Press Advisories

5. 2. 2009 15:15

A. Vondra: Public support must respect key principles such as fair competition

MEPs debate support to the ailing automobile sector.

MEPs debated the effects of the financial crisis on the automobile industry after hearing statements from the Council and Commission. Many MEPs called for support to the industry and on manufacturers to concentrate on green technology. Ministers have expressed deep concern about the serious situation that the sector is facing at present, putting at risk a very significant number of jobs. In 2008 there were about 8% fewer cars sold in the EU than in 2007.

Czech Presidency of the Council
Thanks to the European industry's resilience and adaptability, "European cars today are among the best, safest, most innovative, competitive, fuel-efficient and environmentally sustainable in the world", said Czech Deputy Prime Minister for European Affairs Alexandr Vondra for the Council Presidency. Yet, despite this resilience, and due largely to factors outside its control, the industry had been "particularly badly hit by the global economic crisis", he noted, adding that this had already been clear in November 2008 when the Council had agreed its approach to promoting more fuel-efficient cars, realistic targets for manufacturers and effective demand incentives. Since November, the situation had grown worse, he said, citing industry reports that 8% fewer cars had been sold in the EU in 2008 than in 2007. Mr Vondra predicted that 2009 would be as bad, or worse, with difficulties affecting not just manufacturers, but the industry's whole supply chain. These difficulties "could put at risk significant numbers of jobs", he added.

Public support
"The primary responsibility for responding to these challenges rests with the industry itself", said Mr Vondra, stressing that it must be encouraged to tackle "structural problems such as overcapacity and lack of investment in new technologies". However, "this industry's importance for the European economy, and the fact that it is particularly hard hit by the current crisis, mean that some sort of public support is required", he added.

The need for public support "is reflected in the European Economic Recovery Plan agreed by the European Council last December, as well as in Member States' national programmes". But "we cannot allow short-term support for the industry to undermine its long-term competitiveness. This means focussing clearly on innovation", said Mr Vondra. This support needs to be targeted and co-ordinated. It must respect key principles such as fair competition and open markets. It should not be about "a race for subsidies", and should not result in market distortions, he explained, adding that to this end, Member States had confirmed their willingness to co-operate closely with the Commission on supply-side and demand-side measures.

The Commission had also been invited to explore how the use of loans for this sector can be improved as regards rapid availability, project financing and frontloading, without discriminating among manufacturers or Member States, said Mr Vondra.

Community instruments
Community instruments can help, e.g. to develop clean cars, said Mr Vondra, stressing that "the full potential of innovative and environmentally sustainable propulsion technologies - fuel cells, hybrid, electrical, solar power - needs to be fully explored and put into operation".

At the same time, existing instruments, such as scrapping schemes for old cars, combined with demand for new ones, could generate additional benefits such as improved transport safety and reduced emissions. The Czech Presidency would press the Commission to propose how to encourage co-ordinating car fleet renewal schemes in the area of vehicle recovery and recycling, based on the analysis of the impacts of existing schemes in several Member States, he said.

Mr Vondra hoped that the European Commission would table this proposal well before the Spring European Council, and that the issue would be debated again at the March Competitiveness Council. 

"This is not just about supporting a key sector of our economy, but is an approach from which we all stand to benefit in the longer-term", concluded Mr Vondra.

European Commission
Enterprise and Industry Commissioner Günter Verheugen told MEPs that car sales "give an early warning of economic trends" and the present sales figures are symptomatic of "a lack of confidence in the economy". 

The car industry, he said, employed 12 million people, or 6% of all jobs in Europe, and was the EU's sixth biggest exporter. Not just the passenger car companies but the entire automobile industry was in trouble.

Apart from the financial crisis, key factors affecting the auto industry were "excess capacity in the EU" and "our legislation, which has made European cars expensive". These factors would put pressure on the industry to boost productivity but this would clearly not have a positive effect on employment.

The Commission's goals were "to guide the industry through the crisis" and "to improve competitiveness" so as to make Europe the centre of the world's car industry.

EU measures past, present and future
Describing measures taken so far, the Commissioner said that credit of up to €9 billion had been promised from the European Investment Bank. In addition, Member States would be allowed to use state aid to support car companies provided they did so to safeguard jobs in Europe and there was no distortion of competition.

Referring to his idea for premiums to be offered to encourage car owners to scrap their old model and buy a new "greener" vehicle, he said the premiums were to be used for the purchase of more environmentally-friendly vehicles but could not be tied to those made in a particular country.

Regarding long-term measures, he mentioned the CARS 21 recommendations, calling for more R&D so that in future Europe's cars would be the best in the world, "not just as regards technical and engineering standards but also environmental - including emissions - standards".

The most important outcome of the Commission's discussions with Member States had been an agreement that there must be no protectionism in Europe. At international level, it remained to be seen what the USA decided. It was not in Europe's interests to see US manufacturers go bankrupt but it was equally not in our interests that they should protect their industry at the expense of others. *** Concluding, the Commissioner was confident that "the European car industry is strong enough to cope with the situation".

