Ref. Ares(2020)3731150 - 15/07/2020
COVID-19 pandemic - Structured Engagement with Industry
You may consider the following order of speaking, taking into account that
some of interlocutors will speak to you for the first time:
1
FCA, ACEA
followed by
Faurecia, CLEPA
to start with will give you a status and
general overview
2
Renault outlook on clean mobility
3
BMW outlook on clean and automated mobility
4
Northvolt - ecosystem perspective (they work i.a. with
BMW and VW)
5
outlook on heavy-duty vehicles
6
suppliers/small company perspective
With your introduction, this should cover +_ 40 minutes if they all speak for
max 5 minutes, leaving another 30 minutes for the second round.
Pro memoria, main take aways from the previous meeting:
Sector must be looked at as an ecosystem
Liquidity is a matter of survival
Coordinated and coherent EU level action to prepare restart of
production
Accumulating stock of vehicles/additional burden for balance sheet
Information sharing, in particular with SMEs
Messages and questions:
I am very grateful for you presence today. Even though these days we all
act under very tight deadlines, I appreciate making yourselves available
on such a short notice thank you!
This is the second time I talk to your industry but the first time with
several of you.
I see this meeting as an introduction to the structured dialogue with you
on recovery.
My idea is to gather those of you who represent different segments of
the industry, or rather of the ecosystem. This is how I see industries and
this is how I would like to talk to you about the recovery: how the
COVID-19 pandemic - Structured Engagement with Industry
ecosystem of companies which constitute value chains, manufacturing
and service around, could be lifted from the crisis.
You are aware of the horizontal measures that the Commission took over
the last weeks, they also apply to your sector.
But I am interested in hearing from you what synchronised decisions and
what measures need to be taken
t
you consider needed.
Such decisions should help you recover but not necessarily restore a
status quo ante and move ahead in a new reality.
You wil have to make difficult choices about strategies, investments and
people.
But if we are to help you to put the money where your mouth is, I want
to understand your priorities for the immediate but more importantly,
for longer term future.
I see several items for discussion:
1. measures stimulating demand (scrapping schemes, bonus, fiscal
incentives, etc)
2. measures focusing on supply: we must develop critical capacities in
Europe (resources, production)
3. Combining industrial recovery and clean mobility
4. Investments in infrastructure (electric and hydrogen)
5. upskil ing and reskil ing strategies
I would like to invite you to take the floor and give your view and
perspective on the items I mentioned. Of course, do not hesitate to add
anything else you consider important.
COVID-19 pandemic - Structured Engagement with Industry
Background:
Automotive sector gathers a variety of actors: OEMs, engines, parts and accessories
suppliers, tyre industry, dealerships, repairers, logistic and mobility services, etc.
It generates 13.8 mil ion jobs (6,1% of EU jobs), of which 3,4 in manufacturing, 4,6 in
automobile use (sales, repair, renting, etc.) and 5,8 in transport or construction.
It represents 3.2% of total EU output, 12.5% of EU manufacturing output, 4% of EU GDP and
generates a trade surplus of EUR 84,4 bil ion for the EU
EU automotive sector ranks among the main investors with EUR 57,4 bil ion invested in R&D
annual y
It is one of the most integrated sector in intra-EU value chains, as it relies for almost half of
its total production (45.3%) on EU inputs.
The main car-producing countries in the EU27 are DE, ES, FR, CZ, SK, IT in terms of volume.
RO, SE, HU have a much higher share of direct automotive employment in total
manufacturing than DE and FR.
Health bulletin
Jobs: according to ACEA figures, at least 1.1 mil ion employees are affected by the crisis.
After the crisis, for DE only, at least 100,000 jobs would have to be cut in car manufacturing.
Demand: new registrations plummeted in March (from -37% in DE to -85% in IT). For the
the drop was limited to 8% over two years). Carmakers fear a drop of sales until Q2 2021 as
consumers wil tend to postpone their car purchases
Production: industry is at a standstil , due to shutdowns. Losses in the EU are estimated to
almost 1.5 mil ion vehicles (on a total of 19 mil ion vehicles produced in 2018); however
some manufacturers plan to reopen in the coming days (e.g. VW) as wel as dealerships in
some MS wil resume work (DE).
