Emerging Markets Offset Weak Auto Sales in Europe, Less So for U.S.

By Jennifer Yousfi

A trio of European automakers, including Volkswagen AG (VLKAY.PK), Wednesday released stronger than expected second-quarter results based on strong car sales in emerging markets.

In addition to Germany’s Volkswagen, France’s PSA Peugeot Citroen SA (PEUGY.PL) and Italy’s Fiat SPA (FIATY.PK) reported Wednesday, and reaffirmed their outlook for the remainder of 2008, which gave all three shares a boost in European trading.

“Volkswagen’s successful model rollout, leaner processes and disciplined cost management are enabling us to grow profitability,” Chairman Martin Winterkorn said in a statement.

“The operating environment has become tougher and is demanding considerable efforts from the automotive industry. This does not make it easy for us. However, we are well-positioned and have the right strategy to master the tasks ahead of us,” Winterkorn added.

Much of the gain in earnings for all three European automakers was attributed to sales growth outside of the 15-nation Eurozone, where the number of new car registrations is actually on the decline. Emerging markets such as the BRIC nations of Brazil, Russia, India and China were strong markets for the European automakers.

“Peugeot and maybe Volkswagen will buck a downward profit trend in 2008,” Howard Wheeldon, senior strategist at London-based BGC Partners LP told Bloomberg News. “The European carmakers that suffer most” will be the manufacturers with less trade outside the mature western European and U.S. markets, he added.

European automakers also benefited from a currency conversion boost, as the euro remains strong against most other currencies.

Domestic Car Trouble 

While Europe’s carmakers are triumphing over maturing markets and high oil prices, U.S. automakers that have traditionally focused on larger, less-fuel-efficient models continue to struggle.

General Motors Corp. (GM) Wednesday announced second quarter sales dropped 5% to 2.29 million vehicles, while Toyota Motor Corp. (TM) announced its sales gained 1.8% to 2.41 million vehicles.

Toyota’s new lead will likely bring to an end the 77 years GM has spent atop the global leader board as the largest automaker. In 2007, GM narrowly beat out Toyota by just 3,100 sales.

Outside of Europe and North America, GM saw a 16% sales increase fueled by strong demand in Latin America and Asia.

“There was not quite enough sales volume in these emerging markets to offset weakness in North America, more specifically in the U.S.,” GM’s chief sales analyst, Mike DiGiovanni, said in a conference call Wednesday, Bloomberg reported. “The short-term outlook remains challenging.”

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Comments

[paulk8756]

I saw an item recently that said full-size Buicks (...black ones) are the favorite auto purchase of upscale Chinese. Obviously, however, owing to skyrocketing gasoline prices, VERY small, VERY fuel efficient cars are going to outsell everything else the world over.

[paulk8756]

Speaking of which, Ford announced an $8 billion quarterly loss today, the largest in their company's history. They said they planned to arrest these poor sales results by importing several European models to the U.S. between 2010-12.

Tell you what. They had better dial up their Congressional delegation, the EPA, NHTSA, their European factories and whoever else they need to call and start LOADING THE BOATS RIGHT NOW if they still want to be around by then!

For the life of me, I cannot understand how we're not reacting to the obvious ECONOMIC EMERGENCY we're now confronting due to skyrocketing energy prices with greater VIGOR and ALACRITY. It's just BUSINESS AS USUAL in Detroit and Washington!

Can all these otherwise smart people REALLY be so STUPID? I don't mind telling you, it's scary!!!