Automakers don’t overreact to international tensions and currency fluctuations. They’re playing the long game, making decisions that many times will be in place for decades.
That’s why the comments coming from auto execs on the verge of the Geneva auto show are so striking. They indicate that, behind the hoopla and posturing at the show, automakers are pondering how two mega-issues might reshape the industry.
Issue No. 1: Russia
The Wall Street Journal last week quoted General Motors CFO Chuck Stevens recounting GM’s steps to cut production and shipments to Russia, trim marketing expenses and limit the amount of cash kept in Russia. As auto executives do, he reaffirmed belief in the long-term potential of the Russian auto market.
But, Stevens told The Journal, “Clearly the risk profile in Russia has increased.”
Likewise, Renault-Nissan CEO Carlos Ghosn told Automotive News Europe Editor Luca Ciferri that “some of the emerging markets where we have significant capacity such as Russia are not moving in the right direction.”
Ghosn added that a rebound in oil prices could make Russia a boom market again: “Russia falls very quickly but also recovers very rapidly.”
Issue No. 2: The weak euro (aka the strong dollar)
Daimler’s labor chief, Michael Brecht, last week suggested that the Mercedes-Benz parent reconsider plans to shift some vehicle production to the U.S.
Brecht, who is deputy chairman of Daimler’s supervisory board, told Reuters that “strategic decisions were made on the basis of a dollar-euro exchange rate of $1.35.” Last week, the euro was hovering near $1.13.
Meanwhile, Ghosn said that the exchange rate could be a boon for European automakers with underutilized factories.
“A weak euro is good news for all carmakers building cars in Europe because most of the players have overcapacity in the region, and Europe is a net exporter of vehicles,” Ghosn said.
Automakers are generally loath to suggest that they might take production away from nations with strong currencies, or that they might pump up exports to those markets. Nor do they like to admit that they are quietly minimizing their presence in a turbulent emerging market.
But as the industry gathers in Geneva this week, industry leaders are talking publicly about such actions. That probably means they think that troubles in Russia and the weak euro will be with us for a while.