No quick fixes in Europe
 | Keith Crain is editor-in-chief of Automotive News. |
| Sponsored by |
| » | ||
| » | ||
| » | ||
| » | ||
| » |
Reprints
Print
Respond
Most of the automobile companies doing business in Europe are between a rock and a hard place.
They're damned if they do and damned if they don't.
Developing a new car is expensive. It takes cash flow because you'll shell out hundreds of millions of dollars and recoup your investment over the life of the vehicle.
And if you don't keep investing for new vehicles, drivetrains and plants, you will find yourself behind the eight ball without any new products as the competition carves you up without a knife.
You need profits to create new models. Bringing out a new car, even a mildly refreshed model, costs lots of money.
Most of Europe is struggling with plummeting sales and profits.
It's not just the automobile industry, but the car business needs huge amounts of cash and profits just to keep up.
And, like it or not, all of this will have a huge impact on North America, sooner rather than later.
The Detroit 3 are bleeding in Europe. Right now Fiat is being saved by Chrysler, an ironic turn of events from just a few years ago. Even the home market for Fiat is showing huge drops in sales.
Ford seems to have a plan, but there will be hundreds of millions in losses in the foreseeable future before its European operations break even.
General Motors also is struggling. GM Vice Chairman Steve Girsky's old friends at Morgan Stanley recommended that GM dump Opel, a suggestion Girsky rejected. Losing Opel would be critical for GM, but the company is struggling to determine who can fix GM Europe and how to do it. GM's new partner, Peugeot, is struggling as well and can't spare any resources to help GM.
Even Renault-Nissan is finding business terrible in Europe, and that will dramatically affect the investment that Nissan hopes to put into the United States.
Until Europe comes out of its financial malaise, many of the global players will be at a definite disadvantage. Investments in future products are going to be hard to come by, and that will bode badly for lots of car companies, suppliers and dealers.
There are no quick fixes in Europe. As in the United States, it will take a lot of government cost cutting to get fiscal houses in order.
In the meantime, it's going to be a struggle all over the world.
You can reach Keith Crain at kcrain@crain.com.
