26 July 2012

The European Car Crisis Overview 2012

Car sales are poor in Europe and will not be improving for the foreseeable future. It is not upmarket brands that are suffering, they never do. The well healed are less affected by economic downturns. The people who pull out of new car buying in harder times are the people who purchase ‘run of the mill’ models.

When car makers of these ‘bread and butter’ models run factories at full capacity, they still only make modest profit. If the factory is under utilised, then losses soon come calling. This is what is happening in Europe, factories well below optimum use.

Unfortunately the farce that is the European Union is now responsible for the weakening of car makers in the region. The name may have ‘Union’ in it, but that is where it ends. Each government puts self interest before the overall good of the region. Plants can close elsewhere but not in their country. Any car maker that suggests a car factory is closing is castigated and then in effect bullied by the government where the plant is located. They back down, the inefficiency then continues, ultimately weakening the company further.

One nation that has accepted factory closures is the UK. It understood reality. Interestingly, car plants in Britain are not now suffering to the degree that some in Europe are, due to earlier rationalisations. However, I scratch my head at the way some nations across the channel carry on when it is clear to everyone else that closures are essential for the survival of the companies involved. No one closes a plant for the sake of it. They want busy factories, but the also have to run competitive businesses. The sooner that is realised, the sooner the mess can be sorted out.

In future posts, some detail about the situation will be explored. I am apolitical in my opinions.

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