Very early this morning, I was sitting in the back of a VW Transporter being propelled along a foggy Autobahn towards Ingolstadt, Audi’s HQ.
I was reading an equally early email from Erich Hauser, an auto analyst at Credit Suisse, who was underwhelmed by the proposed GM-Peugeot-Citroen tie-up. He pointed out that the two carmakers have a combined component purchasing budget of £78bn but were predicting just a £1.26bn saving from the new alliance.
Ultimately, according to the analyst, PSA and GM do not lack scale, or bargaining power with suppliers, but suffer from under-used factories and the inability to realise decent transaction prices for their products. These problems, says Hauser, affect all the European mass-makers, apart from VW. Hauser thinks that the mass-makers lost around £1.5bn between them in the second half of 2011.
A hour or so later, I was at the press conference where Audi opened its books for 2011. The company made a staggering £4.4bn profit, up 60 per cent on 2010. Admittedly, Audi is a global brand, but the contrast between the kind of money it can bank on sales of 1.5 million cars against the huge losses suffered by the mass-makers in Europe, shows just how perilous the situation is for non-premium carmakers.
It’s hard to see how the middle-market is going to pull out of this nose-dive. Those brands struggling to shift the metal are resorting to big fleet and showroom discounts and running up big losses and bigger debts. The premium car makers seem to be able to do no wrong. Not just because they can sell significant volumes of pricier larger models, but also pull in that crucial extra £3-4000 per model in the sub-£20k new car segment.
Even if the mass-makers start to form even larger conglomerates (and Fiat-Chrysler boss Sergio Marchionne says his company is on the look-out for more partners) I doubt whether any of them would be capable of knuckling down, throwing away long-held company values and using a small number of common parts to create as many different models as possible.
Even if they did manage this, few European governments would allow the factory closures needed to balance capacity with demand. Marchionne thinks that European car makers should all agree to reduce factory capacity as a matter of urgency.