Wolf Richter: Deep Trouble at the Core of the Eurozone

By Wolf Richter, San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Cross posted from Testosterone Pit.

In France, new vehicle registrations have been plunging. Already down 17.8% in December and 20.7% in January compared to prior year, they sank 20.2% in February. Year to date, the results were even worse than they appear. With 43 selling days in 2012, against 41 in 2011, sales per selling day were down 24.2%. French automakers suffered the most. In February, PSA Peugeot Citroën was down 29.2% and Renault 28.5%.

Last year, the prime à la casse—the cash-for-clunkers à la Française—was doping sales through March 31, 2011. The CCFA (Comité des Constructeurs Français d’Automobile) expects the nosedive to accelerate next month. It also estimates that sales for the entire year will decline by 7-10%, which may be a tad optimistic, given the headwinds France faces.

Layoffs and plant closings will be tough to undertake during the election, as they become highly politicized. Labor Minister Xavier Bertrand issued a stern warning to Philippe Varin, CEO of PSA; layoffs as part of its alliance with GM would be out of the question. Already in November, Varin was summoned by President Nicolas Sarkozy and told to reconsider laying off 6,800 workers.

And layoffs might even be tougher to undertake after the election if socialist François Hollande wins. Last quarter, the French economy lost 31,900 jobs, the first quarterly job losses in two years, and unemployment rose to 9.8%. These trends will put immense pressure on Hollande to do something visible. And for auto manufacturers, it will mean even greater difficulties.

The German auto industry, which is far larger than its French counterpart and plays a disproportionate role in the German economy, is still basking in last year’s glow. Audi, BMW, Daimler, Porsche, and VW just announced record worldwide sales and profits for 2011, and record bonuses for their beaming employees. GM’s subsidiary Opel and Ford’s subsidiary Ford-Werke, however, were struggling in 2011. And now the rest of the industry is getting hit, too. Registrations in January were down only 0.4% due to massive fleet sales. But February was a nightmare: down 30%. The Abwrackprämie, Germany’s cash-for-clunkers, which ran through the summer 2011, might explain part of it. But compared to the last February without cash-for-clunkers, February 2008, sales were still down 15%.

It’s not helping that gas prices are at an all-time record high—$8 a gallon. And for months, manufacturers have been trying to boost car sales with rebates. Even Porsche jumped into the fray. Boxsters for April delivery were offered at a discount of 14% by online dealer www.meinauto.de—possibly the deepest discount ever for a Porsche. At the other end of the spectrum, Opel Astras were offered “up to” 29.9% off retail price. Nosebleed discounts (or rebates in the US), crashing volumes, billowing inventories, and overcapacity are the bane of the car business, and if they occur at the same time, the industry gets into very serious trouble and needs to restructure to reduce capacity.

But layoffs aren’t easy in Germany. Chancellor Angela Merkel got personally involved in protecting Opel factories during the financial crisis and tried to broker the sale of Opel to keep GM from shutting it down. While the deal fell apart, the restructuring agreement survived and prevents GM from closing any plants until 2014. This is the desperate backdrop for the alliance between GM and PSA, a mind-boggling non sequitur: GM lost $15.6 billion in its European operations since 1999 and had to dump or shut down a whole slew of brands and alliances during its bankruptcy—only to now drive down that same cursed road again, but this time with US taxpayer money.

There were other signs of a kink in Germany’s growth trend: tax revenues in January declined for the first time in 17 months. Experts at the ministry of Finance consider it significant that the trend of growing tax revenues was broken and cite as primary reason the economic slowdown late last year. Among the still growing taxes: sales taxes were up a very disappointing 1.3%, after rising 5.5% on average over the last 12 months; and tobacco taxes jumped by 12.2%.

Yet, the German unemployment rate had dropped to a two-decade low and was touted by politicians in the governing coalition, from Merkel on down. And the media hyperventilated about Germany’s superior economic model. But a recreational dive into the Federal Labor Agency’s monthly report for January reveals another, much darker, story. Read….  German Unemployment Obfuscation.

