The financial and economic crisis has hit the car industry with full force. In the last quarter of 2008 new car registrations in Europe declined by an average of 20 %. With regard to managing the crisis, the EU now puts the ball firmly back in the corner of the industry, thereby restricting its role to supervising the industry’s adherence to the regulations of the internal market and the competition law.
With an annual turnover of € 780 billion, the automotive sector is one of the most important key industries in Europe. Two million people throughout Europe are directly employed by the automotive industry. This sector is responsible for a total of 12 million jobs along the entire value-added chain. As a result, the effects of the current downturn in orders are therefore far-reaching. New passenger car sales fell by 1.2 million in 2008. The prospects for 2009 are also gloomy. In January 2009 alone, the European passenger car market was 29 % lower compared to the previous year. The automotive industry in particular suffers from structural adjustment problems, a drastic fall in demand and the still ongoing credit crunch.

Answers provided by the EU
The Commissioner for Enterprise and Industry, Günter Verheugen points out that the industry must first become active itself to solve the industry’s own structural adjustment problems. In other words, the industry itself has to adjust its production efficiency and its capacity utilisation accordingly to be able to survive in the long run. The switch to more environmentally friendly products will prove to be a vital step. The communication of the European Commission explicitly refers to the importance of the social partners during this structural adjustment process. Governments, industry and social partners should regularly meet at a “Round Table” to develop solutions for tackling the automotive industry crisis. With respect to the decline in demand, the answer of the European Commission restricts itself to pointing out that the European economic support programme contains key elements for public support, which are also relevant to the automotive sector. The European Commission also recommends the following principles for scrapping programmes:
  • Scrapping programmes must not discriminate against certain products because of their origin.
  • The measures must be configured in such a way that end-of-life vehicles are actually scrapped and that there is no option for reselling.
  • All scrapping programmes must be compatible with European Community Law.
The European Commission invites the Member States to notify their scrapping programmes, which it will examine within 15 days. Commissioner Verheugen defends the not very detailed scrapping guidelines with the argument that scrapping premiums are ultimately paid by national taxpayer’s money and that as a result the EU’s room for manoeuvre is restricted. With regard to the financing problems, the European Commission particularly points out that current projects of the automotive sector worth € 3.8 billion are scheduled for approval by the European Investment Bank for March 2009.

For further information:

Press Release: EU supports to fight crisis in the automotive sector

Background on the situation in the European car industry

Communication from the European Commission