Political group speakers
Jean-Paul GAUZ?S (EPP-ED, FR)
began by pointing out that the message just outlined by the Council and the Commission is not going to restore confidence and stated that "I don't think that your proposals are commensurate with the challenges." He spoke about his concern that some Member States are going to 'go it alone' in their response to the current crisis, about the problems facing the automobile industry - the cyclical decline in demand, the structural problems it faces and the fact that it "can't compete on the world markets." Mr Gauzes argued that the pressure put on people not to use their vehicles is contributing to these problems. He concluded by pointing out that "we need a coordinated response." He spoke of the need for the banking system to be able to fund the automobile industry at normal interest rates, the need to give a future to the car industry, the need for a true industrial policy and the need to consider sustainable development too. His final statement was that innovation should not suffer in these desperate times.

Guido SACCONI (PES, IT) said that he "entirely endorse[d]" the concerns and the realism shown by the Council and the Commission in their statements. He mentioned a figure he had seen that two million jobs could be lost in the car industry, mostly in the spare parts sector. He spoke of the extraordinary contradiction in this case, where, on the one hand, we have a fleet of available cars and, on the other hand, we have demand which has slowed considerably. Mr Sacconi stated that he "very much appreciate[d]" this recovery plan drafted by the Commission. He went on to say that "we need to take anti-cyclical action on the demand side and on the environmental side. What will happen is that countries will act on their own."' Mr Sacconi concluded by stating that he agreed that "we have to make an effort to try to see to it that there is the greatest amount of coordination at least on the criteria", for example, that of linking demand and purchases with emissions targets.

Patrizia TOIA (ALDE, IT) pointed out that "the crisis in the automobile industry has become a crisis in the whole sector." She listed areas such as sales, suppliers, etc., which have also been hit. She referred to the current situation as "a tragedy for employment." Mrs Toia called on the European institutions "to take decisive and rapid action" and "to look at the possibilities for innovation." She went on to say that "European countries need to send out a signal" and that "we need Europe to be more involved in the plan to jump-start this industry." Mrs Toia concluded by stating that "the fate of Europe's great car makers is a fate we all share in" and by reminding her colleagues that "we have to worry about competition within the EU in the form of state aid." She spoke of the need for a coordinated response, providing support, aid and more incentives.

Guntars KRASTS (UEN, LV) said that the motor industry, like the construction sector, concentrates its resources in future development, but this is dependent on credit, so the sector is particularly badly hit by the credit crisis. "So we need to overcome the financial crisis first," he said. "Our challenge is not to preserve jobs, but to save the competitiveness of the sector by looking to reduce dependency on oil and improving ecological performance in general."

Rebecca HARMS (Greens/EFA, DE) was critical of the motor industry lobbying on the recent CO2 vehicle emissions legislation. "The same companies that wanted us to be less ambitious in our targets are now parking their gas-guzzlers in some siding, because the future is for small, efficient cars." She insisted that a discussion of the car industry cannot be separated from energy policy and transport policy: "If all you do is talk about cars, and not about transport in general - and especially public transport - you are selling yourself short," she said.

According to Roberto MUSACCHIO (GUE/NGL, IT), "the financial crisis is now an economic and social crisis", with 2 million jobs expected to be lost. The elderly and other vulnerable categories were the chief victims and he called for the European Social Fund to be used to help them. He also believed there should be coordination on state aid at European level.

Patrick LOUIS (IND/DEM, FR) said "this industry is suffering from relocation, social dumping, environmental dumping and tax dumping". He was especially concerned about cars from the American and Asian markets and called for a return to the common external tariff.

UK Members

Stephen HUGHES (PES, UK) reported that Nissan has announced the loss of 1,200 jobs at its Sunderland plant in his North-East England constituency. If such a plant, widely acknowledged as the most productive in Europe with the highest productivity in Europe needs to lay off a quarter of its workforce then heaven help us when this crunch fully hits the less productive. A recovery task force has, he said, been set up involving all major regional actors. The measures being planned - assisting job search, training and retraining, starting small companies, assisting self-employment - are all ideally suited for support from the European Globalisation Adjustment Fund and he welcomed the Commission proposal to simplify this fund. "It needs to be urgently simplified and mobilised on a massive scale as part of a coordinated European response to the crisis in the car industry. Only a tiny fraction of that fund was used last year. Let us not hoard it. Let us put it to work to put our people to work."

John WHITTAKER (IND/DEM, UK) said that there is a possible case for some financial support to the car industry and other sectors to keep capital intact and to keep skills intact. But this can only be decided at the national level because the support – apart from the European Investment Bank mentioned by Mr Verheugen – can only be provided by national taxpayers. But there is one thing that the European Union could constructively do here, at least until the recession is over, and that is to give car manufacturers a break from environmental restrictions. The industry is already in serious trouble. These environmental and other standard restrictions make cars more expensive. You are helping to kill off an industry which is already in serious bother, he warned.

Malcolm HARBOUR (EPP-ED, UK) said that there has never been a situation where sales have collapsed so quickly. This is not a failure of business models: it is a failure of the whole economic system. He agreed that action has to be taken at national and European level to help the industry through this restructuring. It is much better to help the industry keep those core people on the payroll and retrain them than to let them go and then to hire them back again later. The problem is actually getting buyers and demand back into the economy. We need to tackle credit and help public buyers back into the market. We do not want a competitive race between businesses. But above all, he said, we need to face up to the fact that the car dealers have to be out there selling and looking after cars. On a final point, on the proposal to change the structure of dealer contracts, he asked that this unwanted and destabilising proposal be taken off the table.

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