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Source: The Wall Street Journal
Sinking consumer confidence in Western Europe is undercutting the gains General Motors Corp. racked up in Eastern Europe's emerging markets earlier in the year, leading the U.S. auto maker to report a 1.9% drop in overall European sales for the first nine months of the year.
GM, which is battling Toyota Motor Corp. for the leading share of global auto sales, faces increasing pressure in Western Europe, where a weakening economy and high fuel and raw-materials prices are depressing demand. GM earlier this week said it will pare production of Opel vehicles built in the region. The cutbacks could cause the company to burn through more cash than planned as it incurs expenses even as productivity decreases.
GM Europe's performance adds pressure for the auto maker at a time when concerns about a miserable U.S. economy and dwindling cash reserves have knocked the company's shares to their lowest point in nearly six decades. Shares of GM continued falling Thursday after declines earlier in the week.
This year's sales performance for GM Europe stands in contrast to the first nine months of 2007, when GM recorded an 8% increase on the Continent thanks to sizzling sales in Russia. Sluggish demand in several of Europe's more mature auto markets, including Spain and Germany, more than offset the continued increases in Eastern Europe during the first three quarters of 2008.
"We are facing an unprecedented set of economic challenges due to the global economic crisis," GM Europe President Carl-Peter Forster said in a statement. "The credit crisis and inflation from surging oil and commodities prices have seriously hurt consumer confidence."
GM said that its Western European sales fell about 11% during the first three quarters of the year, while Eastern European sales increased 43%. The Chevrolet brand, which relies on Eastern European markets for sales, posted a sales increase, while the higher-margin Opel brand reported a sales decline.
GM delivered a total of 1.62 million vehicles in Europe between January and September. Sales in Eastern Europe hit 318,245 vehicles, which led the auto maker to a 10.4% market share in the region. GM will report world-wide sales results on Oct. 29.
The decline in Western Europe comes just as the region appeared to be getting back into black ink after billions of dollars and several years worth of restructuring.
On Wednesday, foreign auto makers selling vehicles in Russia collectively reported a 22% sales increase in September, but GM's Chevy brand and Ford Motor Co.'s Ford were the only two of five foreign brands to register declines. Chevy fell 2%, while Ford sales slipped 13%, according to the Association of European Businesses.
DETROIT (Reuters) - General Motors Corp shares fell to their lowest level since 1950 on Thursday as concerns mounted that an industry decline that started in the United States was spreading and a leading forecaster warned global auto demand could "collapse" in 2009.
Oct. 9 (Bloomberg) -- General Motors Corp. headed toward its lowest close in New York trading in 58 years and Ford Motor Co. fell for the seventh straight day as the outlook for U.S. auto sales worsened and a ban on short selling ended.
Market researcher J.D. Power & Associates today estimated that car and light-truck sales will fall to 13.6 million this year and 13.2 million in 2009. The total was 16.1 million last year and hasn't been as low as the 2009 projection since 1992.
``Buyers are both voluntarily and involuntarily exiting the U.S. new-vehicle market,'' Jeff Schuster, executive director of automotive forecasting for Westlake Village, California-based J.D. Power, said in a statement. ``The global market in 2009 may experience an outright collapse.''
U.S. auto sales tumbled 27 percent in September, the biggest monthly drop since 1991, as the credit crisis reduced access to loans for potential buyers. The industry already had been hurt by gasoline prices that reached a record high in July and by the housing slump that weakened consumer confidence.
Short-Sale Ban
Shares of GM and Ford, the largest U.S. automakers, were on the list for the U.S. Securities and Exchange Commission's three- week ban on short selling, which ended last night. In a short sale, traders borrow shares, sell them and hope to make a profit by buying back the stock at a lower price and returning it.
GM's 8.375 percent note due July 2033 rose 6.3 cents to 34.3 cents on the dollar, yielding 25 percent. Dearborn, Michigan-based Ford's 7.45 percent note due July 2031 fell 5.9 cents to 28.5 cents on the dollar, yielding 26 percent.
``People aren't sure they're going to be able to get their U.S. distribution and sales in line with their projections,'' said Peter Kenny, a managing director for institutional sales at Knight Equity Markets in Jersey City, New Jersey. ``That's what's killing them.''
Kevin Tynan, an analyst at New York-based Argus Research Corp., said the auto industry before the financial crisis ``was perceived as the most troubled sector. Investors are circling back and saying this is pretty bad.'' He rates shares of GM and Ford ``sell.''
`Fragile' Balance Sheets
GM and Ford shares this week were cut to ``sell'' by Citigroup Inc.
``Declining global credit conditions are complicating what are already fragile U.S. automotive balance sheets,'' Citigroup analysts including Itay Michaeli wrote in a note dated Oct. 7. Without a recovery, ``U.S. automakers might be forced to consider pursuing either drastic spending cuts and/or broader workout scenarios sooner than previously contemplated,'' they wrote.
GM said on July 15 that it would increase available funds by $15 billion by the end of next year through cost cuts, asset sales and new debt.
The J.D. Power estimate for 2009 industry sales comes after consulting firm Global Insight Inc. last week trimmed its projection for next year to 13.4 million cars and light trucks from its previous figure of 14 million.
``There's no sign of recovery that you can point to,'' Global Insight analyst Rebecca Lindland said in an interview Last week at the Paris Motor Show.
GM hasn't posted a full-year profit since 2004, while Ford hasn't done so since 2005. Both automakers have lost sales as high fuel prices caused a consumer shift away from large pickup trucks and sport-utility vehicles. Neither automaker has said when it expects to return to profit.
