02 May 2012

Plant Closures In Europe...Not

Ford just posted another loss in Europe, $149m this time. GM loses money each year. Yet both are popular within the region, 2nd and 3rd respectively according to ACEA. GM knows it needs to close a plant at least, one of the three in Germany would be obvious. I'm less sure what Ford should do. Close its Belgium plant and move Mondeo production elsewhere? PSA, Renault and Fiat all have far too much capacity. They all need to close plants in their home nations.

All these companies have a common problem. European politics. Companies need to run profitable businesses or they will eventually fail. Governments know that closing a car plant is bad publicity. Politicians only think of the next election and getting voted back in. Each year the Koreans use their profits to make better cars. The Chinese brands are getting better. If Japanese brands make more cars offshore and become more profitable, then they will make a comeback too.

In the meantime, European operations will slip back as R&D is cut back, quality suffers and market share is eroded. Of course the 'here today and gone tomorrow' politicians won't be worried about that. They kept the short sighted public happy and got reelected. No wonder things in Europe are a mess.

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