Spanish auto sector sector wraps up bleak year

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Spain's auto sector, a key source of jobs, is wrapping up a disastrous year due to a slump in demand from the rest of Europe and the end of a government trade-in bonus scheme at home.

Sales of new cars in the country plunged 25.5 percent in November over the same period last year to 64,515 units, the fifth monthly decline in a row, according to figures from manufacturers' association Anfac.

While total sales in the first 11 months of the year are up 5.9 percent to 913,073 units, this is due to strong sales during the beginning of the year before the government pulled the plug on the subsidies programme in June.

Under the trade-in scheme introduced in May 2009, the government offered subsidies of up to 2,000 euros to help boost car sales. The programme expired when the money set aside for it was exhausted.

For all of 2010 Anfac expects sales to total sales of around 950,000 units, levels last seen in the early 1990s. It said sales should average between 1.3 and 1.4 million units per year.

The auto manufacturing sector has fared no better, with a 6.5 percent drop in the number of vehicles made in October, its fourth monthly decline.

Spain's auto manufacturing sector is the third-biggest in Europe and ranks eighth worldwide, although it has no national auto maker besides Seat, which is now owned by Germany's Volkswagen. It built 2.2 million vehicles last year.

With 90 percent of its production destined for export, the sector is a good reflection of the state of the European market, which is also struggling.

Sales of new cars in the crisis-hit European Union fell by 7.1 percent in November, its eighth monthly decline, according to the European Automobile Manufacturers' Association.

The slump in auto sales at home and abroad threatens jobs in the sector.

"The auto sector employs 500,000 workers along the entire value chain. But if we add up all the jobs generated on other sectors, like marketing and banking, we arrive at a figure of two million jobs," said Pedro Nueno, a professor at the IESE business school of Madrid.

Spain is already struggling with a jobless rate of around 20 percent, the highest level in the 27-nation European Union, caused in large part by the collapse of a labour-intensive property boom at the end of 2008.

"It is important that the government declare the auto sector as a strategic sector since it employs 8.7 percent of the active population," said the president of the Spanish branch of Ford, Jose Manuel Machado.

Spain's auto dealers' federation Faconauto said it was necessary to "revive the only sector that is well positioned to improve the economy of our country."

The auto sector accounts for around six percent of Spain's gross domestic product and the jobs it offers in manufacturing as high paying.

But the government is under pressure to rein in spending to soothe financial market fears that it may need a costly bailout similar to those given fellow EU member states Greece and Ireland earlier this year. So it is in no position to continue to pay incentives for car purchases.

Anfac has warned that Spain will no longer be able to maintain current production levels if its domestic market does not recover.

Spain has 18 auto factories belonging to ten different car makers, including Nissan and Peugeot, and most have already made layoffs or reduced working hours.

Renault Spain Chairman Jean Pierre Laurent said recently that he was "pessimistic" about the future of the sector in Spain.

"The majority of factories in Spain have lost their competitive advantage over the past ten years because of the lack of labour rule flexibility, weak productivity and high logistical costs due to Spain geographic position," he told business daily Cinco Dias.

© 2010 AFP

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