Digging a Hole in China's Black Gold

China's love affair with coal will endure, but for investors the romance is gone.

For the last few years, investors in China's coal sector have been mining a rich seam. From the beginning of 2005 through the end of 2011, the benchmark Qinhuangdao thermal coal price rose 81%, supporting strong growth in profitability and enviable margins at mining majors such as China Shenhua Energy.



But as any miner will tell you, the longer you work a seam, the more difficult it is to extract value. China's thermal coal prices have fallen nearly 10% in the last three months.

A seasonal fall from the winter peak, and a cyclical slowdown brought about by China's slowing construction and monetary tightening, are only part of the picture. Those effects will fade, but coal miners will still have to battle against structural pressure for lower prices.

In 2008, China's 60 biggest miners—the efficient elite from a sector with 9,000-plus firms—accounted for just over half of domestic production. Since then, the big have gotten bigger and the small are getting edged out.

Michael Parker, coal-mining analyst at Sanford Bernstein, estimates that this year the top 60 miners will account for 80% of output.

The assumption has always been that it is the very low-cost guerilla mining operations that will go to the wall, pushing prices up. In fact, Mr. Parker argues that it is the small industrial operations—working difficult seams, and with poor access to transport—that will be the first to go. The exit of these high-cost outfits means that spot prices will increasingly be set by bigger more-efficient producers—and that means pressure for prices to stay low.

With structural forces aligned against a return to rising coal prices, investors in China's black gold should be wary of digging themselves into a hole.

Source: http://online.wsj.com/article/SB10001424052970203918304577242270708211732.html?mod=WSJ_Heard_LEFTSecondNews

Vì sao tiền đồng có dấu hiệu lên giá?

Dấu hiệu tiền đồng lên giá trong thời gian gần đây được cho là nhờ giảm nhập siêu, kiều hối về nhiều. Tuy nhiên nguyên nhân sâu xa, căn bản của việc tiền đồng lên giá chưa được đánh giá đầy đủ.

Nguyên nhân mất giá của đồng Việt Nam kể từ năm 2008 đến quí 4-2011 được giải thích bởi thâm hụt cán cân thanh toán và dự trữ ngoại hối thấp; lạm phát cao, sự lỏng lẻo của chính sách tài chính; thiếu niềm tin vào chính sách.

Nguyên nhân của dấu hiệu tiền đồng lên giá trong thời gian gần đây (giá mua đô la Mỹ và giá bán phổ biến của các ngân hàng thương mại thời điểm này chỉ ở mức 20.750 đồng và 20.850 đồng) được cho là nhờ giảm nhập siêu, kiều hồi về nhiều, tuyên bố của Thống đốc Ngân hàng Nhà nước (NHNN)... Nhưng nguyên nhân sâu xa, căn bản của việc tiền đồng lên giá chưa được đánh giá đầy đủ.

Giảm nhu cầu đô la Mỹ để nhập khẩu tư liệu sản xuất

Nhập siêu giảm là yếu tố căn bản để giảm nhu cầu đô la Mỹ. Theo dõi kết quả nhập siêu qua các năm, đặc biệt là từ năm 2010 đến nay, cho thấy khoảng cách giữa xuất khẩu và nhập khẩu đang thu hẹp lại. Nhập siêu hàng hóa năm 2011 ước tính 9,5 tỉ đô la Mỹ, là mức thấp nhất trong vòng năm năm qua và là năm có tỷ lệ nhập siêu so với kim ngạch xuất khẩu thấp nhất kể từ năm 2002.

Giảm nhập siêu là một tín hiệu đáng mừng của nền kinh tế, nhưng sự sụt giảm liên tục trong bối cảnh nhiều năm qua nhóm tư liệu sản xuất luôn chiếm tỷ trọng cao nhất trong cơ cấu nhập khẩu (năm 2011 chiếm 90,6%) là một điều cần phải lưu tâm.

Theo Tổng cục Thống kê, tháng đầu tiên của năm nay giảm nhập khẩu mạnh nhất là nhóm hàng nguyên liệu phục vụ sản xuất. Trong đó, phương tiện vận tải và phụ tùng giảm 86,2%; bông giảm 56%; dầu mỡ động thực vật giảm 51,8%; kim loại thường khác giảm 53,5%; vải giảm 30,9%; nguyên phụ liệu dệt may, giày dép giảm 20,6%. Như vậy có thể thấy nhu cầu đô la Mỹ cho nhập khẩu từ nửa cuối năm 2011 đến nay đã giảm mạnh.

