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Why leave Europe's car market? So many reasons.

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#1 ·
Why leave Europe's car market? So many reasons.
Crowded market, regulations make for brutal competition
February 18, 2017
Christiaan Hetzner
AutoNews.com

FRANKFURT -- Why is General Motors looking for a way out of Europe?

That's easy. While home to many of the oldest and most venerable car brands in the world, Europe also may be the most brutally competitive and demanding market, with a complicated patchwork of regulations under which a host of American, European and Asian brands do battle.

Thanks to the effects of the ongoing eurozone debt crisis, volumes in Europe remain roughly 1 million vehicles off the 2007 pre-crisis peaks. Growth essentially comes solely from replacement demand as population growth in the region is largely stagnant and vehicle ownership rates remain unchanged.

With fewer cars sold in the past decade, industry overcapacity became a bigger and bigger problem. Former General Motors CEO Dan Akerson famously said five years ago that Europe had anywhere between seven to 10 car plants too many. Since then, just three have been shut: Ford's factory in Genk, Belgium, PSA's assembly lines in Aulnay, France, and GM's own Zafira MPV site in Bochum, Germany.

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#2 · (Edited)
Lots and lots of reasons. The "domestic" demands of each market besides, the possibility of "harmonizing" things among EU member states hasn't truly occurred.
Financial reporting practices also differ: U.S. carmakers break out their results by region, creating instant yet often ugly transparency -- particularly when losses in Europe ballooned in 2013. Many companies, however, don't bother informing investors whether their operations in Europe are in the red, including potential Opel owner PSA Group. Volkswagen, for example, did away with regional accounting 10 years ago in favor of global results by brand, helping to conceal its chronic losses in North America.
That's really surprising. I would think that their own shareholders would want to see that kind of transparency.
"There are two ways of looking at the European market," said PwC Autofacts Global Lead Analyst Christoph Stuermer. "One is there's no growth and no margins, true, but the other perspective is cars are quite expensive here, so if you are looking at a revenue perspective, Europe is quite nice because -- however little margin you make -- you still make a lot of cash."
I don't get that. You can have an incredible amount of cash/revenue coming in; but if you only make .5% profit on all that investment, you'd wonder if the dynamic needs to change (or you look to other markets). If a Golf costs $7,000 more to buy than in the U.S. market, but you're only reaping $300.00 of profit (I'm making up these numbers), what good is it that you brought in an additional $7,000, but none of it helps fatten your bottom line?

When it comes to satisfying investors and keeping your doors open, I would think that lower revenue --- but fatter margins and profits --- would be the ideal scenario. That helps to not only keep your ownership happy and drive new outside investment in your company, but also help to rationalize your own operations.
Luxury brands may be largely reluctant to move downmarket in the U.S., but in Europe, Opel Astra buyers are inundated with their choice of premium compacts. Audi went so far as to even sell the pint-sized A1 in Europe that can appeal to those originally shopping for an Opel Corsa or Adam. In the West European market, where transaction prices are the highest, both BMW and Mercedes-Benz have grown so fast that -- with some minor help from Mini and Smart -- they were actually able to outsell Opel last month.
And that's the difference. Luxury cars will always command higher transaction prices and reap their manufacturers fatter profits. If you reach down market to steal sales away from mainstream brands, you're winning on both the profit and revenue side. That said, at some point down the line, do you worry about diminishing the perception and image of your brand? Do you become so ubiquitous that consumers see your marque as being "on par" with a Ford, Peugeot, or Fiat?

In the US market, that latter scenario is very likely to happen because Americans seem to consider (on some level) for the "size/segment" of a vehicle to equate to a type of luxury. In Europe this doesn't seem to be a factor.
Finally, popular East European budget brands such as Skoda and Dacia, both entirely absent from the U.S., make use of their lower labor costs to attack Opel and PSA by appealing to price-conscious buyers with models that give the most amount of space for the least amount of money, such as the Octavia and Sandero.

