GM warns on markets as gloomy Paris Auto Show opens

PARIS (Reuters) - Top automakers including General Motors Corp (GM) warned of tough times as the Paris Auto Show opened on Thursday amid concerns that slowing demand could force production cuts and job losses.

The event opened under a cloud as makers struggle to attract buyers worried by slowing economies and reel as a global credit crisis hurts auto leasing.

GM Chief Operating Officer Fritz Henderson warned of weakness for months to come in both the U.S. and western European markets.

"Certainly in the first half (2009) it's going to be weak," Henderson told reporters at the auto show.

Ford Motor Co Chief Executive Alan Mulally said he expected no recovery in the global car market until 2010 and urged governments and central banks to work together to bring stability back to the financial markets.

"2009 is not going to be better than 2008," Mulally told reporters at the show. "We won't see a recovery until 2010," he added, noting markets were down around the globe.

A source at Europe's biggest automaker, Volkswagen , told Reuters that the company faced tough times at Spanish unit Seat and while the company's overall targets remain intact, it may have to consider trimming output.

"If markets continue to develop in such a dramatic way then we have to consider reining in production," the source told Reuters at the Paris car show.

Volkswagen Chief Executive Martin Winterkorn told reporters that VW expects to be able to generate a small gain in unit sales and revenue next year despite turmoil on financial markets, while confirming VW's outlook for 2008.

He also said the company, which plans to start making cars at a U.S. plant in Tennessee, wants to benefit from government aid offered to U.S. makers.

"We will raise our hand when the time comes," Winterkorn said.

U.S. President George W. Bush on Tuesday signed into law a spending bill which included guarantees of $25 billion in low-interest loans for U.S. automakers Ford, GM and Chrysler LLC.

The aid comes as U.S. demand slumps and makers tool up for production of more fuel efficient and environmentally-friendly vehicles, including electric models.

Major automakers reported a 26-percent plunge in U.S. September sales, including Ford off 34 percent and Japan's Toyota Motor Corp <7203.T> down 32 percent, its steepest decline since 1987.

Auto executives said Americans had either walked away from vehicle purchases or been stymied by a lack of financing or requirements for larger down-payments.

Renault SA CEO Carlos Ghosn told reporters at the show that no one could rule out difficult years for the auto sector in 2009 and 2010 and promised an update on its plans October 23.

Renault outlined a job cuts plan last month.

Like European peers such as Renault and Fiat , Peugeot-Citroen is trimming costs to safeguard profits.

Fiat boss Sergio Marchionne this week warned of the knock-on effect which the financial crisis threatened to have on manufacturing.

"(It) will have repercussions at an international level if it is not resolved in America. It will have an impact on industry, that is without doubt," Marchionne said.

Peugeot CEO Christian Streiff told reporters at the show that the French maker had achieved 2 billion euros ($2.79 billion) in cost savings in the past 18 months and expected "great progress" in cost reduction in the near future.

The firm is sticking to its 2010 objectives despite the market's tougher climate, he said.

(Reporting by Gilles Castonguay, Christiaan Hetzner, Jan Schwartz, Helen Massy-Bersford in Paris; Kevin Krolicki in Washington; Writing by Jason Neely; Editing by Sharon Lindores)

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