Why Ford and GM Scaled Back in Europe | WSJ


(thoughtful music) – [Narrator] Take a look at this map. It shows 23 plants that Ford has in Europe from the UK to Russia, but recently, Ford laid out plans to cut six of these European factories. – So six of ’em, they’re gonna sell one. They’re closing several,
they’re gonna lay off about 20% of their workforce there,
which is about 12,000 people. – [Narrator] But Ford is
not the only U.S. automaker that’s scaling back in
Europe, two years ago General Motors pulled out of
the market almost entirely, selling their European brands
to French car maker Peugeot. Both companies expanded
to Europe decades ago as a wider strategy to scale globally, but they both had trouble
making money in the region. Let’s take a look at these two charts. This one shows Ford’s operating costs in Europe over the past six years. The gray is profits overall, and the red is profits in Europe. Now let’s go to GM, this chart
shows GM’s losses in Europe over the 20 years before they
pulled out of the region. So, why has it been so hard
for these two auto makers to turn a profit in the European market? – So the first reason is that Europe’s always been a real tough market. Ford and GM have always been sort of middle of the pack there,
I mean the real powerhouses are Volkswagen, Renault, Peugeot, and when you’re sort of a
middling player in Europe, when you already have
small profit margins, it just makes life a lot
harder for the U.S. brands. GM is making a decision to only compete in markets where they’re the number one or number two operator,
and so they felt like they’ve lost money there for 20 years, and they didn’t wanna continue to do that. – [Narrator] And while GM has largely pulled away from Europe, Ford is looking to scale back and shift focus. – What’s behind this is a
change of business strategy. They’re selling fewer passenger
cars to individual buyers, and they’re focusing more
on their commercial market where they’re strong, which
is cargo vans and trucks to business buyers and governments. Bigger vehicles generally
equate to bigger margins. There’s less competition,
they’re the number one commercial van auto maker there, so they
already are more profitable in that space and they
feel like if they focus on growing that, they could
boost margins even more. – [Narrator] The second
reason U.S. auto makers are scaling back has to do with Europe’s tight environmental rules. – Another big factor that
GM talked about a lot, when it pulled out, was
emissions standards. Europe has some of the most
stringent in the world, and they’re only gonna get tougher, and that’s gonna cost a lot of money for the car companies to comply because they’re gonna have to invest in hybrids and battery electric cars. It’s mostly battery technology. Battery cells, the costs
have come down some, but most experts think we’re still six, eight, 10 years
out from an electric car being sort of on-parative cost
wise with a gas powered car. – [Narrative] The last major reason is that Ford and GM are gravitating back to their sweet spot, SUVs and trucks. – I mean these U.S. car
companies are really good at making big SUVs and big pickup trucks. I mean Ford’s, the best
selling truck in the U.S. is Ford’s F150, it has
been for years and years. GM sells the Chevy Silverado,
and the Chevy Suburban. These are huge vehicles
that aren’t sold in Europe. The gas prices are too expensive. You know, the streets are narrower. People don’t have as many big
garages like we do in the U.S. And so, I mean that’s what
Detroit has focused on, and that’s where they make
virtually all their money. And that’s why they’ve never
really been all that great at making small cars,
and the European brands have a big advantage over
the U.S. brands there. So they’re playing to their strength. Companies like GM and Ford, for decades they tried to build
scale, not only in Europe, all around the world because it’s a really capital intensive
business, and you need scale. And now what you’re seeing is, they’ve got other needs to
spend that capital elsewhere. Electric vehicles, autonomous vehicles. So they realize they can’t
be all things to all people in all markets, and they’ve
gotta pick their battles. They’ve gotta choose where
they’re gonna spend their money. (soft music)

59 comments

Could it be in part to Europe's declining economy 🤔 Could it be the increase in tesla and EV sales 🤔

Sounds like a good move to me. Besides who would want to deal with all the crazy regulations in the EU?

because France and Germany aren't willing to let american car manufacturers pollute their air with Pickup Trucks. Also the French and Germans know to buy quality products…

Sounds to me that Ford & GM don't care about the customers, whether it's North America, England or Europe. We're seeing executives w/ college degrees w/ one solution, the lowest common denominator; make it cheap. The customers see it in the lack of quality. It has nothing to do w/ emissions(though the EU has no clue what they need to regulate, just pot-luck), nothing to do w/ market segment. They got lucky in the larger vehicle markets but won't follow through in the smaller markets. Yes, there is a lot of competition & probably brand loyalty. Ford/GM have been in Europe for decades but have resulted in greed & low quality! Blame anyone but themselves.

