A storied era in automotive history has ended. General Motors has decided to sell Vauxhall and Opel, and effectively pull out of Europe. It is easy to see why; the last time the American automotive giant made money in Europe, Bill Clinton was in the White House and Tony Blair was Prime Minister.
General Motors (NYSE: GM) has not made money off vehicle sales in Europe since the 20th Century; an analysis by Quartz writer Jason Karaian indicates, yet it waited until March 5 to sell its European Division. That division includes two storied brands; Germany’s Opel and Britain’s Vauxhall, a European financing division, 11 manufacturing plants and an engineering center.
The company lost money for 17 years in Europe from 1999 to 2017 before finally leaving. Disturbingly the only reason why it stayed so long was; trouble finding a buyer for it European assets.
GM will probably lose money off the sale to France’s PSA Group, a Washington Post article indicates. General Motors will incur non-cash accounting charges of $4 billion to $4.5 billion, yet Opel and Vauxhall are only worth around $2.3 billion. PSA owns Peugeot and Citroen, two troubled but historic French brands.
Auto Sales in Europe Good, GM’s Sales Dismal
Interestingly enough the sale is coming as car sales are increasing in Europe. Best Selling Cars reported that passenger vehicle sales in the European Union increased by 10% in January 2017. On January 1, 2017, Germany even reported a record number of car registrations 45.8 million in a country of 80.62 million.
Opel was still the second most popular car in the Federal Republic, but its sales are dropping. The number of Opels registered in 2016 fell by 1.7% to 10.1% of the vehicle fleet, well behind Volkswagen which accounted for 21.6% of the cars on Germany’s roads. There are currently around 9.74 million Volkswagens and 4.687 million Opels in Germany.
Yet the market is not growing fast the number of cars in Germany increased by just 1.6% in 2017, indicating that demand is not there. To make matters worse, Germans simply are not buying new cars the average age of a vehicle in the Federal Republic increased in 2016 from 9.2 years to 9.3 years. That shows that the demand is simply not there in Europe’s largest economy.
The European car market is also complex and highly competitive; over 400 new car models were for sale in the UK alone in 2016, with 70 model launches planned for 2017. UK car sales were up by 2.25% in 2016 to 2.692 million.
GM’s hasty exit from Europe will have many people asking the question will Ford (NYSE: F) be the next to leave. Ford’s sales in the UK fell by 5.06% in 2016. Like GM it might be considering a pullout and a repositioning to faster growing international markets like China and India.
Strangely enough there is one “American vehicle brand” that is doing well in Europe. Jeep’s sales in the United Kingdom increased by 30.54% in 2016, that doesn’t say much for the U.S. auto industry because Jeep is owned by Italy’s Fiat Chrysler Automobiles (NYSE: FCAU).