Bigger is better, or so goes the automotive industry maxim that has seen manufacturers race across the world chasing ever-larger sales numbers.
So why is General Motors selling off its operations in Europe and South Africa, closing its Russian plants and halting sales in India? For many of the same reasons why Ford has tried to redefine itself as a "mobility company," rather than an automotive manufacturer, while Fiat Chrysler goes looking for a new partner and has hinted it might even sell off its two most profitable brands.
"As the (Detroit) Big Three look out at the landscape, they see dramatic changes coming in the concept of mobility," says Joe Phillippi, a veteran Wall Street auto analyst and now the lead at AutoTrends Consulting. "They are desperately trying to figure out the future business model and how they will fit in."
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Two big announcements this week highlight the challenges the domestic automakers face:
- Confirming widespread rumors, Ford on Wednesday said it would eliminate 1,400 salaried jobs in North America and Asia as part of a broader plan to shave $3 billion in costs
- A day later, General Motors announced plans to sell off its operations in South Africa and East Africa, while halting sales in India — though its Indian factories would continue to produce vehicles for export to other markets.
GM has already shut down in Russia, fearing that the collapse of its car market due to sanctions and an economic slump will last indefinitely. The Detroit giant also announced in March it would sell off its long-struggling Opel/Vauxhall brands, that European division running deep in the red since 1999, despite a series of turnaround efforts.
"These actions will further allow us to focus our resources on winning in the markets where we have strong franchises and see greater opportunity," GM President Dan Ammann said on Thursday morning.
GM's move runs counter to conventional automotive wisdom on several fronts. For one thing, it has become accepted gospel that the so-called BRIC nations — Brazil, Russia, India and China — spell the future of the auto industry. Then there is the religion of growth, manufacturers ceaselessly seeking improved economies of scale, with many analysts predicting only those companies capable of selling at least 10 million vehicles annually will survive.
GM nudged that figure last year, though it slipped to third in the global auto sweepstakes, behind both Volkswagen and Toyota. Once it completes the sale of Opel and the other newly announced moves it could slip behind Renault-Nissan, Hyundai-Kia and others, its global volume dipping to around 8 million.