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Europe's Auto Makers Poised To Lose $6.6 Billion In 2013 — Moody's

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WSJ 4/9/13

'MILAN—Moody's Investors Service Inc. expects four of Europe's volume car manufacturers including Fiat SpA and PSA Peugeot-Citroën SA to lose a combined €5 billion ($6.6 billion) in the region this year as demand falls to its lowest level in two decades.

It would be the second year in a row that these manufacturers—Ford Motor Co. and General Motors Co. being the other two—suffer such a loss at the operational level.

With demand in western Europe expected to fall for a sixth year in a row—down 5% to 12.48 million units.'

I've only posted that which isn't behind the paywall.

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WSJ 4/9/13

'MILAN—Moody's Investors Service Inc. expects four of Europe's volume car manufacturers including Fiat SpA and PSA Peugeot-Citroën SA to lose a combined €5 billion ($6.6 billion) in the region this year as demand falls to its lowest level in two decades.

It would be the second year in a row that these manufacturers—Ford Motor Co. and General Motors Co. being the other two—suffer such a loss at the operational level.

With demand in western Europe expected to fall for a sixth year in a row—down 5% to 12.48 million units.'

I've only posted that which isn't behind the paywall.

IIRC GM Europe has lost money every single year since 1999, even through the biggest consumer boom the world has ever seen. The cumulative losses must be in excess of $20bn by now. Perhaps Barmy Barry can arrange another $50bn bailout for the company courtesy the American taxpayer?

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More taxpayer bail outs for France, Italy (and Germany - but they can afford it!). A very expensive way to reduce the unemployment figures.

When Fiat, PSA and Renault start some serious factory closures / productivity improvements and Fiat / PSA reduce the number of brands I will believe they are doing something about it!

Edit to add: and start building more decent models too

Edited by koala_bear

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Far too many debt-waggons on the road already, no loss.

For some models that is a particularly apt description. Last week:

"People are using finance a lot, lot more," says Linda Jackson, head of Citroën in the UK. "They like understanding what they're paying each month." That peaks in the brand's fashionable DS3 hatchback range, a whopping 85 per cent of which are bought on finance. That figure is repeated for the Mini hatchback, according to owner BMW.

http://www.telegraph.co.uk/motoring/news/10262974/Death-of-the-list-price.html

Still, manufacturers are pretty bullish on the UK's prospects. Astonishing finance figures, seems to be more widespread than just particular models.

http://europe.autonews.com/apps/pbcs.dll/article?AID=/20130904/ANE/130909992/uk-car-market-still-has-room-to-grow-auto-bosses-say#axzz2dvIjtjrY

UK car market still has room to grow, auto bosses say

Nick Gibbs

Automotive News Europe

September 4, 2013 06:15 CET

UK car sales have risen every month since March 2012 and industry leaders believe the volume gains will continue.

"There's more scope to recover," BMW UK Managing Director Tim Abbott said. "I think we're still under-capacity in terms of sales."

That optimism has caused the Society of Motor Manufacturers and Traders to predict that full-year sales will rise 8 percent compared with rise of 3 percent forecast earlier in the year. By comparison, overall car sales in Europe are forecast to fall by about 5 percent.

If the SMMT's prediction is correct, 2.2 million vehicles will be sold this year in Britain. That is close to the pre-downturn figure of 2.4 million in 2007 and it would keep the UK ahead of France as the second-biggest car sales market in Europe behind Germany.

'Very bizarre'

Even carmakers aren't exactly sure why the UK has been so successful while the rest of Europe sags. "It is very bizarre," Linda Jackson, head of Citroen in the UK and Ireland, told Automotive News Europe. "I'm hoping it's confidence coming back into the industry."

A key to the success has been a 16 percent rise in private sales, which has been driven by competitive finance deals resulting from low interest rates, automaker bosses said.

At Citroen, up to 85 percent of retail sales are financed using the automaker's house lender, Jackson said.

BMW said in June that 80 percent of the models its Mini brand sells in the UK are financed using the automaker's financing arm.

At Ford, the average is about 70 percent, which is the highest figure globally for the manufacturer, UK head of sales Andy Barratt said. Ford remains the top-selling brand in the UK, ahead of General Motors' Vauxhall subsidiary, after sales grew 12 percent through July. The Fiesta subcompact was the UK's best-selling model ahead of the Focus.

Ford's Barratt said the UK finance market is more sophisticated than the rest of Europe. One big difference is the high proportion of cars bought using what's know as a personal contract purchase. A PCP reduces monthly payments by financing the car's depreciation amount rather than the total cost of the vehicle.

