Who cares about Europe? We all should

This is a very important editorial by Keith Crain of Crain.com that everyone should read and understand, as it truly effects everyone.

Just because you’re a single-point dealer in the middle of the United States with a franchise from one of the Detroit 3 doesn’t mean you should not worry about Europe.

Europe is in tough economic condition. The automobile sector is getting hit hard. Sales are falling, and there is no end in sight. Many European automotive executives want governments to intercede with a stimulus to help sales.

Even the few companies that appeared to have avoided the financial doldrums are now sharing the red ink.

So who cares in America?

Everybody should be concerned.

The economics of Europe will have a big impact on the automobile business in America.

Among many other things, auto manufacturers, suppliers and dealers will notice that capital investment is going to shrink.

You can’t lose billions of dollars in Europe and not have it affect the entire organization. Certainly the emphasis is going to shift to more prosperous markets of the world. China will continue to be very important, along with North America.

In some ways it will be the most difficult for General Motors, Ford Motor Co. and Chrysler Group. Money that otherwise might have been spent in North America on everything from products to facilities to marketing will have to be cut back to compensate for the dismal results in Europe. That’s a fact of life.

Regardless of how successful North American sales and revenue are today, they can’t make up for the disaster in Europe.

As the automobile industry becomes increasingly global, it will be impossible to ignore the results from one region and their impact on the entire operation.

Once upon a time, most American car companies had independent operations around the world. For example, what Opel did was important but didn’t affect GM investments planned for the United States.

Today there’s a ripple effect. Whatever happens in one region has a significant impact on the rest of the world.

When products are delayed or postponed in North America, it could be because the company is compensating for multibillion-dollar losses in Europe. Suppliers will have the same challenges.

We don’t live on an island and haven’t for years. We can’t expect global auto companies to live like that either.

   You can reach Keith Crain at kcrain@crain.com