AP
In this February 13, 2008 file photo, Peugeot-Citroen Chief Executive Christian Streiff answers reporters after the presentation of Europe's second-largest car manufacturer by sales PSA's 2007 full years results, in Paris. PSA Peugeot-Citroen on Friday slashed its full-year targets and announced "massive" production cuts after third-quarter revenue shrank 5.2 per cent. Chief Executive Christian Streiff said the company is reacting to the "collapse" of the European auto market, cutting production to prevent a build-up of inventories, raising prices to offset raw materials costs and cutting costs.

PARIS (AP):

European car makers are taking a beating from the financial crisis, announcing an alarming series of profit warnings and production stoppages last week, as the industry braces for the financial crisis to turn into a severe economic slump.

French automakers PSA Peugeot Citroen and Renault SA announced massive production cuts on Thursday and Friday. Earnings tumbled at Swedish truck maker Volvo AB, German automaker Daimler AG issued a profit warning and Italy's Fiat Group SpA warned of a worst-case scenario that could see sales dropping up to 20 per cent next year.

The pain was also felt across the Atlantic, with Chrysler LLC and General Motors Corp earlier announcing job cuts.

All these companies are worried their industry is next in the firing line in what many expect will be a world economic downturn, as consumers and businesses put off buying big-ticket items like cars and trucks.

Shares plummeted

Shares in European automakers plummeted. Peugeot-Citroen fell 5.9 per cent to €16.84 (US$21.57) in Paris afternoon trading. Renault was down 15 per cent at €21.63 (US$27.71), the lowest it's been since June, 1997.

Fiat fell 8.7 percent to €5.84 (US$7.48), Daimler dropped 6.3 per cent to €22.33 (US$28.60), and Volvo was 17 per cent lower at 36.10 Swedish kroner (€3.62, US$4.64).

"In the last couple of days in the quarter, the situation massively worsened," said Oliver Kammerer, an analyst with WestLB Research in London. "Things are unlikely to get better in the short term."

European auto sales are being whacked by the credit crisis, which makes it harder and more expensive for customers and dealers to pay for cars. Dismal economic news - including recession in many countries - has shaken households' confidence in their own earnings and raised fears of unemployment.

Germany's Daimler AG reported on Thursday a fall in North American sales and abandoned its 2008 earnings forecast.

"This is more than just a headwind," Chief Executive Dieter Zetsche said.

Massive production cuts

Peugeot-Citroen on Friday slashed its full-year targets and announced "massive" production cuts after third-quarter revenue shrank 5.2 per cent. Chief Executive Christian Streiff said the company is responding to the "collapse" of the European auto market by cutting production to prevent a buildup of inventories.

That amounts to a 30-per cent production cut - which for French plants will mean between a couple of days and two weeks of shutdown, depending on the popularity of the models produced on their lines, spokesman Laurent Cicolella said. There will also be cutbacks at Peugeot's Spanish sites and at Trnava in Slovakia, he said.

Rivals

Cross-town rival Renault SA cut expectations for the full year after revenues fell 2.2 per cent in the third quarter to €9.15 billion (US$11.75 billion). The company said it is cutting production by 20 per cent in the fourth quarter which will result in the temporary closure of 10 factories in France for one or two weeks, said Nathalie Bourotte, a spokeswoman for Renault.

Workers at Renault's Sandouville plant in northwestern France, hardest hit by the crisis because it produces the luxury Laguna, whose sales are flagging, reacted by blocking the entrance of the factory on Friday.

They are protesting an already announced cut in employment to only two weeks a month, which workers say means they are losing about €400 (US$512.40) per month in take-home pay.

Last month, Renault announced 6,000 job cuts across Europe out of a total work force of 130,000, and the gloomy news is worrying workers.

"For me at 51 years old, how do you want me to look for a job?" said Jean-Pierre Joignant, a Sandouville factory mechanic as he left the factory.

"We don't have any diploma, we have nothing and so we're unable to find jobs. Even the youth are having trouble finding jobs and at our age we can't find work."