To save $2 billion in some distant year—at least that’s the official story—GM bought 7% of French automaker PSA Peugeot Citroën. Perhaps it hoped that the alliance would bail out its bleeding subsidiary Opel. But what GM bought into was one of the most uncompetitive automakers in one of the toughest auto markets in the world. And there is no happy end in sight.
Europe with its relatively affluent population of 500 million has turned into a nightmare for the auto industry. And the R-word—restructuring—unpalatable and almost illegal as it is in Europe, is being bandied about, this time by Fiat-Chrysler CEO Sergio Marchionne, who, as President of the European Automobile Manufacturers’ Association, spoke for all EU automakers. It was a dire warning and a cry for help.
The latest success—I suppose you could call it that, at least for those involved on the financial end—was the Kiekert deal last week. The company was founded in 1857 near Düsseldorf, Germany, and became the largest manufacturer of automotive door-lock systems. Its customers are GM, Ford, VW, BMW, and other automakers around the world. But now a Chinese company bought Kiekert, the sign of a sea change.
In France, new vehicle registrations are plunging: -17.8% in December, -20.7% in January, -20.2% in February. French automakers suffered the most. PSA Peugeot Citroën -29.2% and Renault -28.5%. The German auto industry is still basking in last year’s glow of record worldwide sales and profits, and record bonuses for their beaming employees. But so far this year, they have been stagnating. And it’s just the beginning.
Supercar enthusiasts went into a tizzy when Honda announced that it would bring its Acura NSX back to life. Design and manufacturing would be shifted from Japan to Ohio. And much of the production would be exported. It won’t add much volume to Honda’s production, but it will be a technology showcase. And a precursor that the math of manufacturing in America is changing.
Practically every car or truck sold in the US today contains Chinese-made components, though Chinese-designed vehicles haven’t made it yet. Chinese automakers scramble to move from nice-looking but shoddy copy-and-paste models to reliable products that would be competitive in the US. It’s a government priority. And they’re getting there through the back door.
The US trade deficit with China will hit a record $300 billion for the year, a big hit to the economy. It’s politically convenient to blame China, particularly its yuan policy. But the driver is a broad strategy by US corporations to shift an increasing range of economic activities to China. And now a trade war has broken out. Politicians, have a word with your corporate sponsors!
A convoy of 20 supercars was speeding down the Chūgoku Expressway, trying to get to a supercar gathering in Hiroshima. The mere sight of such an apparition can turn heads and cause accidents. The convoy entered a left-hand bend at 90–100 mph, though the posted speed limit was 50 mph. The highway was wet. And the rest was very expensive.
Alabama immigration law, a Mercedes-Benz executive from Germany, and Republican bifurcation on illegal immigrants: and the outcome was … flip-flopping.
Bubbles go on much longer than a rational mind can fathom, especially bubbles that are supported by governments and central banks. Everyone benefits, so everyone (except for a few hapless shorts) pushes to keep them going. But when they burst, they wreak havoc. And in China, there are new ominous signs.