At Auto Show, :

Carmakers brace for tough times ahead

Even as car companies struggle to pull out of a deep crisis, they are not scrimping on auto show bombast.

Volkswagen's Audi unit went so far as to hire the pop star Justin Timberlake to introduce its new high-end subcompact A1 at the Geneva International Motor Show on Tuesday.

Its a cool car, declared Timberlake as a crowd of industry insiders held cell phones over their heads to capture the celebrity moment.

But in the plain conference rooms hidden behind the auto show stands, where car company executives receive journalists and business partners, the mood was far less exuberant.

The executives are relieved to have survived 2009, when global auto sales plunged five percent after a similar decline in 2008.

But they are also facing the fact that it will take several more years for sales to return to 2007 levels, especially in Western Europe.

We're a long way from a normal situation, Norbert Reithofer, chief executive of BMW, said during an interview. Sales for the industry as a whole will not return to their pre-slump levels before 2012, he said, though he added that he expected his company to perform better as it rolled out new models like the redesigned Series.

Other auto executives were even more pessimistic. Nick Reilly, president of G.M. Europe and chief executive of Opel/Vauxhall, said sales would not reach a semblance of normalcy until 2012 and would still be below the level seen in 2007.

"We are not planning for it to ever get back there", Reilly said.

The outlook is especially dim for the mass-market carmakers, which benefited from cash-for-clunkers programs in Germany and many other European countries last year but must now deal with the hangover.

Carlos Ghosn, the chief executive of both Renault and Nissan Motor, predicted Monday that the European auto market would shrink about 10 percent this year. Luca di Montezemolo, chairman of Fiat, declined to make a long-range prediction, but said in an interview, We will have a very difficult spring in Western Europe. "As the auto managers shift from a crisis to an uncertain recovery, they must also cope with major technological and geographical shifts that require billions in new investment.

All the automakers are working on ways to reduce fuel and emissions, initially via hybrids but eventually with battery or hydrogen-powered cars.

Toyota Motor's problems with sticking accelerators and the resulting image damage serve as a stark reminder of how careful carmakers will have to be as they begin delivering these new technologies.

The risk of problems only rises as cars become more dependent on software and electronics. Schadenfreude about Toyota would be misplaced,' Reithofer of BMW said.

BMW, based in Munich, is working on a new, battery-powered small car provisionally named Project i, which will be built substantially from lightweight carbon to increase the range.

But Reithofer would not confirm speculation by some analysts that BMW, which has promised the new vehicle by 2015, will push up the introduction date.

We need that development time to do a reasonable job, he said.

In fact, Toyota, which pioneered the hybrid market, may be more cautious in presenting new technologies after its recall problems, said Kazuo Okamoto, vice chairman of the carmaker.

We do not want to slow down the pace of such introductions but quality is foremost, he said through an interpreter. Further underscoring the point was news Tuesday that G.M. would recall 1.3 million compact cars because of complaints about the vehicles power steering.

Automakers can take some consolation in healthier growth in other markets, including the United States and China. Daimler's Mercedes unit sold 67,000 cars in China in 2009, a 39 percent increase, even as overall unit sales fell 14 percent. But for the European carmakers, growth in other regions is still not enough to compensate for the sorry state of the home market.

There are also worries that China is growing too fast and that that growth could prove unsustainable.

Dieter Zetsche, the Daimler chief executive, said that he believed growth in China was solid.

But he also said, there is no growth anywhere in the world that is continuous without hiccups.

Moreover, expansion in new markets comes at a price. Companies must build up dealer networks or even construct new factories.

At the same time, they may need to cut capacity in slower markets.

"It costs money to close plants and it costs money to develop new ones" said Peter Wells, co-director of the Center for Automotive Industry Research at Cardiff University.

You've got an industry with historically low profits that has very high capital requirements, he added.

General Motors is an example.

The company said Tuesday that it would more than triple the amount of money it was committing to turn around its Opel and Vauxhall units, to 1.9 billion, or $2.6 billion, while scaling back its request for public loan guarantees.

Some of the money will go to develop new products like the battery-powered Ampera, but some is also needed to pay for restructuring, including the closure of a plant in Antwerp, Belgium, and eliminating 8,300 jobs.

Despite all the uncertainties, companies are working intensely on new technologies for fear of being left behind.

Daimler, for example, increased its research budget in recent years even though the company had a "352 million loss in the fourth quarter of 2009.

Daimler's Mercedes unit, which introduced its first hybrid models last year, wants to pull ahead of competitors with innovations like a propulsion system that combines a diesel motor with batteries.

In Geneva, the company is displaying an E-Class sedan with the diesel hybrid system, which potentially offers greater fuel economy than the gasoline hybrids now sold by Toyota and others.