Bloomberg News

Ford Leads European Car Sales Drop as German Demand Falls

September 18, 2012

Europe August Auto Sales Drop

The European auto market has shrunk for 11 consecutive months, and ACEA is forecasting a 17-year low for full-year sales. Photographer: Kostas Tsironis/Bloomberg

Ford Motor Co. (F:US) led the steepest decline in European car sales in six months as the region’s economic woes hurt demand in Germany.

Industrywide car registrations fell 8.5 percent from a year earlier to 722,483 vehicles in August, the Brussels-based European Automobile Manufacturers’ Association, or ACEA, said today in a statement. Ford’s European sales dropped 29 percent, and the company accounted for 6 percent of the region’s deliveries compared with 7.7 percent in August 2011.

The European car market has shrunk for 11 consecutive months as governments grapple with a sovereign-debt crisis, and the ACEA is forecasting a 17-year low for full-year sales. Registrations in Germany, Europe’s biggest economy, fell 4.7 percent. Among the 10 companies that sell the most cars in the region, only Volkswagen AG (VOW) posted growth in August, as gains at its Audi and Skoda brands and the first-time inclusion of Porsche luxury models made up for a decline at the VW marque.

“Most of the market share Ford lost in Europe probably went to Volkswagen and Hyundai,” Daniel Schwarz, an analyst at Commerzbank AG in Frankfurt, said by phone. “But Ford is one of the strongest global manufacturers and has sufficient scale and engine technology, so they have the potential to turn this around, more than companies like Peugeot.”

Peugeot’s Drop

European sales by Dearborn, Michigan-based Ford fell to 43,401 cars in August. The U.S. company ranks fifth in Europe by deliveries. PSA Peugeot Citroen (UG), Europe’s second-biggest carmaker after Volkswagen, posted a 12 percent drop to 81,562 vehicles. Volkswagen group registrations in Europe rose 1.6 percent to 204,034 vehicles as growth of 8 percent at Audi and 3.9 percent at Skoda made up for a 3.3 percent decline at VW.

Ford’s European business reported a second-quarter pretax operating loss of $404 million compared with profit of $176 million a year earlier. Mark Fields, Ford’s president of the Americas, is set to be promoted to chief operating officer, assuming global responsibilities to help turn around the carmaker’s unprofitable European operations, a person familiar with the plan said earlier this month.

“August was even slower than usual this year, and there was a lot of short-cycle business and heavy incentives that we decided to largely refrain from,” Roelant de Waard, vice president of marketing, sales and service at Ford of Europe, said today in a statement. The U.S. company expects a “strong rebound” in its European sales in September because of new models such as a Focus equipped with a 1-liter EcoBoost engine.

Italian Contraction

The European car-market decline last month was the biggest since a 9.2 percent contraction in February. Italy’s car registrations plunged 20 percent, while sales in France dropped 11 percent. Sales rose 3.4 percent in Spain and 0.1 percent in the U.K. Across the region, eight-month sales fell 6.6 percent to 8.59 million cars. Registrations in July fell 7.5 percent to 972,860 vehicles, the ACEA also said today.

“We’ll probably see a continued weakness in southern Europe and in addition to that an accelerated weakness in France and Germany,” Arndt Ellinghorst, a London-based analyst at Credit Suisse Group AG, said today by phone. “That would be a big problem next year as Germany and France are more profitable than Italy and Spain.”

The ACEA compiles sales figures from the 27 European Union countries plus Switzerland, Norway and Iceland. The group forecast on June 6 that industry sales in the region will shrink 7 percent this year to the least since 1995 and 21 percent below the 2007 peak. The market is likely to drop 9 percent this year and 3 percent in 2013 before recovering in 2014, Goldman Sachs said Sept. 12.

Plant Shutdowns

The declines have prompted Peugeot and General Motors Co. (GM:US)’s Opel unit to announce the first French and German car-plant shutdowns in decades. Peugeot will be removed from France’s leading stock index after the Paris-based company’s shares declined more than 50 percent in the last 12 months. The stock has been trading near a 26-year low in recent months.

GM’s group European car sales, including Opel, its U.K. sister brand Vauxhall and the Chevrolet marque, fell 18 percent to 53,586 vehicles in August. Sales by Turin, Italy-based Fiat SpA (F) also fell 18 percent, to 37,687 cars. Renault SA (RNO), France’s second-biggest carmaker after Peugeot, posted a 13 percent decline to 61,749 vehicles. European registrations at Hyundai Motor Co. (005380) fell 3.3 percent to 26,499 cars.

Fiat Chief Executive Officer Sergio Marchionne, who currently holds the rotating ACEA presidency, said Sept. 14 that German carmakers remain opposed to his efforts to form a united front to push the European Union to address overcapacity in the region. Calls for coordinated efforts have “fallen on deaf ears, certainly from my German colleagues, who do not see the need,” he said.

Confidence Declines

Business confidence in Germany fell for a fourth straight month in August as the European sovereign debt crisis curbed economic growth. German gross domestic product expansion slowed to 0.3 percent in the second quarter from 0.5 percent in the first as the debt crisis damped demand for exports and prompted companies to postpone investments.

“It’s a deteriorating picture, with also the German market now heading in the wrong direction,” said Jonathon Poskitt, head of European sales forecasting at LMC Automotive in Oxford, England. “Consumer confidence is being hit with all that’s going on in Europe. There’s no quick turnaround in sight.”

VW reduced its internal sales forecast for 2012 by as many as 100,000 vehicles as the sovereign debt crisis saps demand, a person familiar with the matter said this month. The lower delivery target is focused chiefly on Europe and affects models such as the Polo subcompact.

Bayerische Motoren Werke AG (BMW), the world’s largest luxury-car maker, sold 42,894 cars in Europe last month, a 12 percent drop, with the namesake brand’s registrations falling 11 percent. Daimler AG (DAI), whose Mercedes-Benz ranks third in the luxury- vehicle industry after the BMW and Audi brands, reported a 0.3 percent decline in August European sales to 39,464 vehicles.

To contact the reporter on this story: Ola Kinnander in Stockholm at okinnander@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net


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