Political difficulities in closing plants will only see some sites “trimmed” said LMC at today’s inaugural just-auto intelligence seminar at the National Motorcycle Museum near Birmingham, UK.
Structural over-capacity is leading many European automakers to drastically downsize their operations as plummeting consumer confidence takes its toll across Europe, but actually shutting sites will prove immensely difficult.
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Addressing the intelligence seminar at the UK National Motorcycle Museum near Birmingham, LMC managing director, Pete Kelly, outlined some of the challenges facing the industry.
“There has been a catastrophic decline in European volumes and there is structural over-capacity,” said Kelly. “Manufacturers are keeping production aligned to sales [but] for suppliers there is not a great shock heading…with massive inventory correction.
“Politically, it is extremely difficult to close plants – there will be plant trimmings but the measures introduced so far are nowhere near enough to deal with over-capacity.”
Kelly noted Fiat CEO, Sergio Marchionne, had tried to convince the European Commission to accelerate consolidation on the continent, but that widely different market needs were making such a harmonious approach almost impossible on a Continent-wide scale.
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By GlobalData“This [consolidation] only works where everyone has the same incentive to work together,” said Kelly. “For BMW, for example, there is no incentive, absolutely.
“For the current manufacturers, the current period looks and feels very similar to the Detroit manufacturers a few years [ago] and they of course went through a profound restructuring.”
The enormous disparity between European manufacturers was highlighted by the LMC managing director, who noted the UK auto sector was currently operating at around 85% capacity, compared to that of Italy at just 45%.
Kelly also sounded a prescient tone by adding “never say never” when discussing capacity at Vauxhall’s Ellesmere Port factory in north west England.
Reports today (11 October) indicate some 2,000 staff are moving to a four-day week at Ellesemere Port as a cost-cutting move to save energy costs.
“Vauxhall has concluded a new operating agreement at its Ellesmere Port plant, which condenses a five-day working week into four days with subsequent savings in utility costs,” a spokesman is quoted as saying.
“The move will also allow time for installing equipment to make the next generation Astra – a project that has guaranteed the plant’s future beyond 2015. Staff will still apparently work a 38-hour week.”
