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European Auto Sales Rebound, but With an Asterisk

May 17, 2013 by Leave a Comment

New passenger car registrations in the 27-nation European Union rose 1.7 percent in April from a year earlier, the first increase since September 2011, the European Automobile Manufacturers’ Association reported from Brussels.

But the association pegged that improvement mainly to the fact that European countries had two more business days, on average, this April than last.

Cara McLaughlin, a spokeswoman for the automakers’ association, said that was because the Easter holiday fell in March this year, instead of in April as it did in 2012. She also emphasized that, even with the extra days, the year-on-year comparison was underwhelming, as E.U. car sales in April 2012 were the worst on record for that month.

“We cannot talk about the market picking up at this stage,” she said.

The overall trend in car sales remains a dismal one: April sales, at just over one million units, were still the third-worst ever recorded for that month since the association started compiling the data in 1990.

Many European households remain reluctant to spend on big-ticket items in a grinding recession and a precarious labor market. Unemployment in the 17-nation euro zone stands at 12.1 percent. Many Europeans see cars as a lifestyle option rather than a necessity.

More ominous for the car industry, a major generational shift appears to be under way, with younger Europeans, like their American counterparts, far less interested in car ownership than their parents and grandparents were.

One-third of the way through this year, the report showed, new car sales were down 7.1 percent from the first four months of 2012. Last year was particularly bad, as annual sales fell to just over 12 million units, the fewest since 1995.

For all of that, though, investors on Friday seemed to embrace the headline number as a sign that the auto market might be reaching its nadir.

Shares of PSA Peugeot Citroën jumped 10.1 percent in Paris on Friday, while Renault closed 3.6 percent higher. In Frankfurt, Volkswagen gained 3.7 percent, and Daimler rose 3.9 percent.

Michael Tyndall, an auto analyst at Barclays Capital in London, said that while it was understandable that people were grasping for good news, the weakness in Europe was not over yet.

He said he had previously predicted a 4 percent drop in European auto sales this year. But with the French market declining at a 10 percent annual rate and Italy faring even worse, at 12 percent, his earlier forecast might prove to be too optimistic.

Mr. Tyndall predicted, though, that the market would hit bottom before the end of the year, and that it would manage growth of just over 1 percent in 2014.

Replacement demand, he noted, might remain insufficient to bolster the market for some time, given that the European fleet is relatively young — about 8.5 years, on average, compared with 11 years in the United States.

Over the longer term, Mr. Tyndall said, the E.U. market, which has declined every year since peaking at 16 million vehicles in 2007, would probably find its eventual equilibrium at around 14 million units.

The latest data show Germany’s auto market, the largest in Europe, growing 3.8 percent in April, while Spain’s expanded 10.8 percent. The market in Britain, Europe’s second-largest, grew 14.8 percent. But the third-largest market, France, continued its slump, shrinking an additional 5.3 percent, while Italy’s declined 10.8 percent.

The four-month trend is more revealing, showing that, among major markets, only Britain grew, with car sales up 8.9 percent. New car sales in Germany are down 8.5 percent in that period.

Sascha Gommel, an auto analyst at Commerzbank in Frankfurt, said he believed the market “is bottoming out at the moment.”

But even so, a return to precrisis sales “is a very long way down the road,” he said. “We wouldn’t be surprised if the market never gets back to those levels.”

Deal to end Peugeot strike

Workers at a PSA Peugeot Citroën factory have agreed to end a four-month strike protesting its planned closure, the C.G.T. union and the carmaker said Friday, Reuters reported from Paris.

Striking employees will return to work this coming week, said Jean-Pierre Mercier, who represents the C.G.T. union at the Aulnay-sous-Bois plant near Paris. He said Peugeot had agreed to drop disciplinary action against strikers and to make pay concessions. The company is cutting 8,000 jobs in France, and the Aulnay plant is to close next year.

Article source: http://www.nytimes.com/2013/05/18/business/global/european-auto-sales-rebound-but-with-an-asterisk.html?partner=rss&emc=rss

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Weakness in Europe Undercuts Ford’s Profit

October 31, 2012 by Leave a Comment

Ford, the second-largest American automaker, after General Motors, on Tuesday reported flat profits for the third quarter, as the sharp downturn in its European business continued to undercut its strong performance in the North American market. The company said that it earned $1.63 billion in the quarter, compared with $1.65 billion in the same period last year. Its global revenues dropped slightly to $32.1 billion, down from $33.1 billion in the third quarter of 2011.

