Europe's Woes Could Slow the Global Auto Industry

Bill Ford, the executive chairman of Ford Motor (F), says he is concerned about car and light truck sales in Europe. He believes that the lack of a sales recovery in the region could harm the growth of the company that bears his name.

The European economic recovery is terribly uneven. Germany and France have done well, but many of the smaller nations in the region are in financial trouble, as the media point out every day. Some of these problems are caused by unemployment -- and the unemployed don't buy new cars.

Europe is also an extremely competitive car market. Large companies like Volkswagen, Fiat and Renault, the latter two of which have almost no market share in America, are among Europe's dominant manufacturers. In addition, General Motors (GM) , Ford and most of the Japanese car companies have significant sales in the region

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Ford isn't the only U.S. carmaker with trouble in Europe. GM is still in the midst of a turnaround of its Vauxhall and Opel units. The ACEA, which measures car sales in Europe, said they were down 7.1% last month. The drop for the first 11 months of the year was 5.7%, so the problem could be accelerating. Foreign car companies are having a particularly tough time. Toyota (TM) sales fell nearly 22% in Europe last month.

Many of the world's largest car companies have turned their attention to China and other emerging markets like India and Brazil. China has passed the U.S. as the world's largest car market, but the fight for market share there is fierce. Manufacturers know that they must do well in the People's Republic to do well worldwide.

Europe remains a massive market for car companies. And it's hard to imagine that China can offset extreme weakness in Europe. The U.S. market has recovered somewhat, but it's far from 2006 when over 16 million cars and light trucks were sold in America. Europe may be the "make or break" market for a number of global car manufacturers that still don't have robust profits.

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