The European automobile market is anything but healthy. Car deliveries decreased 11% in September, meaning the overall market is on pace for an annual drop of 10%; that would be the biggest decline since 1993, the year after the European Monetary System began to erode. Way back in September 1992, Britain withdrew its precious pound sterling from the European Exchange Rate System. Then Italy withdrew. Then there were all sorts of speculative events on other countries’ currencies, and Europe was quickly knee-deep in a recession.
In those days, currencies were fun. There wasn’t an omnipotent Euro; instead the Italian Lira, French Franc, Deutsche Mark and German Bundesbank ruled commerce. Though it’s clear that the variety of currency in Europe did little for coolness in car design. Check out the 1993 Volkswagen EuroVan:
Unfortunately for car manufacturers, the evolving designs and types of automobiles will not be enough to avoid a severe industry contraction. Here are some startling numbers:
- Overall for the industry, nine-month sales are down 7.2%.
- Renault SA’s European sales were down 29% in September; Fiat’s 19%.
- Four of the five largest European markets shrank in September; Germany, which accounts for 25% of the region’s sales, was down 11%.
- In the first half of the year, GM posted a loss (before interest and taxes) of $617 million.
- Ford’s pretax operating losses in the second quarter were $404 million. Last year, in the same quarter, Ford’s European unit earned $176 million. The company is expecting a full-year loss of over $1.0 billion.
- Even Volkswagen (maybe partially due to the ghosts of that awful 1993 EuroVan) struggled in September, dropping 14%. In turn, VW is limiting car parts purchases by 10% and demanding cheaper components.
Similar to VW’s decision-making with its suppliers, other players in the industry will start to experience the economic pain. Replacement tire sales, accounting for almost 75% of tire industry revenue, are expected to shrink 5.9% this year.
What this means for the healthy American car industry is still in question, but it would surely benefit Detroit if Europe recovers quickly.