Responding to the crisis in the European automotive industry

The automotive sector has been in considerable difficulty since the start of the crisis in October 2008. In order to remedy this situation, the European Commission and the Member States are launching a strategy which includes the industrial, financial, economic and social aspects of this sector.

ACT

Communication from the Commission of 25 February 2009 - Responding to the crisis in the European automotive industry [COM(2009) 104 final – Not published in the Official Journal].

SUMMARY

This Communication has the aim of getting the European automotive sector, which has suffered badly since the crisis of October 2008, moving again.

The position of the automotive sector in Europe

The European Union is the world's largest producer of motor vehicles, producing over 18 million vehicles a year - a third of the world’s passenger cars. More than two million people work directly for this sector and twelve million indirectly.

The automotive sector therefore plays a strategic role in the Union. It makes a major contribution to GDP with an annual turnover of 780 billion EUR and a value added of more than 140 billion EUR.

However, since the beginning of the crisis during the last quarter of 2008, industrial production has dropped by 8.4%. The automotive sector is encountering many difficulties for the following reasons:

• demand for passenger and commercial vehicles has dropped significantly, in particular due to the reduction in credit availability and declining purchasing power;
• some companies in the automotive industry are having financial difficulties, in particular due to the reduction in credit;
• long-term structural problems of overcapacity (currently 20% in Europe) are a handicap for automotive producers.

In addition, the forecast is for a reduction in demand for vehicles of between 12% and 18% in 2009, which will probably lead to a fall in production and threaten the jobs of 15 to 20% of the workers in the sector.

Planned strategy

The automotive sector must react quickly to the crisis by concentrating on three main challenges:

• technology;
• environment;
• safety.

Europe must invest in research and development in “green vehicles” so as to implement a low-carbon economy. European regulations will enter into force in 2012 to this effect.

Industry and the public sector have an essential role to play in an approach which has four main aims:

• to support demand in order to assist with remedying the effects of the credit squeeze;
• to facilitate the adjustment by cushioning the costs associated with restructuring;
• to encourage the modernisation of industry;
• to adapt industry to the challenges of climate change.

The CARS 21 process is a strategic framework and may be modified according to future road transport and sustainable mobility requirements.

It appears to be essential to reinstate easy access to credit, by re-establishing financing at reasonable conditions and by restoring liquidity, so that consumers may once again purchase new vehicles.

Aid must be given to the financial sector and to small and medium-sized enterprises (SMEs). A temporary State aid framework was adopted in December 2008 (pdf). This provides for subsidised loans for the manufacture of “green products” such as “green cars”.

The Commission and the European Investment Bank have planned to support industry that decides to invest in future technologies, in particular green technologies, through the 7th Research Framework Programme and the research partnership planned therein. This is a partnership between the public and the private sector covering:

• the design of “green” vehicles (passenger cars, buses, trucks, urban vehicles, etc.);
• infrastructure (for electric cars and hydrogen vehicles);
• logistics.

The Commission has also studied the possibility of adopting a scrapping scheme.

The question of employment must also remain at the heart of the strategy for the automotive sector. The Commission proposes to implement the following measures via the European Social Fund (ESF):

• support for short-time workers;
• supporting company restructuring in this sector;
• financing retraining;
• anticipating change requirements;
• matching skills.

Fair competition must become the basic principle in force on the market and a return to protectionism must be avoided.

Last updated: 18.06.2009