On the other side of the Planet, after an endless stream of horrid reports on the tragedy of the March 11 earthquake and tsunami, and the subsequent nuclear catastrophe in Fukushima, there was something … lighter. And cynical. And in a deeper sense, truthful…. Nuclear Contamination As Seen By Japanese Humor (mostly visuals).

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  1. Kiste

    The German “cash for clunker” programs ended in December 2009, not summer 2011, as Mr. Richter claims, so it explains exactly nothing at all.

    While it is certainly legit to look at http://www.meinauto.de discounts, you really need to dig a bit deeper before you draw conlusions.

    All French cars are heavily discounted, which might very well be the result of the French auto industry’s problems, but you have to be more careful when it comes to German cars.

    The Porsche Boxster is discounted because a new model will be introduced in April. And that’s the reason why it’s offered at a discount.

    If Mr. Richter you knew anything about how the auto business works, then he’d know that sales of a car models begin to drop like a stone about 8 or so months before the introduction of a new model. The car manufacturers try to counter this by offering either discounts or attractive accessories packages, or a combination of both.

    This is, by the way, also the reason why certain VW and Audi models are currently more heavily discounted than they usually are: new models will be brought to market in the next few months, including the high-volume models VW Golf and Audi A3. The same, by the way, applies to the VAG subsidiaries Skoda (Czeck Republic) and Seat (Spain).

    Another point is that the internet car sales thing is a rather new phenomenon in Germany. Car dealers always had quite a bit of leeway for discounts and the internet just makes things a whole hell of a lot more transparent. It now enables pretty much everyone to get the maximum possible discount. This, in itself, doesn’t really tell you much about inventory and such.

    Now, on to Opel (GM). It is true that Opel has huge economic problems, which are partly caused by GM itself. Opel is not allowed to sell cars outside of Europe because GM does not want Opel to cannibalize Chevrolet sales. This makes it extremely hard for a major car manufacturer like Opel to turn a profit and this is NOT a new problem, this has been going on for years. They are forced to fight with one hand tied to the back and then blamed for losing by GM.

    In addition to that, Opel’s cars are currently are not particularly competitive in terms of technology. Especially when it comes to motors, they seem to lag a generation behind the competition. Hence the big discounts.

    Ford’s European sales in 2011 were not as strong as they might have been for one reason: the introduction of the new high-volume Focus model, which happened in May in Germany, the biggest European market. This means that Focus sales Jan through April were probably crap and this makes for a somewhat weaker year. Ford seems to be in a rather strong position these days.

    As with Mr. Richter’s absolutely atrocious article on the German “housing bubble”, he seems to be someone who sits in San Francisco, looks at data he doesn’t quite understand and then draws conclusion about things he knows nothing about.

    This time, he at least happened he got the basic gist of what’s happening right, but then again, you don’t need to be a rocket scientist (or a “executive, entrepreneur, start up specialist, and author”) in order to figure out that car sales are going to plunge when the economy is in the shitters.

    If you’re writing about something, even as a blogger, you should really put some research and diligence into it. This, as well as Mr. Richter’s article on Germany’s housing market, are just shoddy.

    1. Very Serious Sam

      Well said, Kiste. Quite obviously Mr. Richter is absolutely clueless about what’s really going on in Germany.

      Unfortunately this deficit doesn’t prevent him from writing his anti German ranting science-fiction pieces (0% science and 100% fiction).

      There are others like him in the blogsphere, for instance Marshall Auerback. His ‘Anschluss Economics’ piece, with a lot of nazi wording, speaks for itself.

    2. Yves Smith Post author

      Richter was an executive in the auto industry for a decade. I’d hazard he knows the business better than you do.