Barratt said repeat buyers are benefiting from more conservative predictions of their vehicles' depreciation compared with the rates seen during the downturn in 2009. "It means people are coming out of their old car with equity and that becomes a deposit for a new one," he said.

Windfall payments

Another factor that's causing growth is that many people in the UK have received windfall payments from their banks for making them purchase payment protection insurance (PPI) before the financial downturn. UK consumer group Which? estimated that in August banks had set aside 18.4 billion pounds (21.4 billion euros) to reimburse customers for PPI. The average payment is between 2,000 and 3,000 pounds. Said BMW's Abbott: "If you look at the sums of money coming back from PPI, that's typically a deposit on a car."

Citroen's Jackson said that automakers in Europe are looking at the growth in the UK to help soak up excess capacity they have elsewhere in the region. She also agreed with Ford's Barratt and BMW's Abbott that the market's gains are "natural" and not artificially boosted by discounts. Abbott, who was named SMMT president this year, added that there's no oversupply: "We've all learned our lessons."

Sounding a note of caution was Renault UK boss Ken Ramirez: "The market is growing unevenly. It's not necessarily because of demand," he told Automotive News Europe, citing discounted sales to daily rental companies by unnamed automakers as one possible market distortion. He said Renault was growing primarily in sales to private customers.

Barratt said that although growth would continue, it was unlikely the UK market would see a return to its peak sales of 2.6 million in the early 2000s in the near future. "A lot of that growth historically was manufacturer push. I think there is less push now. We want natural demand," he said.

Abbot said buyers have enough reasons to change without the need for manufacturer discounting. "Fuel economy is better, financing on a monthly basis is as good as it has ever been," he said. "Put all those together then there's a very compelling argument to replace a car."

Read more: http://www.autonews.com/article/20130904/ANE/130909992/uk-car-market-still-has-room-to-grow-auto-bosses-say#ixzz2dvJJ1qWp

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For some models that is a particularly apt description. Last week:

http://www.telegraph...list-price.html

Still, manufacturers are pretty bullish on the UK's prospects. Astonishing finance figures, seems to be more widespread than just particular models.

At least we know now where Osborne's stealth fiscal stimuli are likely to end up.

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At least we know now where Osborne's stealth fiscal stimuli are likely to end up.

Yup, as called by you for some time- nice one.

I'm surprised to read about firm used values given the cars sold via the scrappage scheme are now four years old on average. I guess there's nothing to stop a PPI payout going to a used vehicle purchase of course. When PPI refunds tail off things ought to get interesting.

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Re cheeznbreed autonews quote - lots of interesting stuff in that article, though I'm not sure innovative auto finance is the kind of innovation the UK should be doing. Lowering monthly repayments and equity from previous vehicles should also ring alarm bells (cf IO and liar loans?)

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Re cheeznbreed autonews quote - lots of interesting stuff in that article, though I'm not sure innovative auto finance is the kind of innovation the UK should be doing. Lowering monthly repayments and equity from previous vehicles should also ring alarm bells (cf IO and liar loans?)

It seems pretty vulnerable to a drying up of deposit finance, which seems tied to PPI in the aftermath of the scrappage scheme.

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Jun13-chart.jpg?9b6f83

Plausible that used values are due a fal when all this dries up, hope new PCP contracts are not adjusting to strengthening residuals as the new 'norm'...

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It seems pretty vulnerable to a drying up of deposit finance, which seems tied to PPI in the aftermath of the scrappage scheme.

So you get the money back from mis-selling.. and it instantly vanishes in depreciation on a new car..

I really should start selling moonbeams and fairly dust.

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So you get the money back from mis-selling.. and it instantly vanishes in depreciation on a new car..

I really should start selling moonbeams and fairly dust.

Should be some used bargains around in 3 or 4 years if the PPI effect is significant. By then, there will be loads of cars up to 7 years old which have been sold via some subsidy or another. Whether they've been maintained properly or not is another matter though..

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IIRC GM Europe has lost money every single year since 1999, even through the biggest consumer boom the world has ever seen. The cumulative losses must be in excess of $20bn by now. Perhaps Barmy Barry can arrange another $50bn bailout for the company courtesy the American taxpayer?

Something like $20bn since '99, there was an article in last month's CAR magazine.

To alleviate their problems GM have hired a new head of marketing from L'Oreal. Because you're worth it obviously.

