General Motors Co. (NYSE: GM) and Ford Motor Co. (NYSE: F), which have posted huge financial loses in Europe, face larger ones in 2013 that could swamp strong revenue from the United States. Passenger car sales took a sickening plunge in December. Since each company has said it will not exit Europe, the bleeding will hurt earnings, probably for years.
The European Automobile Manufacturer's Association announced:
In December, new car registrations declined by a sharp 16.3% in the EU, continuing a downward trend commenced fifteen months ago. The decline is the steepest recorded in a month of December since 2008. In December 2012, there were on average two fewer working days in the region than in the same month in 2011. Over the whole year, demand for new cars reached the lowest level recorded since 1995, totaling 12,053,904 units. The resulting 8.2% contraction of the EU market (year-on-year) is the most important experienced since the 16.9% downturn in 1993.
In December, most of the major markets recorded a double-digit downturn ranging from -14.6% in France to -16.4% in Germany, -22.5% in Italy and -23.0% in Spain. The UK was the only significant market to post growth (+3.7%). Overall, a total of 799,407 new cars were registered in the EU.
The most astonishing drop was in Germany, which is supposed to have the healthiest economy in the region. However, that perception was undermined as gross domestic product there dropped in the fourth quarter of 2012.
Ford and GM took much of the blow in December. GM sales dropped 27.2% to 62,640. Ford's sales fell 27% to 52,475. The sales were so bad for each that they were even topped by luxury car firm BMW.
GM's automotive group made less than $2.1 billion last quarter, which included a loss of $478 million in Europe. GM made $1.8 billion in North American. If unit sales continue to fall in Europe, it is not hard to imagine that losses from that region could approach $1 billion.
Ford made less than $1.9 billion in the third quarter, burdened by a $468 million loss in Europe. It remains at as much risk as GM for an offset of North American profits by European losses. And the market is so badly off that the introduction of new models can hardly reverse the problem, particularly as each loses share against companies like Volkswagen.
Estimates are that it would cost billions of dollars for either GM or Ford to leave Europe because of labor and manufacturing obligations. The write-downs for the exits would be monumental. But the death of Europe's economy is so profoundly broad that neither company can hope to offset a string of annual losses there for at least a decade.
Filed under: 24/7 Wall St. Wire, Autos Tagged: F, featured, GM