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EU Calls for Coordinated Action Amid Car Industry Crisis

Date : 11/08/2012 @ 5:54PM
Source : Dow Jones News
Stock : Ford Motor Co. (DE) (F)
Quote : 14.1375  0.0 (0.00%) @ 4:33PM
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EU Calls for Coordinated Action Amid Car Industry Crisis

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  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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