THE CRISIS OF 1992

The European Car Industry has been a sector in crisis since the early 1980’s. This is was not apparent due to the economic boom followed the German unification, but became obvious only after 1992, “when entered a period of profound restructuring”. There were several several reasons for these developments: Firstly, it was a high level of saturation, similar to the U.S. one during 1970’s. Apart from this, while there was a weak, the car companies continued to increase their production. The result was an overcapacity of about 25-30%.

Additionally the Japanese and Korean producers presented a remarkable activity in the European region, establishing a great number of plants. The market has been already fully employed by the existing mass production from the ten car companies, six of which are in the same volume market (Fiat, Ford Europe, GM Europe, Renault and VW Group) and four in the luxury market (BMW, Mercedes-Benz, Volvo, Audi). From consumers’ perspective, things were similarly depressing: A long period of austerity plans reduced their purchasing capacity.

Another important reason was the exchange rate policy of Bundensbank and other Central Banks, which was opposed to the interests of European exporters. This made the situation even worse and the whole market was led into a recession.

Reference: http://www.wz-berlin.de/pdf/1998/i98-305.pdf