German supplier Robert Bosch says it will postpone investments in Europe in 2013 after miss ing its 2012 profit target because of declining sales in the region. BMI has long maintained a bearish outlook for vehicle production across Europe, and we are forecasting declines in many markets as autos companies reduce output and cut jobs in the face of falling sales ( see our online service, October 26 2012, 'BMI Overcapacity View Playing Out' ). This decline in production volumes is impacting the supplier segment across the region ( see ' Production Downturn Continues To Impact Supplier Segment ' , January 17 ).
In 2012, Bosch's global operating return on sales was 2%, below its 8% long-term target. Globally, revenue increased 1.6% to EUR52.3bn (US$69.7bn), although there was significant regional variation. In Europe, revenue dropped 2% to EUR29.7bn (US$39.6bn). In contrast, revenue in the Americas increased 9% to EUR10bn (US$13.3bn), and rose 5% in Asia-Pacific to EUR12.6bn (US$16.8bn).
BMI has long maintained that many auto companies will increasingly seek to shift their strategic focus away from Europe towards higher-growth markets elsewhere. We expect this trend to continue over the medium term, as we believe many European markets will face declining sales until 2014 at the earliest.
Indeed, passenger car sales declined 8.2% in Europe in 2012, to 12,053,904 units, and we expect a further decrease in sales volumes in 2013 ( see 'Bearish Sales Outlook Playing Out', January 17). On the back of these weak figures, many auto manufacturers have cut back output in a bid to overcome the substantial production overcapacity issue in the region. Further, many companies have cut investment in the region and announced large job losses. Such cuts in output have impacted the supplier segment, as Bosch's revenue figures suggest. BMI expects suppliers to continue to struggle in Europe as manufacturers continue to cut output.