Source: The Wall Street Journal
Sinking consumer confidence in Western Europe is undercutting the gains General Motors Corp. racked up in Eastern Europe's emerging markets earlier in the year, leading the U.S. auto maker to report a 1.9% drop in overall European sales for the first nine months of the year.
GM, which is battling Toyota Motor Corp. for the leading share of global auto sales, faces increasing pressure in Western Europe, where a weakening economy and high fuel and raw-materials prices are depressing demand. GM earlier this week said it will pare production of Opel vehicles built in the region. The cutbacks could cause the company to burn through more cash than planned as it incurs expenses even as productivity decreases.
GM Europe's performance adds pressure for the auto maker at a time when concerns about a miserable U.S. economy and dwindling cash reserves have knocked the company's shares to their lowest point in nearly six decades. Shares of GM continued falling Thursday after declines earlier in the week.
This year's sales performance for GM Europe stands in contrast to the first nine months of 2007, when GM recorded an 8% increase on the Continent thanks to sizzling sales in Russia. Sluggish demand in several of Europe's more mature auto markets, including Spain and Germany, more than offset the continued increases in Eastern Europe during the first three quarters of 2008.
"We are facing an unprecedented set of economic challenges due to the global economic crisis," GM Europe President Carl-Peter Forster said in a statement. "The credit crisis and inflation from surging oil and commodities prices have seriously hurt consumer confidence."
GM said that its Western European sales fell about 11% during the first three quarters of the year, while Eastern European sales increased 43%. The Chevrolet brand, which relies on Eastern European markets for sales, posted a sales increase, while the higher-margin Opel brand reported a sales decline.
GM delivered a total of 1.62 million vehicles in Europe between January and September. Sales in Eastern Europe hit 318,245 vehicles, which led the auto maker to a 10.4% market share in the region. GM will report world-wide sales results on Oct. 29.
The decline in Western Europe comes just as the region appeared to be getting back into black ink after billions of dollars and several years worth of restructuring.
On Wednesday, foreign auto makers selling vehicles in Russia collectively reported a 22% sales increase in September, but GM's Chevy brand and Ford Motor Co.'s Ford were the only two of five foreign brands to register declines. Chevy fell 2%, while Ford sales slipped 13%, according to the Association of European Businesses.
DETROIT (Reuters) - General Motors Corp shares fell to their lowest level since 1950 on Thursday as concerns mounted that an industry decline that started in the United States was spreading and a leading forecaster warned global auto demand could "collapse" in 2009.
Oct. 9 (Bloomberg) -- General Motors Corp. headed toward its lowest close in New York trading in 58 years and Ford Motor Co. fell for the seventh straight day as the outlook for U.S. auto sales worsened and a ban on short selling ended.
Market researcher J.D. Power & Associates today estimated that car and light-truck sales will fall to 13.6 million this year and 13.2 million in 2009. The total was 16.1 million last year and hasn't been as low as the 2009 projection since 1992.
``Buyers are both voluntarily and involuntarily exiting the U.S. new-vehicle market,'' Jeff Schuster, executive director of automotive forecasting for Westlake Village, California-based J.D. Power, said in a statement. ``The global market in 2009 may experience an outright collapse.''
U.S. auto sales tumbled 27 percent in September, the biggest monthly drop since 1991, as the credit crisis reduced access to loans for potential buyers. The industry already had been hurt by gasoline prices that reached a record high in July and by the housing slump that weakened consumer confidence.
Short-Sale Ban
Shares of GM and Ford, the largest U.S. automakers, were on the list for the U.S. Securities and Exchange Commission's three- week ban on short selling, which ended last night. In a short sale, traders borrow shares, sell them and hope to make a profit by buying back the stock at a lower price and returning it.
GM's 8.375 percent note due July 2033 rose 6.3 cents to 34.3 cents on the dollar, yielding 25 percent. Dearborn, Michigan-based Ford's 7.45 percent note due July 2031 fell 5.9 cents to 28.5 cents on the dollar, yielding 26 percent.
``People aren't sure they're going to be able to get their U.S. distribution and sales in line with their projections,'' said Peter Kenny, a managing director for institutional sales at Knight Equity Markets in Jersey City, New Jersey. ``That's what's killing them.''
Kevin Tynan, an analyst at New York-based Argus Research Corp., said the auto industry before the financial crisis ``was perceived as the most troubled sector. Investors are circling back and saying this is pretty bad.'' He rates shares of GM and Ford ``sell.''
`Fragile' Balance Sheets
GM and Ford shares this week were cut to ``sell'' by Citigroup Inc.
``Declining global credit conditions are complicating what are already fragile U.S. automotive balance sheets,'' Citigroup analysts including Itay Michaeli wrote in a note dated Oct. 7. Without a recovery, ``U.S. automakers might be forced to consider pursuing either drastic spending cuts and/or broader workout scenarios sooner than previously contemplated,'' they wrote.
GM said on July 15 that it would increase available funds by $15 billion by the end of next year through cost cuts, asset sales and new debt.
The J.D. Power estimate for 2009 industry sales comes after consulting firm Global Insight Inc. last week trimmed its projection for next year to 13.4 million cars and light trucks from its previous figure of 14 million.
``There's no sign of recovery that you can point to,'' Global Insight analyst Rebecca Lindland said in an interview Last week at the Paris Motor Show.
GM hasn't posted a full-year profit since 2004, while Ford hasn't done so since 2005. Both automakers have lost sales as high fuel prices caused a consumer shift away from large pickup trucks and sport-utility vehicles. Neither automaker has said when it expects to return to profit.
