German car makers earn pat on back: Competitiveness improves, but another difficult year is forecast

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GERMAN car manufacturers have made impressive strides towards restoring competitiveness over the past year, improving production efficiency and establishing new relations with suppliers, the VDA industry association said yesterday.

Although internationally high wage costs still posed a problem, the VDA noted that car makers had succeeded in pushing unit wage costs down by nearly 10 per cent in 1993 in a continuing cost offensive.

However, a persistently weak market means that they face another difficult year, regardless of whether the domestic economy picks up or not. Erika Emmerich, the association's president, foresaw another drop in domestic new car registrations from 3.2 million to around three million this year.

An expected light improvement in exports to North America and eastern Europe would provide some compensation, leaving overall production in 1994 at around last year's total of 3.75 million.

BMW, at present Germany's most successful vehicle maker, dissented by forecasting little improvement in world demand for cars. 'The continuing strength of the mark means that exports will provide scarcely any boost for the economy,' it told shareholders.

Despite a drop in car production of nearly 11 per cent and a more than 9 per cent drop in sales, BMW would return a clearly positive result for 1993, it said. It expected business to improve in 1994. Indicating the greater flexibility introduced into its production, it said it was the only German maker to have weathered the recession without short-time working.

The VDA was unwilling to go into details of the improvements in the industry, dwelling on the problems with an eye to the final stage of the wage negotiations now under way in the engineering sector. It noted that German car and truck production in 1993, at 4 million, was 23 per cent down on 1992 and at its lowest for 25 years.

Some 70,000 jobs were lost in the western German industry, reaching a total of 650,000 or 18 per cent below the record number of July 1991.

The effects of the downturn on car suppliers was highlighted by Robert Bosch, which reported an operating loss in 1993 after its first decline in sales since 1967.

Hermann Scholl, chief executive of the privately owned electronics and parts supplier, said Bosch would show a profit this year because of better foreign earnings and a tax refund.

He said it was still not clear whether operations would return to the black in 1994. Bosch reduced its global workforce by 13,000 to 170,000 last year and further cuts will occur this year.

Japanese vehicle exports will also keep declining this year, due to the strong yen and increasing output of overseas units, according to industry sources. The Japan Automobile Manufacturers Association said that vehicle exports last year fell by 11 per cent.