Car industry braced for worst year since 1997

Published on Saturday 3 January 2009 12:24

EUROPEAN car manufacturers are heading towards their worst year since 1997, experts are warning.

According to analysts at PricewaterhouseCoopers, car production in Europe will fall to 15.5 million vehicles this year – the industry's poorest performance for well over a decade and a 12% fall compared to 2007.

The stark forecast will add to the pressure on Business Secretary Lord Mandelson to throw a lifeline to the UK's struggling car industry after hopes that the Government would announce a multibillion-pound bailout before Christmas were dashed. A spokeswoman for the Department for Business, Enterprise and Regulatory Reform said negotiations between the Government and manufacturers, including Jaguar Land Rover and Vauxhall, continue but there are no plans to give the sector a package in the next few weeks.

Although Tata, the Indian owner of Jaguar Land Rover, relieved immediate concerns over the company's future in the run up to Christmas when it agreed to pump in "tens of millions" of pounds to prevent a cash-flow crisis at Jaguar, unions and manufacturers say thousands of skilled jobs remain at risk in the UK if the Government fails to intervene in the sector as a whole.

According to PwC, the US car industry, which got $17.4bn of loans from the Bush administration last month, will fare even worse. Manufacturers are this year tipped to undergo their harshest recession since the 1980s, with production to fall 17% to 10.8 million.