Financial situation:
o Cash flow: assuming a sales decline of 50% and maintained operation costs, cash
reserves could be exhausted within 5 to 21 weeks until now depending on the group
(internal estimates). VW appears to be the most exposed company, due to high
operating costs (around EUR 2 bn./week).
o Liquidity: many carmakers face severe liquidity issues. Ford and GM drew
approximately $16bn from their credit facilities
tra
credit and Toyota $9.2 bn. Many suppliers are also endangered. On 26th March,
o Stock market capitalization: according to McKinsey, stock value fel on average by
29% between the start of the crisis and the 25th of March (i.e. as much as banks but
less than air transport and oil sectors).
R&D: auto companies are cutting CAPEX to shore up continuing operations, starving R&D
funding for advanced technology initiative. This could considerably slow down the transition
to clean and automated mobility.
Key EU policy actions relevant for the sector:
COVID-19 pandemic - Structured Engagement with Industry
Financial help:
o A flexible State aid Framework; more than 50 schemes have already been notified.
o EUR 1 bil ion wil be redirected from the EU budget as a guarantee to the European
Investment Fund to incentivise banks to provide liquidity to SMEs and midcaps. This
wil help 100,000 European SMEs and smal mid-caps.
o The Commission proposed a EUR 37 bln Corona Response Investment Initiative
(CRII), to provide liquidity to corporates (covering e.g. working capital in SMEs).
o The EIB wil mobilise up to EUR 40 bln. Amongst them, EUR 10 bln wil be dedicated
liquidity lines to banks to ensure working capital support for SMEs and mid-caps.
o
Pandemic Emergency Purchase Programme (PEPP)
and the expansion of the range of eligible assets under the corporate sector
purchase programme which wil help major companies of the sector.
Al eviate the impact of the pandemic on jobs
o EU wil support the financial viability of temporary layoff schemes with a 100 bil ion
guaranty. This mechanism, named SURE (Support to Mitigate Unemployment Risks in
an Emergency) wil benefit to Member States in the form of loans from the Union.
o The European Globalisation Adjustment Fund could also be mobilised to support
dismissed workers and those self-employed under the conditions of the current and
Support to the production of health products:
o The Commission created a Clearing House which is charged to facilitate coordination
between industries to ramp up the production of PPEs (masks, gloves), ventilators,
therapeutics, etc. (and notably between the automotive and the health industry)
o The Commission created the RescEU mechanism to secure provision of PPE
o It implemented the green lanes mechanism to keep bottlenecks on medical products
to a minimum and to secure the supply chain of the industry
o So far, it is not clear whether Industry is ready to engage in the production of health
products beyond the pandemic
Expectations and positions of stakeholders:
1. Financial aid:
significant liquidity problems in the short- to
medium term 1. Massive financial aid is thus expected to avoid chain-linked bankruptcies and
to safeguard European jobs and industrial know-how.
2. Targeted aid for recovery: scrapping schemes, green bonuses, spending on recharging
infrastructure for electric vehicles or other public policy are expected to support purchases
3. Regulatory framework: the industry is asking for postponements of several regulatory
deadlines as wel as consultation processes on the new initiatives.
4. Border and health issues: the automotive industry underlines the necessity to find solutions
for businesses and employees who live in border regions, as their employees are not
considered as critical. It wil help the ramping-
protect the supply
chain and to keep machines running. The idea of a European laissez-passer beyond health
professionals has been proposed. Guidelines regarding the health and safety conditions
under which workers can return to the factories, dealership and workshops were requested.
1 ACEA/CLEPA/ETRMA/CECRA, Letter to President von der Leyen, 25 March 2020
COVID-19 pandemic - Structured Engagement with Industry
5. Skills: profound reskilling and upskilling will be needed (notably to prepare the shift to
automated and connected vehicles).
LTT/Questions to the interlocutor(s):
Impact on production
Given the cross border nature of the automotive sector, what are your
recommendations for the facilitation of circulation of essential goods, services and
persons (e.g. experts) across EU countries?
Reconversion of production
What are your current plans to convert some of the existing facilities to produce
protective personal and medical equipment (e.g. masks and ventilators)?
Can you indicate your difficulties and your needs, as well as the state of progress of
your work if you are working on innovative projects?
Assessment of measures
In addition to the horizontal support measures put forward by the Commission and
Member States, are there any additional, immediate automotive specific support
measures needed?
What are your needs in terms of financial support? Has your government proposed
to help?
Among your suppliers, can you help us identify companies that are critical to your
value chain and threatened with bankruptcy due to the crisis?
What kind of measures do you consider necessary to relaunch the production and
demand once the health pandemic is over?
Contact: DG GROW, C4: