Big Three's Biggest Problem is Europe

Brandy Cordeiro & John Reeves

European Car Market

• European car sales fell to a 14-year low

• Car registrations in the EU dropped 6.6%

• 2012 first quarter sales dropped 7.3%

• Ford sales dropped 7.6%o Expects loss of

$500-600 million

• GM sales dropped 10%o Lost $747 million in 2011

Who's to blame?

• UK and other countries in a recession

• Spain's unemployment rate 24.4%

• Overcapacity in auto industry

• Sovereign-debt concerns

North American Sales- Ford Motor company had its most profitable quarter ever for its North American operations.

- Chrysler had its most profitable quarter since 1998.

- Europeans are on pace to buy nearly 1 million fewer cars and light trucks than Americans this year.

- US auto Bailout worked for Chrysler and GM, however European sales are dragging profits down.

The Big Three Going Green"We're going in with a business model that clearly isn't profitable," said

Ford Chief Financial Officer Bob Shanks

Gas prices are rising and government fuel economy requirements are going up, too. This time around, Detroit's ready for the fight.

Ford Fiesta Chrysler: Fiat 500 Chevrolet Spark

Looking to the Future

• Reduce cost structure

• Lump-sum pension payments to retirees

• Only produce what is demanded

• GM's alliance with French

automaker PSA

Peugeot Citroen

Fixing The Problem- Auto industry experts say fixing the problems in Europe could cost billions.

- Labor laws in much of Europe make it far more difficult and expensive to close unprofitable plants.

- Alliances: Auto industry agreements to share resources.

- Has a bad record in the US auto industry.

- 1998 Mercedes Benz merger with Chrysler = Failure

- 2009 Fiat merger with Chrysler

Questions

• Is there anything auto companies like Ford and GM can do to succeed in the European Market?

• What does the future of the auto industry look like? Positive? Negative?