Europe: worst yet to come for car industry

 

Europe’s auto industry crisis is far from over.

Many experts estimate that the road to recovery is still long and will not be without obstacles.

Many jobs are still on the line. Only a few carmakers are managing to pull through, by placing their bets on highly skilled labour.

Bob Shanks, chief financial officer of the U.S. carmaker Ford, told French press agency AFP, on 29 January, that the restructuring of the European auto industry was in its early days and "the harder things are just beginning".

He commented that although the worst was yet to come, "it is possible to restructure the industry in Europe, but it will probably need fewer employees because there is excess capacity there".

In France, for instance, a former car industry leader is reported to have said that there was an excess of some 150,000 jobs, in a sector employing 400,000 workers, two thirds of which are employed by parts suppliers and subcontractors, and that successive governments and companies had done nothing to deal with the situation.

The same view is echoed by Bob Shanks: "There seems to be unwillingness or inability on the part of many of the players — both government and companies — to do what it takes to create a healthy environment for the industry."

Ford already made massive losses in Europe in 2012 (around 1.75 billion dollars), and the forecasts for 2013 are even grimmer, with losses expected to reach the 2 billion dollar mark.

The French groups PSA (Peugeot-Citroën) and Renault face a similar fate.

The two carmakers announced drastic restructuring plans in 2012. Over 8,000 direct jobs are to be shed by the two employers (in 2014 at PSA and 2016 at Renault), not to mention the thousands of indirect jobs that will go with them in the region.

A new round of negotiations is underway with the trade union organisations and the discussions could not be more heated.

Production at the sites still in operation is being affected by strikes being held by employees tired of being pawns in a game they no longer understand. Whole families are set to see their livelihoods disappear, with little chance of finding alternative employment in the current economic climate.

The reasons behind the restructuring are well known. For PSA, for example, the year 2012 was catastrophic. Sales quite simply collapsed in southern Europe and France, where the manufacturer has a strong presence.

It is, of course, difficult for countries to invest in the car industry whilst facing one of the worst economic and financial crises in modern history, with citizens struggling day in day out to find decent work.

But although sales in this region have fallen by almost 15 per cent, they are, in spite of everything, on the rise in China. So if PSA wants to revive its operations in Europe, it is going to have to innovate in the very short term.

Another consequence of the crisis in the European automobile market is the planned closure of several steelworks by Arcelor Mittal, such as in Liege in Belgium, and Florange in France.

The workers are deeply angered, and deeply distressed. The French and Belgian governments are putting the pressure on, but the cards are in the hands of steel magnate Lakshmi Mittal, seen by many as a rogue employer.

Vincent de Coorebyter, chairman and managing director of the Belgian socio-political research and information centre CRISP, gave his analysis of the situation in the Belgian daily Le Soir on Wednesday 30 January.

For de Coorebyter, it is first and foremost the system of globalisation that allows industrialists like Mittal to open and close sites as and when it suits them.

"Let us not forget, that for any industrial group, every investment is seen as a source of profit and becomes an adjustable variable when so required by the market."

For a global group like Mittal, the steel industries of Liege and Florange are just cogs in the machine. Once again, this is the harsh reality for the workers faced with the looming spectre of unemployment.

 

A carmaker in the full throes of expansion

Belgium has been witnessing the exodus of auto manufacturers for over 15 years.

There were five carmakers back then. Now there are just two: Volvo and Audi.

While Volvo has been in the country for many years, Audi Brussels was only established in 2007, on the ashes of the Volkswagen plant.

The Audi group is doing very well and is in the full throes of expansion in Europe.

According to Gerhard Schneider, management spokesperson and managing director of technology and logistics at Audi’s Brussels site, also quoted in Le Soir, "There is a future for the auto industry in Belgium."

Of course, Mr Schneider acknowledges that it is thanks to the premium segment that Audi and Volvo are able to thrive.And, needless to say, it is those least affected by the crisis that are able to buy this type of vehicle.

Nevertheless, he explains that Belgium was chosen for the quality of its workers: "We do not want to be constantly hiring and firing. For us, it is very important to keep this highly skilled core employed on permanent contracts."

Although issues can be raised about the Audi setup in Brussels, such as its use of temps as safety valves, it has to be acknowledged that it avoids having to lay off permanent staff when times are tough and makes them more and more competitive.

And thus far, the figures speak for themselves.