Even as Opel looks set to leave GM’s cratering corporate mothership, the German division has scooped top honors in the European Car of the Year (ECOTY, although UK buff book EVO also claims that acronym). Oops! Did I say Opel? I mean Vauxhall. The British brand under which GM products are sold in the UK. Other than Chevrolet and Cadillac, which are also sold throughout Europe, although, in the UK, not so much that you’d require more than your two hands to count them. Anyway, the methodology used to bang the gong (and get it on) is beyond question. ECOTY is judged by a panel of 59 swag-scarfing, press car luxuriating journos members, representing 23 European countries. The Motor Authority reports that “National representation on the panel is related to the size of the country’s car market and its importance in car manufacturing, with France, Germany, Great Britain, Italy and Spain topping the list with six members each… Of the total 59 judges, 20 gave the Insignia top points, while 19 put the Fiesta in first place.” And Sweden showed it no love at all. See the votes by judge here.
Category: Europe
Quick, what do egregious bailouts have in common with the invasion of Iraq? Sticklers for a little-known concept called “international law” aren’t fans of either. And this time they could actually sue. “We will look very carefully at the details of the proposed aid package to the U.S. auto industry, in order to ensure compliance with international trade rules and assess the potential impact which it may have on trading partners,” Peter Power, trade spokesman for the European Commission told CNN yesterday. The World Trade Organization prohibits a range of subsidies that unfairly hurt competitors, and with pro-bailout rhetoric hitting new heights in “whatever it takes” shrillness, there’s a chance that good intentions will translate into a WTO lawsuit. After all, Europe and the US are already beefing over a number of trade issues, from aerospace subsidies to agriculture. In fact, it’s possible that Bush’s resistance to bailout plans is a result of his humiliating retreat from steel-industry protectionism some five years ago. Then, as now, a struggling industry needed his help, and help he did. Until the EU threatened $2.2b in retaliatory economic sanctions. Sue me once, shame on you…
Scientists all over the world are in a mad scramble to find a vaccine against the vehicular flu, commonly called “motor malaise.” Now, Europe also finds itself in the grips of the pandemic. Today (Farago beat me to it), the European association of auto makers ACEA released their January through October numbers. Analysts from the automotive anorexia formerly known as America may envy the fact that from January to October, Europe (as defined by ACEA) fell only 5.4 percent to 12.852m units. Taking a closer look, we now know why the EU was so eager to enlarge eastwards. In the new easterly member states, there was at least an ittsy bit of growth, 2.5 percent for the first 10 months. Without the eastern comrades– make that members– the EU would be looking at an even heftier percentage-letting. Have a Maalox, or a stiff drink, and read on, if you dare ….
Can you believe that GM used to claim that their foreign ops would prop-up the sinking North American market while they got their shit together? I mean, these are the same guys that were busy touting the advantages of a world car. Anyone who doubted that it’s a small world after all should have a gander at October sales stats across the pond [via Bloomberg UK]. “Registrations dropped to 1.13 million vehicles last month from 1.33 million a year earlier, the Brussels-based European Automobile Manufacturers’ Association said today in a statement. Sales for the first 10 months fell 5.4 percent to 12.8 million vehicles, accelerating from a 4.4 percent contraction through September.” And who got whacked the hardest? “GM’s sales in Europe fell 25 percent to 94,479 vehicles, with the Saab brand reporting a 28 percent plunge… Registrations in Europe by Toyota slumped 24 percent to 54,612 cars. Asia’s largest carmaker, leading GM in global auto sales this year, posted a 69 percent plunge in quarterly net income on Nov. 6. Deliveries of its Lexus brand fell 32 percent.” So, that’s the mass market, then. How about the top end?
