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How to achieve sustainable growth in the automotive industry within an enlarged European Union H.J. Keulen Trade Union Official

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Page 1: How to achieve sustainable growth in the automotive industry within an enlarged European Union H.J. Keulen Trade Union Official

How to achieve sustainable growth

in the automotive industry within an

enlarged European Union

H.J. Keulen

Trade Union Official

Page 2: How to achieve sustainable growth in the automotive industry within an enlarged European Union H.J. Keulen Trade Union Official

Developments automotive industry

• Highly competitive market due to huge overcapacity.

• Consumer market, big incentives (more demands for less money).

• Increasing demands regarding environmental and safety issues.

• Shorter time to market and life cycles. • Negative exchange rate effects due to strong

Euro.

Page 3: How to achieve sustainable growth in the automotive industry within an enlarged European Union H.J. Keulen Trade Union Official

Developments automotive industry

• Cost pressure within the value chain and declining financial results.

• Profit margins OEMs under pressure.• Price cutting within the value chain from

OEMs towards suppliers.• Stronger demands from OEM towards

suppliers regarding product development.• Shifting financial risks from OEM towards

suppliers.

Page 4: How to achieve sustainable growth in the automotive industry within an enlarged European Union H.J. Keulen Trade Union Official

Scenarios future European automotive industry

• Key drivers * Demand* Consolidation rate OEMs and suppliers* Capacity* Competition/introduction new players * Production locations* Outsourcing* Technology* Legislation

(environment, safety, taxes, social standards)

Page 5: How to achieve sustainable growth in the automotive industry within an enlarged European Union H.J. Keulen Trade Union Official

Scenarios futureEuropean automotive industry• Limited growth new car sales in western European

markets and eastern European markets. Demand in eastern European markets will develop but especially in the used car segment

• Limited consolidation OEMs,continuous consolidation process suppliers

• Overcapacity maintains• Risk of new players entering European Market

regarding current investments in new capacity in Asia\China

• More stringent legislation especially on environmental and safety issues

Page 6: How to achieve sustainable growth in the automotive industry within an enlarged European Union H.J. Keulen Trade Union Official

Scenarios European automotive industry

• Development of new production locations in new markets in central and eastern Europe.

• Suppliers will (have) to follow.• Smaller production sites which will produce

more flexibly in smaller volumes.• Continuous process of outsourcing. • Overall employment probably will decline.

Page 7: How to achieve sustainable growth in the automotive industry within an enlarged European Union H.J. Keulen Trade Union Official

Undesired scenario

• “Laissez faire” policy of the European Union and individual member states.

• A development of the European automotive industry only driven by cost optimalization in the value chain.

• Massive reallocation of labour.• Negative spiral in the income and other working

conditions within the enlarged EU.• Member states competing each other by created

cost advantages. Risk of further reallocation to even cheaper production sites.

Page 8: How to achieve sustainable growth in the automotive industry within an enlarged European Union H.J. Keulen Trade Union Official

Challenge

• To achieve sustainable growth within the European automotive industry in an enlarged Europe.

• A European policy encouraging further development of the industry in the new member states and preserving and further developing the industry in the original member states.

• A European policy in which social, economic and environmental interest are in balance.

Page 9: How to achieve sustainable growth in the automotive industry within an enlarged European Union H.J. Keulen Trade Union Official

Consensus model

• An European consensus model should be developed to achieve sustainable economic growth within an innovative climate, stimulating the development of employment.

• Innovation of products, processes and organizations.• Important actors:

Industry, academic/R&D institutes, unions and politicians on a European, regional (cross-border) and national level.

• Lisbon Agenda Car 21 initiative European Commission

Page 10: How to achieve sustainable growth in the automotive industry within an enlarged European Union H.J. Keulen Trade Union Official

Framework for fair competitionwithin European Union

• Harmonization of legislation.

• Minimum standards for taxes and subsidies.

• Minimum standards for working conditions.

Page 11: How to achieve sustainable growth in the automotive industry within an enlarged European Union H.J. Keulen Trade Union Official

Improvement innovation capability

• Innovation will ultimately be a more important driver for competitiveness and consolidation of the European automotive industry than costs.

• New member states should not only focus on their low wage advantage as this is only temporary.

• Cooperation between OEM, suppliers, unions and research and academic/R&D institutes in cross border clusters within the several European automotive regions.

• Example: coordination of investments in fundamental research/R&D programs and facilities.

Page 12: How to achieve sustainable growth in the automotive industry within an enlarged European Union H.J. Keulen Trade Union Official

Improvement cooperation in value chain

• Current business model within value chain is mainly driven by cost and does not support the necessary drive for innovation by suppliers. Lack of cash flow. Risk: further consolidation and transfer of knowledge to USA/Japan

• A new business model is desirable in which besides cost effectiveness innovation within the value chain is encouraged.

• System suppliers will be the driver in this innovation process. Especially electrotechnical system innovations using embedded systems and nano technology have high global potential.

• Pre seed and seed capital has to be available to encourage these innovations, especially those supporting safty and environmental targets. Should be part of EU en national policy.

Page 13: How to achieve sustainable growth in the automotive industry within an enlarged European Union H.J. Keulen Trade Union Official

Professionalized relationship companies - employee representatives

• No unfounded protectionism but realism.• Open discussion between companies and

employee representatives on a national and European level on investment planning and production allocation, based on a dynamic total costs account.

• Life long learning.• More flexibility within working conditions.

Page 14: How to achieve sustainable growth in the automotive industry within an enlarged European Union H.J. Keulen Trade Union Official

Contribution Unions/EMF

• Exert influence on EU politics for an integral European policy on industrial development.

• Start up dialogues with OEM and supplier confederations.

• Encouraging development European works councils and support.

• Creation, development and support of employee representation structures within the new member states.

• Encouraging development of employees on all levels in the member states to enable and contribute to innovation targets.

Page 15: How to achieve sustainable growth in the automotive industry within an enlarged European Union H.J. Keulen Trade Union Official

Sustainable growth let’s do it the smart way

• Some developments are inevitable regarding the globalization of the world economy and the automotive industry.

• We can manage to cushion the negative effects of these developments by finding an European way for sustainable growth.

• Sustainable growth is achievable if we manage to cooperate within the enlarged EU and find smart, knowledge-based solutions in competition.

Page 16: How to achieve sustainable growth in the automotive industry within an enlarged European Union H.J. Keulen Trade Union Official