A recent article in the FT announcing GM’s intention to shut one of six European car plants, at Bochum in Germany, underlines the over-capacity and loss-making status of many European auto manufacturers.
GM lost $747 million in Europe last year, where it sells cars under its Opel/Vauxhall and Chevrolet brands. The firm clearly needs to rationalize production of some 1 million cars per year made in six plants in the UK, Spain, Germany, and Poland, but is facing stiff political opposition from host governments keen not to lose employment opportunities. Car sales in Europe fell nearly 10 percent in May over the same period last year as the European debt crisis continues to weigh on sentiment and confidence.
Meanwhile, Sweden’s Saab, already once sold by GM to Dutch Spyker before failing into administration last December, looks like it may have an even more bizarre future as a maker of electric cars.
National Electric Vehicle Sweden, a new company owned by Hong Kong-based alternative energy group National Modern Energy Holdings and Japanese investment firm Sun Investment, bought Saab for an undisclosed sum. The Asian-owned group said that Saab’s first new car would be a modified electric version of the Saab 9-3, with sales initially focused on the Chinese market from 2014.
How much more of a chance of success this has than previous manifestations of what was once a great brand remains to be seen — Saab has struggled to make money for 20 years.
UK Auto Production Improving
Not all producers or car-producing nations are in the doldrums, though.
In the UK, the Telegraph reports that car production in Britain has risen to the highest level in eight years last month, rising 42.2 percent to 141,146 cars. 85 percent of cars produced in the UK are exported and $8.5 billion of investment over the last two years is driving rising production up 17.3 percent year-to-date to the highest level since 2004.
Although car production for the home market grew at “only” 25.8 percent, it is demand from Asia for premium brands such as Jaguar Land Rover that is driving production of not just finished cars, but also engines for use in assembly lines abroad.
In spite of robust growth in the automotive sector, however, other parts of the UK economy are not faring as well. Exports fell 5 percent last month and imports soured to produce the second-worst trade results on record and the worst figures since August 2005.
Interestingly, even though the UK exports 85 percent of the cars it makes, imports of cars contributed to the poor trade figures, suggesting the country does not produce as many of the cars Brits want to drive as maybe they should.