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European Auto Market is Awful

I thought it was bad in the same way that the US market has been bad. Apparently they’ve defined the term in a new and very unhappy way. Read a little about it here:

Major market casualties could be Opel, Ford, Fiat, and Peugeot-Citroën. Any of them could go down the tubes. I don’t think the comments about foreign market presence apply to Ford and Opel since they are divisions of much larger corporations. But it is amazing to think that even these subsidiaries might not last.

True, our economic problems, while significant, are small compared to the “PIIGS” (Portugal, Italy, Ireland, Greece, and Spain). Unemployment is way into the double digits in many of them. Very bad.

In 2007, the only stock I sold was European. Otherwise I hung tight. You’ve got to remember, they have $10 gas, mass transit, lots of regulations, and the big deal at least in some areas is the huge sales tax representing 50% of the cost of the car. So with the general trouble they are in, consumers just aren’t buying cars like they used to. Same as us in 2008 but they have more strikes against them.

Natural selection will likely have VW, Daimler-Benz, BMW, Renault-Nissan, and Chrysler-Fiat as the remaining Euro-based car makers. The rest will be bought up by the Chinese or Hyundai, and both GM and Ford will likely stop manufacturing in Europe. I see still design work being done in Europe, but the inflexible social structrure and lack of work ethic in most of Europe dooms it as a cost-effective manufacturing area.

Doc, do you feel that low profits taxes relative to the U.S. will keep manufacturing in Europe viable?

@mountainbike Car manufacturing in Europe suffers from low worker productivity and very restrictive work practices. Union contracts are very rich with short work weeks, early retirement, and long holidays. Implementing more streamlined manufacturing practices will immediately result in a work stoppage. Fiat literally has its hands tied in their Italian plants. French manufacturers want to close several plants but the government won’t let them.

In other words, unit labor costs are very high in Europe. Germany has high wages but at least the plants are efficiently run. Taxes are not a major disadvantage. If Italy had no tax at all it would still not have much of a future in car manufacturing.

The only efficient car manufacturing in Britain are Japanese owned non union plants and the BMW Mini plant. All others are on their way out. Ford’s Dagenham plant will close soon. Henry Ford II called this plant “the cesspool of the automotive world”.

As the UAW found out in America, being rigid and demanding will eventually mean you have no job or plant to work in. Europe is only 5-8 years behind.

The car business is globilizing and China, India, Brazil, Thailand, Korea and Mexico will be major producers. Mexico already makes more cars than Canada, which used to produce about 3 million vehicles per year, but is now down to less than 2 million.

Sincere thanks for the explanation. I don’t get out much anymore.

Hopefully Korea will continue their path to being a significant player. I fear for them after seeing North Korea’s recent actions and hearing their latest threats. I suspect North Korea is becoming emboldened by our recent failures to respond to attacks on our embassys and the noise being made in the media about sequestration crippling out military. Hopefullly there’s at least one top North Korean millitary commander with the sense and the cahunas to enlighten the young Un about the dangers of his exploits.

It’s a shame the auto workers can’t see how they are putting themselves out of work. Are they all so old that they don’t care anymore? Don’t they care about their children? Maybe I should see the glass half full. GM can start exporting the ATS to Europe.

The UAW is like a political party or a large corporation. It has committees that determine their cause and once committed they just rush blindly on. It’s the American way. How long did it take GM to recognize that Monte Carlos and Parissiannes were obsolete while they continued to stack them up on car lots? GM has been praying for years that socialized medicine would soon be enacted to drastically reduce their long term healthcare liabilities. The UAW can’t justify backing down when the boards of directors continue to increase their wealth.

If it wasn’t for Unions, we would ALL be working for $1/day like the Chinese do…The difference is, they will NEVER be able to afford the products they build…The standard of living we enjoy in the United States was created by Unions, not benevolent corporations who paid us $15-$25 / hour out of the kindness of their hearts…

“GM has been praying for years that socialized medicine would soon be enacted to drastically reduce their long term healthcare liabilities.”

I think that all companies that pay health care benefits hope for this. Where are their Republican lap dogs on this issue?

Unions are more business than anything else. And you pretty much become their slave once they have you; you just don’t realize you’re their slave
I work for a non-union factory and I know if we got a union in the shop, we’d be open just long enough for them to build a new plant somewhere else before they shut the doors.

Before unions we had this

But she was “Just a mill kid”

And townspeople (those who could afford to let their children go to school) said that working in the mill “taught them good work ethics.” I recall Newt expressing his desire to see that happening again.

Like everything else, unions are both good and bad. It depends on how the local handles it’s business.

Like I said before, no company ever got a union that didn’t deserve one. Back in the late 30’s my Dad told about the local plant paying 14 cents an hour when he left to work out of town. You can say everything was cheaper then but that was never very much for hard labor. In the 60’s though he was able to help the guys in the same plant unionize.

@Caddyman Chinese workers don’t work for $1/day; their wages are rising rapidly and will approach those in Mexico soon. And China is now the world’s largest car market.

The wealth of a country is built by constant improvement of the means of production financed by risk taking entrepreneurs. Henry Ford, Bill Gates, Michael Dell, and others being good examples. Education and training of workers adds to the value of products produced. When production is efficient, the owners can pay good wages.

Unions played a very useful role to counter abuses during the industrial revolution in the 1800s. In North America they similarly influenced a decent working environment and led the movement to better wages. However, since the 60s it has been mostly a donwnhill process, with inflexible work contracts and excessive demands making those industries less competitive.

At this stage of the game, non-union car plants pay about the same in wages and benefits to their worker as UAW plants. The main difference is that non-union companies are more efficient and have optimized work processes that result in higher quality and lower cost production. But it is nice to see GM trying to build small cars again at a profit in the US.

Keep in mind that before the recession and bankruptcies, only Honda, Hyundai and Toyota made money on their small cars built in the USA while Ford, Chrysler and GM lost as much as $1400 per car while working under these restrictive UAW contracts and low efficiency plants. That was one reason to move small car production to Mexico.

Chinese workers don't work for $1/day; their wages are rising rapidly and will approach those in Mexico soon. And China is now the world's largest car market.

That depends on where you live in China. My nephew just adopted his third child from China. She came from the north west border near Russia. Average salary in her village is less then $10/mo. But I agree the factory workers in the more modern areas have seen rising wages. It’s just that the whole country is NOT part of their industrial/technical advancements.

The denigrating and demonizing of ideologies is crippling this country. Of course it’s not a new phenomena. But have we ever benefited from it?