June car sales in the European Union prove two things. First, that the recession in the region continues to cripple auto registrations at an extraordinary rate. And second, that it is time for General Motors Co. (NYSE: GM) to get out of Europe. GM sales fell 9.9% to 96,517, and by 11% in the first half to 499,055, according to the ACEA.
The other two car companies that are part of America’s Big Three had mixed results. Chrysler parent Fiat had an EU drop of 12.6% to 67,477, which shows that, like GM, Fiat has come to rely increasingly on the U.S. market and Chrysler’s success there. Ford Motor Co. (NYSE: F) did better. Its sales rose 8.1% to 87,894, but its first half numbers were off 9.6% to 465,922.
Incidentally, sales of PSA Group cars fell 10.8% to 131,531. It is the parent of Peugeot and Citroen, and by sales the second largest car company in the European Union. However, its financial situation is bad enough that it is not considered a viable standalone company.
The inability of car companies in Europe to lower losses, or increase profits in come cases, is due to the stranglehold by local governments and unions. This problem has been present for years. But the recession-bred drop in revenue makes the problem more acute and financially dangerous for the manufacturers.
GM has lost billions of dollars in Europe, and those losses have continued for decades. Not a single bit of evidence shows that the trend will reverse. GM management continues to fool itself with comments about how it can engineer improvement and how Europe is a strategically important market. That can be said only about a market that has a profitable future. For GM in Europe, there is no such thing.
GM’s successes in China and the United States are beyond question. It remains the top car company by sales in the two largest nations by sales. GM ought to be satisfied with that. Europe, as it has been pointed out ad nauseam, can only harm overall earnings and damage prospects for its investors.
It will cost GM a great deal to exit Europe, because of one-time charges for plant shutdowns and severance. No matter. It is GM’s only logical course.