      I also find the tendency to tag anyone who makes negative observations about the German economy as being a German hater as, frankly, deranged. I haven’t seen a single person who has talked about the sorry state of the Japanese economy tagged as anti Japanese. And the Germany export driven model IS unsustainable in its current form.

      1. IF

        Kiste deservedly disassembled Richter without having to resort to the “German hating” accusation. Sadly most guest authors do not have your analytic skills. Unfortunately you often turn a blind eye to subpar fill material. Less sometimes is more.

      2. Kiste

        An argument from authority does not debunk my factual criticism of Mr. Richter’s article. He obviously didn’t even consider that there might be different explanations for discounts.

        His article reads as if he started off with a conclusion and then cherry-picked and (intentionally or unintentionally, who knows?) misrepresented data to support this conclusion. This is exactly what he also did in his article on the “German housing bubble”.

        Furthermore, I never tagged anyone as German hater, though a lot of the rethoric that is coming out of the Anglo press and blogosphere is hysterical and over the top. If anything, some of these bloggers and media hacks undermine their own credibility by employing language that has no place outside a low-class British Murdoch tabloid.

        Do you honestly feel that this article, and the one on the German housing market, are up to the level of quality that usually your distinguishes blog, considering that they are
        1. factually wrong
        2. badly researched
        3. consist of little more than conjecture based on limited data that is also misinterpreted to boot?

      3. Paul Walker

        Always a spectacle when folks’ confirmation bias gets a challenge.

        Presently it appears what is being disassembled is the current economic order premised upon enhanced structural trade and finance imbalances, favorable/unforfavorable currency conditions that super regionalize untennable vendor financing systems, uniformity of harmonization within the region, impeeding competative realignment and maintenance of the illusion of solvency to name a few. However, these are indeed global issues that just happen to be most observable within the eurozone.

        Yves, thanks for carrying Wolf’s work. Agreed or not I find he contributes meaningfully to a wide variety of debates. Often his insights cause me to dig a bit deeper into my own perceptions and biases to further challenge and enhance my knowledge base.

        1. Kiste

          “Always a spectacle when folks’ confirmation bias gets a challenge.”

          You’re joking, right?

          “Presently it appears what is being disassembled is the current economic order premised upon enhanced structural trade and finance imbalances […]”

          What does this have to do with the factual errors in Mr. Richter’s articles, this one and the one on the housing market? His interpretation of the data is either right, or wrong.

          In his housing article he came up with the ludicrous idea of a housing bubble in Germany based on very few data points, while he didn’t even bother to look at significantly more important data, e.g. credit creation in the mortgage market.

          In this article, he completely misses the effect of the product cycle on car discounts, uses factually wrong data (e.g. the cash for clunkers program supposedly running through summer 2011) and seems generally clueless about the German car market.

          This, by the way, does not mean that the European auto market is not shrinking. It is. Yet, Mr. Richter’s contribution adds nothing to our understanding of what is actually happening.

        2. LeonovaBalletRusse

          PW, don’t take the Kiester personally, he’s just a bad sport who got up on the wrong side of the bed this AM.

          Add to your comment the hot frame: CDS in Europe and where the “money” is really going and why.

      4. bmeisen

        I don’t get why Kiste goes after Richter so aggressively, unless it’s just typical blog comment rantiness (please note at least one finger pointing back in my direction).

        You can take issue with the piece without emptying the clip. I personally don’t hear the “the Nazis are coming!” screams in Richter’s writing, and though some of us here in Germany may be intollerant of criticism of Germany for evil reasons, most of us are genuinely outraged by the ignorance of Germany and the American exceptionalism/anti-German bias that infests American MSM and sometimes the not so MSM.

        Social democracy doesn’t have a fingerhold in American discourse, in part because approaches to what is standard practice and successful in Germany must first go through the “the Nazis were evil and American GIs rescued the world” devotionals.