Competition is indeed so fierce that many Japanese brands have largely given up on Europe. Honda, a major player in North America, controlled just 1 percent of the market last year. Were it not for the Outlander plug-in hybrid's success in the U.K. and the Netherlands, Mitsubishi wouldn't be worth mentioning. Sales of Subaru are so small, the European Automobile Manufacturers' Association doesn't bother reporting them.
So on some level, it looks like they're saying that, if you're a mainstream/middle-market brand, you're going to get squeezed front the top and the bottom.

Makes you kind of wonder if what some others have stated about this entire Opel/PSA scenario will somehow ring true: GM should get rid of the expensive manufacturing and operations; then later on "try again" with another brand at the bottom of the market (first by importing them; later by sourcing them from Eastern Europe). And when they do make the attempt, start with sub-compact, compact, and "small" crossovers first.
 
#4 ·
We can but wonder how different it might have been if GM had kept Opel/Vauxhall at arms length like Tata does with Jaguar Land Rover.

Since GM struggles with Chevrolet/Buick/Cadillac/GMC on home territory where it should understand the market, it's hardly surprising it failed in Europe where it's never seemed to understand that market or it's subtle differences.
 
#15 ·
We can but wonder how different it might have been if GM had kept Opel/Vauxhall at arms length like Tata does with Jaguar Land Rover.
But that's not GM's MO. Not only do they not keep them at arms length, they use them as rungs on the promotional stepladder. Go out to the colonies, show how good you are at slashing costs and promoting American values at the expense of the local culture, then leave after a couple of years back to the US and some new cushy position.

What do car makers need to succeed in Europe?
1. Robust commercial sales
2. Provide SUVs to Europeans who are now coming on board like North America
3. Plenty of high series trim vehicles, cars and utilities that encourage premium buyers

These three areas are where Ford has made big changes and inroads in product mix in the past two years.
IMO, GM Europe hasn't moved fast enough to cover these critical areas and has suffered financially for it.

I would be happy if Opel Vauxhall had a plan to pare back vehicle types and production to get to profit
but they don't even seem capable of that, so I'm not sure what's there for a potential to capitalize on
save for the regional brand names... PSA could now theoretically have local brand sales channel for the
main French, German and UK markets and could do great things in about 4-5 years time..
Having been through England, Italy and France recently, I'm not sure I agree with your 3 point plan. In England maybe, but the vast majority of vehicles I saw on mainland Europe were small base-model hatchbacks. There were very few SUV's compared even with Australia. The SUV's we saw were mostly small by virtue of the fact that anything bigger just doesn't fit on a lot of the roads. And premium trim did not seem to be a priority either.
 
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#6 ·
Just look how fanatically the RKM Presstitutes are selling this thing as all positive.

And we know what that means....
 
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#8 ·
I wonder if this will put pressure on Ford to abandon the European market as well. Though I believe their European operations are now profitable, the ROI is very low - they'd get better returns by selling the European operations and buying bonds.

As sad as it is to see GM abandon the market, financially it is the wise choice. Do any of the non-luxury brands make money in Europe (and by money, I mean worth the investment - ROI)? I know VW doesn't, they are reliant on luxury. I don't believe Fiat or Renault is. So Ford, VW, Fiat, Renault, Opel don't make much, if any, profit - it is a bad market to be in.

I've always wanted GM to be really profitable, as all of us do. Sadly, this new, profitable GM is making much better business decisions but also makes them less fun. Minimal sports variants of vehicles as I assume the ROI isn't there, Opel going, Holden, etc.. Hopefully the Chinese start to place a priority on fun/handling cars vs. the current desire for cushy cars.
 
#22 ·
I wonder if this will put pressure on Ford to abandon the European market as well. Though I believe their European operations are now profitable, the ROI is very low - they'd get better returns by selling the European operations and buying bonds.

As sad as it is to see GM abandon the market, financially it is the wise choice. Do any of the non-luxury brands make money in Europe (and by money, I mean worth the investment - ROI)? I know VW doesn't, they are reliant on luxury. I don't believe Fiat or Renault is. So Ford, VW, Fiat, Renault, Opel don't make much, if any, profit - it is a bad market to be in.

