Over the last few years we have seen the rise and fall of a number of major, seemingly unsinkable vehicle manufacturers, and this picture continues to be redrawn. Like old battleships, although they appeared impressive they proved to be outmoded; too inflexible to adapt quickly enough to major changes. Nautical analogies aside, it raises the question why some OEMs have prospered and others now face drastic restructuring in order to survive. The European carmakers are a good case study. They all depended heavily on the European market, so its sharp decline has obviously impacted on revenues. But there are clear ‘winners and losers’ and this seems to be reflected in the level of an OEM’s 'footprint' in the real growth markets of China, India, etc.

Since most OEMs, if not all, have joint venture operations in China, the profits being posted represent a mixture of loses in Europe offset against gains elsewhere. But what are the ingredients in making this kind of successful venture in one market that can largely offset the losses being made in another? Clearly it will be a combination of factors; established partnerships, brand recognition, the right mix of models, good pricing and marketing, the list goes on. To add further complication, markets like China, India, Brazil and Russia have all experienced a degree of slowdown in growth (albeit relative), increased labour costs and changes in consumer demands. Since those playing catchup in the developing markets can’t turn back the clock the only option seems to be to invest heavily in expanding manufacturing and sales infrastructure; not easy when carrying the burden of falling profits and overcapacity in Europe.

Predictions are that the European economy still has someway to go on the road to recovery before car sales will get back to anywhere close to previous levels. And it seems certain that a great deal more painful restructuring of European manufacturing operations will be needed to deal with the levels of debt and overcapacity. However, looking at the US automakers, a reversal of fortune is possible. Granted the US economy has recovered more strongly than previously anticipated but the restructuring of its automotive manufacturing sector has seen much leaner, more efficient operations emerging. The US car makers have been posting healthy profits made on lower volumes. It remains to be seen how the European manufacturing map will change.