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Oracle of Delphi

Wait, can all this activity really be Europe?

7 posts in this topic

Jason Stein

Automotive News Europe

December 10, 06:01 CET

Markets are booming. Factories are expanding. Dealers are lining up to be considered for new franchises.

And you can’t see the end in any of it.

This isn’t the model we’ve grown accustomed to in Europe of late. But it’s real.

How refreshing is it to sit with a leading executive in Europe and have him tell you he is going to exceed every expectation in the coming years?

How refreshing it is to be in the game in Russia.

General Motors Europe President Carl-Peter Forster has a vision. It is more plants, new agreements and higher revenues. And he wasn’t talking about western Europe.

Truth be told, the Russian market is the saving grace in everybody’s European plans. When even the most conservative growth estimates for western Europe sound wildly optimistic, Russia is the game-changer. Want to make your European sales look better? Just include Russia.

Ask Forster. He’s upping his forecast virtually every minute.

Russia is on track to become Europe’s largest market by 2011. Forster wants to build more Opels there. He wants more capacity. And last week came word that GM is bidding for a big stake in Russia’s largest automaker, AvtoVAZ. When it comes to Russia, GM is in.

“The growth isn’t slowing and we will be there,” Forster told us recently.

The trouble is, so will everyone else.

GM isn’t the only one looking for partnerships to realize growth plans in such a hot market. Toyota, Ford, Volkswagen, Renault -- to name just a few -- all have Russia on their radar.

The forecasters say the market is there. But draw a circle around everyone’s expectations and it’s simply unrealistic. It’s like adding up annual sales for the coming year based on January auto show interviews.

They all won’t happen. So, what to watch for? And what to watch out for?

1. A rapid expansion in capacity. (Careful: You might not need it all.)

2. A rapid expansion in dealerships. (Warning: Are the economy and government stable enough?)

3. A rapid drop in the price of oil. (Attention: Russian wealth is built on crude. Any hint of a decline and the party is over.)

For now it continues. The engine is humming. The future is endless.

Just keep an eye on that rear-view mirror.

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Wouldn't it be deliciously ironic if GM and Ford simply abandoned the North American market to the Japanese? Already, GM sells more vehicles outside of North AMerican than inside. China and Russia are surpassing the size of the Canadian market already. Brazil and India are following suit. GM is strong in all of those countries. The U.S. may be the largest single market, but it is becoming unprofitable because there are too many players who view the market as 'easy.'

Which then leads us right back to the only closed market in the world: Japan.

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I think it would have to be decades of continual losses before GM and Ford abandoned the North American market. We still are extremely large even with the shrinkage expected...doesn't the US sell about 9.5 million vehicles a year? I think China is about 8 or 9 million, although it will probably surpass us fairly soon.

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Isn't the population in Russia declining? How is business there going to be sustainable?

Mostly because of the mail order brides. How good are they for the economy anyways? :P

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I read a very scary book recently, "America Alone" and the author postulates that one of the biggest threats to the world order today is the declining population of Russia. He fears that at some point they will not be able to defend their own borders and, well, 1.2 billion Chinese would welcome the room and the natural resources. Not a cheery prospect, indeed.

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I think it would have to be decades of continual losses before GM and Ford abandoned the North American market. We still are extremely large even with the shrinkage expected...doesn't the US sell about 9.5 million vehicles a year? I think China is about 8 or 9 million, although it will probably surpass us fairly soon.

I believe it is about 16 million per year for the US.

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