        Richter makes intersting points. For example, PSA. The French have been competitive in part because the subsidize their auto industry with discounted electricity from nuclear power plants, waste from which gets shipped to dumps in Germany. Sales might be collapsing because of the general malaise at the Euro fringes. What would happen if the Greens successfully lobbied against nuclear power in FRance and electricity prices began to rise?

        1. Kiste

          “The French have been competitive in part because the subsidize their auto industry with discounted electricity from nuclear power plants, waste from which gets shipped to dumps in Germany.”

          Cheap energy is certainly a competitive advantage for French auto makers. The French car makers do seem to suffer disproportionally, though. They shrink faster than the overall market does.

          My guess is that the Koreans are to blame. If you want to spend money, you buy a German car. If you want something more affordable, you buy a French or an Italian car. The problem is: Hyundai and KIA are now competing in this segment as well, and their cars are simply better.

          As for French nuclear waste being shipped to Germany… that’s actually not true. The Germans ship their spent nuclear fuel rods to France for reprocessing in La Hague and the waste that results from the reprocessing is shipped back to Germany. It’s actually German waste.

      5. pigeon

        Dear Yves,

        hard not to side with you but the facts that kiste has given are true. I was also deeply astonished by what Mr. Richter wrote. So many factual errors. The same struck me when I read his article about the “housing bubble”. Where does he have his sources? From the name I thought he’d be german but from his articles I conclude he hasn’t been to Germany for a long time.

      6. Anonymous Jones

        How in the world do you “hazard he knows the business better than [Kiste does]”?

        You don’t even know Kiste’s background.

        It is said that everybody has an “Achilles Heel”, and it’s always in these quick somewhat defensive-minded moments in comments that you lay out some really poor arguments.

        I know people who have been in the real estate business for at least twenty years [twice as long as you claim for Richter in the auto industry] who understand that business probably about as well as an 8th grader.

        Seriously? Now we’re defending ideas based on seniority?

        Ahhhhhh….I want to tear my hair writing this!

        I’m not an expert at all on the auto industry, but as a rhetorical matter, Kiste just utterly destroyed Richter. He did not resort to ad hominen, stupid made up labels (please, will the Occamstard dude just stop, it’s not clever or funny or useful) or prejudicial attacks based on nationality. He just gave facts and alternative [seemingly far more plausible] explanations.

        As I’ve said before, I come here because of your great posts [and some really insightful comments over the years from the likes of DownSouth, craazyman and yes, now Kiste…and even one-noters like Hugh, whose one note is annoying but generally true]. If I were willing to constantly endure the shoddy nature of the analysis in posts like this and of Olenick, I could go anywhere in the MSM.

        OK, OK. Point made. It’s your site. I get it. I don’t have to read these posts. I usually do just to see if there are great comments, which in this case there were [by Kiste].

        As always, reality dictates that you are free to do as you wish.

        My whining aside, thanks for the great site!

        1. Anonymous Jones

          Oh, I forgot to mention skippy! What an awesome takedown of Beard he had the other week. He just lies in wait sometimes and then, boom, lays the smackdown! It was spectacular.

      7. sidelarge

        Well, I used to label those Economist types “anti-Japanese” because their condescending patronizing dismissal of how the Japanese economy performed after the real estate bubble burst was so overwhelming, nasty and intense. That swift over-night turn from (misguided) admiration to ridicule was a bit traumatizing for the Japanese to be honest. I happened to have this deep-seated anti-neo-classical view already back then, and kept saying that roughly the same thing would happen to any advanced economy that had a similar bubble burst. But they kept saying that there was something uniquely wrong with the Japanese-ness, that nothing of that sort would ever happen in any “Western” country, going so far as to call it the “Japain problem,” remember?

