Fear in German Automakers' Hearts
Commentary. Doron Levin is a columnist for Bloomberg
News. The opinions expressed are his own.
By Doron Levin
Geneva, March 6 (Bloomberg) -- Last week, German Chancellor Gerhard Schroeder
met with about two dozen Union of German Auto Industries members in Berlin to
discuss the rift between the U.S. and Germany over Iraq.
Juergen Hubbert, the head of DaimlerChrysler AG's Mercedes unit, read aloud letters
from U.S. customers asserting they would never buy Mercedes vehicles again. The
letters expressed indignation that Germany had spurned the U.S. request to support
military action in the Persian Gulf.
``Hubbert explained we had to do what we could to improve relations with the U.S.,''
according to Carl-Peter Forster, chief executive officer of Adam Opel AG, the German
automaker owned by General Motors Corp., who attended the meeting.
The meeting between Schroeder, who was elected on an anti-war platform, and the
automotive trade group followed full-page advertisements in U.S. newspapers the
week before, sponsored by German automakers and others, affirming German-U.S.
friendship.
Strained relations between the two countries over a possible war with Iraq threatens a
German auto industry that depends on exports to the U.S. for a significant chunk of
its revenue and probably an even bigger proportion of its profit.
``In the interest of the German automotive industry and the interest of our companies,
it is essential to overcome the tension that has now come to bear on
German-American relations,'' said BMW Chief Executive Officer Helmut Panke.
War Jitters Evident
The last time there was a U.S. political backlash against a foreign auto industry was
during the 1980s and early 1990s when some consumers bypassed Japanese-built
imports because of trade tensions between the countries.
Sales of some German luxury car brands already are reflecting consumer
nervousness over the prospect of a war in Iraq. On Tuesday, Porsche AG said it was
cutting production of ``several thousand'' 911 and Boxter models, due to slow sales.
The effect of the stronger Euro, which has gained nearly 30 percent in value against
the dollar in the since early 2002, also has hurt German exports to the U.S. The
decline in value of revenue derived in dollars gives German manufacturers less
flexibility to match deep discounts by U.S. automakers.
To some Americans, the German government's determination to avoid supporting a
U.S. war against Iraq signifies ingratitude for U.S. military protection during the Cold
War, as well as financial aid under the Marshall Plan following World War II.
Porsche Sales Down
Germans, based on my impression from dozens of interviews at the 73rd International
Motor Show here, remain by and large friends, admirers and eager trading partners of
the U.S. They also are ultra-cautious about committing the nation to armed conflict
based on their own tragic history of military aggression.
``There's no question we want the disarmament of Saddam Hussein, the differences
we have are on the means,'' said Hans Riedel, executive vice president for sales of
Porsche AG. ``As long as there is room for diplomacy it should be pursued.''
The U.S. is Porsche's single biggest market, accounting for about 46 percent of its
unit sales. In the first two months of 2003, U.S. sales are off more than 25 percent
from a year earlier.
So far, U.S. sales of Mercedes are up 6 percent in 2003 in an overall U.S. automotive
market that is down almost 5 percent. The rest of this year will be critical for the
brand's new super- luxury Maybach model, selling from $359,000 to $417,000. Of the
1,000 being built, 40 percent are for the U.S. market.
``We are convinced American consumers can distinguish between politics and quality
products,'' said Volkswagen spokesman Guenther Scherelis. In the first two months
of the year, VW's sales in the U.S. were off 8.3 percent.
The German automaker best positioned to avoid potential political backlash might be
Opel. Despite its ownership by General Motors, the company and brand are
perceived as genuinely German in Europe and Opels aren't sold in the U.S.
The Public Face
For now, German automakers are putting on brave faces, telling the outside world
they aren't overly concerned that political tension between the countries will chill their
sales. The reality is different: Nervousness abounds because of war fear, a
strengthening Euro and some evidence of backlash.
The German auto industry wants to see Saddam Hussein out of power. Hence, many
German auto executives support U.S. policy. ``Personally, I think without the
presence of U.S. pressure on Iraq this part of the world would be out of control,'' said
Axel Schulmeyer, vice president of sales and engineering of Edscha AG, an
automotive supplier based in Remscheid.
As recent polls and elections in Germany have shown, Schroeder's popularity is
waning, and thus his ability to press a political agenda based solely on avoiding
military involvement at any cost. The time has never been better for the U.S. to
consider German sensitivity against military action except in self-defense -- and for
German politicians to reflect on the nation's relation to U.S. carbuyers. |
