Wheels of fortune

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Since 2007 BMW has laid off 8,000 employees and recently cut production by 60,000 units.

The global automotive industry is in freefall, with car giants in Japan and the US posting record losses and slashing tens of thousands of jobs. In the Gulf, sales figures are expected to slump as the economic crisis continues, but how badly will local forecourts be hit?

Last week Nissan, Japan's third largest carmaker became the latest auto manufacturer to predict devastating losses for the current financial year. The firm will axe 20,000 jobs worldwide over the next year, during which it expects to post a $2.9bn loss - its first in over a decade.

"Our worst assumptions on the state of the global economy have been met or exceeded," said chief executive Carlos Ghosn as he unveiled the measures, which will see 8.5 percent of Nissan's global workforce laid off.

The Japanese giant is far from alone in its distress. Earlier this month Toyota, the world's largest automaker, said it expects to make a $4.9bn operating loss, the first annual loss at the firm in 70 years. And with their competitors in the US faring no better, and much of the world's car industry brought to its knees, sales are stalling on Gulf forecourts too.

While the region's car industry is not as troubled as its US counterpart - which is currently surviving on $17.4bn of government aid - the days when local manufacturers registered 20 to 30 percent year-on-year growth are long gone, reports analyst Jose Paul, of consulting firm Frost & Sullivan.

"It's obvious the market is going to be quite tough this year," he says. "Overall as an industry we should be happy to see single digit growth, which is going to be tough to do.

Judging by recent forecasts, it seems some local car company chiefs are equally cautious about the year ahead. Last month Tomas Erinberg, Volvo's regional manager for the Middle East, told Arabian Business that more than 25 percent of bookings for its latest model, the XC60, were cancelled in the UAE during December. A further 10 to 20 percent of customers reneged in January, amid fears of job uncertainty across several sectors.

Despite Volvo Middle East's "catastrophic" December, Erinberg expects a 20 percent increase in car sales this year. It's an ambitious target, but Erinberg believes sales for the recently launched XC60 will pick up in the Middle East.

He is, however, less optimistic about the Swedish car manufacturer's operations in other regions. "We are on safe ground and we're predicting an increase in sales," he said. "But worldwide I think Volvo is facing difficulties, especially in the US with the recession. It's going to be really difficult and it's about survival for Volvo in 2009."

Like Erinberg, BMW Middle East's Phil Horton believes some car manufacturers could struggle in 2009. Last year, the German carmaker sold 15,059 BMWs and Minis through 12 importers across this region - a five percent increase compared with 2007. But Horton, managing director of the company's Middle East operation, insists he will be happy with no growth this year.

"It's clearly going to be a challenging year," he admits. "We finished last year with five percent growth and would have done better had it not been for the financial crash in the last quarter, which hit BMW and most, if not all, manufacturers pretty hard. If we can get to the same position overall in 2009 as we did in 2008, right now I would be happy with that."

While BMW's Middle East operation has grown in recent years, the German company's European divisions have endured tougher times. Since 2007 the company has laid off 8,000 employees and more recently cut production by 60,000 units.

The reduction was made to match production with demand and avoid having a "mountain of vehicles", according to Horton. The company - which plans to roll out the Z4 Convertible in March and continue promoting its X5 and X6 models - will not shed any of the 35 employees working in the Middle East this year, he adds.

Other car companies expecting a rough ride in 2009 include Jaguar Land Rover and Toyota. The former announced late last year it was axing 450 people in the UK. Since then, Jaguar Land Rover has secured an undisclosed sum from a $3.4bn rescue package arranged by the government to support struggling British car manufacturers.

Despite Jaguar Land Rover's problems, Robin Colgan insists there are no plans to reduce the 26-strong workforce in this region. But the managing director for the Middle East admits the company - which made 226,395 Land Rovers and 60,485 Jaguars available for sale in 2007 - will sell fewer cars this year.

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