I await unsubstantiated technical claims for ChumpusRex's sodium cooled unobtainium, quicker than you can say Advertising Standards Authority

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It seems pretty vulnerable to a drying up of deposit finance, which seems tied to PPI in the aftermath of the scrappage scheme.

Plausible that used values are due a fall when all this dries up, hope new PCP contracts are not adjusting to strengthening residuals as the new 'norm'...

Of course they are using them as the new norm!

PPI payouts still at £400m a month :o

That will be over £10bn paid out shortly. £5bn a year boost for consumers, the easiest way to leverage it is with auto lending...

When will the PPI payouts start drying up given it seems to defy most predictions?

Given Lloyds is one of the biggest car leasers did they also flog PPI on car loans? If so they repay on PPI and then get it all back shortly afterwards with a cut for the claims firm?

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Of course they are using them as the new norm!

PPI payouts still at £400m a month :o

That will be over £10bn paid out shortly. £5bn a year boost for consumers, the easiest way to leverage it is with auto lending...

When will the PPI payouts start drying up given it seems to defy most predictions?

Given Lloyds is one of the biggest car leasers did they also flog PPI on car loans? If so they repay on PPI and then get it all back shortly afterwards with a cut for the claims firm?

Yes, the ever-cheaper lease deals around these days are likely a result of feeding better residuals into PCPs. Makes sense.

Looking at complaints lodged with the Ombudsman things are at record levels in terms of numbers of complaints submitted:

Quarterly:

http://www.financial-ombudsman.org.uk/publications/ombudsman-news/110/1stquarter-chart.pdf

Bi-annual

http://www.ombudsman-complaints-data.org.uk/

'istorical:

http://www.financial-ombudsman.org.uk/publications/complaints-data/earlierdata-index.htm

I suppose as time goes by the payouts will drop even if complaint volumes rise, as most of the big claims will be dealt with. That said, it can take a year or more to get through the Ombudsman system, I think the average is around 6 moths plus a further ~year on the appeals track is required, then (if successful) a further 12 weeks for payment. So a complaint filed in June 2013 might generate a payout in March '14, even if it doesn't go all the way. Typically the Ombudsman will look to resolve glaring cases(many of them) without issuing a formal judgement so it could take as little as 12 weeks plus 12 weeks for payment, so a good fraction of cases lodged in H1 '13 may be dealt with by Xmas, assuming the system doesn't break down.

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Bumping this thread although these are UK registrations data from the SMMT:

https://www.smmt.co.uk/2013/10/super-september-sees-new-car-registrations-roar-ahead/

  • 63-plate boost helps September market rise 12.1% to hit 403,136 registrations.
  • September 2013 is best performing month since March 2008 (highest volume in 66 months).
  • Private registrations have risen by 16.7% over year-to-date, helping overall market rise by 10.8%.
  • More than 1 in 7 new cars registered is UK-built.
  • Average new car CO2 emissions at 128.6g/km; average fuel economy around 55mpg

PPI-funded PCP deals here for a good while yet.

The average CO2 emissions equate to a typical VED charge of £105 per annum, although care is required since the VED bands do not scale exactly and higher bands pay a lot more, lower bands a lot less. Might be nothing more than a rough guide. It's now inside the EU target of 130g/km by 2015. The next target is 95g/km by 2020, which might be a bit trickier. Whether anyone actually obtains the mpg implied by these emissions targets is another question.

Here's Reuters take on it:

http://uk.reuters.com/article/2013/10/04/uk-britain-auto-sales-idUKBRE99308F20131004

(Reuters) - New car sales in Britain soared to their highest level in more than five years last month, lifted by a brighter outlook for the economy, attractive financing deals and demand for new fuel-efficient models.

New car registrations surged 12.1 percent compared with a year ago to 403,136 units, the Society of Motor Manufacturers and Traders said on Friday.

That is the highest monthly level since March 2008, just before Britain plunged into its deepest recession in generations.

September is a key month for Britain's auto industry as it marks a twice-yearly change in registration plates. Nonetheless, the trade body and analysts think the improvement is unlikely to tail off.

"As we head into the quieter months, I suspect we'll see sales hold firm, keeping the UK market zooming ahead of our European counterparts," said Richard Lowe, head of retail and wholesale at Barclays.

Solid car trade in Britain contrasts with a decline in Germany, Europe's biggest car market, and the gap between the two is narrowing as a result.

So far this year, 1.79 million new cars have been sold in Britain, compared with 2.22 million in Germany. The latter was 6 percent fewer than at the same point last year.

