The European restructuring
processes: carmakers strategies and
public policies- Gerpisa 2013
An interpretation by Francesco Garibaldo – fgaribaldo@gmail.comwww.francescogaribaldo.it
Europe in the global
context -1
• FT 2013 forecast for cars and other light vehicles
production:
China 19,6 millions vs. Europe 18,3 m. (22m. in 2007)
Total global production 82,4 m.
China 23,8% vs. Europe 20%
In 2001
China 3,5% vs. Europe 35%
Europe in the global
context -2
• The picture can be misleading because of
the western OEMs process of offshoring;
for instance one in ever three VW cars
are produced in Asia
The actual situation:
offshoring to be present in the new
markets
• The automobile industry is now fully and evenly
globalised, meaning that the processes of structuring
and restructuring capacity are intertwined and
distributed on a global scale.
• One of the net effect of global offshoring was a
combined process of structuring, through additional
capacity in the new markets, and restructuring of the
existing capacity in the old markets, namely Europe.
• Structuring and re-structuring are the two sides of the
same process.
The actual situation:
outsourcing and offshoring because of
lower level of wages and job protection
• The European OEMs can reach this goal within
Europe, both the EU countries, as in the case of
Poland and Spain and eastward and southward on the
borders of the EU. This depends also on the need of
the OEMs, in this sector, to have a reduced distance
between the production sites and the market.
• In this case there is a very fine tuned, by processes and
corporate functions, process of outsourcing.
Europe from within:
Divergent trends -1
Europe from within:
Divergent trends- 2
Europe from within:
Divergent trends-3
Overcapacity and
demand - 1
• In Europe there is an overcapacity problem that is both
a consequence of the process of structuring and
restructuring and of lack of demand ( see later on), as
well as of the economic crisis.
• The global figure can be misleading because of the
divergent trends by countries, by brands and by plants
of the same brands ( see previous figures).
• Europe – EU 27 - has hit at the same time by a global
overcapacity and by an uneven distribution of it, by
countries and by brands.
Overcapacity and
demand - 2
• Besides the negative demographic trends, namely in most
EU countries, largely compounded by a cultural shift among
the youngsters on the usage of cars and the desire for
physical mobility.
• A European trend towards the economy segment since
before the economic crisis.
• Urbanisation of the majority of people with a fundamental
split of the car market in two different spheres, one
primarily looking for all-purposes vehicles and one
primarily looking for single-purpose vehicles.
• It implies both product innovations and business model
innovation.
Overcapacity and
demand - 3
• A crisis o the traditional model of a personal
ownership of the car: “Zipcar, recently acquired by
AVIS, and other car-sharing services have been more
successful than traditional car rental companies at
reacting to the trend towards declining car ownership
in many industrialised countries”. (FT, 08/01/2013)
• It implies the search for new business models.
Overcapacity and
demand - 4
• A crisis of efficiency and efficacy of the mobility based
on cars in metropolitan areas because of congestion
and of the social costs of pollution.
• It implies an integrated approach of urban planning,
of the introduction of smart shared vehicles and their
integration in a hybrid mobility platform, based on
ICT – based technologies, made up of public systems
and car-sharing schemes and the search for the
integration of different kind of knowledge, of
different professions, of different economic activities
with the overall task of improving the mobility of
people. ( open innovation models)
Lack of Demand:
At the
aggregate level the economic crisis
The European Car
Market 2012
• “in the EU in 2012 reached 12.1m units, down 8.2 per cent
from 2011.The worst hit countries were those suffering from
the biggest economic difficulties arising from the broad
economic woes of the Eurozone, with Italy suffering a yearon-year fall in registrations of 19.9 per cent, France of 13.9
per cent and Spain 13.4 per cent. Peter Fuss, a partner at the
Ernst & Young consultancy, said the decline in sales was
“much worse” than the statistics made out as “sales figures
for the year were artificially inflated as a result of selfregistrations by dealers and automakers, especially in the
region’s biggest market, Germany”.
FT 24/01/2013
The European Car
Market 2013
continued a contraction that in March reached its lowest level for
at least 23 years. The further downturn in demand in Europe
during the first quarter, particularly in Germany, caught many in
the industry by surprise
UK on the contrary
Consequences and the first
political challenge - 1
• Redundancies and plant closures, namely in the South
of Europe.
• A corporative retrenching of Trade Unions and the rise
of a nationalist stance by the governments.
• A declining level of working conditions and of the
degree of labour protection for the workforce.
• A strong pressure on the supply chain ( firms and their
workers).
Consequences and the first
political challenge - 2
All theses consequences are in the framework of a very
uneven situation, by brands and countries, in terms of
R&D investments, besides the uneven distribution of
overcapacity, redundancies and plant closures. The
uneven distribution is also one of the consequences of
the EU internal balance of trade disequilibrium:
•The firs political challenge is to reverse the nationalist
and corporative trends to design and to enact a EUwide strategic project on mobility; for instance how to
supply products suitable for the new cultural stances
and the demand for cheaper but effective vehicles.
Consequences and other
political challenges
The overall trends imply:
1.both product innovations ( new power train technologies, new
materials, new vehicle’s architectures) and business model
innovation ( not only ownership);
2.an integrated approach of urban planning;
3.the introduction of smart shared vehicles and their integration
in a hybrid mobility platform, based on ICT – based technologies,
made up of public systems and car-sharing schemes;
4.the search for the integration of different kind of knowledge, of
different professions, of different economic activities with the
overall task of improving the mobility of people;
The main political
challenge - 1
These are strategic political challenges for the policy makers, the
industrialists and the Trade Unions, both at the EU level and at the
national/local level; to sum up:
•A cultural shift is needed from car to mobility as the actual product.
In other words if cars are a by-product of the real product, that is
mobility, and if mobility to-day is for the majority of mankind a
urban mobility, then the focus is on designing together the city and
the infrastructure for mobility; cars are just part of a broader system.
Besides, each new design implies the search for new products to
support mobility and of new industrial processes to build them.
•It implies the necessity of a vertical integration between the classical
automobile sector and a newly emerging urban design and
management sector.
The main political
challenge - 2
But looking at the actual situation a long industrial and social
transition is needed:
•a new EU macroeconomic model out of the actual intra-trade
disequilibrium ( NSM as consumer markets and not only as
productive place, new EU-wide labour standards);
•Employment levels in the car industry cannot be considered
only in a short term perspective but also as an asset to support
the transition; it implies a combined effort of governments,
EU-authorities, firms and Trade Unions to avoid a collapse in
terms of employment, not only as an aggregate EU-wide
figure but also looking at an even distribution of it.
The main political
challenge - 3
• A new public authorities activism to contribute to designing and
supporting the transition of the car industry toward a new
paradigm. New powertrain technologies’ success depends more
on a network economic effect than on the traditional economy of
scale and for these reasons new public procurements policies for
public fleets and public transport equipment; new standards for
public and private fleets, etc., are relevant ;
• To moderate the rush for a neo-mercantilist approach, based on
the premium market as the main road for the car industry, because
a world-wide market for luxury goods of the new global middleclass exists, but it will not grow indefinitely at this pace, and it will
not be for ever a captive market for the western brands. Beside
these flows can be intercepted only from the OEMs specialised in
producing cars in the E, F, S and also J segments; that are the
segments with the highest level of economic returns.