Auto Growing Pains

Europe is an automaker's dream. It has 300 million increasingly affluent people, but only one in 15 owns a car (v. one in three in the U.S.), leaving a tremendous potential for growth. European automakers will produce 7,000,000 cars this year, expect to overtake U.S. production by 1970. But there is a hitch: Europe has more than 50 auto manufacturers, and no market is big enough to support so many. Everyone expects a round of mergers, alliances and dropouts.

Last week France's sixth ranking auto company, Facel-Vega, went out of business. Meanwhile, the two largest German-owned auto companies, Volkswagen and Daimler-Benz, put through a partial merger. In an agreement that foreshadows further pooling of resources, Volkswagen anted up $20 million for half interest in Daimler-Benz's Auto-Union subsidiary.

U.S. Competition. Many Continental auto producers have run into sharp competitive curves and bumps in the road. In Italy, auto sales are down 10% so far this year, largely because of such government anti-inflation measures as higher auto and gasoline taxes and restrictions on installment buying. In France, where auto sales are off 5%, Renault, Peugeot, Simca and Panhard have reduced their work weeks. By contrast, auto production this year will hit alltime highs in Britain (2,000,000) and West Germany (3,000,000).

Everywhere, Europe's old-line producers are being pressed by well-financed local subsidiaries of U.S. companies. France's fastest growing auto firm is Chrysler-controlled Simca, which has increased sales 25% this year. General Motors' Opel and Ford's German subsidiary have closed in on Volkswagen, increased their combined share of the German market from 32% in 1962 to 41% last year. In Britain, Ford has captured 31% of this year's market, a new high. Ford is invading Italy, too, last week introduced the Anglia Torino, a small sedan that will be assembled and sold in Italy.

Volkswagen Chairman Heinz Nordhoff and Citroen's Pierre Bercot have both expressed alarm at growing competition from "American giants" in the European market. Fiat's Chairman Vittorio Valletta has openly called for a cartel of European producers, and Renault's President Pierre Dreyfus favors government protection against the U.S. subsidiaries.

Roomier & Racier. Taking a cue from the U.S. competition, the Europeans are bringing out more new models and moving to somewhat greater size. Despite the Italian slowdown, Fiat is doing better than last year because of the success of its recently introduced "850" model, which is roomier, racier and more luxurious than the standard small Fiat; sales have reached 1,000 a day. British Motor Corp. has brought out a new Austin "1800" model to compete against Ford's Cortina and G.M.'s Vauxhall Viva. In Germany, the larger Volkswagen "1500" has made up some of the sales that the old beetle-back has lost. The French auto industry, which has not introduced a new model all year, looks forward to a lift next spring, when Renault and Peugeot will bring out fresh designs.

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