Không còn tình trạng các doanh nghiệp nhập khẩu chầu chực, đôn đáo chạy đi mua đô la như những năm trước. Có thể nói sản xuất đình đốn, co cụm của các doanh nghiệp trong nước là nguyên nhân sâu xa của cầu đô la giảm, do đó tỷ giá tiền đồng/đô la Mỹ cũng dần sụt giảm.

Không còn kỳ vọng tỷ giá đột biến

Có lẽ điều thành công nhất trong thời gian gần đây của Thống đốc NHNN Nguyễn Văn Bình là giữ được tỷ giá theo tuyên bố. Ngày 7-9-2011, ông Bình tuyên bố điều chỉnh tỷ giá đô la Mỹ/tiền đồng đến cuối năm (2011) không quá 1%. Thực tế, cho đến những ngày cuối năm 2011, NHNN đã giữ được cam kết. Điều này bước đầu đã tạo niềm tin cho thị trường. Tiếp đó đầu năm 2012, ông Bình nói nếu không có những tác động bất thường (cả trong và ngoài nước) ảnh hưởng đến kinh tế thì tỷ giá tiền đồng/đô la Mỹ năm 2012 biến động không quá 3%.

Lời tuyên bố của ông Bình được những yếu tố khách quan hỗ trợ (kiều hối về nhiều, giảm nhập siêu, lãi suất tiền gửi bằng tiền đồng vẫn ở mức cao... Những yếu tố này chắc người đứng đầu NHNN với các số liệu thống kê đã nắm chắc), cộng với những động thái điều hành ngoại hối (chủ quan của NHNN mà bên ngoài khó có thể biết) khiến cho kỳ vọng tăng tỷ giá của doanh nghiệp, dân cư và các nhà đầu tư giảm mạnh. Trong hai tuần vừa qua, rất nhiều doanh nghiệp và người dân đi bán đô la Mỹ cho các ngân hàng thương mại. Giá mua ngoại tệ của ngân hàng giảm dần từ 20.930 đồng xuống 20.750 đồng/đô la vào cuối tuần trước. Dù giảm mạnh nhưng vẫn có nhiều người dân bán ngoại tệ lấy tiền đồng gửi các ngân hàng có mức lãi suất cao hơn 14%/năm. Dập kỳ vọng tăng tỷ giá là nguyên nhân thứ hai khiến tỷ giá tiền đồng/đô la Mỹ trên thị trường tiền tệ chính thức và tự do giảm khá mạnh trong mấy tuần gần đây.

Kiều hối về chuyển sang tiền đồng

Kiều hối về Việt Nam tiếp tục tăng mạnh trong năm 2011 và dịp Tết Nhâm Thìn 2012 (riêng năm 2011 ước đạt 9 tỉ đô la) là một nguồn cung ngoại tệ để ổn định tỷ giá. Những năm trước đây khi tỷ giá thị trường tự do cao hơn tỷ giá ngân hàng, việc quản lý thị trường còn chưa nghiêm, kiều hối bán cho ngân hàng rất ít. Nay tỷ giá thị trường tự do chỉ bằng, thậm chí có thời điểm thấp hơn, cộng với mức phạt rất cao 300-500 triệu đồng khiến người nhận kiều hối chủ yếu bán cho ngân hàng rồi gửi tiết kiệm bằng tiền đồng (ít đầu tư vào bất động sản như những năm 2009, 2010). Lãi suất gửi tiền đồng vẫn ở mức cao là một trong những nguyên nhân thu hút nguồn kiều hối.

Tỷ giá bao giờ điều chỉnh?

Một điều chắc chắn là tỷ giá tiền đồng/đô la Mỹ không thể ở mức như hiện nay. Mức tỷ giá này sẽ làm giảm sức cạnh tranh của hàng hóa Việt Nam, về lâu dài không tốt cho hoạt động xuất khẩu. Đã có ý kiến bình luận để mức tỷ giá như hiện nay là “con dao hai lưỡi”. Tuy nhiên, nếu có điều chỉnh thì mức tăng tỷ giá của năm nay cơ bản sẽ ở mức biến động 3% mà ông Nguyễn Văn Bình tuyên bố. Với những yếu tố như đã đề cập ở trên, dư địa để NHNN chủ động điều hành tỷ giá rộng hơn các năm trước. Sự điều hành tỷ giá trong thời gian tới sẽ đồng bộ với việc kiềm chế lạm phát và giảm lãi suất tiền đồng.

