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How is Volkswagen shrugging off the European slump?

30 October 2012

UK car manufactures have been hit by a weakening demand in Europe. Despite this, shares in Volkswagen have increased and the company remains on track to match its 2011 operating income. In contrast, Ford has announced the closure of two UK plants. Raising the question: What are they doing differently?

On Wednesday, 24 October, Volkswagen shares climbed by 3.7 per cent whilst many of its competitors' saw a fall. Volkswagen has largely shrugged off the European slump by relying on growth in the US and China.

By leveraging strong sales in these markets Volkswagen has been able to offer cut-price deals in Europe, helping it to gain market share in its home region.

Although profits did fall during Q3 the German group is still on track to meet its 2012 goals. It aims to beat the previous year's sale revenue of 159.3 billion Euros and match 2011 operating profits of 11.3 billion Euros.

Group Board Member for Sales, Christian Klingler, said, "Our worldwide deliveries grew further in September with a particularly strong performance in Central and Eastern Europe, North America and the Asia-Pacific region.

"However, the present uncertain situation in the eurozone and current overall market conditions require close monitoring and will be receiving our full attention in the fourth quarter as well."

In comparison Ford revealed plans to close two UK plants next year. The news came a day after Ford said it had started consultations on closing its factory in Genk, Belgium.

Stephen Odell, Ford's chairman, said that the changes reflected the economic and business conditions. He added "We've seen a dramatic decline in the economic situation and indeed the automotive industry as a whole."

In terms of vehicle numbers the company is running a fleet around 14 million a year in Western Europe, 20 per cent below the numbers in 2007.

It seems as though the car manufacturers that are  placed to take advantage of emerging markets are the ones that are able to weather the European crisis.

Paul Everitt, Chief Executive of the Society of Motor Manufacturers and Traders (SMMT), said. "The decline in European vehicle markets and the uncertain future growth prospects has resulted in a number of vehicle manufacturers restructuring their operations.

"These are difficult times for the European automotive industry as manufacturers adapt to new market conditions and changing patterns of global demand."

Suppliers to car manufacturers should regularly review customers and their credit limit. As the future of the European market remains uncertain being vigilant with credit control procedures is even more important.

This entry was written by Ranjna, posted on 30 October 2012 Bookmark the permalink. Follow any comments here with the RSS feed for this post. You can post a comment.

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