American car makers fear shrinking market, Europeans invest
The American car market will shrink in the next years and the car manufacturers over there are taking measures to cope with it. In Europe car producers like PSA and Fiat are still investing.
In the beginning of the week General Motors caused a shock in the US by telling that it wants to save 6 billion dollar a year and will close seven factories and fire one fourth of the management. President Trump immediately ventilated his anger, as he is worried for his re-election since many of these car workers are his voters.
“The American car market will shrink in the next years”, says Charlie Chesbrough, economist at Cox Automotive. “So the pie is getting (a little) smaller and the manufacturers are trying to adapt to it.” According to Cox Automotive, the market will recede to 16,6 million cars in 2019 and 16,5 million in 2020, coming from more than 17 million this year.
“Historically, 5 to 10% less sales are interpreted as the end of a sales cycle and a signal to adapt production”, says Nicholas Colas from DataTrek Research. “Once the peak is passed it goes downwards and could even go as low as 13,5 million of sales. That’s what is scaring the manufacturers.”
An additional problem this time is the uncertain future of the market. Will co-sharing expand, will electric car sales explode, when will autonomous cars really be available? “Nobody has a clue what the next cycle will look like”, continues Colas, “so companies like GM really have to prepare the future and foresee for at least 5 to 10 years.”
President Trump wants to counter this recession of the market by putting import tariffs and protecting the home market and its manufacturers, but the big car manufacturers are preparing for a big restructuring movement, focusing on other more popular products (pickups, SUVs) and investing in the electric and autonomous future.
A third American manufacturer, Chrysler, now being part of the FCA group together with Fiat, is reacting to the situation by investing 5 billion euro in its Italian car plants between 2019 and 2021. That was announced by Mike Manley, the successor of Fiat saver and FCA creator, Sergio Marchionne, who died suddenly a few months ago.
FCA also announced the venue of 13 totally new or face-lifted models within that same period and a serious engagement in electric and hybrid propulsion. The objective is to keep all plants running and remain the most important employer in Italy with 65.000 directly employed workers. The announcement has been warmly applauded by the Italian workers unions.
At the same time, PSA has announced investing 326 million euro in its Mulhouse plant the coming three years, after it had already invested 400 million between 2014 and 2017. Despite the investments, production will slow down (from 260.000 in 2019 to 170.000 in 2020 and 200.000 again in 2021). This is due to the out-phasing of the Peugeot 2008, which will only be replaced a year later.
Mulhouse is actually employing 5.300 people as a permanent workforce and 1.400 interim workers. Unions have insisted that these jobs have to be maintained.