Cuối năm 2011. Ông Tai Hui, Trưởng bộ phận Nghiên cứu Đông Nam Á của Ngân hàng Standard Chartered, dự báo tỷ giá tiền đồng/đô la Mỹ của Việt Nam sẽ đạt mức 21.400 đồng/đô la Mỹ trong quí 1-2013 và vào quí 3 cùng năm sẽ đạt mức 22.000 đồng. Nếu dự đoán này là đúng thì có thể cuối quí 1-2012, NHNN sẽ đi bước đầu tiên trong lộ trình điều chỉnh tỷ giá của năm. Tuy nhiên, sự điều chỉnh này cũng không gây sốc cho thị trường vì bước điều chỉnh ngắn. Ngay tại thời điểm này, dù dự đoán có sự điều chỉnh tỷ giá thì khi đặt tương quan so sánh với lợi nhuận thu được từ việc gửi tiền đồng trong ngân hàng, nhiều người vẫn quyết định bán đô la Mỹ để chuyển sang tiền đồng.

Source: http://www.thesaigontimes.vn/Home/taichinh/tiente/71810/Vi-sao-tien-dong-co-dau-hieu-len-gia?.htmlc

Maersk Bets on Better Shipping Forecast

Container ships and hurricanes don't mix, as all captains know. But AP Moeller-Maersk is weathering economic squalls well. Despite weak global trade and high fuel prices, shares in the world's largest shipping company are up 25% this year, buoyed by cuts to industry capacity. Now Maersk is merging some of its Asia to Europe services with rival CMA CGM, further reducing capacity. If that enables Maersk to raise freight prices this year, the shares could rise further.

Still, it won't be plain sailing. The industry's order book for new ships—placed in healthier economic climes—is around 30% of the current fleet. Capacity is currently outstripping demand for shipping of finished goods by around 4% annually, forcing shipping groups to cut prices last year. Even after a recovery this year, spot shipping rates from Asia to Europe—the world's busiest route—are around $710 per container box, below the cost of the fuel needed to transport them.

The wind is now changing. The main carriers are aiming to raise prices between Asia and Europe by $600-$900 per container in coming months, an unprecedented hike, notes data specialist Alphaliner. To regain pricing power, Maersk, CMA CGM and MSC are keeping ships in port or cutting routes. Around 7% of market capacity is sitting idle, double the level of a few months ago, already enabling the industry to push through the first rate rises in two years.

Even so, Maersk still trades at around book value. That's in line with Asian rivals China Cosco Holdings and Evergreen Marine, which lack Maersk's oil-rig operating business and stake in oil producer DUC, which act as a partial hedge against rising fuel prices. Yet even a small freight-price increase could buoy its prospects. Each extra 1% rise would add approximately 5% to its 2012 earnings, notes Deutsche Bank. That's something investors might like to take on board.

Source: http://online.wsj.com/article/SB10001424052970204131004577235363815010118.html?mod=WSJ_Heard_LEFTTopNews

Repo Rate Foretold China's Reserve Move

SHANGHAI—The timing of China's latest decision to ease conditions for bank lending came as a surprise to the markets.

But to anyone alert to the liquidity squeeze in the interbank market, in particular the sharp rise of the benchmark short-term interest rate, Saturday's announcement of a lower reserve requirement for banks was less of a shock.

In the week before the People's Bank of China's announcment, the weighted average rate on seven-day repurchase agreements, or repo—the most widely used funding instrument in China's interbank market—had surged, signaling that the country's banks were uncomfortably short of funds.

Early Friday the rate hit 7%, its highest level in a month, up 3.37 percentage points from a week earlier—mainly due to a five billion yuan (US$794 million) share offering by China Communications Construction Co., as depositors hoping to subscribe pulled a total of 180 billion yuan from the banks.

That matters for the real economy because the repo rate represents the cost of capital for China's banks, and is passed along to their borrowers.

The Chinese central bank has proven to be skillful in adjusting liquidity, controlling the ups and downs of the repo rate through its regular open-market operations and use of the reserve requirement ratio.

In 2009, with the global economy on the brink of crisis, the central bank sought to encourage investment by flooding the financial system with liquidity. The repo rate fell to 1% in the opening months of the year, which was key to pushing the banks into their stimulus lending spree.