Yesterday, we reported that the European Commission threatened to drag Germany in front of the European High Court again– if Germany dares to pass a revamped Volkswagen Gesetz (VW Law.) Yesterday evening, the German parliament flipped a whole aviary worth of birds in the direction of Brussels, and passed the face-lifted law with an overwhelming majority. Result for the time being: VeeDub’s soon majority-owner Porsche will have to kowtow to the state of Lower Saxony, owner of a paltry 20.1 percent of the shares. Porsche must ask for their OK on major issues. On one issue, Porsche doesn’t even need to ask. Lower Saxony will say “nein, nein, nein” to Porsche booking VW’s profits as theirs. Und now European Trade Commissar Charlie McCreevy will file papers “before Christmas,” and the contemptuous Bundesrepublik Deutschland will face the judges of the European High Court. Again. The court will rule (anybody guess how?) Germany will have to implement the wishes of the court again (anybody guess whether they will?) The never-ending saga continues. In the meantime…
The Financial Times reports the run on the bank scenario mooted by TTAC– bankruptcy-wary suppliers demanding cash-on-the-nail for goods and services– may be going down across the pond. “Troubled US carmakers General Motors and Ford Motor have been given a potentially devastating vote of no confidence by three big European credit insurers [Euler Hermes, Atradius and Coface], which have removed cover from their suppliers. The withdrawal of credit insurance – which covered suppliers against the risk of the car companies’ failing – has previously hastened the demise of a string of European companies, with suppliers to retailers and construction companies finding cover increasingly hard to come by.” The FT reports that the move leaves only three possibilities, all them swirling around a bathtub full of Not Good: “GM and Ford can start paying upfront for goods; they can hope their suppliers will trade uninsured; or they could be unable to buy the parts they need for car production.” [Thanks to Uncommon Sense for the link]
Note to CEOs: if you’re going to meet with your competitors at a clandestine hotel in order to fix prices, make sure nobody in your entourage is a snitch. And if you’ve already received a regulator’s multimillion-dollar fine a few years ago, be more careful the second time, otherwise you’re likely to be fined a cool billion bucks– as France’s Saint Gobain was yesterday. Neelie Kroes, European Commissioner for Competition: “Saint-Gobain, Asahi, Pilkington and Soliver have defrauded the auto industry and consumers for five years. The FT reports that the fines are so punitive because the auto glass industry is large (sales of $3bn/year) and because Saint-Gobain had been involved in a similar incident in the past.”
Germany’s industry rag Automobilwoche [sub] is running an interesting ballot. “Who do you think would profit the most if GM goes bust?” (or German words to that effect). The options are kind of odd. Only Ford, Renault/Nissan, Toyota, and Volkswagen are eligible. But keep in mind, Automobilwoche is a German rag. They could have asked “What if Opel would die?” But they didn’t. Do they know more than we do? 846 souls have voted so far.
Bad news (or, if compared to anorexic America, good news) from J.D. Power: Western European auto sales fell by 15.5 percent to 1,035,243 million units in October from a year earlier, reports Automotive News Europe [sub]. They say, the decline in new-car sales in Western Europe could be worse than a slump in the early 1990s. Contrast that to “the worst sales month in the post World War II era,” which GM’s Chief (Non-) Sales Analyst just saw for his employer in NA. Everything being relative, our relatives in the Old Country still have it relatively good. If J.D.Power’s crystal ball is still functioning, the Western European car market may decline by 8 percent in 2008, and go down between 10 and 11 percent in 2009. J.D.Power came to the not all to surprising conclusion that this would “place major strains on the European auto industry.” As opposed to the end of the world, as if we don’t know it already. Note: As long as VW stock goes for between €500 and €1000, depending what time of day it is, or the whims of Porsche may be, as long as BMW’s owneresse can afford millions to pay a gigolo, the European market will be just fine. All things, considered, of course.
Despite the five-week holiday Daimler said its German workers will get this winter, the firm is still going ahead with plans to build a €800 million factory in Hungary. The factory is, according to Reuters, meant for “compact cars,” though what they’d be I have no idea. Smart doesn’t need any more capacity (a previous attempt to expand the smart brand was a dismal failure). It’s not as though the expensive A- and B- Class Benzes are flying out of showrooms, either. The original plan: build four compact models at the Hungary plant, including an off-roader, cabrio, coupe, and small van. But that was in June, before everything went to hell. And Mercedes changes its product plans on a weekly basis, anyway. The bigger story is how much the Hungarian government is contributing to the deal, whether in the form of tax credit or just direct subsidies. Hungary’s economy has been in seriously deep trouble in the past six months, with the currency in freefall and interest rates at 11.5 percent in an attempt to help the currency. Just this weekend, the IMF scrambled to bail out the country (this was after the European Central Bank gave Hungary’s central bank an emergency €5 billion line of credit earlier this month). With all this in mind, Hungary’s officials are probably looking to the Mercedes factory as an economic blessing, and Mercedes is likely cautiously optimistic about the low value of Hungary’s currency.
The Financial Times (FT) reports that car manufacturers’ finance arms are eligible for huge French and German bank loans approved in the past two weeks. While this isn’t a bailout per se, it does give the manufacturers’ credit operations access to some €40b worth of cash to make loans to shoppers. The FT claims that as much as 15 percent of European car manufacturer profits come from the financing divisions. Car sales in the UK and Spain are taking an old world battering, and while the loans are unlikely to affect lending in the U.S. (i.e. Mercedes will not be using the money to make loans to American buyers); this will be a major component affecting European sales and manufacturer profitability. The most frustrating part? You just know they’re going to make the money available overnight, while we’re still sitting and waiting to see what, if anything, companies like GMAC can actually get from the $700B bailout passed weeks ago. Question: is that a good thing or a bad thing?