The results underscored both Ford’s success in its home market and its festering problems in Europe, where the auto market has fallen to its lowest sales levels in nearly 20 years.

Ford said its pretax profits in North America increased to $2.32 billion in the quarter, from $1.55 billion a year ago. The results were driven by new vehicles like the Escape S.U.V. and higher transaction prices.

But its European operations floundered because of lower sales and higher incentives. Ford reported a pretax loss of $468 million in the region during the quarter, compared with a pretax loss of $306 million in the third quarter last year.

The company forecast severe economic conditions in Europe into 2013 and possibly beyond. Ford’s chief financial officer, Robert L. Shanks, said it would be up to the North American operations to provide the bulk of its income until Europe recovers.

“It has been the foundation and still is,” Mr. Shanks said of the North American market.

Ford has now lost more than $1 billion in Europe this year, and has said it expects its full-year loss to exceed $1.5 billion. Last week, the company said it would close three factories in the region and eliminate 5,700 jobs to better balance production there with shrinking demand for new vehicles.

Ford’s chief executive, Alan R. Mulally, said the automaker would continue to face stiff challenges in Europe as it restructured. “While we are facing near-term challenges in Europe, we are fully committed to transforming our business,” he said in a statement.

Other auto companies in Europe have so far resisted making large-scale overhauls like Ford’s.

“This industry has a lot of excess capacity and needs to restructure,” Mr. Shanks said. “It won’t get any better if other companies avoid the situation.”

He said the company expected “difficult and interesting” discussions with its unions in Belgium and Britain about separation agreements for factory workers.

Ford’s other regional operations contributed little to its bottom line during the quarter. The company said it earned $45 million in pretax profits in Asia, in contrast to a $43 million loss a year ago. Pretax profits in South America fell to $9 million from $276 million a year ago.

The healthy profits in North America reflect Ford’s turnaround in its home market since a financial crisis crippled the United States auto industry in 2008. Unlike its rivals General Motors and Chrysler, Ford survived without a government bailout or filing for bankruptcy.

Since then, Ford has revamped its product lineup to offer a broader range of smaller, more efficient models. The company said its operating profits in North America were its highest since 2000, and it forecast similar results through the remainder of 2012.

“Ford’s more balanced product mix, with a stronger presence in the small-car segments, enabled the company to operate at highly profitable levels in the North American and Asian markets, whereas the European operations continued to struggle,” said Jesse Toprak, an analyst with the auto-research Web site TrueCar.

Ford ended the quarter with $24.1 billion in automotive cash reserves, an improvement from $20.8 billion a year ago.

The company produced 1.36 million vehicles in the third quarter, about the same number as a year ago. Ford said it would build 1.48 million cars, trucks and S.U.V.’s in the fourth quarter, an increase of 112,000 from the same period in 2011.

General Motors, the largest American automaker, is scheduled to report its third-quarter earnings on Wednesday. Chrysler, which has little exposure in the European market, said Monday that its profits improved 80 percent during the period.

Article source: http://www.nytimes.com/2012/10/31/business/ford-sees-little-change-in-net-income.html?partner=rss&emc=rss

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China’s Economy Slows, but Inflation Still Looms

May 30, 2011 by Leave a Comment

Chinese manufacturers’ backlogs of orders are gradually shrinking in many industries. Purchasing managers have become less optimistic about their businesses’ prospects. And after surging past the United States in car sales over the last two years, the Chinese auto market unexpectedly stalled last month, as carmakers curtailed production plans.

Because China’s cooling economy is partly a result of Beijing’s efforts to contain inflation, some economists are not worried, saying a slight slowdown could be positive. And they say that after the government eases off the brakes, economic growth should quickly pick back up.

But other experts worry that inflation is already so entrenched that the government may be forced to continue braking the economy for a considerable time.

“They have to continue to tighten policy into what we expect will be a sharp growth downturn, already likely to be under way,” said Diana Choyleva, an economist in the Hong Kong office of Lombard Street Research, an economic forecasting firm based in London.

The world closely monitors the temperature of China’s economy, so crucial has it become to the health of global business and finance. This spring, as economists at Western investment banks have been reducing their growth forecasts for China, the specter of slackening Chinese demand has helped send world prices for industrial commodities like copper falling by 10 percent or more.

