General Motors’ Europe Pullout Rocks Big Car Show.
“Look at where the growth is in the world and it’s no longer Europe”
GENEVA, Switzerland – Not even gleaming, sexy new machines from Ferrari, Lamborghini and Porsche could switch the spotlight at the annual car show from the fall-out from General Motors’ decision to sell its Opel-Vauxhall subsidiary, and the implications of this decision for business in Europe.
Corporate leaders wonder if this will finally trigger a wave of consolidation in Europe, long criticized for failing to shut-down excess factory capacity. Sales in Western Europe are stagnating, endemic over-capacity rips apart bottom lines whenever economies slow, and even at the best of times profitability for mass carmakers is tough. Labor laws make it difficult to shed workers, and in countries like Germany, labor unions have a veto over some company’s strategy.
IHS Markit forecasts Western Europe car sales will lose momentum in 2017, gaining 1.0%, down from last year’s healthy 6.2% gain, to 16.0 million. Western Europe includes all the big markets like Germany, France, Italy, Britain and Spain.
Then there is the gathering storm of new technology for autonomous, electric and connected cars, which insist every company invests heavily, even in areas which may eventually provide no return. They see this as required insurance against the dreaded overnight blindside move in which some rich technology company like Apple or Google strikes a killer blow out of the blue with a revolutionary product. And don’t forget the new ways of doing business through companies like Uber and Lyft which threaten to make car access so easy, cheap and ubiquitous people wont need to buy a new car ever again.
GM’s decision to sell, or as some experts said, give away Opel-Vauxhall to France’s PSA Groupe, showed that the U.S. company no longer thought Europe was a crucial market in which it had to have a presence.
Not very important
“General Motors doesn’t see Europe as very important any more. Its not made any money in a long time, and there’s all that regulation and CO2 (rules),” said Professor David Bailey of the Aston Business School in Birmingham, England.
“Look at where the growth is in the world and it’s no longer Europe,” Bailey said.
Europe does have fearsomely complicated business regulations, an ever tightening set of expensive laws on CO2 (carbon dioxide) fuel consumption, plus a stagnating market in which small, profitless cars dominate.
When it seemed the U.S. market was following a similar trend, it made sense for the likes of GM to own a European company, which provided expertise in fuel-efficient small cars and diesels. That kind of regime seems less likely now that President Trump is in charge, and the Volkswagen scandal has made the future of diesel tentative to say the least.
The fact Opel-Vauxhall lost more than $18 billion this century just underlines the puzzle that it GM took so long to realize that the promises to make a profit one day were empty.
If that wasn’t enough tribulation, the future of the European Union looks a bit shaky, with elections pending in the Netherlands this month, France in late April and Germany in September. If Marine Le Pen of France’s Front National wins the presidential run-off election in early May the economic and political ramifications will be shocking. Le Pen has vowed to leave the European single currency and have a referendum on French membership of the European Union, a French version of Brexit, called of course Frexit.
If France left the euro single currency, other members like Italy and Spain would do the same thing to keep their exports competitive. It wouldn’t be long before Germany was the only remaining euro currency user, Opel’s finances would look even worse, and GM would be looking smug in Detroit.
At a show press conference, Opel chief Karl-Thomas Neumann put on a brave face saying more or less everything will remain the same after the PSA takeover. Neumann will remain at the helm of Opel as the German-based automaker is folded into PSA.
Opel-Vauxhall launched the big Insignia Grand Sport and the Crossland SUV at the show, the latter developed with its new owner PSA.
Volkswagen sounded a little bit more realistic about prospects.
“We are really in a transitionary phase for the industry. There are new competitors on the horizon like Tesla or Chinese ventures,” Herbert Diess, the head of Volkswagen’s (VW) own brand car division, told reporters.
“My feeling is that the industry as a whole and brand positioning will change in the next 10 or 15 years and that comes in addition to traditional consolidation in the industry,” he said. He did not expect a wave of Opel-style deals.
After the last big European car show, in Paris show last October, the age of the electric car was said to be upon us at last. But new battery powered mainstream cars are thin on the ground in Geneva, with the next big event, the launch of the Tesla Model 3, awaited towards the end of this year.
At the show, exotic cars were hitting the headlines, led by the new Ferrari 812 Superfast, the new Lamborghini Huracan Performante, and the Mercedes-Maybach G650 Landaulet SUV.
Land Rover added to its Range Rover line-up with the new Velar, a rival to the Porsche Macan. Porsche is unveiling a new wagon, the Panamera Sport Turismo. There are still some companies without a full range of SUVs and Mitsubishi launched its Eclipse compact 4X4. Volvo has redesigned its XC-60 in the same category and added a plug-in hybrid. Subaru’s new SUV is called the Crosstrek.
The Geneva Car Show opens to the public from March 9 through March 19, at the Palexpo Exhibition Centre.