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Stock market: Trouble in store from Americans

The auto analysts in Europe who cover the stock markets concentrate on the financial performance of the listed carmakers.

Reams are written on BMW, Mercedes, VW, Peugeot and Fiat but very little on the two companies that take 21% of the market between them – Ford of Europe (FoE) and General Motor Europe (GME).

Little is known about their financial performance because the parents are US-listed and do not need to do much more than disclose the headline figures.

But Max Warburton of UBS has dug beneath the surface to discover what is being achieved by the Americans in Europe and found that they could just be about to cause trouble.

While the three reforming heads of Peugeot-Citroën, Renault and Fiat – respectively Christian Streiff, Carlos Ghosn and Sergio Marchionne – are telling investors how they will regain share in their domestic markets, FoE and GME are actually nicking it.

The Americans are putting up a fight after a long decline since 1955, when the domestics also lost market share to the luxury brands and Asian brands. Both companies have gained market share this year, with particularly strong third quarters, thanks to GM’s Corsa and Ford’s Mondeo and S-Max.

Warburton reckons that FoE’s last year of losses was 2003; and that 2006’s success will be trumped with a 2.3% pre-tax margin this year. GME finally turned around last year, and is expected to make a 1.1% margin. GME’s recovery is not as developed as FoE’s, but Warburton predicts more to come through vastly superior productivity – GME makes 31 cars per employee; VW makes 16.

Both American groups’ European stronghold is in the UK where they are strengthening market shares of 17% and 15% respectively, Ford has won in the B-segment and MPVs. Vauxhall has struck gold in B segment and SUVs. The third quarter was particularly strong for Vauxhall’s Corsa in the UK. Segment share grew by 1.4%.

Says Warburton: “The Americans are better positioned than most expected and are willing to price aggressively and push hard in fleet. They are not going away.”

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