I've always wanted GM to be really profitable, as all of us do. Sadly, this new, profitable GM is making much better business decisions but also makes them less fun. Minimal sports variants of vehicles as I assume the ROI isn't there, Opel going, Holden, etc.. Hopefully the Chinese start to place a priority on fun/handling cars vs. the current desire for cushy cars.
I would say as long as they are making money there they should stay. with there product the same world wide they also get to spread the cost for all cars over a larger number. if they sell 100,000 Fusions in the US and 100,000 in Europe they get to spread developmental cost over 200,000 cars instead of 100,000. this bring down the cost per product globally and making more money in the US, China and Europe.
 
#34 · (Edited)
Why take notes? Chibby won 20 awards! Yes They Can!

Exactly.

GM has never figured this out and why they set their course for oblivion when they refused to use the Zeta platform to create the vehicles they desperately needed in 2009 due to their egos making business decisions.

GM had to use what they had available and Zeta was/is more than adequate to create the products GM had to have from 2009 to 2025 and it was already paid for,

Now they are paying the price for a very poor business decision as leaving Europe is the beginning of the end of the road for GM - ironic that the platforms that destroyed GM are GM's Alpha and Omega.
https://video.search.yahoo.com/yhs/...a5b18e59cbc7a29868310f23243c1de5&action=click
 
#14 ·
What do car makers need to succeed in Europe?
1. Robust commercial sales
2. Provide SUVs to Europeans who are now coming on board like North America
3. Plenty of high series trim vehicles, cars and utilities that encourage premium buyers

These three areas are where Ford has made big changes and inroads in product mix in the past two years.
IMO, GM Europe hasn't moved fast enough to cover these critical areas and has suffered financially for it.

I would be happy if Opel Vauxhall had a plan to pare back vehicle types and production to get to profit
but they don't even seem capable of that, so I'm not sure what's there for a potential to capitalize on
save for the regional brand names... PSA could now theoretically have local brand sales channel for the
main French, German and UK markets and could do great things in about 4-5 years time..
 
#30 ·
Agree.

Those are all required to succeed in the future European Market and GM has never put a priority on Commercial sales since GM's management has no clue on how to make money in the Auto Industry and insist on making unrealistic margins on sales.

1. Said for years GM had to make GMC it's global commercial Truck brand since it could sell in Europe and R.O.W. and do it at good margins.

2. Again, GM had to use GMC to enter the lucrative SUV market that is now starting to get hot in Europe as you correctly point out.

3. GMC also gives GM a way into the Truck market that will grow in the coming years, and while it will never be anything like the U.S. truck market, there is high margin revenue growth in the segment for those who are in it.

4. GMC can deliver the high margin SUV sales required to attract premium buyers who will buy other premium offerings from the brand (GMC) or it's dealer mates (Opel/Vauxhall).

5. Buick could share higher end trim products with Opel/Vauxhall to spread costs and improve global margins.

Been trying to give GM the answers to their European (and Global) problems since 2009, trouble is I cannot make them listen, but they were given the answers - directly.

Unfortunately for GM, in 2009 GM sold their future out on the Alpha and Omega platforms that will never deliver the returns required to fund GM in the future and neither platform was needed at the time they were green lighted.

GM had to use the Zeta platform to produce the vehicles that were required in 2009 and are still needed for 2017 and beyond, and Zeta could have produced them as it could produce the ATS, CTS, CT6 and SRX in compact, midsize and large CUV along with variants for all other GM brands, and could have been used for a commercial van.

Opel/PSA/VAuxhall-Holden will create a comprehensive plan to get production-vehicle types-volumes in line with the aid of the French, German and UK Governments and do what GM should have done in 2009.
 
#18 ·
Sure there are lots of small cars and CUVs in europe but those are not the only vehicles
and arguably npt the ones that make billions in profit for the major players..

Ford has basically followed the plan I suggested and made a Pre-Tax profit of $1.2 billion.
The point being to not just do what every other car manufacturer does in Europe,
it's more about seeking out groth areas that are profitable to carmakers that already
have access to the needed vehicles....
 
#23 ·
There is something amiss at GM and, I believe, not in a good way. 1. We have the sell-off of the European division. 2. Why does GM persist with the share repurchases? Is this the only way they can maintain the share price? (or just to keep management's share bonus scheme valuable?) 3. Corporate debt has virtually doubled in the past year (although I don't know if GM Financial is included in the numbers) whilst cash on hand is diminishing.

