Korean Trade Deal One-Sided, Damaging. Delay Japanese Talks
Overcapacity Remains Unreformed, Forcing Unsustainable Price War
E.U. Transport White Paper “Unrealistic”, “One-sided”
COLOGNE, Germany – Unnecessary and anti-car regulation from the European Union will stifle future vehicle use, discourage important research and development and increase unemployment in the industry, Ford of Europe Chairman and CEO Stephen Odell said.
Odell warned that the European industry was still being undermined by at least 35 per cent overcapacity. This contrasted with the profound change in the U.S. industry which had become leaner, more efficient and stronger. Overcapacity has forced European manufacturers into a price cutting war which was unsustainable, and threatened to damage the entire industry.
Odell also took a pop at what he called the E.U.’s one-sided free-trade agreement with South Korea.
“The E.U.-South Korea free trade agreement is damaging for the E.U. automotive industry. It gives improved market access for Korean manufacturers in Europe, while export opportunities for European-based manufacturers are likely to remain strictly limited in South Korea,” Odell told Automotive News Europe’s annual Congress.
Odell called for upcoming E.U.-Japan free trade discussions to be delayed until the issue of non-trade barriers is fully addressed by the Japanese.
Odell said he was worried by what he called an increasingly industry-sceptical Brussels regime, which was producing marginal and unnecessary regulation and anti-car European Commission strategy papers.
“The European Commission has a big role to play in the future of the auto industry across Europe. Do they wish to enhance it? Or undermine it? Decisions taken at the European level are crucial for us all here tonight. If those decisions are wrong, then I’m not certain if volume automotive manufacturing has a long-term future in Europe,” Odell said.
Overcapacity was driving a damaging and unsustainable price war.
“This is leading to huge pressure in the industry as some manufacturers reduce their vehicle prices to unrealistic levels to attract customers, and to try to keep their production facilities operating. This is unsustainable and it is damaging the entire industry,” Odell said.
Another speaker at the conference, Philippe Houchois, auto analyst with UBS Investment Bank, said Europe was already suffering from structural overcapacity even when sales in the region peaked at 16.8 million in 2007.
“Basically, we have in operation the same number of manufacturing plants we had four years ago, despite sales declining almost 2.5 million units,” Houchois told Automotive News.
Most European volume manufacturers were losing money in Western Europe, with even the VW brand only making between zero and two per cent margins.
Odell demanded that E.U. regulation on fuel efficiency be more realistic, and said the European industry had already made enormous progress in curbing carbon dioxide (CO2) emissions.
Industry experts reckon that E.U. rules calling for an average of 130 g/km by 2015 are attainable, but worry about the next step, down to 95 g/km by 2020.
Odell was particularly concerned by the latest E.U White Paper on Future Transport, which called for a 50 per cent cut in internal combustion-engined cars in urban areas by 2030, and a complete ban by 2050. This did not effectively address the issues of congestion and environmental improvement.
“I find the proposals to make a general shift from road to rail and shipping in the same timeframe to be unrealistic and one-sided. Such radical proposals require further discussion and reflection, and they need to respect the principles of technical neutrality and freedom of choice,” Odell said.
The White Paper could discourage essential R&D in Europe and significantly reduce employment.
Odell said that is the E.U could be persuaded to encourage a strong and competitive industry, the volume auto industry had a big future in Europe.
“The auto industry is one of the world’s great growth industries. It’s estimated the annual global vehicle market cill be around 95 to 100 million units a year by mid-decade, and about 112 million vehicles by 2020. That’s 112 million vehicles by 2020 that have to be designed, engineered and built somewhere in the world – So why not here in Europe?” he said.
Neil Winton – July 20, 2011