As Hurricane Sandy batters the US eastern seaboard and just one week ahead of the final votes being cast in the race for the White House, component manufacturer body, OESA, president and CEO, Neil De Koker, talked to Simon Warburton about the state of the industry and European travails.
j-a: Europe is still labouring under chronic over-capacity and falling demand – resulting in high-profile closures such as Ford’s planned shuttering of its Genk plant. What is the view across the pond of such drastic restructuring?
NDK: “We had to face the reality in North America of dealing with excess capacity in 2008/2009 when we had a dramatic reduction in output forcing us to go through dramatic cost reductions.
“The industry as a whole is [now] quite competitive and profitable because we have taken the very [difficult] steps in 2008/2009.
“Europe has not had to face that at all. But the reality [is] of having significant excess capacity and [falling] sales from traditional companies. The reality is some plants have to get shut down. The various companies need to be more realistic in order to survive. We shut down at least 13-14 assembly plants.”
j-a: That entailed huge job losses in the US – has employment recovered in the auto business?
NDK: “We lost around 300,000 jobs in the big OEMs and suppliers. We have gained some back and have had some good hiring in the last year or so.
“Today, we are producing in the supplier industry about the same volume as we did in 2007, but we are doing it with around 100,000 fewer people.”
j-a: There has been significant union opposition in Europe though to similar restructuring.
NDK: “If people have a choice, they are never going to accept sacrifice – being opposed does not solve the problem. It is like the people in Greece – when you have the number of people benefiting from government handouts – that has to change.”
j-a: After the painful reorganisation in the US, how would you characterise the American automotive sector today?
NDK: “We are a healthy industry now, very much so.
j-a: Did you approve of how the US government supported the American auto industry during the crisis?
NDK: “We had a financial [difficulty] on the banking system and the government stepped in to save [it]. But the banks were unable to do any lending so vehicle sales dropped exponentially – sales went down 50% – it was virtually impossible to get finance.
“The only way was for the government to provide that short term. There are people who agree the process saved the domestic auto industry and hundreds of thousands of suppliers. On the other hand there are people who say the UAW and bondholders were unfairly treated because they got a disproportionately low return.
“Obama’s administration is claiming the credit for saving the auto industry, but what is misleading is [Presidential candidate Mitt] Romney advocated General Motors and Chrysler should go through a bankruptcy proceeding and not have the government bailout. There is a difference of view.”
j-a: How is the automotive industry faring against the backdrop of a challenging US economy?
NDK: “The big issue is the domestic economy. We have still around 8% unemployment. It is very, very rare we have not been [able] to get the economy moving.”
j-a: What are the major challenges facing the US automotive industry?
“We are having a very difficult time finding appropriate talent, especially engineers to grow our companies. I had one CEO tell me he has 180 requisitions out for engineers and technicians, but they can’t fill them to meet customer launch programmes, which are at their highest level for years.
“They are working excessive overtime – that can’t be sustained for ever. We lost tens of thousands of highly qualified people during the downturn and many of them moved out or retired early or just quit.”
j-a: How can that situation be addressed?
NDK: “We need the National Association of Manufacturers to say how important manufacturing is to our country. Our government needs to be more supportive.
“Most other countries in the world have really recommended the importance of manufacturing to their economies and we do the exact opposite.”
j-a: Ahead of a possible change or not of the White House incumbent, how important is lobbying in Washington DC to OESA? Can you give an example of a lobbying issue?
NDK: “We have a staff of eight people in Washington and we advocate on a regular basis.
“We bring in hundreds of thousands of people from around the world, from China, from India who have [got] doctorate degrees and after they get their degrees we take away their green card. If they [are] planning to stay, they should do.”
j-a: What is your view of US environmental regulations?
NDK: “Of course, regulators’ policy continues to be very tough and fuel economy standards are going to add thousands of dollars.
“For example, in Europe, 50% of vehicle sales are diesel engines, which are 25% more efficient, yet we can’t use diesel here because of our emissions regulations. We need to take a look at balancing our regulations.”
j-a: Is OESA back up to its pre-crisis membership levels?
NDK: “We are significantly up on members. We are 435 member companies with global sales of more than US$300bn.”