the annual show in Geneva, which Cardiff University Business School professor Garel Rhys calls the "Monte Carlo of auto shows." The exhibition, the 72nd of its kind, opens to the public on Thursday.

"I think the feeling this year will be one of nervous uncertainty about the European economy and the global economy in general," said Rhys, the director of Cardiff's center for automotive industry research. "There's no sign of any great resurgence in demand as far as the auto market is concerned."

Indeed, two of Europe's biggest truckmakers, Sweden's Scania and Volvo, are forecasting a plunge this year of up to 20 percent in truck and bus sales, Rhys said.

The Sept. 11 terror attacks have also had an impact. Car companies began offering discounts even before the attacks, but price cuts accelerated in their wake. In Europe, car prices fell by an average of almost 7 percent in 2001, further pinching profits, analysts said.

European sales of cars and light trucks shrank last year to 19.5 million vehicles, down from 20.2 million in 2000, according to GM. Rhys noted a more dramatic year-on-year decline of 6 percent in sales of passenger cars in western Europe, to 14.8 million from 15.7 million.

Ford is taking radical steps to reduce its expenses, announcing in January it would cut 35,000 jobs worldwide, close five plants and eliminate four models. Ford claimed an 8.6 percent share of the European market last year, up from 8.1 percent the year before but still well below the levels it reached in the mid-1990s.

"Ford has been probably the most active in trying to put its European business back on an even keel and achieve a decent profitability," said John Lawson, an analyst at Salomon Smith Barney in London.

With the Fusion, it hopes to exploit what it sees as a new market niche. A taller, chunkier version of the Fiesta car, Fusion is Ford's answer to the varied demands of urban families.

"You could call it a scaled-down version of a sports utility vehicle," Lawson said, adding that it's a sensible and potentially "quite profitable" design.

GM's plan for restructuring its business in Europe is less clear, analysts said.

The No. 1 carmaker's loss on regional sales widened last year to $767 million from $257 million in 2000. GM hopes to halve its losses this year and break even in 2003, in part by shaving 15 percent off its European production capacity of 2.3 million vehicles a year.

"A convincing product lineup is the key to everything," GM spokesman Stefan Weinmann said.

At Geneva, GM's Opel unit will roll out a new range of Vectras — a four-cylinder sedan model and a more powerful V6 sports sedan — as part of this effort. The new, restyled models boast what Opel calls "a state-of-the-art nervous system" aimed at better safety and comfort.

Opel's Concept M, a four-seat concept van that burns compressed natural gas, will also make its debut.

Although the mass car market has suffered, sales of luxury vehicles continue to barrel ahead. Volkswagen will test the top end of the market at Geneva with its low-slung Phaeton.

"This is an attempt to catapult Volkswagen into the upscale market," Lawson said, adding that the Phaeton marks "the fruition of a critical change in strategy" for Europe's biggest car company.

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