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European consolidation needed to sustain profits, GM's Wagoner says
By JESSE SNYDER | Automotive News Europe
FRANKFURT - The European auto industry must consolidate because too many companies are splitting the European new-car market to achieve sustainable profitability, says General Motors Chairman Rick Wagoner.
"You cannot have six or seven manufacturers each with 8 to 10 percent of the market and make money," Wagoner said in an interview at the Frankfurt auto show. "I suspect that will change."
Europe's combination of several smaller mass-market automakers, virtually flat sales and market fragmentation forces automakers to spread their resources too thin, he suggested.
Instead of focusing on a limited number of platforms and achieving economies of scale to boost profit margins, European manufacturers are adding platforms, deriving more models per platform and developing multiple powertrain families, he said.
"We're all spending more to do more models," Wagoner said. "And you have to develop both gasoline and diesel powertrains, plus hybrids - and fuel cells if you have any faith in those at all."
The added cost of developing and manufacturing so many variations without a "critical mass" of market share makes it impossible for European automakers to generate consistent, healthy profits, he said.
He defined a desirable critical mass as 15 percent to 20 percent of the European market - if the manufacturer can limit its model range to four platforms on a six-year product cycle. Otherwise, automakers simply cannot maintain profitability.
"There must be further consolidation," Wagoner said.
GM is one of only three European makers that has been unprofitable in recent years; the other two are Ford Motor Co. and Fiat Auto S.p.A.
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