        Some of them even dared to say that any “Western” country would let the banks fail and recover from the ashes like a phoenix in no time. Ah, the memories…

        Of course, I soon realized that their fierce campaign came more largely from the insecurity that their models might not have much to do with the reality, than from their arrogance and prejudices. And here we are, watching those same economists frantically backpedaling or making numbers up in their attempt to stay relevant in the political discourse. Many of them are even acting as if the Japanese bubble burst had never happened, as if this whole thing was something new, which makes me grin inside.

        But boy, do I digress.

      8. LeonovaBalletRusse

        YVES, not to mention the support for Germany from NC, trying to get their Pols and Bankers up to speed in C21 (we know it doesn’t come easy).

  2. psychohistorian

    2012 is going to be a very interesting year all over the world. It just seems that so much press is given to machinations that cause stronger emotional responses in attempts to stir the pot further.

    When are people going to understand that social safety net austerity and militant repression of dissent are growing features of many countries public face…..all this because the global inherited rich want to keep the existing class structure in place.

  3. j.grmwd

    Hardly surprising, is it? Exports make up 1/3 of German GDP. Two thirds of those go to the EU. That’s a big, big chunk of German industrial production and employment that’s being undermined as we speak by European austerity.

  4. Susan the other

    Whether or not German and French auto industries and labor markets are prospering is an argument that drives me even nuttier than I was yesterday when I heard Henry Ford’s grandson was talking up his interests by advocating a new highway and traffic monitoring system so that highways could accommodate a billion or ten more cars on the road. Oh goodie, I can’t wait!

    Question: how did automobile manufacturing become the heart and soul of western economies? It starts a chain of pollution that is killing us all. I’m not Germany bashing when I say that I’d like to see the auto industry wound completely down and retooled into greener enterprises.

    1. securecare

      how did automobile manufacturing become the heart and soul of western economies?

      What do you suppose those production lines do during, oh say a large scale war ? Does the term “dual use” mean anything to you ?

      If you look back in history note how fast those production resources have been turned to the generation of war (defense) material. You might want to do a search using the phrase “defense industrial base”. And, of course, there are financial arrangements supporting this situation.

      No surprise.

  5. Wolf Richter

    Thanks Kiste and everyone else commenting on my post. I appreciate your disagreement. So let me weigh in here a bit.

    First things first: I don’t hate Germans. I am German.

    Second: Kiste, you’re right about one thing, the expiration of the German cash for clunkers. It ended as you said in 2009. I slipped up. Sorry.

    However, I listed it as one of the reasons why registrations dropped off so much in February year-over-year. Now, of course, that reason being gone, the entire sales drop off is due to natural demand.

    Here are a few thoughts on some of your other points:

    New models come out every year. Some automakers have more new models in certain years than they have in others years, but across all brands sold in Germany it tends to average out. A 30% drop in sales across all brands in Germany can NEVER be explained by the routine introduction of a few models.

    A really harsh winter one year, when it was mild the prior year, would be a better explanation, but it’s also inadequate to account for a 30% decline.

    The sales drop off is real in Europe, and has been going on for a while, depending on country. What is new is that it hit Germany very seriously in February and France late last year.

    So things might suddenly turn around in March or April. Weather might have something to do with it. But when sales decline suddenly (year over year), with lead times as long as they are, inventories will rise, and inventories are VERY expensive for many reasons in the car business. And then production schedules will have to be altered, which is also VERY expensive. This is why discounting happens. When there is strong demand and when inventories are low to normal, there is not much discounting (beyond the advertised price leaders and some give and take during negotiations).

    Concerning your comment about the forming of a housing bubble in Germany: in some cities, prices for apartments have gone up 25-30% in a couple of years (I only showed price changes for one year in those cities). That is bubble territory. Look up the numbers. RE investors will of course welcome it—as they welcomed such price increases in the US. Bubbles take years to form and years to blow up. My intention was to point at early indications (rather than call it a bubble after it blows up). It is always risky to point at early stages of a trend, and it’s a lot safer to wait until the trend has played out.

