If you're wondering how the financial crisis is rippling through the European economy, just log on to Broadspeed.com. Since November, the Essex, England, online auto broker has extended an offer that even cash-strapped customers can't refuse — buy one car, get one free.
With new car sales in the United Kingdom sinking to their lowest levels in nearly 20 years and unsold inventory levels rising by the day, The Guardian newspaper reported that Broadspeed stunned the auto industry with its "BOGOF" offer, a sales trick usually used for items like shoes and toothpaste. Simon Empson, Broadspeed's managing director, offered the desperate-times, desperate-measures argument, telling the newspaper, "The motor trade is beyond desperate — it's in crisis."
Demand was so great when Broadspeed first launched the offer that its Website crashed. Not surprisingly, Empson said the broker plans to continue the offer in 2009.
But even as grand a gimmick as a BOGOF car offer may not be enough to dazzle consumers. PricewaterhouseCoopers predicts that one in five shops on the UK's commercial thoroughfares will close by the end of this downturn. That could include Woolworths, the troubled retailer that is due to celebrate its 100th anniversary in the UK this year, if it doesn't find a buyer soon. It's rumored that Hilco, the U.S. distressed-business specialist, has made an offer to buy the company — for £1.
The crisis won't be confined just to the UK or to retailing. According to the BVR, a Berlin-based association of banks, the total number of corporate insolvencies will increase 4.5 percent in 2009, to 30,300.
Beyond BOGOF offers, what else will European companies do to avoid insolvency? One option is to go green. In a December rescue effort, the European Investment Bank (EIB), the European Union's lending arm, reportedly is planning to provide some €8 billion in loans over the next few years to manufacturers that can prove they are developing environmentally friendly autos. The offer is good news, as the EIB's loan terms tend to be extremely favorable.
One thing companies are less likely to do is raise prices. Last year, Europe's CFOs found that the rising cost of commodities helped them hike up prices on their products with little outcry from customers. With commodity prices heading downward, that won't be so easy in 2009. In fact, it may be difficult to keep prices flat: in another recent article in The Guardian, readers were instructed on "how to haggle on the high street," and were told, among other things, that they should expect to be able to "name their price." They were also encouraged to share their tips online.
Janet Kersnar is editor-in-chief of CFO Europe.