European insurers quit covering Ford and GM suppliers
Soaked in bad news, GM and Ford received yet another dousing when their three big European credit insurers dropped them this week. Euler Hermes, Atradius, and Coface have all refused to write policies for suppliers trading with both automakers. The three giant insurance companies control more than 80 percent of the world's credit insurance (insurance companies typically pull their coverage when a client stops proving insurers with enough information to calculate a credit risk, or their overall risk profile has deteriorated). Without their credit cover, suppliers will be forced to either trade uninsured, cease trading, or ask for payment up front. Supply issues aside, this news only compounds the automaker's problems as it also weakens investor confidence, already completely slumped.
[Source: FT, free subs. req'd]
Reader Comments (Page 1 of 2)
moyoi 9:29AM (11/15/2008)
wtf, I know business is business, but why try to kill a company?
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Smegley 10:03AM (11/15/2008)
Might be some backdoor coordinated pressure from the European Union who is protesting the probable bail-out thru the WTO. Gives them some bargaining room. That would be my guess since it all happened from 3 separate companies at once overnight going into a weekend at that.
But on the other hand, it makes the bail-out that much more likely. Still seems like an odd move since Opel/Vauxhall and Ford have quite large operations in Europe, and are not hurting worse there than the other makers. Could be that this withdrawal of credit insurance is targeted at the north american ops which are legally separate entities - I dont see that above but it seems a likely scenario.
Hanoi Jane 10:06AM (11/15/2008)
No one is trying to kill they. These are market realities. Making a product no one wants will lead to this. This has been coming since about 2000, slowly GM had to sell asset after asset to raise money, first Huges Electronics then GMAC, TopKick (i am not sure they sold it), Hummer, now there are no more assets to sell, they are not selling cars (at profit) and there's no credit......and country is ABOUT (we are not there yet, the worst is ahead) to enter a recession.
If the worst is still ahead, and they are already nearly dead, why take a huge risk insuring them?
happy_penguin 10:49AM (11/15/2008)
I don't know how you can say nobody wants the product. Corsa and Astra are top sellers for Vauxhall.
happy_penguin 10:50AM (11/15/2008)
As well as Focus and Fiesta...
Hanoi Jane 11:00AM (11/15/2008)
Penguin you are right, Cobalt also sells in big numbers. The thing is that these cars are sold either at a loss or at a tiny profit. People want GM and Fords cars, just not at the price GM and Ford want to sell them at.
happy_penguin 11:32AM (11/15/2008)
Thank you Big Rocket. Now do you care to find the profit numbers for Corsa, Astra, Focus and Fiesta?
We're not talking about Cobalt or American cars.
Kitko 1:52PM (11/15/2008)
Smegley, you're a conspirator, aren't you...
EU has no power to pressure world's top three insurers to drop their lucrative (until recently) clients. They make money out of the insurance they provide, once they stop making them or the risk is becoming to high to make profit, they walk away.
There are insurers who do not insure 18 year old drivers with 300 hp cars, not because they don't want them do have fun and drive, it's just the risk is too high.
Kitko 2:05PM (11/15/2008)
Hanoi Jane
Cobalt? In what numbers? In what country? It didn't make it into top 20 in October. BMW sold more 3-series cars....
http://www.wsj.com/mdc/public/page/2_3022-autosales.html
andy 10:35AM (11/15/2008)
im sure this has to do with the European unions.
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Kitko 2:00PM (11/15/2008)
It's European Union. Singular.
You know, like in State of the Union Address, not state of the unions. Both doing terribly, anyway...
Samurai Jack 5:11PM (11/15/2008)
Um, what do you call the organizations for factory workers in Germany, France and Spain when you refer to them collectively?
European unions.
It's possible that's what he meant.
Avinash machado 10:39AM (11/15/2008)
The end is near!
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happy_penguin 10:46AM (11/15/2008)
"proving insurers with enough information to calculate a credit risk"
I believe you meant "providing".
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Swede 11:05AM (11/15/2008)
Insurance companies have one goal: make money. To suppose they have a hidden agenda of bringing american automotive manufacturers down is just ludicrous.
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Hamud 11:22AM (11/15/2008)
Isn't making money the primary goal of every company in the world?
I could understand they doing this with Ford and GM in NA, but in Europe?? Come on, Ford and GM are among the best in Europe...
Hanoi Jane 11:36AM (11/15/2008)
Hamud, Europe is officially in recession. How much can they make in there?
Kitko 1:58PM (11/15/2008)
Hanoi Jane,
In other news, US are in the recession too. And a deeper one.
"The OECD said the U.S. economy is likely to post 0.9 per cent negative growth in 2009, Japan will contract by 0.1 per cent and European economies by 0.5 per cent."
http://www.cbc.ca/world/story/2008/11/13/germany-recession.html
"The US is expected to contract by 2.8% in the final quarter of this year." OECD predicts 1.0% drop for Eurozone.
http://news.bbc.co.uk/2/hi/business/7726905.stm
Jon 12:49PM (11/15/2008)
Wait.You'll see a move by Barack&Co to bail them out. The unions are their power base.
I,however cannot see the sense in floating a bloated GM full of overpaid perk-addicted union workers and CEO's for a few months more at the taxpayer expense to face the inevitable.
They need to restructure and become lean and mean and kick out the union fatcats.
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Abe 1:01PM (11/15/2008)
How many times have European automakers had to be bailed out? Fiat? Renault (once gov't owned)? They now even asking aid from the EU, and yet no one is complaining or rallying against that. When they're doing well they look down on other companies, but when they're in near financial ruin and collapse, they beg on their knees for dear mercy and everyone is so quick to rescue them and the whole world forgives them for their mistakes. But when America is trying to help its own automakers from collapse (which is a very rare occasion), Europe gets upset because it "feels" automakers should fend for themselves. Europe is the last to talk here. They rescue their own businesses all the time and have extreme laws that protect employees, certain industries and products, without these laws they would've been wiped out by sheer competition and unemployment would be at least twice as what it is now. Note to Europe:
Leave America alone. Let it take care of its own businesses so that they don't collapse, if they do then chances are it will have a damaging affect to your own economies, industries and businesses. Like it or not, a great deal of global economy revolves around the US economy. Instead of complaining, how about lending a hand to the US and make yourselves useful to this global economic downturn.
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