    1. Ralf T

      “Concerning your comment about the forming of a housing bubble in Germany: in some cities, prices for apartments have gone up 25-30% in a couple of years (I only showed price changes for one year in those cities). That is bubble territory.”

      Really? Can you name any of these cities?
      Nobody will dispute that there have been significant price increases in some parts of a city(a thing not unheard of even when overall prices are falling), but I´d be very interested to hear where you´ve found a citywide increase of that magnitude!

      BTW, are you still claiming that Denmark is part of the Eurozone as you stated in your article on the “Housing Bubble in Germany”:
      (http://www.nakedcapitalism.com/2012/02/wolf-richter-now-a-housing-bubble-in-germany.html): “The irony inherent in a monetary union: even if bubbles become clearly visible in certain countries, such as Germany or Denmark, their central banks are condemned to sit on the sidelines because they cannot set interest rates.”
      Which charge of shoddy research that “Kiste” made, have you actually debunked? From what I´ve read you´re only digging an ever deeper hole.

      Yves, the reason why I (and I presume this was “Kiste”s intention too) respond to such articles is that we value your blog, have gained valuable ideas and insight from it. The basis for that however is that the underlying facts in an article are accurate. As interested readers, with more in depth knowledge on only a small part of what your blog covers, it does seem to make sense for us to point out factual errors and authors who start with a story and then adjust the facts, where that area is concerned.
      I for one am happy when other readers do so on subject matters I am less familiar with.
      In that sense I don´t really understand your ad hominem attack against “Kiste” (“I also find the tendency to tag anyone who makes negative observations about the German economy as being a German hater as, frankly, deranged.”). If you don´t agree with the (counter-)facts he presents, fine, challenge him on their validity.
      But how is any of your readers supposed to trust that the posts by your guest authors are fact based, if any responses pointing out factual weaknesses are just shouted down by you via ad hominems?
      This post by Richter has a very weak factual basis, the last one contained glaring factual errors(one of them mentioned above).
      I don´t particularily care whether you get it right ór wrong about the current situation in Germany, my problem with seeing errors like this is, that it just starts me wondering how strong the underlying factual basis actually is for posts for which I do not have the ability/knowledge/information/access to check the underlying facts.
      For disinformation there always is MSM(who btw wouldn´t get away with placing Denmark in the Eurozone).
      You going all ad hominem on a commentator questioning the underlying facts(not even disagreeing with the general interpretation) definetely does not help matters.

      1. Dan G

        I very seldom see peer reviewed research on any blog, and I don’t expect it. Even if it showed up sometime, it too might not be trusted if it was sponsored by a party that gained somehow from the resulting data. I don’t see how anyone could say for certain who is correct- Wolf or Kistie. They both make good points.
        In the end, my own perception bias is towards one of troubled depresssed times ahead; therfore,I tend to believe that the data Wolf presentd as highly plausible. Without firsthand knowledge, we all tend towards our our perception bias. Most opinions are formed through this prejudicial process; mine are no different, considering the lack of real hard data.
        Regardless, data is always manipulated. Just look at the une. rate,inflation rate, cpi, Industrial prod., earnings etc.., or listen to the bullshit data the politicians pull out of a hat.

        1. Ralf T

          “I very seldom see peer reviewed research on any blog, and I don’t expect it.”

          Fair enough, but I really haven´t seen any comment asking for peer review. just a bit of fact checking would be nice. It´s not all that hard, see denmark and the Euro for example:


          1. Dan G

            He made a mistake, an error, but did he deliberately mislead?

            My point about “Peer Reviewed” was to point out that even this highly regarded source of information can have misleading data that is taken out of context, or misrepresented. Look at some of the pharmaceutical research tainted research by Merk and others on a web search.

            I find this type of misrepresentation far more egregious than a false assumption error.

          2. Kiste

            Just one point, Dan G.

