From Bad to Less Worse German Auto Industry Sees Glimmer of Hope

March sales numbers for German automakers are still appalling -- but they're not quite as bad as last month. The freefall in exports likewise shows signs of slowing. Is the bottom near?

The ongoing global economic crisis  continues to play havoc with exports in Germany, but for the first time this week there are faint signs that the economy, particularly when it comes to the country's vital automobile industry, may be approaching the end of its plunge.

The Federal Statistical Office reported on Wednesday that exports in February were once again down dramatically over the same month last year. The value of goods shipped to sellers abroad was, at €64.8 billion ($85.5 billion), 23.1 percent lower than in Feb. 2008. In comparison to January of this year, exports dropped by 0.7 percent -- the fifth straight month that exports had dropped.

Still, the drop was less than the 3.7 percent experts had forecast to Reuters. Furthermore, the Statistical Office corrected the drop from December to January to 4.4 percent, down significantly from the 7.4 percent originally announced.

The slowdown of the slowdown seemed likewise to be apparent in the automobile industry. Both BMW and Daimler announced on Tuesday that the drop in sales in March relative to the same month last year was less than the year-on-year drop measured in previous months. Whereas each month since last October has shown a drop of 25 percent relative to the same month a year earlier, BMW saw March sales just 17 percent lower than in March 2008. At Daimler, sales were off by 16 percent.

"In important markets like those in the US and Germany, we are beginning to see encouraging signs," Ian Robertson, a member of BMW's supervisory board, told the Associated Press. He said, though, that it was still too early to speak of a turnaround.

Audi too announced that sales were dropping at a slower rate. And Porsche even announced a 3 percent increase in March sales against March 2008.

Still, the mood among German automobile manufacturers remains dark. Speaking to a shareholders meeting in Berlin on Wednesday, Daimler head Dieter Zetsche said he could no longer exclude the possibility that layoffs might become necessary. Daimler, like most German automobile manufacturers, cut production dramatically, placing many employees on a short-time work program, whereby workers work less and the government pays for part of the burden of keeping them off unemployment rolls.

He also said that a number of projects had been put on ice, including planned improvements to the company's Stuttgart headquarters. "A number of vehicle-related projects have likewise been cancelled, or at least postponed," he said.

Germany's automakers say that much of the demand for new vehicles has been for compact and fuel-efficient models. Indeed, small car sales in Germany have been enjoying a relative boom so far this year, mostly thanks to the government's "scrapping bonus" program. Under the scheme, car owners who junk their old cars -- provided they are at least nine years old -- receive €2,500 towards the purchase price of a new (or slightly used) automobile.

The scrapping bonus has proved so popular that the original €1.5 billion budget allotted to the program was quickly used up. Chancellor Angela Merkel's cabinet, however, has elected to extend the program and has now set a new upper limit of €5 billion.

cgh -- with wire reports
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