Confidence is at a new low in Europe and companies are struggling to survive. Costantino Baldissara calls for a unified approach.
Everyone knows that these are difficult times for the European automotive industry and vehicle logistics sector. With the exception of a shortlived rally at the beginning of last year, we have now struggled through four years of crisis. Providers survived the beginning of the downturn by tightening their belts, shedding capacity and freezing investment. Four years on, they have less room for manoeuvre, and as demand falls further, so does employment and whatever confidence might be left in the industry.
At this stage of a grim game, the focus is on survival rather than profitability or preparing for the future. And yet, as anyone who attended ECG’s annual conference will attest (see p14), the future is not something that the sector can ignore.
According to Günther Percht, general manager of Kässbohrer Transport Technik, one of Europe’s big three car transporter manufacturers alongside Lohr and Rolfo, industry sales have dropped from a peak of 4,500 car carriers in 2008, to 1,000 in 2009 and just 500 the following year. Sales for 2011 and 2012 will again come in below 1,000, although orders from healthier markets such as Russia and Turkey have provided a cushion.
The car carrier fleet is not only shrinking but also getting older. Since the beginning of the crisis, the number of car carriers in use has dwindled by 15% – about 3,000 vehicles – while the average age has risen from 3.8 years to 5.9 years and is heading fast towards 8 years.
This matters for the entire sector. Car transporter manufacturers – family-run companies all – cannot withstand such weak sales indefinitely.
For logistics providers, significant contraction in the car carrier manufacturing sector conjures the possibility that when a recovery eventually comes, there will be insufficient capacity on the road to handle it and insufficient manufacturing capacity to plug the gap quickly. This could mean missed opportunities in responding to pent-up consumer demand for cars after years of penury and struggle.
Dim views on a dark outlook
The automotive logistics sector cannot afford to see car carrier manufacturers go under, and yet how can we, as an industry, prevent it?
market. Asked how they expect the size of their fleet to change over the next six months, just 13.5% of respondents said they anticipated growth. More than double that percentage, 32.4%, expected their fleet to shrink.
expected their fleet to shrink. Though a number of respondents said they would be investing in trucks over the next six months, the size of those investments remains in question, particularly given the downbeat responses we received on other core questions.
Some 69.4% of respondents said lack of confidence in volumes and viable rates going forward would restrict investment. Over the next six months, meanwhile, 51.5% said volumes would fall while 48.6% expected rates to slide, compared with just 14.3% and 22.9%, respectively, who expected gains.
Costs, meanwhile, continue to surge. As well as rising fuel prices – highlighted by 91.5% of respondents – every other element of the cost index has also jumped, including fleet maintenance and repair (86.1% registered an increase), major asset replacement (72.2%), tyres (68.6%), tolls (68.5%), insurance (58.4%) and finance (40%).
Under this pressure, it is little wonder that Europe’s LSPs are reluctant to invest. Once again, we need to come together as an industry, whether to help the trailer manufacturers, or to address other fundamental problems in the sector. Percht suggested, for example, that the ECG might be able to help car carrier manufacturers secure bank financing.
There are areas in which OEMs could help, too. One way to restore the confidence of old would be for the OEMs to grant long-term contracts to their vehicle logistics providers.
Meanwhile, providers and carmakers are already co-operating in a range of areas. The joint meetings between ECG and ACEA (the European carmaker’s association) are working to improve efficiency across the industry, and discussions have already resulted in ACEA’s endorsement of the ECG’s Operations Quality Manual. The ECG Academy alumni association will focus in the coming months on an innovation project that also comes out of these meetings.
While logistics providers and OEMs have often been at odds, these meetings have helped to break down the old barriers. I believe we are beginning to trust each other a little more, which in itself can help restore confidence. And the sooner confidence returns, the better for the vehicle logistics sector, for the carmakers and for the manufacturers of the transporters that allow us to bring Europe’s cars to market.