The EU economic disaster is hurting all automakers, and is of particular concern to Ford and GM shareholders. Fiat, which owns Chrysler, is also in trouble.
Passenger car registrations plummeted in the 27 markets of the EU during February of 2013 to fewer than 800,000 units, a 10.5% drop from the same month last year. In February, the UK was the only country to post growth (+7.9%). All other major markets faced a downturn ranging from -9.8% in Spain to -10.5% in Germany, -12.1% in France and -17.4% in Italy. It was the lowest level of sales since ACEA first started records in 1990.
During January and February, demand for new cars declined by 9.5%, amounting to 1,681,073 units, as the Eurozone crisis deepens and bank runs in Cyprus, Italy and Spain now appear possible.
Two months into the year, Germany (-9.6%) and Spain (-9.7%) performed similarly, compared to the same period a year earlier. France (-13.5%) and Italy (-17.3%) recorded a double-digit downturn, while demand was sustained in the UK (+10.3%), according to ACEA, the automakers trade group.
During February, new car registrations pursued the ongoing downward trend that began in October of 2011 with policy makers still stubbornly pursuing failed forced austerity budgets. EU car sales have declined for five straight years, and a sixth decline is now well under way.
This pending calamity is of more than passing interest to U.S. taxpayers. The health of GM and Ford (both companies have accepted lavish U.S. government subsidies), as well as their shareholders is in harm’s way. Both companies posted the largest drops among major automakers.
Moreover, Chrysler employees via Fiat’s ownership – also U.S. government subsidized – are vulnerable to aftershocks of a deteriorating Europe, which could stop Chrysler’s resurgence if product programs are delayed or cancelled. (Chrysler Group Posts 2012 Net Income of $1.7 Billion)
Consider that GM’s 2012 earnings, while positive for the third straight year, were hurt by deepening losses in Europe. In February, GM’s sales there dropped -21% to 57,000 units. Europe has cost GM -$18 billion since 1999, and -$1.8 billion in 2012 alone, in spite of GM’s best efforts to fix Opel Vauxhall. GM also wrote down more than $5 billion in assets in the Eurozone during the past year, and it also wrote off more than half of its new ownership of the PSA stock (-$220 million) it acquired last year in what it said was a collaboration that would save billions. Now the European Trade Commission is scrutinizing the French Government’s bailout of PSA Group, which could doom the company. GM is betting on PSA to help it recover in Europe by mid-decade, but PSA lost €5 billion in 2012. (GM Earns $4.9 Billion in 2012 down from $7.6 Billion in 2011)
Ford Motor is also bleeding oceans of cash in Europe, and its sales were clobbered in February, off -21% to 52,000. While Ford’s 2012 earnings were $8 billion – virtually all derived from North America, it too lost a breathtaking $1.8 billion in Europe, with an operating margin of -6.6% on sales of 1.35 million vehicles. The loss was much higher than Ford had forecast, the result of the continuing deterioration of the European economy, which is outpacing Ford’s efforts to trim costs. (Ford Makes $8 Billion in 2012 – Almost all in North America)
In terms of absolute light vehicle sales, Germany remains the largest European market at 201,000, followed by, France at 143,255, Italy at 108,000 and the UK at67,000. Spain registered 58,373. new cars, slightly less than Belgium (50,684 units). Volkswagen Group remains by far the EU market leader with its 25% share. PSA Group is second with a 13% share, followed by Renault Group at 10%, GM at 7%, Fiat Group at 6.9% and Ford Motor at 6.5%.
According to the latest new car sales analysis from JATO Dynamics, the Volkswagen Golf continues to be Europe’s best-selling car, despite a fall of 0.3% in February sales, and a 9.1% fall in year-to-date sales, compared to 2012. Four B-segment cars, the Renault Clio, Volkswagen Polo, Peugeot 208 and Ford Fiesta, complete the Top Five.
One final irony: economically insignificant Cyprus, the current cause of banking concerns, saw auto sales drop to 643 units in February, a -45.5% decline from last year.
