Trouble in Europe means local automakers are starting 2013 with a whimper instead of a bang.
Happy New Year
In less than 72 hours, the attention of the automotive world will laser in on Detroit, scene of the North American International Auto Show. There, the car world’s top executives will unveil exciting new models, make hopeful projections about market share that collectively add up to more than 100%, and hope that no one remembers their failed forecasts from a year ago.
The shift in focus is welcome in Western Europe, where fortunes are sharply divided as recent events have ricocheted between tragedy and farce. Mired in a deep recession and burdened with overcapacity, automakers in France are frantically trying to stop their bleeding, while some of their German counterparts seem to skip easily from triumph to triumph. Adding an unexpected note of folly to the New Year’s events was the jail sentence handed down to a former top Ford executive accused of hiding a multimillion dollar fortune from his ex-wife.
Here are some of the lowlights — and a couple highlights for good measure.
Western Europe's economic woes
Capping what has been a miserable year, car sales in Western Europe hit the down escalator in December, falling 16.2%. The European market is at its lowest level in nearly 20 years. Slumping demand, in connection with chronic overcapacity, is driving several automakers to the brink, and more pain is forecast in the coming months. New estimates suggest that Western European sales will shrink another 3% to 5% in 2013.
Peugeot is bleeding
Nobody is hurting worse than PSA Peugeot Citroën. Once a strong No. 2 in West Europe, the French automaker’s market share has fallen to 12.7%. Its stock price has fallen 44% in the past year, and the company has been burning cash. PSA has a particularly large presence in Southern Europe, which has been hit hard by recession. Its market is down 13.3% in France, 14.9% in Spain, and a bruising 20.9% in Italy.” According to the newly installed French socialist government, PSA made strategic mistakes over the past 20 years by not expanding internationally — which anybody who has tried to buy a Peugeot or Citroën in the U.S. would know first-hand.
Peugeot bailout snarled in red tape
To get rolling again, PSA has put out together a $24 billion refinancing plan, which includes $10 billion in state loan guarantees. The plan was initially presented as a pure debt refinancing, but now it is being viewed as a restructuring, which means it has to be examined by EU competition authorities in Brussels. If regulators decide the assistance violates EU competition law, PSA could be forced to make concessions on top of those it has already made, such as the elimination of dividends and bonuses, and the placement of a government appointee on its board of directors.
An Opel payoff for Peugeot is years away
In its struggle to save itself, Peugeot arranged an alliance General Motors’ Opel, to save $2 billion a year in purchasing and engineering. They’re both still waiting to see the benefits of that union. PSA’s European market share in the first 11 months of 2012 fell from 12.5% to 11.7% as Opel’s dropped from 7.3% to 6.7%. Both companies are in a hurry to get healthy, but the first jointly developed models won’t hit the streets until 2016. GM GM CEO Dan Akerson admits the two automakers have been slow to work together because of “a lot of variability” between how the two wanted to engineer some new models.
A Peugeot-Opel merger in the works?
A story that in appeared Le Monde and was reported in English by The Truth About Cars website, says the French government was pushing Peugeot to go further and buy Opel from GM. Given Opel’s performance and GM’s desire to rid itself of the financial liability, PSA could probably buy it for nothing. But it might find itself sinking $5 billion or more into Opel to make it viable. Dan Akerson gave his European unit a less-than-ringing endorsement in a recent interview with the Wall Street Journal. When asked “Is it still GM’s goal to own Opel? Are there talks of selling it?” he replied tersely, “No, there are no talks.” End of.
Renault is hurting too
PSA isn’t alone in its Franco-misery. Renault wants workers at all its French plants to boost their workweek 6.5% to 35 hours, so it can save $85 million a year. Chief Operating Officer Carlos Tavares has been outspoken in his belief that there are too many car plants in Europe and that factories in England and Spain are more competitive than Renault’s in France. That won’t make him very popular with France’s robust labor unions.
Even Russia's got the blues
One of the few bright spots in the European picture turned a bit darker this week and may be about to suffer from the same disease of overcapacity. Russia has grown to become the continent’s second-largest car market after Germany. But according to Automotive News, some industry watchers believe it might be stagnating as sales level off. A prominent businessman was quoted as saying he did not expect to see any growth in the economy “in the coming months.” Still, automakers continue to expand there. Volkswagen is building a new engine plant, Ford is adding a fourth assembly plant, and AutoVaz (otherwise known by its trade name of Lada) is gearing up to produce 350,000 vehicles a year at a factory in partnership with Renault-Nissan.
But in Wolfsburg, VW rolls on
A survey of top automotive executives surveyed by KPMG picked VW as the automaker most likely to gain global market share over the next five years. Volkswagen announced in December that by the end of November it had beaten its sales for all of 2011, with a total of 8.29 million vehicles sold. It has even been strong enough to fend off attacks by Fiat by commanding 24.9% of the Western European auto market, up from 23.3% a year ago. Fiat chief Sergio Marchionne has said that VW is creating a “bloodbath” with its savage pricing and wants to drive its weaker competitors out of business.
Meanwhile in Munich...
The BMW Group is popping bottles of sekt sparkling wine after selling a record 1.85 million vehicles in 2012, up 11% from a year ago, and it is forecasting another record year in 2013. Luxury car customers made BMW the best-selling premium brand worldwide over Audi and Mercedes last year, but it was the smaller Bimmers that made the difference: Sales of the 1- series rose 29%, while 3-series sales represented more than a quarter of total BMW volume.
A former Ford Europe CEO disgraced
David Thursfield, onetime chairman and CEO of Ford Europe, was sentenced to two years in jail by a U.K. judge for failing to disclose his hidden wealth in a divorce settlement. Thursfield, now 67, left Ford in 2004 after numerous clashes with other executives. Author Bryce Hoffman has described him as an “unlikable Brit” and “an iron fisted cigar chomper.” According to Britain’s Daily Mail, the former Mrs. Thursfield hired private detectives and a forensic accountant to track her husband’s alleged wealth to a bank account in Switzerland. For his part, Thursfield told the court he was “virtually penniless” after paying for his third wedding, school and university fees for his daughter, and the upkeep on his waterfront property in the Bahamas.