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Home > Car Makers News > Other > Tougher market expected for U.S. in Europe | detnews.com | The Detroit News


Tougher market expected for U.S. in Europe | detnews.com | The Detroit News


-- Detroit's automakers are occupying less space at this year's Frankfurt Motor Show, and in the European auto market, after shedding brands and assets to get through a global industry downturn that hit them especially hard.

General Motors Co. will essentially be fielding one brand in Europe -- Chevrolet -- once it completes the sale of its two European brands, Saab of Sweden and Germany's Adam Opel GmbH, which GM has owned since 1929. Ford Motor Co. is more successful in the region, but it also will be confronting a cutthroat market with only the Ford brand after dismantling its collection of European premium marques.

Figures released Tuesday by the European Carmakers Association show GM's market share shrank this year, and Ford's European share also is down, excluding Volvo, which is for sale.

But while Ford is fully in control of Ford of Europe, its main business in the region, GM faces the added challenge of managing a growing amount of its overseas business through alliances. GM has partners in China, South Korea and now Europe, where it will own Opel alongside Canadian supplier Magna International Inc. and its Russian partner, Sberbank.

"Any alliance is a challenge beyond the normal business challenges," Nick Reilly, executive vice president of GM's international operations, said in an interview. "Joint ventures are more difficult to run than 100 percent-owned companies. Issues come up that you don't have in a 100 percent control-and-command environment."

But GM has been successful with its most important alliances, said Reilly, who is based in Shanghai. Its venture partnership with state-owned Shanghai Automotive Industry Corp. functions well. "We work hard at it," he said. "We respect each other."

In South Korea, GM Daewoo Auto & Technology, which GM controls, has been beneficial to the U.S. automaker. "The difference in the European one is that we do not have management control," Reilly said. GM expects to complete the German government-funded sale of a majority stake in Opel to Magna and Sberbank in a few months.

At the Opel exhibit at the show, where GM Europe President Carl-Peter Forster unveiled a new Astra small car that shares underpinnings with all GM compacts, some Opel employees and executives appeared jubilant at the prospect of becoming an independent carmaker. The new partners all played down the strains that emerged during a protracted sale negotiation process.

"We've known GM for 50 years," said Siegfried Wolf, co-chief executive of Magna. "GM is one of our biggest customers." He said he expected the business relationship to remain good.

Reilly disputed the notion now prevalent in Europe that Opel is finally breaking loose from GM's heavy yoke. "They wouldn't be here," he said of Saab and Opel, "if it weren't for GM."

Opel, with a 7.5 percent market share, accounts for the bulk of GM's European share of just over 9 percent this year. Excluding Opel and Saab, GM's share shrinks to 1.3 percent. Ford holds 10.1 percent through August, up from 9.8 percent for the same period last year; excluding Volvo, Ford's share drops to 8.8 percent.

Overall, the European market is huge, with 2008 sales of 14.7 million cars and other light vehicles.

GM expects to double Chevrolet sales in Europe, including central and Eastern Europe, to close to 1 million vehicles in the coming years, said Wayne Brannon, head of Chevrolet in Europe.

But analysts and executives say Europe's tough market is becoming even tougher. Enormous pricing pressures have been aggravated by the industry downturn, said Patrick Pelata, the No. 2 executive at France's Renault SA after CEO Carlos Ghosn.

Meanwhile, automakers are taking on enormous costs to develop new, significantly cleaner technologies. Renault and its Japanese partner, Nissan Motor Co., are investing more than $5.6 billion in an ambitious electric car program.

Also weighing on the industry is a growing sentiment among European consumers that it's irresponsible for people to buy or consume more than they need, and a perception, seen in polls in France and Germany, that cars no longer represent progress, Pelata said.

While analysts believe GM's Chevrolet brand, Ford -- and Opel, too -- will struggle in Europe's crowded midmarket segments, Ford financial chief Lewis Booth said the Dearborn automaker has succeeded in recent years.

"Ford of Europe has been making money since 2004," Booth said in an interview. "They had some issues in the fourth quarter (of 2008) and the first quarter, but they returned to profit in the second quarter of this year."

Consumers are willing to pay for well-equipped cars, he said. At Ford of Europe, "they're selling a lot of high series Fiestas," Booth said. "They've done a very nice job of demonstrating that, with great product, there's increasing income to be earned."

Booth confirmed that Volvo is still for sale, but declined to discuss negotiations. When Ford sells Volvo, he said, "we'll make sure it's equipped to thrive."

Detroit's smallest carmaker, Chrysler Group LLC, was in Frankfurt with its new Italian partner, Fiat SpA. At the last Frankfurt show two years ago -- the biggest European show is held alternately in Paris and Frankfurt -- Chrysler had just been sold by Daimler AG and acquired by Cerberus Capital Management LP.



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