Speaking at last week’s Spring Congress and General Meeting of the Association of European Vehicle Logistics (ECG) held in Dublin, Ireland, its president Costantino Baldissara, said that while there are a number of issues pressing on the industry, including the need for improvements to road infrastructure and safe parking areas, the crucial target for EU funding should be in a car scrapping incentive scheme to promote vehicle sales, similar to those rolled out in 2009.
Production of light vehicles across Europe has dropped back below 2007 figures, with annual growth at -3.4% and a third of assembly plants now running at just 20% capacity according to figures from analyst LMC Automotive. While exports continue to offer a bright spot of activity for premium carmakers, capacity utilization has dropped to 62% on average over seven quarters of contraction and the difficulties are likely to remain in place for the next five years said LMC Automotive’s managing director Arthur Maher.
Meanwhile, however, there are 60m vehicles more than 10 years old on the roads in Europe. A scheme to boost production would benefit the whole European car sector, not least those involved with the shipment of vehicles from the factories to the dealers. Without such a scheme finished vehicle providers in the region are facing some bleak business prospects.
“Many companies are struggling to survive,” said Baldissara. “This is an emergency situation.”
He went on to point out that the European automotive sector makes a larger contribution to the European economy than Greece, a country that continues to concern the EU. “If we are worried about the economies of countries like Greece then we should also be worried about the automotive sector,” he said.
Part of the problem, according to Baldissara was that, unlike other sectors (and perhaps Greece itself) which are characterised by strikes and production stoppages, the finished vehicle logistics sector is not making enough noise to get the attention of the stakeholders involved.
However, that is not to say the ECG has not voiced its concerns. In February this year the European Union announced that the proposed budget for transport infrastructure would be cut by a third to €23m, something that was described as a missed opportunity at the time by a collection of transport-related associations including the ECG (read more here).
Asked last week where the reduced resources should be targeted for the benefit of the sector Baldissara said that the answer has changed.
“If you had asked me this question five years ago I would have given you a lot of ideas,” he said. “This does not mean that we don’t have them now, but today we have another priority: to survive.”
Baldissara said that funding should be found for car scrapping incentive schemes. While better connectivity between the ports and roads was important he said right now the finished vehicle sector needed to transport more vehicles otherwise those companies involved would start going out of business.
That money appears to be available. “Italy is going to have a €15 billion reduction in interest costs because now there is a more stable situation,” said Baldissara. “Is it not possible that they could devote €300m to encourage people to buy a new car? The resources can be found and I think that these schemes are a bargain. It is an opportunity more than a cost,” he said.
Italy needs the reduction in interest rates badly, having been hit by a particularly severe slump recently, but it also deserves a different approach to manufacturing, especially for Fiat-Chrysler, which is at just under 41% capacity across its plants there.
“Is it possible that all [Fiat-Chrysler] factories are at full capacity in the US but it does not have the possibility of producing more in Italy where there is a great under-utilisation?” asked Balidssara. “What is worse is that they have been forced by the Italian system to go to Serbia to make the new 500 ‘large’. Are we crazy? I think that we are because we do not have a sense of urgency for the business.”
Delegates had the opportunity to express these and other concerns to the European ministers in attendance, including MEP Jim Higgens, member of the Transport and Tourism committee at the European Parliament, and Maurice Mullen, assistant secretary with responsibility for maritime, ports and freight issues at the Department for Transport during the Irish presidency of the EU.
Asked why the cut to the proposed transport budget was so drastic Maurice Mullen found it difficult to answer having asked for an increase as a member of the transport committee. He admitted the cut was very significant and the debate over the allocation of budget had dragged on over a long period. “We were concerned that transport would still have reasonable visibility,” said Mullen but had to admit that the political process behind the budget had a widely divergent range of opinion, with Ireland pressing for more than the final sum. He still saw the benefit of an envelope for transport being made available and that there would be positive consequences for the sector in Europe.
Johannes Hödlmayr, CEO of Hödlmayr Internaitional, pointed out the modal split in Europe today was 70% road, 20% rail and 10% waterway, despite an EU white paper which identifies a 30% increase in transport by 2030 and the use of alternatives to road on journeys over 300km by the same year. He asked what the real steps would be for the EU to move to a better mix of modes and what the EU would do to support companies faced with such high loan rates from the banks when investing in new equipment.
Claire Whittaker from the European Commission’s Directorate-General for Mobility and Transport (DG MOVE) said the proposals were to be taken as a general direction the Commission wants to move in and that there were a number of initiatives set up that would help it get there. “The bulk will continue to be on road as infrastructure needs development,” she said, adding that Commission had introduced a ports policy to promote intermodal freight. Funding would be provided through the Marco Polo initiative as well as TEN-T funding for other modes.
Pressed on the point about support for investment in the face of high interest rates Whittaker acknowledged that investment was a challenge but could only refer back to the savings available through more efficient transport which would “bring savings eventually”.
The question that remained hanging in the air between the transport providers gathered in Dublin was how many of them would still be around when those savings “eventually” came through.
Read more about the topics discussed at the ECG Spring Congress in the July-September edition of Automotive Logistics magazine.