Peugeot sees bleak outlook for car industry

PARIS
Capacity reductions in Europe's automobile industry are inevitable as most companies are losing money on every car they produce, the chief executive of French car maker PSA Peugeot Citroen said Thursday
Peugeot expects the European market for cars and light commercial vehicles to contract by about 8% this year compared with a 5% fall that was projected earlier this year, and the outlook for the next two or three years is for sales to remain flat, Philippe Varin told a group of journalists at the Paris motor show
Mr. Varin said his company lost about 350 euros ($450) in operating earnings for every car that it sold in Europe in the first half of this year
Many of the company's competitors lost between EUR500 and EUR600 in the same period, he said, adding that this situation is unsustainable
Peugeot in July announced it is halting production at an assembly plant north of Paris and became the first auto maker to reduce capacity in a bid to stem a cash haemorrhage of EUR200 million a month
This will come down to an outflow of EUR100 million a month next year, and the company expects to be cash neutral by 2014
"The overcapacity affecting European car makers is set to last and the only way to resolve the problem is to reduce capacity," Mr. Varin said