By most accounts Russia will be the largest car market in Europe sometime within the next five years. General Motors (NYSE: GM) sells about 250,000 vehicles in the market, but is anxious to get a stronger foothold. Things have not worked out.
Several companies have been competing to get a piece of Russian car maker Avtovaz. Yesterday, Renault announced that it would pick up a 25% interest in the company. According to MarketWatch, the European car company will pay $1.25 billion for its stake.
The announcement is a blow to GM, which has to increase its sales overseas. The U.S. car market is slowing and is expected to drop as much as 7% next year. The No.1 U.S. car company also faces increasing domestic competition from Toyota (NYSE: TM) and Honda (NYSE: HMC), so it faces smaller share in a shrinking market.
GM has had real success in China where its is the leader in car sales along with VW. But local car manufacturers want a larger slice of sales there. GM's vehicle business in Europe is mature. That leaves South America, India, and Russia as the largest potential markets.
In October, GM's share price was up 40% for the year. Due to a fear of falling North American sales, it is now down about 8%. It needed the Russia deal.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
12-09-2007 @ 4:28PM
moon said...
Buy GM i've always bought GM and always will they've been extremely reliable. Please buy Amerian to keep the US market thriving. It's a bunk that American care and trucks are nor reliable crap US amde vehicles are just as good as any foreign market. US vehicles are also getting much better in quality and have been for quite some time.Buy American please even if it's not GM.Go GM go go go.Gooooooooo American manufacturers show the world we are the best God speed to all, happy holidays!!
12-09-2007 @ 6:10PM
Paul McCoy said...
Don't buy a car today, because what has happened to the price of homes will soon happen to the price of cars. The American Auto Industry did this to themselves with their "short term" thinking of cutting wages and their workforce in half to save money up front. They off-shore MOST Design, Engineering & Manufacturing and today the housing market is going bust -- and soon will the auto industry. So, where's the American Auto Industry BIG GAIN now?!! They made a short term BIG profit, but they will soon suffer an even BIGGER long term disastrous loss.
12-09-2007 @ 6:31PM
Paul McCoy said...
Remember when "our" US government tried to keep the Russian governments behind us in technological information??? That was when it was OUR government and NOT the sole property of an elite aristocracy hell-bent on profits over OUR national security. Corporate America's greed is reviving a "sleeping giant" that fundamentally hates us and thereby they are committing acts of treason. Let American Industry pay for the mess they've made by taxation. Let GM send THEIR children to fight Russians, when Russia nationalizes American factories.
12-10-2007 @ 2:12PM
jpdr1100 said...
Russians don't "fundamentally hate us."
Their government may not like our government.....
12-10-2007 @ 11:25AM
vcs745 said...
This news about GM not getting into the Russian market is in my view...good news for GM....screw Communist Russia and all the little KGB agents running around killing people.
12-10-2007 @ 2:12PM
jpdr1100 said...
Try reading the article again. It does NOT say GM is not getting into the Russian market; they are already in it, and have been for years.
They just got beat by the French in acquiring a larger part of a Russian producer.