Ford's Fiesta claimed the top spot in Britain's best-seller list in September, followed by General Motors-owned Vauxhall's Corsa and Ford's Focus, reflecting motorists' budget-conscious approach.

Britain's economy has shown signs of accelerating growth in recent months after several patchy years, with rising optimism unleashing pent-up consumer demand and boosting spending.

"This is the 19th consecutive month of steady growth (in car sales) and, with fleet and business demand still to reach pre-recession levels, we believe the performance to be sustainable," said Mike Hawes, SMMT chief executive.

Sales of new cars in Britain have been supported this year by high fuel prices, low interest rates and compensation to victims of a banking scandal.

(Reporting by Olesya Dmitracova, editing by Jeremy Gaunt)

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Bumping this thread although these are UK registrations data from the SMMT:

https://www.smmt.co....ons-roar-ahead/

PPI-funded PCP deals here for a good while yet.

The average CO2 emissions equate to a typical VED charge of £105 per annum, although care is required since the VED bands do not scale exactly and higher bands pay a lot more, lower bands a lot less. Might be nothing more than a rough guide. It's now inside the EU target of 130g/km by 2015. The next target is 95g/km by 2020, which might be a bit trickier. Whether anyone actually obtains the mpg implied by these emissions targets is another question.

Here's Reuters take on it:

http://uk.reuters.co...E99308F20131004

The indy's take on it is a little more informative:

http://www.independent.co.uk/news/uk/home-news/blessed-are-the-carmakers-but-what-is-driving-the-british-motoring-miracle-8859790.html

But there are other factors at play, explained Mike Hawes, SMMT chief executive.

"Alongside competitive finance deals, the general public has been receiving significant injections of cash as a result of the mis-selling of payment protection insurance (PPI) which has been main-lining between £400m- £500m a month into household coffers through compensation schemes."

According to the Financial Conduct Authority since January 2011 some £11.5bn has been repaid to customers who were persuaded to buy unnecessary policies.

“Overall the picture is very bright,” said Mr Hawes who is predicting sales on target for 2.2m vehicles this year. “We know that a number of our customers have been benefiting from PPI mis-selling claims. They have had a cheque in the post – a sizeable cheque for some people – and an investment in a new car can obviously be beneficial over time and that has been driving sales,” he added.

Banks bailing out car manufacturers (makes change from governments :lol: - well directly any way)

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The indy's take on it is a little more informative:

http://www.independent.co.uk/news/uk/home-news/blessed-are-the-carmakers-but-what-is-driving-the-british-motoring-miracle-8859790.html

Banks bailing out car manufacturers (makes change from governments :lol: - well directly any way)

Cheers for the Indie link. Balancing the io/repayment monthly income difference for the time being?

edit I also like the use of the "main-lining" phrase, most appropriate for debt addled people.

Edited by The B.L.T.

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Should be some used bargains around in 3 or 4 years if the PPI effect is significant. By then, there will be loads of cars up to 7 years old which have been sold via some subsidy or another. Whether they've been maintained properly or not is another matter though..

Given the ads VW are running talking about matching independent garage's service costs I would guess maintenance is being scrimped on in a big way - I also think those ads are very poorly thought out as firstly rubbishing the competition directly in adverts is generally considered not to play well and secondly it's effectively saying you were ripping them off previously. The ad agency and internal marketing bod that came up with that campaign both want sacking.

I also find the 85% on finance stats interesting as for new cars I'd say 15% cash buyers seems high. I suspect another good chunk of those, although seemingly paying cash, will have sourced it from a car bank loan or similar.

Edited by SNACR

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"Alongside competitive finance deals, the general public has been receiving significant injections of cash as a result of the mis-selling of payment protection insurance (PPI) which has been main-lining between £400m- £500m a month into household coffers through compensation schemes."

I knew I could rely on the British public to spunk their windfall on a new car (probably getting themselves into more debt) rather than to pay down their debt! :lol:

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Given the ads VW are running talking about matching independent garage's service costs I would guess maintenance is being scrimped on in a big way - I also think those ads are very poorly thought out as firstly rubbishing the competition directly in adverts is generally considered not to play well and secondly it's effectively saying you were ripping them off previously. The ad agency and internal marketing bod that came up with that campaign both want sacking.

I also find the 85% on finance stats interesting as for new cars I'd say 15% cash buyers seems high. I suspect another good chunk of those, although seemingly paying cash, will have sourced it from a car bank loan or similar.

Interesting on VW. I wonder if Kia's 7 year warranties pull in more revenue from people meeting the servicing requirements than the extended guarantee costs in failures etc.

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