I wonder what GM Financial's prospects will be in Europe now?

What happens if South/North America or China slow down? (remembering GM only is due 50% of any profit there). Will the Chinese eventually want GM (and VW) out in preference to their own home-grown industry?

Bankruptcy II - here we come.
 
#25 · (Edited)
BMW and Mercedes make cars that can sell as a base commuter car/taxi, and barely pay for themselves. But the same car, with augmentations can sell as a M or AMG - which doesn't cost 3 or 4 times as much to build, but brings in 3-4 times the price. GM has Cadillac who can only make very expensive cars - as Alpha is showing, not really working as a bread'n'butter product. BMW makes a 316 that can produce the M3/4.

Ford may make $1.2b off $30b in sales - but then the cars are paid for and anything they make selling them in America and Asia are money for jam. The platfom cost is paid once, then you have relatively small amounts to regionalise. People didn't understand how GM could make money off the GTO, G8. The reason why is if they had to engineer and make a factory from scratch, it costs $1b per vehicle to Job 1. To Americanise the GTO was $65m - that's peanuts compared to Ford's bill for the 04 Mustang. The G8 was $200m. That's nothing. Even the Gen V Camaro - $500M to make a car and factory, that sold for and ATP in 100K volumes. That is serious profit on each unit, when you don't have to amortise the development. They almost got the model right, of having serious hardware capable of a commercial vehicle or family sedan but also capable of underpinning a performance car with outrageous power.

Economies of scale - BMW and Mercedes can sell expensive cars in America 'for free' because all the R&D is done on the cars sold in Europe. Whereas, if GM wants to take Cadilac to Europe, it's got to spend a lot more on the cars to optimise them and then spend a heap more on marketing. They're coming from nothing. And Mercedes and BMW have a big economy of scale advantage, their models sell in hundreds of Ks a year - each. Alpha is probably lucky if it's hit more than 100,000 across all models. That's why global car makers launch models that can be sold in all markets - Jaguar launches sychronised models all around the world - in Oz, we could get the XE, XF, F-pace, F-type in a full range off models within weeks of their launch elsewhere, from the base XE with diesel or petrol, to the $220K SVR F-type. They might sell 10,000 cars in our market - but it's cream because the ones they sell, will cost a lot of dough.
 
#28 · (Edited)
The issue is that in the last three months, the German saw significant price squeezing on their US car sales
and significant reductions in volume selling cars as people more to utilities.

I'm feeling quite pleased about the Ford Europe result in the context of the times.
Sales... 1,539K (+9K)
Revenue $26,5 Billion (+$200 Million)
EBIT 1.2 Billion (+$300 Million)

It may not look like much to cheer about but the figures appear to becoming more robust,
the massive changes Ford executed there in the past few years are now starting to bear fruit.

I am saddened that GM appears to be throwing the towel in regarding European operations,
maybe the funds required for changing direction is now just too great or the moment has passed..
 
#36 ·
Why does GM have no compact/midsize CUV/SUV that could be sold in Europe? Every other global group has them.

All GM offered Europe was the Antara which was outsold across Europe by the Ssangyong Rexton to show how off the pace GM Korea is.

The Mokka created the sub-compact CUV niche but the opportunity to grow that is lost with no compact CUV in the showroom next to it - even now GM had to turn to PSA to build their 2008/3008 and rebadge them is as Crossland/Grandland.

If an alien landed from outer space and looked at Opel/Vauxhall over the last 20 years, they'd never guess their parent company was once the biggest car maker in the world - but they'd realise why they no longer are!
 
#37 · (Edited)
Reality check -

Ford Europe 2015 / 2016 Q1 and 2015 / 2016 YTD Net Delta after three more Quarters. Delta for Q2 thru Q4 vs Q1.

Wholesales: 376 / 399..... + 23,000 units / + 9,000 units / - 14,000 units

Revenue: 6.9 B / 6.9 B.....'=' / +.3 B / +.3B

Marketshare 7.7 % / 8.0%.... + 0.3% / '=' ( 7.7% ) / -0.3%

Operating Margin: -0.6% / 6.3 %.... + 6.9% / 4.2 % / -2.7%

Profit before Tax: -42M / + 434M.... + 476M / +946M / + 470M Made more than half the improvement in Q1.....


