German automakers ready for weaker USA market

European car manufacturers are preparing for stormy weather in America. Steady sales for the likes of BMW and Mercedes, and any black ink at all, will be applauded by investors as something of a triumph as the premium car makers fight off weak U.S. market conditions, and see their bottom lines buffeted again by the dollar's weakness.
Since 2002, the dollar has lost nearly 40 percent of its value against the euro, beaten down by the U.S.'s massive trade deficit, a negative savings rate, an unsustainable consumption binge and the sub-prime mortgage debacle.

And the move to more fuel-efficient cars in the U.S. may benefit the Japanese more than the Europeans, as Americans shrug their shoulders about diesels and embrace smaller cars with improved gasoline engines.

As the Europeans, and that's mainly the Germans, pray for a recovery in the dollar, they have been forced into unpalatable action to protect their sales. They've had to cut prices and therefore profits, and take expensive foreign exchange gambles by using hedging operations to insure revenues against further dollar weakness.

VW scouring the U.S.
German luxury carmakers BMW and Daimler have moved more production to their new factories in South Carolina and Alabama to protect themselves from the dollar's dive. German mass car manufacturer VW, which owns luxury vehicle maker Audi, is thinking about a raising production at its Mexico factory, and is even now scouring the U.S. for a suitable site for a new plant.

Despite all this, some European carmakers, which have no presence in the U.S., are contemplating moving here. Fiat of Italy, which admitted defeat in the 1990s and gave up on America, is thinking about returning, this time by opening a factory to make sporty little Alfa Romeos. Fiat is apparently banking on the U.S. market returning to health.

But that won't be just yet.

According to Professor Ferdinand Dudenhoeffer, managing director of Bochum, Germany-based automotive analysts B&D Forecast, U.S. buyers of premium cars will not avoid the overall sales malaise in 2008. More at Detroit News