Dangerous driving

8 February 2008 By William Echikson

Peugeot has started the reporting season with strong results, but investors will be wary. Demand is slowing. The French face strategic challenges and the Germans are endangered by a weak dollar. No wonder the European carmakers shares have done badly. They could fall further.

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French auto maker PSA PeugeotCitroen reported a strong increase in 2007 net profit to E885mn, up from E183mn in 2006, on Wednesday and said new products and costcutting would allow it to improve margins next year.

Its share price jumped some 5% in early trading, before falling back. Chief Executive Christian Streiff told a conference call that the business environment had become more challenging but kept profit targets and foresaw continued growth in emerging markets such as China and South America.

Renault and Daimler are scheduled to report full year earnings on Thursday, with signs of a slowdown in car sales in both the U.S. and Europe. The European Car Association also announces January sales data on February 15.

The Dow Jones Euro Stoxx Automobiles & Parts 3300 sector index has lost about 30% during the past three months. The decline follows a 25% gain for 2007.

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