GM says ‘nobody’ makes money in Europe as VW sees bankruptcies

General Motors Co. said Europe’s car industry will remain unprofitable at current vehicle pricing levels, while Volkswagen AG said some competitors are at risk of going out of business without state aid.

Competitors Fiat SpA and PSA Peugeot Citroen are producing “very scary numbers” with discounts of as much as 30 percent off gross sale prices, Susan Docherty, who runs European operations for GM’s Chevrolet unit, told reporters today at the Paris Motor Show. “Nobody can make money in Europe when you’ve got incentives at that level.”

Demand has plunged so much that deliveries continue to tumble, even with such large discounts. Although discounting in Germany is at the highest in more than a year, according to industry publication Autohaus PulsSchlag, car sales across Europe may fall to a 17-year low, the region’s main auto- manufacturing trade group has predicted.

“The biggest problem for the industry is the complete meltdown of pricing discipline,” Erich Hauser, a London-based analyst at Credit Suisse, said by phone. “The two guys with the most stretched balance sheets are clearly Fiat and Peugeot.”

Fiat, forecasting a loss of about 700 million euros ($900 million) in the region for 2012, isn’t introducing any new models at the Paris event, Europe’s biggest showcase for carmakers this year.

U.S. Carmakers

GM, which owns the Opel and Vauxhall brands in Europe, has racked up $16.8 billion in losses in the region since 1999. The business posted a first-half loss before interest and taxes of $617 million, and wrote down $590 million of goodwill. Dearborn, Michigan-based Ford Motor Co. is projecting a loss of more than $1 billion in Europe this year.

Peugeot, Europe’s second-biggest carmaker after VW, has been burning through 200 million euros in cash a month as the market contracts, a figure that Chief Executive Officer Philippe Varin said today may fall by 50 percent in 2013. Paris-based Peugeot plans to cut jobs and close an auto plant, amid resistance from the French government, and has been selling assets to cut debt.

“It is unclear if all carmakers will survive without governmental help,” VW Chief Financial Officer Hans Dieter Poetsch told reporters yesterday. “Especially carmakers in southern Europe that produce small cars will be affected.”

Page 1 of 3 >>

Copyright 2014 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Comments
comments powered by Disqus