How Bad is the News for GM and Ford?

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Data released by the European Automobile Manufacturers’ Association on Friday show that passenger car registrations for the region are down 4.8 percent in October. Passenger car registrations for the first 10 months of the year are now down 7.3 percent compared to 2011.

American manufacturers Ford (NYSE:F) and General Motors (NYSE:GM) lost about $1 billion between the two of them in Europe for the third quarter. The region has been suffering from a glut of overcapacity as demand evaporates in the face of brutal economic conditions. Car makers have been trying to scale back production and reduce costs in order to mitigate losses, but progress has been slow. Ford recently bit the bullet and announced that it would be closing three plants in the region. The announced closure of the company’s plant in Belgium has sparked days of protest by union workers.

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GM has pursued a different strategy, aligning itself with French car manufacturer Peugeot, which has also been devastated by the economic downturn. Now, a parts-buying and partial production relationship between the two companies has been put on hold. The proposed relationship and $2 billion in savings through 2015 hinged on the ability to reduce workforce, but now that the French government is underwriting bonds issued by Peugeot’s financing arm, the company is not allowed to lay off workers.

Spain and Italy were the hardest hit in October, with car registrations dropping 12.4 percent and 21.7 percent respectively. Over the past 10 months, the only major European market to show any auto-market growth was the United Kingdom, with registrations climbing 5 percent for the period.

Separately, shortly after its Model S won the Motor Trend Car of the Year award for 2013, Tesla Motors (NASDAQ:TSLA) announced that it had opened its first store in Canada. The new store front in Toronto marks another step toward the company’s goal of 24 locations in North America and 34 worldwide by the end of 2012.

Having demonstrated that electric vehicles are ready to compete in the market, GM is set to roll out its own power-packed EV next summer. The Chevrolet 2014 Spark, which reportedly boasts a whopping 400 foot-pounds of torque and 130 horse power, will debut at the Los Angeles Auto Show later in the month.

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