The US auto industry is almost extinct in Europe

The US auto industry is almost extinct in Europe

The US auto industry is almost extinct in Europe Izvor: Pixabay (ilustracija)

American automakers once felt that doing business in Europe was essential to their global ambitions. Now they see the region as a profit killer, a market to be avoided if at all possible.

That retreat was symbolized at this week's Frankfurt Motor Show, one of the industry's biggest global events, where the USA was MIA. Ford was the only US automaker with any presence, and it was a quiet one, with no press conference, no vehicle reveals, no attention.

There are numerous factors aligning to make Europe a difficult market for automakers. A much tougher regulatory environment is prime among them, with officials demanding automakers cut emissions and make the transition to electric vehicles much faster than US regulators.

Stronger labor laws and union power make it far more difficult to close plants in Europe than in the United States, leading to more overcapacity in the market, and downward pressure on prices.

The slowdown in European economies is also hurting automakers. Germany, the region's largest economy and the powerhouse of the auto industry, is teetering on the brink of recession. Added to that are fears that a disorderly Brexit could disrupt European supply chains for auto plants and cause a big drop in productivity.

"It's all those things that make Europe so difficult," said Jeff Schuster, president for global vehicle forecasting for research firm LMC Automotive. "But it's also a change in attitude. In the past automakers strived to be everything to everybody, everywhere. That's not the case any more. The drive for profitability has really taken over."

General Motors pulled out of Europe two years ago when it sold its Opel and Vauxhall brands to Groupe PSA, the French automaker that makes Peugeot and Citeon cars. The two brands had lost $22.4 billion over the the previous 17 years. GM cited the risks posed by Brexit in announcing the deal to sell.

"We expect geopolitical events will continue to impact commerce in the region, as we're experiencing real time with the impact of Brexit," GM President Dan Ammann said when he announced the sale.

GM had previously pulled the plug on its core Chevrolet brand in the market.

Ford is also in the process of retrenching in Europe, closing five plants in the United Kingdom, France and Russia and selling a sixth in Slovakia, as it works to reshape its business worldwide. And its recent alliance with Volkswagen suggests it could soon leave much the European market to its new partner.

"It wouldn't surprise me if it ultimately goes in that direction," said Schuster.

Even Fiat Chrysler, the Italian-American automaker formed out of Chrysler's bankruptcy 10 years ago, is struggling in Europe.

Its share of the market outside of Fiat's Italian base is in the low single digits, and its profits are dwindling. While European sales are about half the size of its North American sales, its European profits are only a small sliver of its US earnings.

The company has made efforts to merge with French rival Renault to give it a better chance of competing in the tough market, but so far it has been rebuffed.

"Europe represents the most challenging combination of regulatory stringency and consumer price sensitivity," Fiat Chrysler said in its most recent annual report.

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