EUROPEAN SLUMP BLAMED AS MANUFACTURING STALLS

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Tough trading for manufacturers
Tough trading for manufacturers

European trading conditions are taking a tough toll on several manufacturers and suppliers.

Ford announced that it will close it’s Genk production facility in Belgium by 2014. Ford also confirmed that its Southampton Transit facility will close alongside a diesel plant in Dagenham. Total job loses stand at more than 5500.

PSA Peugeot Citroën has also been having difficulty and had to secure a €7 billion state guarantee for its finance arm.

Dark times for Europe indeed, and it’s not just VMs that are feeling the pinch. Parts supplier GKN has also issued a profits warning for 2012, blaming the slump in car sales in Europe.

The company’s interim management statement shows that while trading profit is up on the same time last year, expectations for the full year have had to be revised down.

“Macroeconomic conditions have deteriorated in recent weeks,” reads part of the statement, “and some softening in order books is now evident, particularly regarding European automotive and industrial markets.

“The fourth quarter is anticipated to show the usual seasonal improvement, although the softening markets are expected to have some impact on performance.”

Speaking to The Financial Times, analysts at Killik & Co said they expect earnings downgrades of around five percent. Oriel Securities said: “Our initial instinct is that full-year pre-tax profit will comeback to £480m-£490m from £510m.”

There could be light at the end of the tunnel, however, with news that the UK finally came out of its double-dip recession with 1 percent growth between July and September.

There is already evidence of investment in the aftermarket, HgCapital’s support of The Parts Alliance is just one example, so this upturn could prompt the influx of more funds. The service and repair sector could still boom further as new car sales drop.

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