So ..... One Great Q1 plus an improved but much weaker Q2 + Q3 relative to that Q1...... and then plus a weak as **** Q4 makes for an 'interesting trend line and helps explain why this is all happening.

Well, really that plus the freefall for Ford Car product elsewhere including in the USA....


More specifically in terms of Profit before Tax change ( improvement ).

Q1 + 476M

Q2 +306M

Q3 +129M

Q4 +035M
-----------

YTD + 946M ( May not foot due to ( Ford provided ) rounding.)

Oh yeah... sure.... they got it all figured out .... Opel / Vauxhall 'Deal' is the only good lookin' 'savior' in view for Ford Europe 2017.....
 
#40 · (Edited)
More specifically in terms of Profit before Tax change ( improvement ).

Q1 (-$185 M ) + 476M

Q2 (-$14 M) +306M

Q3 (-$182 M) +129M

Q4 ($131M)+035M
-----------

YTD (-$259 B) + 946M ( May not foot due to ( Ford provided ) rounding.)

Oh yeah... sure.... they got it all figured out .... Opel / Vauxhall 'Deal' is the only good lookin' 'savior' in view for Ford Europe 2017.....
Nice try to make those figures look dubious but when we look at what really happened side by side,
we get real context...

Q1 2015: -$42M ------> 2016: +$434M (Up $476M)

Q2 2015: +$161M -----> 2016: +$467M (Up $306M)

Q3 2015: +$9M -------> 2016: +$138M (Up $129M)

Q4 2015: +$131M -----> 2016: $+$166B (Up$35M)
-----------

YTD 2015: +$259M ----> +$1,205M (Up $946M)

All the figures line up, the actual numbers instead of deltas gives us a much clearer picture
of where Ford improved substantially over 2015.

Or maybe Pre-tax results from 2013 to 2016 is more indicative of the turnaround...

YTD 2013 -$1,442M Loss
YTD 2014 -$1,062M Loss
YTD 2015 +$259M Profit
YTD 2016 +$1,205M Profit

As of Q2 in 2015, Ford Europe's Pre-Tax results started turning positive and
that change has gained momentum over the past seven quarters.

Now compare that with GM Europe,
YTD 2013 -$0.9B Loss
YTD 2014 -$1.4B Loss
YTD 2015 -$0.8B Loss
YTD 2016 -$0.3B Loss

So yeah, compared to Opel/Vauxhall, Ford Europe has indeed got some of it figured out....
 
#48 ·
Using the same logic so often present in the Media and here...... then ........even bigger, better, more powerful versions of this should have applied to Ford Europe by no later than 2010, and also for Toyota / Lexus over there in 2005ish.

Honda, Nissan, Subaru, Daihatsu, hell, PSA themselves, Hyundai / Kia further back than relatively recently...... FIAT...... and Renault at one time. I mean seriously, who other than eh .... BMW, VW and Daimler ......
 
#77 ·
Just wondering: why shouldn't GM sell Holden next?
The Australian market has even more players in it. They are losing the real Commodore and they are selling Opel,one of the main suppliers of their cars. Profits won't be that good int he coming years, I'm guessing.
Why not sell Holden to PSA as well? Or did they decline and will it be sold to someone else?
 
#78 ·
Why not sell Holden to PSA as well? Or did they decline and will it be sold to someone else?
In 10 months time Holden won't have any tangible assets. It will be just a tiny regional sales office reporting to their HQ in Singapore. The only asset will be the proving ground - the office building is leased, including the furniture, computers, etc. And if I remember correctly their spare parts facility is either to be sold and leased back, or has already been sold - don't know, don't care anymore.

Nothing to sell in Australia. And the brand, although they call it iconic, is damaged goods.

GM Holden - from hero to zero in just over a decade.

And the dealer network? Holden are trying to get rid of half of their dealers anyway.

PSA don't have to buy Holden, they already sell Peugeots and Citroens in Australia.
 
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