Peugeot-Citroen Warns About Profits, Others Struggle
VW Apparently Unaffected, Expects Much Better Profit
Europe’s car manufacturers are facing difficult times, as the cost of raw materials soars, some still reel from the Japanese natural disaster’s supply interruptions, the path of key interest and exchange rates remain hard to predict, and important markets remain weak.
That’s the evidence which emerges after most of Europe’s big manufacturers reported their financial results for the first half of the year in late July.
Peugeot-Citroen has suffered the most, predicting that its auto division might make a loss in the second half. Renault performed a little bit better as did Fiat. Daimler reported strong results and said it expected to do better in the second half, but was pessimistic about overall prospects for the others.
“At the beginning of the second half of 2011, although the world economic upswing still seems to be intact, the outlook has distinctly worsened,” Daimler said. The Stuttgart-based company said a continuation of the U.S.’s weak recovery, budget cuts in Europe and energy market volatility could hamper growth. Scarily for the German premium manufacturers, Mercedes also said strong demand in China and India was likely to slow sharply next year.
And then there was Volkswagen, sailing serenely through the sea of troubles.
Fiat said European trading conditions were “difficult”. Renault said the European market could remain stable or even contract slightly by two per cent for the year as a whole, as France dives by four to six per cent.
Cititgroup Global Markets auto analyst Philip Watkins put it this way.
“There is clearly a structural problem in the mass market industry related to raw materials with pricing power limited. This won’t go away and could get even worse if raw materials continue to rise through 2012 and 2013 as emerging market industrialization-driven demand for commodities continues to rise,” Watkins said.
Tough environment
Deutsche Bank said Peugeot-Citroen’s profit warning confirms the tough environment the industry as a whole is facing in Europe.
Even high-flying VW warned about the continuing volatility in interest and exchange rates, and commodities prices, while saying that its own operating profit would be significantly higher this year.
Neil Winton – August 1, 2011
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