Row over Europe’s car-parts industry moves into top gear

By Peter Chapman

Date: 27/05/04

EU CARMAKERS and European commissioners are on a crash course with internal market chief Frits Bolkestein over his plans to liberalize the 10 billion- per-year market for bumpers, lights and body panels across the Union's 25 member states.

Currently the UK, Ireland, Benelux countries, Spain, Italy, Latvia and Hungary allow independent companies to produce and supply the components in the repair market.

But, in other countries, the original manufacturer - such as car companies Peugeot or BMW - are granted the exclusive right of supply.

National laws bestow legal protection to the actual design of parts that affect the look and style of the car.

In France, suppliers of "illegal" parts can be sent to jail - even though the components, for example a light lens, may be freely available across the border in neighbouring Spain.

Under the proposals, Bolkestein wants to get rid of the hotchpotch of rules, creating an exemption from design protection for all of the external parts of a car that need identical components to preserve the original look of a vehicle after a crash.

He wants fellow commissioners to back his car blueprint at a 16 June meeting.

The Dutchman's department argues that the internal market is hindered by the different legal regime from country to country. At the same time, it claims that keeping protection effectively grants car companies an unfair monopoly on a large slice of the repair market - by shutting out the rival parts firms capable of producing parts that are indistinguishable from the "original".

This monopoly is strengthened by the fact that customers suffering a crash have no choice but to replace outside parts with "lookalike" products in order to keep the appearance of their motor.

Car companies have the full array of intellectual property rights protection on their new products to reward manufacturers for their huge investments.

However, Bolkestein's department says the after-sales sector is different because car companies have already been rewarded for investments in the price it received for its new products.

And the Dutchman's team believes in the right to choose cheaper parts from a variety of suppliers, assuming they meet the usual safety standards.

The proposal would mean the car parts, along with some other complex components, would be permanently exempted under a special "repair clause" from an EU law on community designs which entered into force last year.

This allows companies to register their designs with the EU's office for harmonization in the internal market in Alicante, Spain.

Once registered, they are granted legal protection from deliberate copying and "independent development of a similar design" for 25 years.

Alfredo Filippone, communications director at ACEA, the association of European carmakers, told this newspaper: "Our concerns are a matter of principle. On one side, the EU is trying to protect intellectual property rights. In this case they want to get rid of that. It seems a little contradictory."

He said the proposal would allow copycat firms to skim-off profits without making any investments in design.

Filippone added that the proposal did not tally with new EU requirements for carmakers to develop, at massive cost, safer car-fronts that are less likely to kill pedestrians.

Production would often be in countries such as China and Taiwan, where labour is cheap and, he added, there is a risk that products would not live up to the same quality and safety standards as the "original" items.

A study by German insurance giant Allianz showed the parts usually required more labour to fit them properly - meaning that overall cost savings were often negligible.

Sylvia Gotzen, secretary-general of the International Federation of Automotive Aftermarket Distributors, dismisses the car giant's claims.

"At stake is the question of either allowing the freedom of repair" of motor vehicles and of the completion of the internal market for automotive spare parts.

"Or of allowing a de facto monopoly on a 10bn market of visible spare parts to the vehicle industry," added Gotzen, whose group is part of the EU-wide lobbying to lift restrictions, in conjunction with European consumers' body BEUC and the Comité Européen des Assurances, which represents EU insurance firms.

Gotzen said warnings that the alternative replacement products would not be as safe as the "originals" does not tally with evidence. Any parts that are deemed to be crucial to safety ought to be covered by separate EU rules governing type approval, she added.

Under this system, products can only be marketed once they have received an official certificate from competent authorities in the member states.

Moreover, she dismissed "nightmare claims" that spare parts would flood the EU from the Far East.

In fact, she insisted that the bulk of independent parts come from the Union - creating jobs inside Europe, particularly within small firms.

The proposals are controversial within the Commission. An internal document seen by this newspaper reveals bickering in the EU executive on the issue.

The Commission's secretariat-general, which handles its work programme, originally blocked the proposal and demanded a more thorough impact assessment. It said the fact that Bolkestein's plan does not tally with a study carried out for his department by a consultancy "remains a problem".

The enterprise and information society directorate-general, meanwhile, worries that the proposals could harm EU carmakers by encouraging cheap imports from Asia.

Transport Commissioner Loyola de Palacio's department is also concerned about the proposal's impact on safety.