Europe Auto Sales Lowest Since '94

Auto sales in Europe have slumped to their lowest pace in 18 years and they may not improve anytime soon.


Two sobering headlines from Ford and Volkswagen as the automakers reported first half sales in Europe. Ford has already warned that its second quarter losses from international operations will triple and the majority of that weakness is due to lower sales in Europe.

In the first half of this year Ford sales in Europe dropped 10 percent, with the slowdown being especially noticeable in June when sales dropped 16.1 percent. In France, Italy and Spain Ford saw big declines in sales, while Germany (the largest auto market in Europe) was flat.

"The economic environment remains very difficult”, said Roelant de Waard, Ford of Europe's sales chief.

With much of Europe sliding back into a recession auto sales have dropped to the lowest level since 1994. Compounding the problem for automakers is a price war in the industry that is cutting into already squeezed margins.

The troubling news for investors is that sales in Europe may not get better anytime soon. Volkswagen released first half sales that showed a slight gain overall (up 1.8 percent) in Europe. The German automaker warns that it’s not getting euphoric about those results given the weakness in Europe. “The economic situation, particularly in Western Europe, remains tense and difficult”, Group Board Member for Sales Christian Klingler said in Wolfsburg on Friday.

Europe represents about 22 percent of the global auto sales. As business in Europe has slowed, the losses for automakers have accelerated.

On Thursday, French automaker Peugeot announced it would close an assembly plant and cut approximately 8,000 jobs. Friday, Moody’s said it would review Peugeot’s debt rating.

-By CNBC's Phil LeBeau

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