In 2010, with the focus on controlling inflation, the central bank started to withdraw liquidity, sending the repo rate higher, a trend that continued—with some bumps—through 2011 and into 2012.

Looking back at Saturday's move with the benefit of hindsight, the surge in the repo rate provided a heads-up. The PBOC on Friday provided another signal of the urgency of easing liquidity conditions, using an unscheduled open market operation to inject cash into the system. By Friday's close, the seven-day repo rate was down to 5.31%.

Saturday's cut in the reserve requirement ratio is intended to do the rest of the job.

"We weren't expecting an imminent cut, but it didn't come as a big surprise either," UBS economist Wang Tao said of the reserve-ratio reduction. "In recent days, interest rates rose quite a bit in the interbank market, showing that liquidity is very tight."

The seven-day repo rate is increasingly seen as a key measure of liquidity conditions in China's financial system, and a more sensitive indicator of the direction of monetary policy than the rather static fixed-deposit and lending interest rates. Traded by banks, insurers, brokerage firms and fund-management companies, it also serves as a benchmark reference rate for pricing fixed-income derivatives such as interest-rate swaps.



Central bank operations aren't the only mover of China's money-market rates. China's banks are constantly buffeted by forces that add to or subtract from their capacity to lend. Moves by the PBOC are often seen as shifts toward either tightening or loosening. In reality, they are more often attempts to counteract the external shocks that knock money markets off course.

The current account is typically the main source of fluctuations. A current account surplus in most months of the year means extra funds coming into the banking system, requiring the central bank to raise the reserve requirement to soak up additional liquidity. Between August 2003 and June 2008, it raised the ratio to 17.5% from 6%, a series of increases that was as much about counteracting the inflow of funds from a growing current-account surplus as about tightening policy.

Speculative capital sometimes finds a way to evade the government's controls, and that also affects liquidity in the banking system. Analysts blamed capital outflows at the end of 2011 for drying up bank funds and forcing the central bank's hand on lowering the reserve requirement.

Initial public offerings can also have a marked impact. China's equities are typically priced low to ensure a bounce on the first day of trading. That leads to a rush to subscribe, as in the China Communications Construction case, with tens of billions or even hundreds of billions of yuan leaving the banking system as depositors chase the hot stock.

For most investors, keeping track of all the ins and outs of China's capital flows is not worth the trouble. But the seven-day repo rate provides a short cut. If it surges, some combination of forces is draining the system of liquidity. If it dips, banks are flush with cash.

To be sure, the repo rate doesn't always reveal what the central bank has in mind. It stayed little changed in the run-up to the last reserve-requirement cut in late November. And at the end of December, when banks' surging year-end cash demand pushed the seven-day repo rate up by 2.59 percentage points in a week, the central bank refrained from acting.

But analysts say that's a reminder to keep other factors in mind, rather than an excuse to ignore the repo rate's clues to the policy outlook.

"Any sharp increase in the interbank seven-day repo rate might be a catalyst for the final introduction of a cut in banks' reserve-requirement ratio, but economic fundamentals are still key to determining such crucial easing measures," said Zhang Junjie, a bond analyst at Ping An Securities.

Source: http://online.wsj.com/article/SB10001424052970204909104577236414128744998.html?mod=WSJASIA_hps_LEFTTopWhatNews

European carmakers: Too many cars, too few buyers

GERMAN autobahns are unlike motorways elsewhere—on some you can drive as fast as you like. Germany’s car industry is also in a class of its own. Its three big premium brands, BMW, Mercedes-Benz and Audi (part of Volkswagen), are working flat-out to meet demand for their beautifully engineered, stylish motors. The emerging world’s new rich love them. Germany’s domestic car market is doing nicely, too: sales grew by 9% last year.

The contrast with the rest of Europe is stark. Car sales fell by 2% in France, 11% in Italy and 18% in Spain last year. And status-conscious consumers in China are not interested in cars that are merely pretty good. So Europe’s volume—ie, non-premium—carmakers are in trouble. France’s Peugeot-Citroën, Italy’s Fiat and Opel-Vauxhall (the European arm of GM, America’s biggest carmaker) have all seen their European sales fall. To shift their wheels, they have to offer eye-watering discounts, sometimes 20-30% off the list price (see charts). Britain’s car market also shrank, by more than 4%. But its carmakers, now mostly foreign-owned, enjoyed an export boom and their production rose by 6%.

