The eurozone crisis took a twist last week that appeared to suggest that Europe was a little closer last week to accepting ‘mutualisation’ of debt. ECB president Mario Draghi’s unlimited bond buying plan would provide a ‘backstop’ to lower the cost of bond borrowing for the most severely debt troubled countries. It sounded like a line in the sand that would protect the euro currency at all costs and that’s how many people wanted to view it. Hooray, irons from the fire and all that. Not quite.
The devil really is in the detail. The markets may have soared initially, but there are still major uncertainties in the political area (Germany insists on reforms in return for help for struggling countries). And whatever happens in the great economic/political integration debate, Europe’s economy will continue to stall for a while yet. Yet more muddle through is in prospect as politicians grapple with harsh political realities while attempting to keep the lid on the bubbling away financial crisis.
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As far as the European car market and auto industry is concerned, conditions are especially grim for the mainstream volume players. Discounting is rife. The cost of carrying overcapacity is becoming a more pressing concern for all as the European car market shrinks further, a shallow recovery in prospect given the likely economic backdrop for the next few years.
UK: European car sales continued to slide in August
It’s against that not especially helpful background that North America’s big two – General Motors and Ford – are having to develop their strategies for Europe as they rack up further losses in the region.
We heard last week that Ford is going for something of a product blitz, presented as a part of the ‘One Ford’ plan at a bumper launch shindig in Amsterdam. And the frugal 3-cylinder 1-litre EcoBoost engine was confirmed for the new Mondeo – an astonishing sign of changing times and technological innovation for the internal combustion engine.
Graeme Roberts was there and provided this helpful summary based on his live tweets from the event.
PRODUCT EYE(S): Ford’s new European product fiesta, roll up, roll up (from 2013)
Ford’s approach can be summarised as one of maintaining investment in product and making the most of global product consolidation where possible (eg next Mustang and Edge coming in RHD to boost exports). What is happening in Europe is in essence a continuation of Alan Mulally’s One Ford business philosophy for a company that stayed out of Chapter 11 bankruptcy in 2009.
The recent history and European perspective for General Motors is a little different. It came close to selling its Opel/Vauxhall unit, but eventually decided to hang on to it. Could a sale be revisited? A highly respected analyst has recently suggested just that. I can imagine that some painful and very private discussions could be taking place in Detroit (maybe Washington, also). For GM, there’s no obvious strategy for Europe that will have everyone smiling.
GOLDING’S TAKE: Jonas and the GM whale
Europe and its problems will be at the top of many boardroom agendas for a while yet.
