You can see how painful it is to be a mainstream automaker in Europe if you dig into Ford, General Motors and PSA/Peugeot-Citroen's latest financial results.
From July through September, Ford of Europe increased new-car sales by 5 percent to 357,000 units and revenues by 25.8 percent to $7.8 billion.
Boosting unit sales and revenues boosts profits, right?
Actually, no. Ford's pretax losses in Europe increased to $306 million in the third quarter from $197 million in 2010.
Ford says its widening European losses are due to higher commodity costs, including hedging adjustments, as well as unfavorable exchange rates, partially offset by improved structural costs.
What Ford doesn't say is that mainstream automakers in Europe are luring customers and fleet managers with hefty discounts.
Ford in Europe now has a 3.9 percent operating loss, up from 3.2 percent in the third quarter a year ago.
What makes the European results even more striking is the comparison with other regions of the world, where Ford enjoys almost premium automaker margins.
In the United States, Ford's operating margin in the third quarter was 8.6 percent; in South America, a heftier 9.3 percent.
Under "One Ford," the company's products are truly global, as is its management team, so Ford's products and management are not responsible for its underperformance in Europe. Rather, the market is.
Look at GM Europe.
Its loss in the third quarter halved to $300 million, but its operating loss, at 4.7 percent of revenue, is even worse than Ford's.
Globally, GM reported a 6 percent operating margin in the third quarter, with North America at a heftier 10 percent.
Europe had been GM's biggest pain for a long time. In Europe GM has lost more than $13 billion since 1999.
PSA's profit warning for the full year is yet another sign of the growing difficulties that mainstream automakers are facing.
After reporting a 405 million euro (about $583 million) operating profit in the first half for its automotive operations, PSA now says it plans "a close to operating breakeven" result for the full year.
That means the second half for the automaker will likely consume more than the profit gained in the first half. Western Europe will be the main reason for the reversal of fortune as PSA is the automaker depending most on the region, which will generate 57 percent of its revenues this year, according to Morgan Stanley predictions.
Sadly, western Europe failed to address its overcapacity problems during the 2009-10 crisis, and as the market weakens again, it looks like there is more pain on the horizon.
You may e-mail Luca Ciferri at [email protected]