This month’s Geneva auto show was notable for the absence of big-name automakers such as Ford, Hyundai, Opel, Jaguar Land Rover and Volvo, along with smaller brands such as PSA Group's DS Automobiles and BMW's Mini.
All of them skipped a showcase that was once considered mandatory to attend. Their absence highlighted the big theme of 2019 and beyond for automakers in Europe and globally: cost-cutting.
Even profitable companies are scrutinizing the bottom line across the board, including trade shows, as they prepare for headwinds swirling around legislation, new technology and global trade.
Automakers such as BMW, Daimler, Volkswagen, Porsche, Jaguar Land Rover, Ford, Renault-Nissan are hatching plans to cut billions of dollars in outlays over the next few years as they prep future product lineups that legislation dictates should be electrified. BMW is accelerating a previously announced cost savings plan to help offset the impact of trade conflicts and unprecedented spending on electric vehicles. Ford plans to cut more than 5,000 jobs in Germany and will reduce its workforce in Britain as it seeks to return to profit in Europe while Volkswagen Group said it will shrink the workforce at its core VW passenger cars brand by up to 7,000 employees.
“We are facing multiple external geopolitical and regulatory disruptions and technological changes,” JLR CEO Ralf Speth told journalists at a briefing in January during which he announced 4,500 job cuts, or 10 percent of the automaker’s workforce. “Just to name a few: Brexit, China, China-U.S. trade, CO2, diesel, diesel taxes, WLTP and I could go on. These serious challenges are coming in hordes in a manner we have seldom, if ever, witnessed in the past,” he said.
Speth claimed the changes have “wiped out hundreds of billions in share value in the last year alone.”
Perhaps the biggest drain on cash is moving from the relative certainty of the internal combustion engine, with its familiar supply-chains, customer acceptability and industrial base, and into the unknown of mainstream electrification.
Battery costs, an uncertain EV market, and an even more uncertain shift to different car ownership patterns are all weighing heavily on CEOs, says Evercore ISI analyst Arndt Ellinghorst.
“Without visibility on these issues, it is more difficult to forecast revenues, costs and returns than in the past,” Ellinghorst said.
So there will be more cost cutting.
“In 2019, expect to see big programs announced with a focus on purchasing, commonality and platform efficiency, discretionary spending, marketing, travel and distribution costs,” analyst Max Warburton of Alliance Bernstein said in a note to investors in January.