Red ink across Europe

  18 February 2013

Here at Auto Retail Network we try to avoid commenting on car manufacturing. Indeed, I spent quite a lot of time trying to explain to my fellow journalists that making cars and selling cars are two, quite distinct, sides of the same industry.

Having said that, it would be hard to ignore the flood of car manufacturer financial results that have been issued this week – and their likely impact on auto retailing.

The shock-horror headline of the week was PSA Peugeot-Citroen’s full-year loss of €5bn, largely as a result of a massive €3.9bn of one-off charges. Even so, the €1.5bn operating loss for the car division sounds scary enough.

On the face of it Renault’s figures looked better with a net income of €1.7m, but much of that came from a one-off sale of shares in Volvo. Reading between the lines (and it’s quite well hidden), the automotive division posted a ‘slightly negative’ (their words, not mine) operating margin of €25m.

I can’t say I know enough about European reporting standards to explain the difference between income and margin – but I do understand that a ‘negative operating margin’ means a loss.

The European arms of the US volume carmakers fared little better. Ford of Europe posted full year pre-tax losses of $1.75bn while GM Europe adjusted earnings (EBIT) amounted to $1.8bn, according to figures out this week.

As an aside, it’s worth noting for the pedants among you that the US and France use a ‘thousand million’ as the definition of a ‘billion’; unlike the old British system of a ‘million million’.

The risk for all these companies is that the continental European market declines even further in 2013 and that a squeeze on expenditure puts investment in new cars at risk. As any auto retailer will tell you, market share is driven by fresh product.

And that product has to be good. The old adage that ‘the only good car is a sold car’ remains as true as ever, but there is not much space in the market for bad cars these days. At least on that point the two sides of the industry would agree.

Rupert Saunders

Join our LinkedIn group and share your views with us – and other  readers

Start your free 14 day trial

Get free access to our Bulletin, Agenda & Profit for 14 days.

After 14 days we will auto bill your credit or debit card unless the order is cancelled.

As an auto retail executive you need insightful and unique industry intelligence to boost your business potential. Here’s a taste of what Auto Retail Network has to offer:

  • Get informed and boost your business potential
  • More than 1,200 fellow executives have joined us
    since launch
  • Independent, carefully crafted, unique content relevant to you and your business
  • Develop a greater awareness of market trends and opportunities
  • Access to a wide range of materials whenever, wherever and however you want it
  • Significant discounts on ARN events, reports and
    other publications