Recent news for Ford Motor Co. (NYSE: F) and General Motors Co. (NYSE: GM) regarding poor sales in Europe is underscored by Moody’s:
Moody’s expects to see more automotive manufacturers taking restructuring action to tackle overcapacity in Europe. However, any restructuring efforts will only be credit positive for European original equipment manufacturers (OEMs) if they reduce their capacities and costs to sustainable levels of demand and this leads to capacity utilisation rates of 90% or higher.
Moody’s noted that profit margins are “diverging,” but goes on to say the Peugeot, Renault, and Fiat margins will “remain under pressure because of overcapacity and low demand,” while German makers’ margins will also feel pressure for the same reasons. Japanese carmakers will see margins improve, but the strong yen will hamper margin growth. U.S. makers are expected to experience similar or “slightly lower margins” in the next 12 to 18 months, but more competition, slower U.S. economic growth, and higher losses in Europe may erode margins.
Shares of Ford are down 1.3% at $10.40 in a 52-week range of $8.82 to $13.05.
GM’s shares are also down 1.3% at $23.83 in a 52-week range of $18.72 to $27.68.
Paul Ausick
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