Ford and GM under threat over slumping Russian vehicle market

Article by Christian Andrei, on April 7, 2014

The economic and business environments in Russia are hitting foreign carmakers like Ford and General Motors’ Opel which are just recovering from a six-year slump in their European operations. The Russian is continuing its depreciation while economics sanctions pressed against the country – along with slumping vehicle demand – is worsening the situation for foreign carmakers.

A Ford spokesman told Automotive News last week that that carmaker has reiterated its target of returning to profitability in Europe in 2015, despite cutting output and 950 jobs at two of its three joint venture sites in Russia. General Motor integrated its Russian operations under the GM Europe umbrella on Jan. 1, 2014, which means that any market ripple in Russia with affect its revenues in Europe.

GM had a market share of 9.3 percent in Russia in 2013, according to the Association of European Businesses, making it its third-largest market in the region. An Opel spokesman told Automotive News in an e-mailed statement that the GM division has trust in the Russian market and in further growth of the auto sector in the country.

He noted that they are observing the political situation in Russia carefully. GM aims to return to profitability in Europe by 2016, after losing over $18 billion in the region since 1999. The carmaker plans to invest $5.2 billion on its European turnaround bid through 2022.

Chevrolet, which is the best-selling American brand in Russia, saw its sales dropped 15 percent in 2013, while the overall market fell 5 percent. The Ford Focus saw sales drop 27 percent in 2013, ranking seventh among individual brands.

Sales of compact and mid-sized vehicles are dropping in Russia as local consumers shift preferences to low-cost cars or luxury SUVs. Philippe Houchois, an analyst for UBS, remarked that Russia is a polarized market – having the high end and the low end, but not much in between. [source: automotive nws - sub. required]

Topics: ford, gm, russia, sales

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