Warning: information-free article. GM and Ford are cutting back. They lost a lot of money. Nobody knows anything. Period.

The US market is well rigged, after all the small brands were killed off (Cord etc.). In Europe there´s real and sharp competition, maybe too tough for GM and Ford. Ford´s van-market advantage though, comes out of lacking competition. Only Mercedes is better, but twice the price.

Why GM and Ford wouldn't be able to make good small cars? I have a small GM and it is of good quality. We had multiple small Fords in the family and all good cars. In the 70ies, the 80ies and the 90ies Ford and GM had production plants and their hub in my country (Antwerp and Genk) . The thing is that working normally in Belgium is not doable anymore. The unions stop every activity for a broken nail. Comes to it that government propagates plain anti -Americanism in schools and in the media. America is capitalism and capitalism is per definition bad. You can say every American branch and American brand has very hard in my country. A American CEO in Belgium will call his HQ after a couple of days.We hate Telenet, we hate Blackberry and Motorola, and Google, and Microsoft. We hate McDo ,KFC and also Roundup.. The EU punishes and fines regular American trade for would-be false competition.We hate about anything that bears the stars and stripes. Automatically when it comes from the USA it is harmful in one way or another and the press jumps on it. We are highly uncompetitive and suffer from technological illiteracy although we have a whole lot of masters in Belgium.
We as people are pushed into the direction of Asian products. The EU union is a collection of socialist countries and they are certainly no businessmen.
What we need for the coming years is the awakening of the EU citizen. We cannot understand how hard Americans have to work in order to collect all the money to cover general cost. In Europe general cost is covered by the state. And we don't want a better knowledge of how America works. The gap between the purchase power of average Americans and average Europeans is now becoming clear. Who does still buy American in Europe? Self employed people and their kids cuz they have similar values and similar social and family patterns. That group of self employed people in Europe is getting smaller and smaller now for the same reason as above. America should confront us with the past decades where they came to rescue us from nazism. But no American can tell us that because we would find that arrogant. Trump forced us to buy the F-35. He had to make things very clear.
Now I am not a Trump supporter but he has totally right in saying Europe is communist. We are indeed not far off. The same problems arise with Volvo in Gent where unions block regularly the last left over production plant in my country. I foresee Volvo will also leave.
Belgium is a very ungrateful country. WE DON'T WANT YOU COWBOY !
We blabber about Jeffrey Eppstein and that plane and so on and so on…

The problem is that they have a bad reputation in Europe for quality and reliability, also the brand holds no weight. Nobody gets excited about owning a ford/GM etc. when you have so many high quality European auto companies. Just listen to Jeremy Clarkson talk about American cars. That’s pretty much the opinion of most of the UK and probably Europeans too.

US automakers only build big gas guzzlers. Why is the US in Iraq, Libya, Venezuela and starting a fight with Iran. Oil. Just build fuel efficient cars.

When the economy fails all the soccer moms and idiot boomers that bought there huge overpriced SUV’s and trucks on huge payments will go bankrupt.

Because they suck at small cars, except for Ford with their Fiesta line in the UK. Small cars dominate European car markets due to fuel prices, parking and road sizes.

👎🏽 It’s bcs GM makes ugly cars specially Chevy nobody wants to buy those ugly things inside and out. The designers need to be kicked out

I live in Madeira Island, Portugal.. and there's one roundabout where you can get a view of an abandoned ford factory or office. It has a really big and rusty ford logo on the top, so I think It's an office… (because It's too tall for a factory)

Americans finally realize saving Europe 3 times in the last 100 years was a total waste of lives and treasure. Europeans always loved to kill themselves in 2000 years of inta-mural wars, America should have let them alone and not intervene

Would love to drive a F150 in Bavaria but they don‘t sell it here and importers aksing 100k for a Raptor 🙁

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