Things aren't getting any better for European car manufacturers. As a matter of fact, they seem to be getting worse by the day.
Of course, this glut of car making capacity will reverberate around the world in time.
European Car Sales Slump Continues updates the dire situation for us:
"European car sales declined for the 12th consecutive month in
September, piling pressure on some of the region's mass-market auto
makers to more radically restructure their operations as slumping sales
further expose the industry's problem of chronic overcapacity.
New-car registrations, a proxy for sales, in the European Union
shrank 11% compared with a year earlier to 1.01 million vehicles, the
lowest figure for September registrations in more than a decade, and
fell 7.6% to 9.37 million cars in the January-to-September period.
Spain suffered the biggest fall in registrations, down 37%, while
Italy and France recorded drops of 26% and 18%, respectively. Even in
Germany, the EU's biggest single car market and largest economy,
registrations fell 11%.
Mass-market manufacturers have responded to falling demand by
lowering prices, but the severity of the situation has now forced them
to consider more drastic action.
General Motors Co. and France's PSA Peugeot Citroen forged an alliance in March to save costs in fields including
purchasing and vehicle development. Beyond this, Peugeot plans to halt
production at a factory in France in 2014, while GM's Opel unit is in
talks with labor unions over a wide-ranging restructuring program that
might include closing a factory in Germany after 2016.
has said it is looking to use spare capacity to boost exports to the
U.S. and foreign markets and is considering revamping its strategy for
its own-name brand. France's Renault SA and Japanese partner Nissan Motor Co. have raised their target for joint cost savings in coming years, while Ford Motor Co. is offering voluntary buyouts in Europe to cut jobs. . . .
Weak demand and cutbacks in production are spilling over to the car
"Macroeconomic conditions have deteriorated in recent
weeks and some softening in order books is now evident, particularly
regarding European automotive and industrial markets," said GKN which supplies auto makers with powertrains and other components.
GKN added that demand in the U.S. and Chinese auto markets remained
Many car companies were hit by double-digit declines in
new registrations in September. Renault's registrations dropped 30% from
a year earlier, while Fiat recorded a 19% fall. Registrations at GM's
European unit fell 16%, compared with a 15% fall at Ford and a more
modest 8.1% decline at Peugeot.
Even Europe's largest auto maker, Volkswagen . . . suffered an 8.0% decline ....
South Korean auto makers
continued to gain market share in Europe last month, though the pace of
their growth has slowed. Registrations for Hyundai Motor Co. were up 3.3%, while affiliate Kia Motor Corp.
posted a 4.9% gain."
The formula for achieving excessive industry capacity is a very simple one.
Artificial and unsustainable demand causes industry participants to put in place too much capacity due to the easy and cheap credit induced buying bubble.
Then when the overly indebted consumer cuts back, competitors proceed to cut prices in an unsuccessful attempt to create additional demand.
Then after everybody has cut prices to the point where profits disappear, players make every effort to be the last one standing, following the "two guys being chased by a bear" formula for survival.
As the 'bear chase' example teaches, the survivor doesn't have to run faster than the bear --- he just needs to beat the other runner.
And in the global car industry, that takes both time and money, of course, which often results in government subsidies and bailouts. GM, for example.
All in all, it's mostly a case of ongoing tail chasing, pure and simple. And for the taxpayers, it's very expensive tail chasing at that.