Friday, July 27, 2012

More on the European Auto Industry

In the wake of the PSA Aulnay plant's announced closing, we have been looking at the European auto industry. A war has erupted between Volkswagen and Fiat. Sergio Marchionne, the head of Fiat and president of the ACEA, the association of European auto manufacturers, has charged Volkswagen with being "too aggressive" in its price discounting. Marchionne claims that VW, which is selling 2 million vehicles a year in China, is using its profits on Chinese sales to capture European market shares from less well-placed European manufacturers such as Fiat, PSA-Peugeot, and Renault. VW is outraged by the charges and is calling on Marchionne to resign his ACEA position. What's interesting here (assuming that there is some truth to the charges) is the way in which all competition has become global. In an industry like automobile manufacturing, you can't concentrate on your local or regional market and hope to overcome the advantages of the global winner. Some years ago, Claude Bébéar, the head of Axa, the French insurance giant, warned his fellow French business magnates that they had only one choice: "Get big and compete, or find a niche." In automobiles, there are few niches.

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