Opinion of the European Economic and Social Committee on the ‘Communication from the Commission on Responding to the crisis in the European automotive industry’

On 25 February 2009 the European Commission decided to consult the European Economic and Social Committee, under Article 262 of the Treaty establishing the European Community, on the

Communication from the Commission - Responding to the crisis in the European automotive industry

On 23 March 2009 the Committee Bureau instructed the Consultative Commission on Industrial Change to prepare the Committee's work on the subject. The rapporteur was Mr Zöhrer and the co-rapporteur was Mr GLAHE.

Given the urgent nature of the work, the European Economic and Social Committee appointed Mr Zöhrer as rapporteur-general at its plenary session held on 13 and 14 May 2009 (meeting of 13 May) and adopted the following opinion by 141 votes to 2 with 5 abstentions.

The crisis struck the automotive sector more swiftly and severely than most other branches of industry. For this reason, the Commission and the Member States have taken a number of initiatives in the past months to help it out in this difficult situation. The Commission drew attention to the importance of a dynamic and competitive vehicle industry in its Communication of 25 February 2009. In the Communication the Commission looks at the collapse in demand for cars and commercial vehicles and the squeeze on credit, as well as the longer-term structural problems pre-dating the crisis.

1.1.1. With the CARS-21 high-level group, the restructuring forum in October 2007 and numerous small working groups, the Commission has been tackling the challenges facing the automotive sector for some time now. The Committee made an important contribution to this debate in its December 2007 information report on the situation of the automotive sector in Europe (CCMI/046 Opinion on ‘The automotive sector in Europe: current situation and prospects’ (CESE 1065/2007 fin rev.)) and is currently working on an opinion on the components and downstream markets of the automotive sector (CCMI/059 Opinion on ‘The components and downstream markets of the automotive sector’).

1.2. In the second part of the Communication, the Commission sets out the measures – especially those for the automotive industry – that have been taken or are being planned at Community level and in the Member States as part of the European economic recovery plan.

2.1. The Committee welcomes the Commission's Communication, which demonstrates that both it and the Member States are ready to support the automotive industry in these turbulent times. It underscores the need for a coherent and coordinated framework to ward off any drift towards protectionism and to set common goals.

The present crisis calls for swift action. Some measures need to be implemented more quickly than planned, especially to save supply industry SMEs from collapse and to make urgently needed investments possible.

2.2.1. The first thing to do is ensure rapid access to sufficient, targeted funding through banks and the European Investment Bank or through state aid and guarantees from the Member States.

2.2.2. Even then, some insolvencies cannot be ruled out. The Committee therefore calls on the Commission and the Member States to look into how far insolvency laws help companies stay afloat.

The biggest challenge the crisis poses, however, is safeguarding jobs. The important thing is to stave off unemployment and retain know-how in the industry. Member States have a raft of measures (short-time working among them) that they can use to span gaps in the order books. In some Member States, however, such arrangements do not exist, resulting in massive lay-offs. The Committee therefore urges the use of exchange of best practices and targeted support to keep people in work. Slack periods must now be used for measures to boost workforce skills.

2.3.1. The Committee welcomes the efforts made within the ESF to enable the funding of job-protection measures. It supports the proposal to adapt the European Globalisation Adjustment Fund in the light of the crisis. Given that the allocated funds of EUR 500 million may not be enough, the Committee proposes raising this figure to EUR 1 billion (see Opinion CCMI/063).

2.3.2. Fixed-term and temporary agency workers are the ones most badly hit by the crisis and the consequent downsizing. The Committee calls for special measures to be taken for these groups of workers and for the legal framework – especially for agency workers – to be adapted accordingly as a matter of urgency.

2.4. Incentives to boost demand are also needed. On this front, care must be taken to ensure that all financial or fiscal initiatives (such as scrapping schemes) support and accelerate the sector's technological overhaul (energy efficiency of machinery, emissions reduction). In addition, the Committee calls on the Member States, the Commission, the ECB and the social partners to provide the overall macroeconomic environment to safeguard incomes and so fuel domestic demand.

As far as long-term structural problems are concerned, the Committee refers to the Information Report by its Consultative Commission on Industrial Change (CCMI) on ‘The automotive sector in Europe: current situation and prospects (November 2007)’. This sets out clearly the challenges facing the industry and notes that the sector is heading for a profound transformation, accelerated by the current crisis.

2.5.1. The most obvious immediate effect of the crisis and national support measures is a shift in market share to smaller, greener and cheaper models. This has a big impact on the value added by manufacturers and suppliers that will have a long-term impact on the sector.

2.5.2. If the sector is to emerge from the crisis stronger than before, now is the time to put greater effort into research and development, innovation and skilling of the workforce. This is the responsibility of companies as well as of Member States and the Community. The Committee therefore supports the initiatives set out by the Commission.

2.5.3. Care must be taken not to equate structural problems with overcapacity alone. Europe has seen a sharp drop in capacity (especially in Spain, Portugal and the UK) in recent years. Different manufacturers take very different approaches to this and there are various philosophies. To some extent, overcapacity is inherent in the system (changes of model and internal competition, for example). However, there is a danger that the crisis might cause a massive reduction in capacity, resulting in undercapacity and hence increased imports when demand increases once again. For this reason, the Committee calls for this issue to be examined by the CARS 21 high-level group.

2.5.4. US manufacturers, in particular, are mired in a deep structural crisis. The Committee welcomes the Commission's endeavours to mount an effective policy response to the problems that this has caused GM Europe and its suppliers by coordinating the activities of the Member States affected. The EU must press the USA and General Motors to give the European arm (OPEL, Vauxhall and Saab) a chance to survive.

2.5.5. In the Committee's view, mastering the forthcoming challenges will require further efforts on the part not only of companies, but also of the Members States and the European Union as such. For this reason, the Committee endorses the Commission's proposals on implementing the outcomes of the CARS 21 consultation process and on the way forward. It favours continuing the process, which supports a longer-term European industry policy in line with the Lisbon Strategy.

2.5.6. The Committee also draws attention to the importance of the downstream markets (an opinion on the subject is being drafted and will be issued shortly). It calls for a high-level group to be set up that capitalises on CARS 21 experience and gets to grips with the specific challenges facing players in the downstream sector.

2.5.7. The European Partnership for the anticipation of change in the automotive industry instigated by the Commission is an important step in bringing the social impact of restructuring into the spotlight. Given the dramatic turn of events, the Committee calls on the social partners concerned and the Commission to launch a real, effective social dialogue.

2.6. The cornerstone of the continued success of the European automotive industry is open access to world markets and fair competition. For this reason, the Committee welcomes the Commission's intention of stepping up dialogue with trading partners. Developments in the USA and Asia, in particular, must be monitored to ensure a level playing field and the rejection of protectionist and discriminatory measures, as well as effective protection of intellectual property. The Committee stresses the necessity and timeliness, particularly with regard to the conclusion of a free trade agreement with South Korea, of pressing for a fair framework to be created for the European automotive industry. The current state of negotiations fails to reflect the goal of dismantling non-tariff trade barriers for European producers.

Brussels, 13 May 2009.

The President of the European Economic and Social Committee

Mario SEPI