European Auto Sector may lag behind US

Europe

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The Globe & Mail reports that differing management practices in Europe may dampen the recovery of the Continent’s auto sector:

Car factory closings are routine in North America. Not so in Europe. Germany has not closed a car plant since the Second World War. No European plants were shut during the recession, in spite of plummeting sales. While GM and Fiat are breaking from the no-closing pack, other European manufacturers are not, at least not so far. As a result, Europe’s automotive revival – if it comes – will lag North America’s, analysts say, as overcapacity depresses profit margins. . . .

And then there’s the Chinese factor. Chinese government officials recently warned that massive investment in car production sites would create a capacity glut by 2015. Charlene Barshefsky, the former U.S. trade representative, said the Chinese car-factory bonanza will have global implications. “The glut will be destined for export and that will increase trade tension,” she said at a car industry conference in China in September.

If the Chinese glut swells the European glut, Europe’s overcapacity problem – and thin automotive margins – will last a long time.

Isn’t the global economy a wonderful thing?

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