Ref. Ares(2020)3731150 - 15/07/2020
Introductory messages:
I am very grateful for you presence today. Even though these days we all act
under very tight deadlines, thank you for making yourselves available on
such a short notice!
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
automotive ecosystem. This is how I see industries and this is how I would
like to talk to you about the recovery: how the ecosystem of companies
which constitute value chains, manufacturing and service around, could be
lifted from the crisis.
During the last call you presented the economic impact of the crisis on your
ecosystem. A quick update on your liquidity situation and investment needs
would be helpful. You are aware of the horizontal measures that the
Commission took over the last weeks, they also apply to your sector.
Today I am interested in hearing from you what synchronised decisions and
what measures need to be taken – at EU and Member State level that 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 will have to make difficult choices about strategies, investments and
people.
But if we are to help you in this processs, 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. Upskilling and reskilling 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.
Fiat Chrysler Automobiles (FCA), ACEA
(he
risks joining the call later since based in the US) – for general overview
Faurecia, CLEPA
to start with – update and general overview
Renault-Nissan-Mitsubishi – outlook on
clean mobility
BMW – outlook on clean and automated mobility
Northvolt - ecosystem perspective (they work i.a.
with BMW and VW)
SCANIA
riksson – outlook on heavy-duty vehicles
Tubi Style
, Italian SME – suppliers/small company
perspective
Possible questions to the interlocutors:
What are your estimates regarding the
financial needs to repair and invest
in your ecosystem? Has your government proposed to help?
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?
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? Do you see any
problem accessing essential goods, services and persons (e.g. experts)
across EU countries?
What are your current plans to
convert some of the existing facilities to
produce protective personal and medical equipment (e.g. masks and
ventilators)?
On
clean and automated mobility, what are your difficulties and your
needs, are you still working on innovative projects? What kind of measures
are needed to stimulate demand for clean vehicles (scrapping schemes,
bonus, fiscal incentives, etc)?
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 million 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 billion for the EU
EU automotive sector ranks among the main investors with EUR 57,4 billion invested in R&D
annually
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 million 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
whole year 2020, Moody’s estimates that sales will plunge 21% in Western Europe (in 2008,
the drop was limited to 8% over two years). Carmakers fear a drop of sales until Q2 2021 as
consumers will tend to postpone their car purchases
Production: industry is at a standstill, due to shutdowns. Losses in the EU are estimated to
almost 1.5 million vehicles (on a total of 19 million vehicles produced in 2018); however
some manufacturers plan to reopen in the coming days (e.g. VW) as well as dealerships in
some MS will 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. Daimler also seeks €10bn in extra
credit and Toyota $9.2 bn. Many suppliers are also endangered. On 26th March,
Moody’s put 14 key EU auto parts makers under review for downgrade
o
Stock market capitalization: according to McKinsey, stock value fell 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:
Financial help:
o A flexible State aid Framework; more than 50 schemes have already been notified.
o EUR 1 billion will 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 will
help 100,000 European SMEs and small 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 will mobilise up to EUR 40 bln. Amongst them, EUR 10 bln will be dedicated
liquidity lines to banks to ensure working capital support for SMEs and mid-caps.
o The ECB announced a €750 bln Pandemic Emergency Purchase Programme (PEPP) and
the expansion of the range of eligible assets under the corporate sector purchase
programme which will help major companies of the sector.
Alleviate the impact of the pandemic on jobs
o EU will support the financial viability of temporary layoff schemes with a 100 billion
guaranty. This mechanism, named SURE (Support to Mitigate Unemployment Risks in an
Emergency) will 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
future Regulation. Up to € 179 million is available in 2020.
Support to the production of health products:
o The Commission Clearing House facilitates coordination, 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: carmakers and suppliers fear “
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 well 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 will help the ramping-up of PPE’s production, to 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.
5. Skills: profound reskilling and upskilling will be needed (notably to prepare the shift to
automated and connected vehicles).
1 ACEA/CLEPA/ETRMA/CECRA,
Letter to President von der Leyen, 25 March 2020