            An Astrologer might look at the position of the planets and the alignment of the stars and make a prediction. This prediction might just happen to turn out true. This still doesn’t mean that the prediction came true because Astrology offers any special insights.

            If the car market in Germany weakens, which wouldn’t suprise anyone (!), that still doesn’t change the fact that Wolf Richters last two articles contained:
            – glaring factual errors
            – interpolation from too small a sample
            – conjecture based on insufficient and/or unsuitable data
            – shoddy research

            I can read nonsense like that on any number of blogs. The reason why this is bothering me wo much on NakedCapitalism is because this blog used to be different.

            I guess I’ll stick to Yves’ postings and ignore the “shovelcontent”…

  6. kaj

    1/ Any one who deliberately substitutes 2011 for the 2009 cash for clunkers wind-down should not have a voice on this, a generally intelligent blog. We should not pollute the air with errant nonsense.

    2/ The price of housing in Berlin generally has been going up for the last decade, especially, the Mitte area with which I am somewhat familiar because of the move of the capital from Bonn to Berlin: see a recent issue of FT, I believe, last Saturday’s. But neither Berlin nor Munich or Hamurg are reprentative of where most of the German population lives: the population of Cologne is only arond 1 million and the combined populations of Munich, Hamburg and Cologne is approximately the same as that of the Greater DC area, that is around 4 million. Most people in cities rent which are generally city controlled.

    Doubtless, the German export model has a serious achilles heel; generalized European poverty, Chinese piracy+labor cost advantage and the fact that mid-level(sole propritorships) manufacturing companies (the back-bone of Germany) do not generally employ the most au courant researchers because of cultural issues — they are inherently conservative — will contribute to their future difficulties. Turkey is barking at Germany’s heels where a lot of manufacturing is shifting because of costs and pollution control.

    Mr. Richter should take his fear-mongering somewhere else.

  7. Kiste

    Thanks your your reply. Just a few points:

    “A 30% drop in sales across all brands in Germany can NEVER be explained by the routine introduction of a few models.”

    No one claimed it did! I was merely pointing out that the discounts you are seeing have different reasons.

    What I find particularly infuriating is that even the link you provided as reference for the Porsche discount actually makes this abundantly clear. The discounted Porsche cars were inventory cars and only available in a limited number! The article specifically mentions this – a mind-boggling number of 7 cars were available! All you had to do is spend 1 minute on Wikipedia to learn why that car dealer cleared his inventory: the new Boxster is coming out in April.

    Yet, you take this as evidence for your claim that the German car market comes crashing down (“crashing volumes, billowing inventories, and overcapacity”). This is what I mean when I call your articles “shoddy”.

    My point is that car discounts are not particularly useful data at this point, unless you really dig deep and adjust for product life cycle and other competition-related effects – which you didn’t do.

    And even then it seems rather pointless. Why bother? No one would actually be surprised that German car sales fall in 2012 compared to the record year 2011, considering the overall economic climate in Europe.

    You misinterpreted data that was unsuitable to begin with in order to state the obvious.


    Concerning your comment about the forming of a housing bubble in Germany: in some cities, prices for apartments have gone up 25-30% in a couple of years (I only showed price changes for one year in those cities). That is bubble territory.

    I challenge you to find an apartment for rent in Munich that isn’t either a dank basement hole, a tower block apartment the size of an American walk-in wardrobe or priced utterly out-of-reach even for people who earn comparably well. There is simply none to be had. The housing situation in cities like Munich is bad, really, really bad.

    While there might be an element of speculation involved, this is far from being a “bubble” in the German housing market. All you have is rising prices in a few select places that are severely short on residential space. It’s not a bubble, it’s plain old supply and demand.

    You used insufficient/unsuitable data to support a claim that seems, quite frankly, out of this world to anyone who even has cursory knowledge of the German RE market.

    Where is the ballooning credit creation and the steep increase in housing construction activity that usually comes with a real estate bubble? Where is your data on that?

