Call for reappraisal of car industry

Date: 25/04/1996

By David Thomas

THE results of a six-month inquiry by the European Commission into the sorry state of the Union's car industry will come under the spotlight at a meeting of EU industry ministers next month.

There are few EU industrial sectors more important in terms of sheer volume than cars.

The industry produces 2&percent; of the EU's gross domestic product and employs 2 million workers.

But it is facing some serious challenges on a number of different fronts - from the emerging car industries of Southeast Asia and from the possible imposition of much tougher environmental standards, as well as from the depressed state of the domestic market across the EU.

The Commission's report, which must be approved by the full college later this month or in early May before it is considered by ministers at their next meeting on 20 May, is expected to call for the establishment of a high-level panel of industry representatives, unions and user groups to examine EU policies in relation to the car sector.

According to sources, the first part of the draft report amounts to little more than a summary of what the Commission has done in a number of different areas to regulate the sector. The second will recommend a more global approach to policy development, with the forum of industry participants helping to oversee the way in which EU policies in different areas interact with each other in the sector.

Higher environmental standards are likely to be one key aspect of the Commission report.

It is expected that the so-called 'auto-oil' initiative will call for significant reductions in emission levels by 2000. This is likely to present car-makers with their biggest headache.

The key problem facing such an initiative is whether to aim high or low.

Naturally the car industry itself is not keen to be forced into accepting standards which it considers too high. But many observers of the industry suggest that this is the only way in which western European workers will be able to preserve their jobs in the face of tough competition from Eastern Europe and Southeast Asia.

Making the 'car of the future' is one way in which these workers could maintain their competitive advantage, says Alan Donnelly, a British Labour MEP with a long-standing interest in the sector.

Donnelly points out a parallel with the introduction of airbags. At first, car-makers regarded them as an unhelpful addition to costs, but time has shown that such ideas can become selling points.

The same could happen with so-called 'on-board diagnostic' and road-mapping systems which have already been incorporated into some BMW models.

“Innovation and the exploitation of its highly skilled work force is the only way in which the EU can maintain its competitive edge,” says Donnelly.

Another key element of the Commission's communication will be the concept of the 'global car' - a vehicle which can be made according to American or EU standards and then freely sold in either market.

Donnelly helped host a transatlantic conference on the car industry in Washington on 10-11 April which focused on the issue of global automobile harmonisation standards.

He believes that if such harmonisation can be achieved in the car sector, then a similar transformation of other sectors could be more easily mapped out.

The global approach recommended by the Commission is one that the industry could regard as a “positive step” according to one leading EU car industry official who highlights the continuing distressed state of demand in Europe.

Car demand grew by just 0.6&percent; last year and January and February saw even more sluggish figures.

Although March showed a slight pick-up from these depressed levels, he expects “the rest of the year will not be what you would call buoyant”, adding: “Demand is more or less flat.”

Against this background, he suggests that “a global approach to regulatory constraints” may be the best way the industry could hope for to find some relief.

The Association of European Automobile Manufacturers has been notified of the main elements of the Commission's report, but has yet to make an official response to its proposals.