By Christoph Rauwald
The European Commission plans to bring together auto makers,
trade union representatives and industry ministers by the end of
November to discuss measures to tackle the deepening crisis in the
region's car industry and take coordinated action to improve
competitiveness.
"A European response is needed," the Commission said in a
statement. It should "focus on addressing overcapacity, social and
technological investment, as well as state aid and demand-side
measures."
Countries affected by plant closures and large cutbacks could
apply for aid from the European Globalisation Adjustment Fund. The
EGF was created to support redundant workers in sectors with a
large exposure to the globalized economy and is worth up to 500
million euros ($640.2 million) per year.
The European auto industry is one of the largest employers in
Europe with around two million direct jobs and another ten million
in related manufacturing including other sectors such as steel,
chemical and textile. Auto makers produce more than 17 million
cars, trucks, vans and buses in Europe annually, which is roughly
24% of global vehicle production, according to data from industry
association ACEA.
But the auto industry is squeezed by shrinking demand in Europe,
bloated overcapacity and cut-throat price pressure. Mass-market car
makers such as PSA Peugeot-Citroen SA (UG.FR), General Motors Co.'s
(GM) Opel AG unit and Ford Motor Co. (F) are suffering from steep
losses in Europe and drafted plans to cut thousands of jobs and
close plants in the region to stop the cash burn.
While car sales in emerging markets such as China have been
surging, demand in Europe has been shrinking for almost five years
and overcapacity of around 20% has turned into a chronic problem
for the industry here. But unlike in North America, auto makers
avoided large-scale cutbacks in Europe during the last major
industry downturn in 2008/2009, mainly due to fierce protest from
labor unions and political resistance.
European Commission Vice President Antonio Tajani said Thursday
in a statement: "The automotive industry has all the assets to
overcome current problems, remain competitive, become more
sustainable and retain its manufacturing base in Europe."
He added: "The car industry should provide a strong impetus to
maintain a strong industrial base in Europe."
The outlook however is anything but encouraging. ACEA expects
new-car registrations in the region to decline by between 8%-10%
this year compared with 2011 and several industry executives have
stated that demand is expected to stagnate at best in 2013.
"It is a question of survival for many manufacturers who are
struggling to sustain the same level of capacity as in pre-crisis
times," ACEA president and chief executive of Italian auto maker
Fiat SpA (F.MI) Sergio Marchionne said in October.
Write to Christoph Rauwald at christoph.rauwald@dowjones.com
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