On February 15th Peugeot-Citroën’s parent, PSA, said its carmaking business had an operating loss of €92m ($121m) last year. Fiat’s boss, Sergio Marchionne, recently revealed that the Italian maker had lost €500m last year in Europe. As The Economist went to press, GM was expected to reveal heavy losses at Opel-Vauxhall, to add to the $14 billion that its European division is said to have lost since 1999.

Last year 13m new cars were registered in the European Union, 2.5m below the peak in 2007, taking the EU car market back to where it was in 1997. Sales will fall again this year, for the fifth successive year: Peugeot-Citroën predicts a 5% fall across Europe and a 10% drop in France.

In the wake of the 2008 financial crisis, many European governments propped up car sales with scrappage schemes that subsidised motorists to trade their old bangers for new models. But all they seem to have done is bring forward purchases that would have been made anyway, and overall they have not saved jobs, says Ferdinand Dudenhöffer, a car expert at the University of Duisburg-Essen. In January France’s car sales were 21% lower than a year earlier, when its scrappage scheme was still in force, with Peugeot-Citroën and Renault especially badly hit. Peugeot, the weaker of the two, wants to cut 6,000 jobs.

Per ardua ad Astra

The combination of falling sales, idled production lines, deep discounts and rising losses makes Europe’s weaker volume makers look rather like GM and Chrysler did before they were bailed out by the American government and pushed through bankruptcy proceedings. But unlike pre-crisis Detroit, Europe’s troubled makers are not turning out clunky, unreliable lemons. Fierce competition has forced them to improve greatly the quality of their cars, says Richard Bremner of Autocar magazine. Each will have some impressive new models to display at next month’s Geneva motor show. For example, Peugeot is pinning its hopes on the 208, a new “supermini”. Fiat will launch a larger version of its 500 minicar. Opel will launch a souped-up version of its Astra family car.

However, building good cars is not enough when rivals are doing better still. First, the troubled European volume makers have to contend with Volkswagen. The German firm’s huge scale, global spread and “slightly premium” image allow it to drive on ruthlessly down the outside lane of Europe’s price war. Max Warburton of Sanford C. Bernstein, an investment bank, notes that since 2000 VW’s European market share has risen relentlessly, from 16% to 24%. With its ability to match rivals’ discounts, it looks capable of pressing on until others start going bust, he reckons.

Peugeot, Fiat and Opel also face intense competition from Asian producers, especially South Korea’s Hyundai and Kia, which are continuing to build capacity in the Czech Republic and Slovakia respectively, as well as importing cheap, sharply styled cars from back home. Last but not least, they are seeing the top end of their market being nibbled away by the German premium makers, which have broadened their ranges of cheaper entry-level cars: BMW with the Mini and 1 Series, Mercedes’s A-Class and Audi’s A1. The premium carmakers have proved far more successful at getting motorists to identify with their brands, and at finding out what people will pay extra for.

One possible reason for this, muses Thierry Huon of Exane BNP Paribas, a stockbroker, is that the bosses of the German firms tend to be lifelong “car nuts”, whereas the French carmakers’ bosses tend to have parachuted in from other industries. Peugeot’s Philippe Varin came from Corus, a steelmaker; Carlos Ghosn of Renault from Michelin, a tyremaker.

Renault has had some success with the low-cost models produced by its Dacia subsidiary in Romania. But as far as investors are concerned its main asset is its shareholdings in Nissan of Japan, in Mercedes’s parent company, Daimler, and in Volvo Trucks. As a new report from HSBC notes, in 2007 Renault’s own carmaking operations were in effect valued at €11 billion; recently the market has given them a negative valuation of around €7 billion.

Peugeot-Citroën likewise has a stake in Faurecia, a successful maker of parts. But like Renault it is heavily dependent on the weak west European market. It is also worryingly dependent on selling cars in kit form to Iran, which account for 13% of Peugeot’s sales (compared with around 6% for Renault), and which would be vulnerable to any conflict over Iran’s nuclear programme. Renault has gone further than Peugeot in internationalising its production—this month it opened a new plant in Morocco. Peugeot wants to follow suit but seems to have doubts about whether it can afford a big planned expansion into India.

Fiat lux bad

Fiat has been suffering from a decision taken in the midst of the financial crisis: to hit the brakes on its investment in developing new cars. Given the resulting sales slump, it is fortunate that its decision to buy a controlling stake in Chrysler has turned out so well. In its bankruptcy Chrysler was shorn of much of its excess capacity in North America and various other liabilities. It has now bounced back to profitability. Without it, Fiat would be in dire straits.

