Sarko's green shoots leave French auto industry in optimistic mood

David Gow Brussels
guardian.co.uk, Wednesday 7 January 2009 11.39 GMT

In this unhappy, freezing new year, dominated by Gaza and Gazprom, it's hard to detect the "green shoots" of recovery and even harder to be at all optimistic about the whole of 2009. But one sickly sector of the European economy – manufacturing, and specifically the auto segment – is showing some signs of life.
The industry news from Germany and Spain remains dismal. Last month, Spanish car sales collapsed by 50% and German auto exports and overall output dropped 22%. In 2008, German exports fell 4%, production by 3%.
But, across the Rhine and over the Pyrenees, in France, sales were down last year by just 0.7%, compared with a fall of 28% in Spain and 13.3% in Italy. This column is occasionally accused of being a fanzine for Sarko, but fair dues: his planned "greening" of the auto industry may be beginning to work.
For the whole of 2008, French consumers were rewarded and/or penalised depending on which fuel-efficient or gas-guzzling model they bought. So Citroën, which saw sales of its tiny C1 jump 39% in the year, sold 6.3% more cars in December and 4.3% more in the year.
From last month, under Sarko's first economic stimulus package, worth €26bn, consumers get a €1,000 discount if they buy a (relatively) fuel-efficient new model and scrap a 10-year-old banger. Citroën, whose orders fell 20% in November, registered a 30% jump in December.
It's early days, of course, and the confidence-sapping credit crunch and threat of rising unemployment under the recession may yet be so frosty that the green shoots quickly die. But, this week, Renault's chief operating officer, Patrick Pelata, said the new Sarko scheme could help sales fall by just 5% this year compared with an anticipated 15% drop. Renault's sales fell 20% in December but orders last month were 40% higher than they would otherwise have been. The group expects the first impact of the scheme to show up in sales figures for next month and March.
These steps, scarcely trends yet, should propel the European car industry to increase its demands for extra financial aid to "green up" technology after years of campaigning to water down EU plans to cut carbon dioxide and other emissions from all new cars.
Acea, the European car industry lobby, argued in the run-up to Christmas that EU schemes for improving consumption and safety and reducing emissions would add "billions of euros of cost to the industry at a time when revenues are below break-even for most companies".
It is already pressing for Sarko's "scrap a banger" scheme to be extended EU-wide and for loans to develop greener technologies to be increased as part of a €40bn package it has tabled. Reducing emissions, it says, is expensive: adding €1,500 to the cost of each new car. "Neither the industry nor the consumer has that kind of money right now."
Meanwhile, an interesting footnote: EU citizens (apart from Britons, of course) seem to be buying more home-grown vehicles. The biggest fall in French sales last month were registered by Japanese (Toyota and Nissan), South Korean (Hyundai, down 55.6%) and German (Mercedes and BMW) manufacturers. In Germany, local brands lost 4% and foreign brands 14% last month.
Germany looks to the future
Europe's biggest economy could suffer a contraction not only this year but in 2010, according to Hans-Werner Sinn, head of the prestigious Ifo forecasting institute in Munich, who sees unemployment rising to 4m in Germany by the end of next year.
Small wonder that Angela Merkel's government in Berlin could be about to perform a U-turn and embrace, however reluctantly, tax cuts in its (up to) €50bn stimulus package likely to be adopted next week and designed to cover the next two years. But any cuts would be tiny and targeted, it became clear from a first meeting of Merkel's "grand coalition" on Monday, and may even be discarded when ministers meet again next week.
Again, the most significant elements of the package – clearly adopted because of the scale of the contraction hitting the country – will be in infrastructure projects, retraining and aid for business (such as car manufacturers still waiting for their Christmas present from Berlin). Germany will continue to invest for the long term and is quite right, too, to eschew Anglo-Saxon short-termism.
Critical comments I made last week on Peer Steinbrück, the finance minister, and his obviously myopic view of the contraction facing his country drew some very hostile ripostes from, I assume, native Germans. I was accused of being typically English (I'm Scottish, but nae bother) and, worse, of painting Berlin as being intent on domination of Europe and of being beset by Eroberungswahnsinn (a mad passion for conquest).
If they weren't so misguided they'd be insulting – especially to a lover of Germany who spent almost six years reporting from there, in German as well as English, and continues to do so both from here and on occasional visits. Suffice to say two things: a "German Europe" is a concept or fear voiced to me by Germans, not Brits; and the health of the German economy is vital not only to its people but the whole of Europe.
An old acquaintance, now an ambassador and academic, is writing a book entitled The New Face of Germany. It's about how a country emerged from self-hatred and ruin over 60 years to be the more relaxed, more confident but still self-questioning society it is today – and, above all, a rooted, sustained democracy. If Britain, particularly England, could overcome its own past with as much rigour and shed its sorry delusions on the way, it might finally become a home for genuine Europeans.