Fiat CEO Marchionne: "The stench is overwhelming."
While automakers expect to report a double-digit gain in U.S. sales for June, the situation continues to worsen in Europe where demand fell sharply in key markets including France, Italy and Spain – and where even Germany is expected to see a dip for the month.
Several key makers, including both Ford and General Motors, have warned they will show deep losses for the second quarter on their European operations and most of the rest of the industry isn’t likely to do much better.
“We’re standing in doo-doo,” Fiat/Chrysler CEO Sergio Marchionne told reporters in Turin. “Whether you’re in an inch of it or three inches doesn’t matter. The stench is still overwhelming.”
Europe has been slammed by a variety of factors including the economic crisis that began and Greece before spreading to other weak markets including Spain, Italy and Ireland. Even in more prosperous regions, such as Germany and France, consumers appear to be tightening belts – whether because of fears about the future or due to increasingly stringent austerity measures.
“Germany is starting to feel the ripple effects,” auto analyst Erich Hauser, of Credit Suisse, told the Reuters news service.
New vehicle registration data show Italy fell 24% in June to the market’s lowest point since 1979, according to trade organization UNRAE. Spain shrank a more modest 12%%, but it was that country’s 24th consecutive monthly decline. From a 2007 peak of 1.6 million vehicles, Spain is now expected to register just 720,000 new vehicles in 2012, a 25-year low.
Ford last month warned that “operations outside of North America are under increasing pressure,” a filing with the U.S. Securities and Exchange Commission stressing that the situation in Europe has “deteriorated significantly.” The Continental decline is expected to be a major contributor to $500 million in projected overseas losses for the second quarter.
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The situation for GM is likely even worse, with losses in Europe expected to add up to $1 billion in red ink. The board of GM of Europe has just approved a new turnaround plan that will include plant closings – but is not expected to generate a significant upturn for at least a few more years.
The crisis is particularly severe in markets that make up much of the demand for Fiat and Peugeot, both expected to report sizable second-quarter losses of their own.
Volkswagen delivered a surprisingly strong performance during the first quarter but it is unclear if it can again sidestep the problems facing key rivals as the European sales slump worsens even in its home German market. The economic powerhouse of Europe is expected to report flat sales – at best – on Tuesday.