TURIN, Italy -- Do General Motors and Ford still need to compete in Europe -- building and selling cars in a market that has shifted from low growth/low margin to no growth/no margin?
Why keep losing money here when China is expected to become a 30-million-unit market by 2020 and U.S. new-car sales are poised to return to 16 million a year much sooner than expected?
It's not such a crazy question, given that GM effectively would have pulled out of Europe if it had sold Opel/Vauxhall to Magna International in 2009. Chevrolet would have remained, but it's a nonfactor in sales and has no European plants.
Max Warburton, senior analyst at Bernstein Research in London, thinks that it would make sense for GM and Ford to end sales and production in Europe because making money on cars is a lost cause.
"VW is too strong and the others aren't giving up anytime soon," he says. "In fact, the French and Italians have more political impediments to exiting than Ford and GM."
Warburton says that he can envision Europe "as no more than an engineering center one day for GM and Ford."
Arndt Ellinghorst, head of Automotive Research at Credit Suisse in London, says, "Ford and GM need their European engineering resources."
He considers these resources as the backbone for Ford's and GM's innovation and compliance with future emission standards. At the same time, Ellinghorst says, "The question is, how Ford and GM can stop the bleeding from selling cars in Europe."
Like nearly all mass-market competitors in Europe, GM and Ford are losing money there because the region's debt crisis is pushing up unemployment rates, ruining consumer confidence and keeping people from visiting showrooms. The cars sold usually include profit-destroying discounts.