February 25, 2009

As the credit crunch continues to bite EU member states struggle to work out how to jump start the motor industry before it seizes up completely.

The automobile industry’s trade association ACEA, which includes BMW Group, DAF Trucks, Daimler, FIAT Group, Ford of Europe, General Motors Europe, Jaguar Land Rover, MAN Nutzfahrzeuge, Porsche, PSA Peugeot Citroën, Renault, Scania, Toyota Motor Europe, Volkswagen and Volvo, have called for quicker action to try and inject some motion into the industry.

General Secretary Ivan Hodac urged leaders to show more urgency stating: “The EU must show its ability to act in times of crisis. EU leaders, at their summit this weekend, should give the political message to lift bureaucratic barriers and speed up implementation. A coordinated European policy would not only ensure more fairness and respect for EU competition rules but - more importantly - greater efficiency in a single, European market”.  He adds that “The EU has started filling a toolbox with potential instruments but too little of them have been actually put into use due to time-consuming procedures and a lack of guidance at EU level”.

The motoring industry is among the credit crunch’s worst hit victims and no manufacturer seems to be immune from the downturn, regardless of their environmental credentials and efficiency.  The EU is in an extremely difficult position in that it needs to try to give car companies a much needed shot of cash but without promoting what could be viewed as a protectionist strategy.

The bottom line is that consumers are not spending much on anything and as such the big purchases are the first thing that gets cut when buyers are nervous.  Given the state of the credit market, an essential element in the purchase of a new car, it’s not surprising that as the wheels of the credit market have ground to a halt car sales have collapsed.

It’s hard to see that the US motor industry will have much chance of exporting much of its output, so it will be reliant on its internal market, but the EU automotive industry has a more global reach and most manufacturers have moved towards economical and relevant cars that command a place on modern roads.  With Japanese cars showing a 69% drop in sales year on year this month, there's no pretending that the market is anything less than brutal for all that are in it.

The ACEA estimates that twelve million Europeans rely on the automotive industry, either directly or indirectly, for their livelihood.   It estimates that for every job there are five at vehicle-parts suppliers, other equipment producers, car dealers, repair workshops and other vehicle-related activities.  It estimates that in countries such as Germany, France, Spain, Italy, Slovakia or the Czech Republic, the ratio is at least double as high.

Perhaps with swift and decisive action taken now the EU and Asian automotive industry has a future, undoubtedly with a different look and landscape than currently but a sound future nonetheless. With such numbers affected it’s hard to understate the importance of getting the package right.  The fiscal amount it important but the speed of implementation is surely as important.

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