A Lesson For Detroit From VW

Chrysler sells very few cars overseas, so it may never recover from the auto industry recession. GM and Ford (F), which have fairly large operations outside the US, should look at VW’s results for the last quarter. The largest car company in Europe posted profits that were 83% lower than last year at $398 million, but at least VW had a profit.

VW’s results in Europe were as poor as might have been expected, but Brazil and China came close to making up the difference. VW is one of the largest car companies in the world’s most populous country, a distinction it shares with GM.

The VW numbers demonstrate that the future of the car industry may not be in America at all. The US market will only produce 10 million light vehicle sales in 2009. Industry experts are worried that the number will stay low because of the economic crisis and a new habit that American buyers have of keeping their cars much longer than they used to. One by-product of higher quality cars is that they can stay on the road much longer. The incentives to purchase a new car every two years have gone away. It is telling that VW has almost no market share in the US.

China and Brazil, on the other hand, are posting double digit vehicle sales increases year-over–year. VW has put itself into a position to benefit from that as much as any other car company in the world

GM may simply want to move its headquarters to Shanghai. That is where all the action is.

Douglas A. McIntyre