THIS IS AN UNPRECEDENTED BATTLE FOR SURVIVAL

As our American friends might say, a whole new ball game is under way for the entire world’s car industry. Except that, for even some of the biggest or most prestigious car makers, this is no game but an unprecedented battle for survival.

As yet, no-one is in a position to predict the final outcome. But the end of 2009 is likely to see the car industry landscape transformed, with – as just one consequence – the possibility of all three North American giants, General Motors, Ford and Chrysler, sheltering in the protection of ‘Chapter 11’ – the US equivalent of receivership.

As December 2008 approached, and car sales globally continued to plummet, the collapse of the US Big Three was something that incoming president Barack Obama was vowing to avert. But his plan for a $ 25bn bail-out was already under threat – not just from conservative Republicans opposed in principle to corporate bail-outs, but from the powers- that-be within the European Union. Just try it, Obama. It’s illegal state aid and we’ll lodge formal protests with the World Trade Organisation, thundered Jose Manual Barroso, the EU Commission’s president. How that stance is supposed to square, however, with a simultaneous pledge by German Chancellor Angela Merkel and French President Nicolas Sarkozy that they will protect their car industries whatever the cost is anyone’s guess. 

It really is getting that desperate and dirty as the world economy teeters towards recession and even full-fledged depression. The sales figures tell the stark story: European new-car registrations fell for the sixth successive month in October, dropping 14.5 per cent. Sales in North America have plunged to a 25-year low. They have also slowed markedly in what are normally growth markets like India and China, and even dealers in the wealthy Gulf states are detecting signs of nervousness.

The strains are showing up in all kinds of ways. Ferrari, Rolls-Royce, Land Rover, Nissan and Mitsubishi were among a lengthening line-up of car makers pulling out of January’s Detroit motor show, on the grounds that if no-one’s buying, there’s no point spending money on showing. And well under a year after Jaguar Land Rover’s much-vaunted sale to India’s Tata industrial group, JLR bosses have found themselves going cap in hand to the UK government for a billion pounds in financial support, against a background of stuttering production and tumbling sales. Figures from JD Power Automotive Forecasting show a slump in output of 27 per cent up to the end of October.

Indeed, the entire UK motors sector is now demanding help from the Government, not least through seeking access to some of the £50bn handed over to British banks, who have outraged the Government by sitting on the cash instead of lending it on where it’s needed. The UK car market is among the biggest sufferers, with a 23 per cent sales drop in October.

So where does it leave car makers of the type beloved of evo readers? That’s a topic of particular interest to Bentley chairman and former Audi boss Franz-Josef Paefgen. Back in balmier economic days, Paefgen came up with his Triangle theory. In the top $ 250,000+ stratum of the car market there were solid annual sales of around 3000 cars a year. At the $ 150,000 level there were solid sales of 100,000 a year. And in between? Where you’d expect 50,000, the figure was barely higher than at the very top level. It was the perfect pricing point to stick Bentley, Paefgen decided. Aston Martin followed suit, as did Mercedes-Benz and Porsche with their top-of-the-range models.

For a long time it worked. Sales boomed, Bentley and Aston crossed the 10,000-sales-a-year threshold and Porsche, with an admittedly broader price spread, almost joined the volume car makers, with an annual output of 100,000.

Today, the very top of the market, the abode of the super-rich, is still holding up fairly well, although both Ferrari and Rolls-Royce acknowledge their order banks are now shrinking. The problems come slap bang in the middle of the market about which Paefgen was so enthusiastic, populated by bankers and entrepreneurs who, while wealthy, nevertheless had to think hard about whether they could afford a $ 150,000-plus car as an indulgence.

The credit crunch has made their minds up for them. In terms of sales, the Paefgen Triangle has become the Bermuda Triangle instead.