Greece's financial crisis could be the latest stumbling block for Detroit's Big Three automakers on their road to profitability in the long-troubled European market.
Car sales in Europe for Ford Motor Co., General Motors Co. and Fiat Chrysler Automobiles NV are up this year. But all three automakers are likely monitoring the situation in Greece, which on Tuesday became the first developed nation to default on its loan from the International Monetary Fund. While Greece isn't a major market for the car companies, the collapse of the Greek economy and potential pullout from the Eurozone could have significant ripple effects that could send other European economies into distress. That could stunt any growth automakers have made there in recent years.
"I think Greece only adds to any level of apprehension (automakers have about Europe)," said Karl Brauer, senior analyst at Kelley Blue Book. "Every country matters, every region of the globe matters. Even a country as small financially as Greece is something every car company is going to be paying attention to... The concern is that the economy slipping backwards could impact car sales."
Ford, GM and FCA don't have manufacturing facilities in Greece, but all three automakers sell there. Whatever car sales do take place there are likely stifled. In the short term, cash withdrawals have been limited to 60 euros ($67) per day and banks are to remain shut until at least next Monday.
The bigger issue, though, is if Greece were to pullout of the Eurozone and return to its former currency of the drachma, the remaining Eurozone economies likely would suffer, leading to more difficulties for automakers trying to build and sell vehicles in the entire region.
"Despite the ongoing issues, a single currency encourages business and is in the best long-term interests of the European economy," Ford said in a statement Tuesday. "Eurozone governments should work to preserve the Euro, and any reform efforts should focus on improving the economic prospects in the Eurozone."
A GM spokesman said it's "really too early to tell what the impact might be." FCA declined comment.
Financial markets already are showing concern. Monday — when the Standard & Poor's 500 index dropped 2.1 percent — FCA shares fell more than 6 percent, GM shares dropped more than 3 percent and Ford shares fell about 2 percent. As overall markets recovered slightly Tuesday, GM stock was up 0.3 percent, FCA stock was unchanged and Ford fell 0.07 percent.
Jeff Schuster, senior vice president of forecasting for LMC Automotive, said depending on the outcome in Greece, automakers could stand to lose sales of anywhere from a couple hundred thousand vehicles to more than a million. LMC forecasts a small chance of Europe falling into a recession if things get particularly messy in Greece.
"It's definitely created jitters," Schuster said in an interview. "That would be substantial for these recovery plans that have been taking place."
Ford is in the midst of a transformation in Europe that's included cutting jobs and closing plants in an effort to turn a profit. The Dearborn automaker lost $1.1 billion before taxes in Europe last year, and lost $185 million there during the first quarter this year, a $9 million improvement from the same time a year ago.
Through the first five months of the year, Ford's European sales have risen 9.3 percent. FCA's have improved 6.7 percent through the first five months. GM last reported Europe sales at the end of the first quarter, down 13.6 percent. But sales of its Opel/Vauxhall brands, which the company is focusing on, rose 3 percent.
"Things are moving in the right direction there after having a long time period of being static," Brauer said.
Most of that progress has come in countries in Western Europe, where disposable income and consumer confidence is up. Europeans have been turning to highly profitable SUVs, the same as the United States. Russia still remains a trouble spot, and is now joined by Greece as an area of concern.
Late Tuesday, Greece and its European creditors were discussing a last-minute proposal by Athens for a new two-year rescue deal. EU officials have said Greece would lose access to more than 16 billion euros ($18 billion) in financial support once its bailout deal with the IMF expires.
"There's such a wide spectrum of scenarios," Schuster said. "We need to get a little clarity on what's going to happen."