Ford and GM Finding Different Solutions to European Problems

FordFordUnited States of America, 1903 > present92 models
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and GMGMUnited States of America, 1998 > present8 models
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expect to lose a combined $1 billion for the quarter, and they both know that they must find a solution to stem these losses in the future. 

Ford's solution so far has been the most simple. It has decided two close two factories - one in Belgium and one in the UK - and one stamping plant in the UK. That will reduce its European workforce by 13% by 2014 when all of these closings are finished. 

GM's solution aims to finish things faster but is much more risky. It is in discussions with PSA to merge its European subsidiaries Opel and Vauxhall with PSA in a new joint venture. GM would retain 30% control and pay in several billion to start the venture off.

If that does not work, GM is also in negotiations with Opel and its German union to close one or more factories as soon as 2016. 

If GM's joint venture with PSA goes through, then it will get rid of everything and beat Ford by a few years. If it does not work, it will have to wait until 2016 or longer and only be able to get rid of one factory. 

The timeframe of the European auto recovery is still very much in question. Fiat says that things will not return to normal until 2015 or 2016, but Ford believes that a recovery could come as soon as 2014. 

The one thing saving both companies is strong growth in North America. GM's pre-tax profit was up $160 million through the first half of the year in North America this year, and North American sales were up 3.4%. Ford's pre-tax profit was up $219 million and sales in North Americe were up 1.8%. 

Source: Automotive News