Not surprisingly, the automotive industry featured heavily in the 2012 US presidential election, both in the pre-election debates and in the choices voters made; and for some, the decisive factor was General Motors.
Mitt Romney had argued that GM should have been allowed to file for bankruptcy protection, with a subsequent recovery built on private sector money rather than the proposed US$6.7bn of taxpayer assistance; and that the restructure of GM and Chrysler should have been without what some felt to be unnecessary nods to the unions that later backed Obama. But while Obama’s plan to bail out the country’s main vehicle manufacturers turned out to be crucial to the US presidential elections, it has proved equally important for the world’s automotive industry.
[quote align=”center” color=”#999999″]In the first three quarters of this year, at least 11 distressed automotive deals totalling €23m (US$30m) were done in the Europe, Middle East and African region…By contrast, there has been just one distressed deal in the US so far this year
In Europe, where austerity-wedded governments largely pursued scrappage schemes a fraction of the size of the US ‘bail-out’, the run up to the presidential elections was marked by gloom in the continent’s automotive industry, highlighted by Continental Chief Executive Elmar Degenhart’s revelation in October that the German component giant was having to support some of its suppliers. Europe’s car market had just shrunk at its fastest rate for 12 months, with nearly all major brands facing double-digit declines.
An idea of what the different approaches have meant for small sized suppliers in Europe and North America can be gleaned from mergermarket figures based on publically-confirmed automotive deals showing that in the first three quarters of this year, at least 11 distressed automotive deals totalling €23m (US$30m) were done in the Europe, Middle East and African region. This was a significant fall on the previous year, when 13 such deals were done totalling €150m. By contrast, there has been just one distressed deal in the US so far this year: Hopkins Manufacturing’s €11m acquisition of plastic parts manufacturer, F3 Brands, which resulted from the bankruptcy of Blitz USA the previous year. The year before, there were hardly any such distressed buyouts. It is true that some of this might be explained by much higher volume and deal activity in the European automotive industry than in North America or Asia, but this in itself does not necessarily counterbalance the old continent’s woes. French automotive supply companies CFAO, FCI and Chassis Brakes International all went to foreign buyers this year, none of them European. And while there were European acquirers in the top ten biggest automotive deals of the last ten months or so, two of these three deals were from the Volkswagen Group, while ironically the companies which suffered heavily in the US automotive industry crisis in 2009 – GM and Delphi – feature among the Asian and US buyers which dominate the table.
[quote align=”center” color=”#999999″]There is no longer a danger that smaller players in the European automotive supply chain will effectively be lost to fitter overseas buyers: it is already happening, and in some cases at distressed bargain basement prices
Surely what these figures – and the increasingly desperate moves of groups like Fiat and PSA Peugeot Citroen to cobble together some kind of structure, often with a US player – tell us is clear now: Europe’s car industry needs to restructure, but it has needed to do so for years. And this is just at the level of the major players. As Degenhart’s comments suggest, there is no longer a danger that smaller players in the European automotive supply chain will effectively be lost to fitter overseas buyers: it is already happening, and in some cases at distressed bargain basement prices.
Whatever one’s view of the Obama bail-out, the careful way in which his administration used its vast injection of government cash to force US automotive giants to restructure has paid off. Romney lost his gamble, and with elections now looming in some of Europe’s vehicle manufacturing economies, European politicians may begin to realise they have too.
The opinions expressed here are those of the author and do not necessarily reflect the positions of Automotive World Ltd.
Thomas Williams is Deputy Editor at Mergermarket.
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