European car firms doing well

Posted On Dec 28 2019 by

first_img AD Quality Auto 360p 720p 1080p Top articles1/5READ MORECasino Insider: Here’s a look at San Manuel’s new high limit rooms, Asian restaurant “The Europeans are already well-structured with diesel and smaller vehicles, whereas the Big Three had to quickly be forced to spend a little more attention on the passenger-car market,” said Michael Robinet, vice president of global vehicles forecasts with CSM Worldwide consultants. DaimlerChrysler said its 2005 profit rose 15 percent, to $3.3 billion, and beat expectations. Revenue rose 5 percent, to $177.6 billion. Chief Executive Dieter Zetsche has moved to cut costs and rein in expenses, announcing that 14,500 jobs – including 8,500 at Mercedes and 6,000 administrative positions worldwide – will go through 2009. “Our earnings are not where we want them to be,” he said. “We need to get to work.” Despite his stern assessment, European carmakers have seen good results, with profits up at Volkswagen AG and Renault and analysts predicting that BMW will have another strong year. FRANKFURT, Germany – European automakers are reporting stronger profits and keeping their aspirations focused on flashier models and new markets, even as U.S. car companies are slashing benefits and jobs amid sagging results and spiraling gas prices. For carmakers from Italy’s Fiat SpA to German-American DaimlerChrysler AG, profits are improving and sales solid – a stark contrast to the U.S., where Ford Motor Co. and General Motors Corp. have made major job cuts and are scaling back health care and pension plans. Analysts said European automakers are performing well because they’re beginning to exploit markets in Eastern Europe such as Russia and have done better fending off competition from Asian rivals such as Toyota Motor Corp. and Honda Motor Co. While such companies as Volkswagen and Renault SA report improved sales and earnings, they have not had to contend with the same thorny issues that left their U.S. counterparts in such a bad way – including rising gas prices. Europeans have been used to high gas prices for years due to stiff taxes, and the use of more-efficient diesel models is widespread. Most European automakers are operating from a position of strength. They also don’t have the same legacy expenses, such as pension or health care costs, said Adam Jonas, a European auto analyst for Morgan Stanley in London. “Most of the Europeans are growing, at least in global terms,” he said, but he felt trying to compare U.S. and European automakers was looking at “pigs and oranges.” “Peugeot had a bad year but their sales volumes improved,” Jonas said. “GM and Ford are operating at about their break-even market share.” France’s PSA Peugeot Citroen, Europe’s second-largest automotive group, said tough competition caused a 37 percent drop in 2005 net profit, to $1.2 billion. BMW will announce its results March 15. Analysts predict annual earnings will have risen 14 percent, to about $1.2 billion. Fiat, meanwhile, earned 1.33 billion euros ($1.6 billion) in 2005, reversing a 1.63 billion euro loss a year earlier, as sales of its Alfa Brera, Panda Cross and Lancia Ypsilon Momo Design models increased. But the company also benefited from the $1.7 billion GM paid to dissolve their partnership. Stephen H. Cheetham, European auto analyst for Sanford C. Bernstein Ltd., warned that the company faces stiff competition from Renault, Peugeot and Toyota, and will have to struggle to recover the 12 percent of European auto volume lost in 2005. Auto executives say consumers are in need of new models to get their blood pumping and their wallets open. Renault CEO Carlos Ghosn unveiled a new product offensive to bolster sales by producing more luxurious and upscale models as part of the company’s wider plans to bring 26 new models to market by 2009. The goal was announced after Renault posted net profit of $3.9 billion in 2005, up 19 percent, while revenue rose 1.9 percent, to $48.9 billion. Similarly, Volkswagen, in the midst of a restructuring that could see 20,000 jobs eliminated over the next three years, reported strong results and plans to beef up its product line to lure new customers in Europe and in the U.S. The automaker reported a preliminary 2005 net profit of $1.3 billion, up 61 percent. Its full results are due March 7. VW brand chief Wolfgang Bernhard said the company plans to launch 20 new models within five years to appeal to new and existing customers. “Ten of them will be entirely new models,” he said. “We’re pushing forward on the product side.” He also introduced a new concept car – the “Concept A” – that combines elements of an SUV and a coupe. The first production model based on the design is likely to be sold in the first half of 2008 and will also be sold in the U.S. Jonas said the restructuring by VW and DaimlerChrysler are borne out of planning for the future, not the dire need to solve old problems like their U.S. counterparts. “They’re being done from a position of strength – strong balance sheets, positive earnings – and being led by managers who have U.S. experience,” he said. “They’re trying to make a pre-emptive strike. They’ve got breathing room.” 160Want local news?Sign up for the Localist and stay informed Something went wrong. Please try again.subscribeCongratulations! You’re all set!last_img read more