Detroit Three are affected by Europe’s low sales, with Ford and GM plunging to their lowest level since December.
What happened in the U.S. in 2008-2009 is happening now in Europe. Auto sales have reached their lowest level in 14 years and unemployment in some Eurozone countries is the highest on record. For a company such as GM, a $1.7 billion gain in North America, makes a $256-million loss in Europe may seem manageable.
“Europe is the single biggest drag on GM’s stock price,” said Peter Nesvold, a Jefferies & Co. analyst who follows the company. “They’re really between a rock and a hard place.”
Each automakers knows that it has to close its plants in Europe and that this could only mean that thousands of jobs will disappear. Each government wants to protect its companies and employees. Chrysler and Fiat CEO Sergio Marchionne asked the European Union to find a comprehensive plan that has all participants suffering some pain equally.
European countries which are facing gaping budget deficit have cut government spending and raised taxes. This austerity program has only raised unemployment.
“The austerity program is by definition going to … worsen the demand,” Marchionne said. “If there is any value at all in the European Union existing as a functioning body … this is the time to show its capabilities.”