Automotive News Europe [sub] is hosting a point-counterpoint throwdown on the proposed 40b Euro bailout of European automakers. And like the debates we’ve survived over the last few weeks, even the pro-bailout advocates can offer only qualified support. At best. ANE Chief Correspondent Luca Ciferri jumps into his argument with the ambivalence that a billion-dollar giveaway demands. “Would I be happy to contribute some of my tax money to the European industry?” Ciferri asks himself rhetorically. “Not at all,” comes the answer. Great, so why do it? Because the Americans, Koreans, Japanese and Chinese all do it. Despite the fact that European automakers have garnered strong reputations on their own merits. Meanwhile, ANE Editor-in-Chief Arjen Bongard lays into the plans with gusto.
Most Americans don’t know this, but Volkswagen has too many brands. Volkswagen, Audi, Seat, Skoda, Bugatti, Bentley, and Lamborghini. Bugatti, Bentley, and Lamborghini are in their own category. In the mainstream though, VW has four brands competing with each other throughout the European markets. They subsist somehow for three reasons. (1) While the bulk of Audi’s sales come from 4-cylinder A3s and A4s, they are a player in the luxury market. (2) Because of regional favoritism (i.e. the Spanish buy Seats because it was once a Spanish company). (3) Pricing and brand stigma. VWs are more expensive, but a respectable car brand. Seats are unusual outside of Spain and Italy, are priced cheaper than VWs, and tend toward weak interiors. Skodas are still the butt of jokes from when the company cranked out stereotypical Eastern European cars. All good? No. The model isn’t working. Spain’s economy, which has been seriously hurting ever since 1588 they went on the Euro, is getting slammed even worse right now. Sales across Europe are down, and Spain is taking it very hard. “I don’t think the Spanish market will recover, given everything that’s happening,” Seat President Erich Schmitt told Spain’s Expansion newspaper. While Automotive News Europe says VW has no plans to close or sell Seat – down 22% this year – that’s what they always say. Until they close or sell it. TTAC won’t be chronicling this story in close detail, but Seat is on European deathwatch.
Paraphrasing, of course. But the European Union is struggling these days, what with member states breaking ranks to save banks. And now just-auto [sub] reports that the bureaucrats in Brussels are in no mood to indulge European carmakers’ “demands” for a government bailout to help them do whatever it is Ford, GM and Chrysler will do with their share of $25b worth of low-cost federal loans. “European carmakers’ association ACEA had asked for a EUR40bn loan, equivalent to just two years of the research and development budget of its members. The EU responded this would equate to over one third of its annual budget. ‘This idea does not even merit discussion,’ a European Commission source told a German newspaper on Tuesday.” And yet here we are. The only other talking point: the ACEA would AT LEAST like some EU-wide “incentives” for car owners to scrap vehicles over eight years old, over three years, to speed fleet renewal. In other words, ban/tax the Hell out of old [CO2-spewing] cars to stimulate sales of new [CO2-sighing] cars. Sounds like a plan to me!
CAR Magazine has been covering the ongoing collaboration negotiations between BMW and Mercedes for some time. As usual, nothing unites like a common enemy, and the longtime rivals have been brought together by the looming leviathan that is the new Porsche-VW alliance. But partnership does not come easily after decades of fierce competition. CAR speculates on the possible causes of ongoing difficulties thusly: “Maybe it’s a mutual case of ‘not invented here’. Maybe it’s what decades of ingrained rivalry does to you. Or a mix of shortsightedness, ignorance and stubborness. Perhaps a combination of the above.” Whatever the cause, BMW and Mercedes have yet to finalize any plans to share M-B’s new M295 all-aluminium V12. Is BMW, like McLaren, suffering from a restrictive Daimler contract with Aston-Martin? We’ll may never know. What is clear is that Mercedes needs a new corporate four-banger for its burgeoning small-car portfolio. The current C-class four is “too big, too heavy and too expensive” say CAR, and a new, shared four-cylinder could be jointly developed for Benz’s A-, B-, C-, E- and GLK-classes, and BMW’s 1-, X1, 3, X3, and MINI models. If no German alliance forms, PSA and Fiat are waiting in the wings, hoping to snag a technical partner for their own next-gen four-bangers. Meanwhile, “other collaboration opportunities between Munich and Stuttgart include more pace-setting hybrid modules, more efficient dual-clutch and automatic transmissions, advanced driver assistance systems and a highly flexible small car concept.” No mention yet of the Sudetenland.
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