    Do you have any ACTUAL evidence that the Germans are ploughing a rapidly increasing share of their GDP into the housing sector? Anything? Anything empirical at all?

    Merely pointing at steeply increasing apartment prices in places like Munich and then scream “Bubble!” is, again, shoddy.

    1. reslez

      I have yet to see your explanation for the 30% drop in February, which would appear to be the key data point.

      1. Kakko

        We’ll see who’s right in the coming months when the new cars come on to the market.

        In my ignorance I thought that new models generally come out around the same time each year making yoy sales figures telling.

        If this year’s new models produce the same 1st month sales as last year’s new models, Kiste will be proven correct. If not, the point is Wolf Richter’s.

        1. Kiste

          You should read my other posts – I do not doubt that car sales will probably be weaker this year…

      2. Kiste

        I think it’s entirely pointless to speculate at this point, the data sample is too small. Might a fluke, might be a sign of things to come.

        This would be another criticism of Mr. Richter’s article: interpolating from too small a sample! Pointless!

      3. Kiste

        By the way, I just looked it up: there was no 30% drop in new car registrations in Frebruary in Germany. Wolf Richter made that up, too.


        What it says:
        -0.2% compared to Feb 2011
        +6% compared to Jan 2012

        Since, at this point, we can’t take Mr. Richter’s word for anything he writes, I would respectfully request a source for his claim from the article:
        “Registrations in January were down only 0.4% due to massive fleet sales.”

        1. Dan G

          Kiste, For some reason there was no reply button to your reply to me at 1:01 AM; thus, the reply is here.
          I admire your persistence and well spoken criticisms. It is apparent that this article and the past one by Wolf has upset your sense of “attention to detail” on what is acceptable for proper research for an article here.
          I have nothing to add, except, please continue reading and responding to all articles, not just Yves, with the same passion. Maybe we all should tighten up the rigor on what we write and speak. Keep up the good work.

    2. Andrew not the Saint

      Well deconstructed Kiste. It’s my first disappointment with NC, not to see a shoddy article by a guest author (I think I’ve seen some before too), but to see Yves defending something reflexively which just simply isn’t defensible. I do hope she issues an apology (just for that comment of hers) and we can all move along.

  8. LeonovaBalletRusse

    Opel carries on for the Reich from III through IV, from Prescott Bush through his grandsons. And Ford Werke in Germany, a perfect fit for the Reich. Oh, what a loverly world!

  9. steve

    I live and work in Germany. I lived in the UK through 3 major housing bubbles. I an an engineer working in the german machine tool industry and know something about the state of industry and the economy in Germany.
    Kiste is correct, Wolf Richter is holding a bar room debate with few facts and much bias. WR’s german housing bubble article was also so wildly off the mark that it is laughable (I say this as the owner of a german house).
    Good work Kiste. WR, take a break, maybe a few months in the Fatherland would do you good!

  10. blob

    I’m french and i’m a regular reader of Naked Capitalism.
    The French electoral campaign is in full swing, but now something new takes place: a coalition between left wing socialists, communists, socio-ecologists attracts more and more people during the meetings of his leader, Jean-Luc Melenchon. Nobody in meanstream medias really speak about this, but really it’s very impressive! Currenly Melenchon attracts approximately twice as many listeners than PS or UMP leaders during his public reunion.

    It’s totally the same configuration as during the ECT campagn from 2005.

    Jean-Luc Melenchon is really a great speaker: someones compare him to the old french socialist leader Jean Jaures.

    Many french facts checkers said that the Front de Gauche, his coalition, is the most honest political group during this campagn.

    I think it could be a big surprise…

    * An exemple of Facts Checking (in french):
    *Front de Gauche:
    * Melenchon’s Blog

  11. Economic Maverick

    Ironically, If the Germans start to dive into recession, perhaps that the one thing where they may allow for an EMU end to austerity, but perhaps that’s wishful thinking….

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