And the “A” share stock market in Shanghai has dropped 11.7 percent from its high on April 18, including drops of 0.13 percent on Monday and nearly 1 percent on Friday.

Despite signs of slowing Chinese growth, some international corporate executives say they remain optimistic, particularly if they look beyond the next several months.

“I don’t think it’s a hard landing,” said Martin Brudermüller, the vice chairman for BASF of Germany, the world’s largest chemical company, which sells to a wide range of industries in China. “I’m not really worried at this point.”

And even though Goldman Sachs on Tuesday cut its forecast for economic growth in China during the second quarter to 8 percent — down from 8.8 percent — it predicted that growth would recover to 9.3 percent by the fourth quarter.

The optimists note that the Chinese economy expanded robustly until this spring, even though policy makers had been stomping on the brakes since October to try to curb inflation. Seen from that bright-side perspective, policy makers can easily press the growth accelerator, after inflation starts to subside.

The braking measures have included the requirement that commercial banks, to restrict their ability to lend, must park more than one-fifth of their assets at the central bank. That is starving all but the largest and most politically connected companies of capital.

And trying to slow a real estate boom that looks more and more like a dangerous bubble, the government has also put many restrictions on issuing new mortgages. The measures include requiring higher down payments, to reduce the risk that a real estate collapse would harm the banking system, as happened in the United States.

Another slowdown factor: the huge government investments in high-speed rail and other infrastructure, which played a central role in China’s swift recovery in 2009 from the global economic downturn, have begun to level off.

But Douglas Hsu, the chairman and chief executive of the Far Eastern Group, a big Taiwanese multinational with extensive investments in the cement and petrochemicals industries in mainland China, predicted that government-supported efforts to increase construction of low-income housing and move more people from rural areas to cities would offset the gradual deceleration in infrastructure spending in the months and years to come.

The big question now is how much economic growth may slow, before the authorities shift their priority from controlling inflation to revving the growth engine.

Some businesses here in Changsha, a city of 6.5 million people that is the capital of Hunan province in south-central China, say they already see weakening sales.

“Our business is down 30 to 40 percent, we’re losing money every day,” said Li Chuanlian, the manager of a store that sells stoves and water heaters.

Article source: http://feeds.nytimes.com/click.phdo?i=bcfa9d7a578e914929b3c01a34087317

Filed Under: Business News Tagged With: , ,

Saab Resumes Production With Push From Chinese Partner

May 27, 2011 by Leave a Comment

Saab Automobile said on Friday that it was aiming to produce a “first batch of around 100 cars,” which would be the first time since April 6 that the plant had produced vehicles. The company said it hoped to increase output over the next few weeks “in parallel with the full re-establishment of the supply chain.”

“We have gone through a rough patch in recent weeks, but Saab is back in action again,” Victor Muller, the chief executive of Saab and its parent company, the Dutch automaker Spyker Cars, said in a statement.

Spyker bought Saab from General Motors last year, taking on a daunting challenge in trying to restore it to health. But Mr. Muller is aiming to generate cash by selling some of Saab’s real estate holdings to a Russian businessman, Vladimir A. Antonov.

The company’s rebuilding plans are complicated by the fact that it needs financial support from the European Investment Bank and the Swedish government to modernize.

Mr. Muller was joined at the plant by Pang Qinghua, chief executive of Pang Da Automobile, the largest publicly traded car distributor in China. Pang Da stepped in on May 16 and provided crucial aid to get Saab back online after the collapse of a previous deal with Hawtai Motor left the Swedish company scrambling to stay alive.

Saab said that the factory in Trollhattan had outstanding orders for more than 6,500 cars, and that total orders for the company — including for 1,600 Saab 9-4X cars — amounted to more than 8,100 vehicles. Pang Da itself has ordered about 1,300 cars, paying 30 million euros, or $43 million, up front.

Mr. Muller was upbeat about Saab’s prospects for entry into the Chinese auto market, the world’s biggest, with its new partner. But Pang Da must first win approval for a tie-up from the Beijing authorities. Saab has said the deal with Hawtai fell apart because it feared the Chinese company would be unable to obtain official authorization in time to rescue Saab.

Article source: http://feeds.nytimes.com/click.phdo?i=b28564d7cbb925a10c0859a8443452ae

Filed Under: Business News Tagged With: , ,