Auto industry in Europe to undergo a restructuring, says General Motors

Article by Christian A., on March 17, 2012

General Motors Co. expects the auto industry in Europe to undergo a restructuring as sales and pricing take a beating, according to analysts who talked with GM’s management. In a research note on this meeting, Rod Lache, an analyst at Deutsche Bank, wrote that in the last 3 to 4 months, the vehicle pricing in Europe has considerably worsened.

In Lache’s estimates, each vehicle declined by $200. The meeting with analysts took place last Thursday over dinner in New York. GM was represented by Dan Ammann, GM's chief financial officer, and James Davlin, its treasurer. Credit Suisse analyst Chris Ceraso said that Ammann had remarked that Europe’s situation this time is different from the sales declines in 2008 and 2009.

The GM executives also said that sales won’t be given a boost this time by incentive programs by the government due to the region’s debt issues. Ceraso said that pricing is under pressure, especially with Volkswagen’s move to reduce prices and take some market share. Analysts think that the region can identify plants that have to be closed.

However, GM doesn’t believe that this will be an issue at the elections in France. Deutsche Bank's Lache wrote that GM hopes to achieve more substantial capacity reductions. In the meantime, analysts predict that there will be more job reductions around the white-collar work force. UBS analyst Colin Langan said that GM may make use of shortened work weeks.

In a report, GM told analysts that “deteriorating” Europe is “very tough” Peter Nesvold, a New York-based analyst for Jefferies & Co., wrote in a report that the situation is very tough and that the environment is “clearly deteriorating.” Nesvold wrote that pricing seem so trend lower until either volumes rebound or capacity exits the industry. GM spokeswoman Renee Rashid-Merem, confirmed that a dinner had taken place. [source: BusinessWeek]

Topics: europe, gm

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