Automotive News To GM And Ford: Get Out Of Europe Now

Bertel Schmitt
by Bertel Schmitt

Over the last 12 years, GM lost $16 billion in Europe, more than a billion each year. Ford is doing a bit better, but it sits on excess capacity of 300,000 units in Europe and expects a loss of $500 million to $600 million. Automotive News [sub] recommends to both: Pack up and leave. Says Luca Ciferri in AN:

The bottom line is that Europe is the biggest trouble spot in GM’s and Ford’s global empires and could prevent both from sustaining their success.

Ending production and sales in Europe would fix a lot of the companies’ financial problems, but it would be a massive blow to each automaker’s brand image because no one likes a quitter.

For decades, the automaker mantra has been “build where you sell.” But if there is not enough of a market to build cars profitably, then drastic steps must be taken.”

At least at GM, Fritz Henderson is being damned each day for not selling Opel and the Russians.

Two weeks ago, Tom Walsh wrote in the Freep:

“Was Fritz Henderson right after all, back in 2009, when he pushed for General Motors to sell its money-losing Opel subsidiary in Germany?”

Even if GM is able to align its European capacity and costs with the depressed sales volumes in the region, real questions persist about whether GM can generate long-term profit margins that would generate an adequate return on capital in a very crowded market.”

There is no salvation in sight at GM. All Steve Girsky, GM’s designated hitter in Europe, can say is this:

I don’t want to lead anybody to believe there’s any bright spot in Europe right now, although I will say it does look like things appear to be bottoming,”

Things may appear be bottoming because it can’t get any worse. Also, the agony will last longer than planned. Agreements with unions prohibit GM from closing plants before the end of 2014. Now, GM proposed a deal to extend this to 2016, in exchange for salary concessions.

Closing one plant alone would cost more than a billion dollars. The only way around this is bankruptcy. Many, among them Arndt Ellinghorst, head of Automotive Research at Credit Suisse in London, say that Ford and GM need their European engineering resources. At a cost of a billion and more a year, these are expensive resources, especially at a time when tech centers move to China and India.

Bertel Schmitt
Bertel Schmitt

Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.

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  • Marcelo de Vasconcellos Marcelo de Vasconcellos on Jun 29, 2012

    Yikes! Stupid short sighted advice. In case of GM sounds like at least a talking pont. In case of Ford, reeks of America-myopic-disastor advice. Most of Ford world wide sales come from Europe...

  • Carfriend313 Carfriend313 on Jul 03, 2012

    To make it simple, can you imagine the complexity of GM or Ford leaving Europe? The redundancy payments, the complication of adding production elsewhere, setting up new engineering centres elsewhere. At least now they can justify Europe as an expensive engineering consultancy. They do, however, need to increase either sales or decrease capacity in order to provide better capacity utilisation.

  • 3-On-The-Tree I don’t think Toyotas going down.
  • ToolGuy Random thoughts (bulleted list because it should work on this page):• Carlos Tavares is a very smart individual.• I get the sense that the western hemisphere portion of Stellantis was even more messed up than he originally believed (I have no data), which is why the plan (old plan, original plan) has taken longer than expected (longer than I expected).• All the OEMs who have taken a serious look at what is happening with EVs in China have had to take a step back and reassess (oversimplification: they were thinking mostly business-as-usual with some tweaks here and there, and now realize they have bigger issues, much bigger, really big).• You (dear TTAC reader) aren't ready to hear this yet, but the EV thing is a tsunami (the thing has already done the thing, just hasn't reached you yet). I hesitate to even tell you, but it is the truth.
  • ToolGuy ¶ I have kicked around doing an engine rebuild at some point (I never have on an automobile); right now my interest level in that is pretty low, say 2/5.¶ It could be interesting to do an engine swap at some point (also haven't done that), call that 2/5 as well.¶ Building a kit car would be interesting but a big commitment, let's say 1/5 realistically.¶ Frame-up restoration, very little interest, 1/5.¶ I have repainted a vehicle (down to bare metal) and that was interesting/engaging (didn't have the right facilities, but made it work, sort of lol).¶ Taking a vehicle which I like where the ICE has given out and converting it to EV sounds engaging and appealing. Would not do it anytime soon, maybe 3 to 5 years out. Current interest level 4/5.¶ Building my own car (from scratch) would have some significant hurdles. Unless I started my own car company, which might involve other hurdles. 😉
  • Rover Sig "Value" is what people perceive as its worth. What is the worth or value of an EV somebody creates out of a used car? People value different things, but for a vehicle, people generally ascribe worth in terms of reliability, maintainability, safety, appearance and style, utility (payload, range, etc.), convenience, operating cost, projected life, support network, etc. "Value for money" means how much worth would people think it had compared to competing vehicles on the market, in other words, would it be a good deal to buy one, compared to other vehicles one could get? Consider what price you would have to ask for it, including the parts and labor you put into it, because that would affect the “for the money” part of the “value for money” calculation. An indicator of whether people think an EV-built-in-a-used-car would provide "value for money" is the current level of demand for used cars turned into EVs. Are there a lot of people looking for these on the market? Or would building one just be a hobby? Repairing an existing EV, bringing it back into spec, might create better value for the money. Although demand for EVs is reportedly down recently.
  • ToolGuy Those of you who aren't listening to the TTAC Podcast, you really don't know what you are missing.
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