Europe automakers seen changing gears
European automakers have put on a brave face and fared better than their U.S. counterparts but a reality check looms as surging fuel and raw material prices put earning forecasts at risk.
Analysts say France’s PSA Peugeot Citroen (PEUP.PA: Quote, Profile, Research, Stock Buzz) and Renault (RENA.PA: Quote, Profile, Research, Stock Buzz) could miss their operating margin targets, forcing them to either trim targets or boost cost cutting, possibly as part of mid-year results due this month.
“It’s unrealistic to assume that Renault will achieve its original guidance,” said Pierre-Yves Quemener, head auto analyst at Landesbanki Kepler.
“The chances of “commitments miss” are growing week after week as cost inflation bites each time deeper and as the macro environment is depressing volumes.”
PSA and Renault, Europe’s No 2 and No 6 makers, have declined to comment ahead of their mid-year results cheap payday loans.
Sergio Marchionne, CEO of Italy’s Fiat (FIA.MI: Quote, Profile, Research, Stock Buzz), which ranks fifth, has stood by his group targets.
“Despite what is happening, we are not only keeping our 2008 profit and cash flow forecasts, but we confirm those for 2009,” Marchionne told a conference this week.
But in a year when the price of oil is up 45 percent, some steel prices are up 50 percent and other raw materials such as aluminum have also surged, assumptions and forecasts are proving hard to hold on to.