However, Fiat cannot keep running up such huge losses in Europe. Mr Marchionne admits that it needs another partner to create a global carmaker with the scale to take on VW. In recent weeks speculation has centred on a marriage with Peugeot. But to work, this would require big production cuts in one or both companies’ home countries, which might be too politically controversial. Ditto a Fiat-Opel union. Given its near absence from booming Asian markets, Fiat’s ideal partner would be a firm like, say, Mazda, now seeking a new relationship after its divorce from Ford, or Suzuki, another Japanese maker which is trying to unwind a cross-shareholding with VW.

Likewise, Peugeot-Citroën might fare better with an Asian bride: Frédéric Saint-Geours, an executive close to the founding Peugeot family, insists that besides any suitor needing to have a compatible strategy and potential synergies with his firm, a condition of any alliance would be that his company remains independent. But it is intriguing that the big achievement of his boss, Mr Varin, at Corus was to sell it to Tata, an Indian giant (with a growing carmaking division).

GM dallied with selling Opel-Vauxhall in 2009 but changed its mind. Now, as its losses persist, there are signs that it is losing patience again. GM has recently put several new directors on Opel-Vauxhall’s board, including Thomas Sedran of AlixPartners, a consultancy which advised GM on its turnaround. On February 8th the Wall Street Journal quoted unnamed GM sources as talking of closing some of its European division’s plants.

The abortive sale has left the Opel brand even more “soiled” in continental Europe, says Autocar’s Mr Bremner. The Vauxhall brand, under which its cars are marketed in Britain, is still the country’s second-biggest seller, but it is believed that 80% of its sales go to fleet and company buyers, who expect even bigger discounts than individual motorists.

As the losses mount in European volume carmaking, it is becoming ever clearer that the continent is simply making too many cars in too many factories. Christoph Stürmer of IHS, a data provider, reckons that in Europe (including Russia and Turkey) there was capacity to make about 25.5m cars last year, but only 20m were actually made. This year he expects capacity utilisation to fall from 79% to 70%, as sales fall and the Koreans and German premium carmakers open new production lines.

Recent cost cuts may have reduced European carmakers’ break-even utilisation rate to perhaps 75%, says Mr Stürmer. But that still means capacity must fall by about 1.2m cars for the industry to break even. Closing Opel-Vauxhall’s Bochum plant in Germany and Ellesmere Port in Britain, as GM is reportedly contemplating, would cut only about a third of this.

There have been some cuts and cost savings: Opel and Fiat have closed a factory each; Saab, a Swedish carmaker, has recently gone out of business; and Mitsubishi of Japan is giving up a factory in the Netherlands. Several companies have struck deals with unions to cut labour costs, and with other carmakers to collaborate on developing new technologies. But this will probably not be enough.

Making cars in Europe is fearfully expensive. A Renault executive told a French Senate inquiry this month that it is €1,300 cheaper to make a Renault Clio in the company’s plant in Turkey than in the Flins factory in France. As new capacity is built at a rapid pace in emerging markets, such cost differences will get even harder to ignore.

Cutting capacity is costly, however. By Mr Warburton’s back-of-an-envelope calculation, if GM closed Opel-Vauxhall, laying off its 40,000 workers might cost, say, €200,000 each—a painful €8 billion.

Another obstacle is politics. When Peugeot announced its planned job cuts, its boss was summoned before President Nicolas Sarkozy, who has also grumbled about Renault’s délocalisation of jobs to foreign plants. Politicians are obsessed with assembly plants, which some see as a symbol of national virility. This is perverse. Renault argues that the value added in assembly is only 15% of the total. It and Peugeot-Citroën are most concerned to keep high-value engineering and design work, and the production of engines and transmissions, at home and would like to move more assembly work to cheaper places. It seems a reasonable survival strategy, if the politicians would let them.

Europe’s struggling volume makers have all been trying to move their brands upmarket, launching higher-priced small cars—such as Fiat’s new 500L minivan—in the hope of becoming as profitable as the German premium makers. This is another sensible idea. But moving upmarket takes decades, as Audi’s painstaking ascent since the 1980s has shown. Opel, Peugeot and Fiat don’t have that much time.

Source: http://www.economist.com/node/21547788