Auto Industry Destined to Fail Without EU Intervention, Fiat CEO Warns

BRUSSELS – The European Union’s auto industry risks a meltdown similar to the one that hit U.S. auto makers in 2008-2009 if political institutions keep imposing detailed new regulations and free-trade deals, Fiat CEO Sergio Marchionne tells a Brussels conference this week.

Commenting on the historically low sales EU auto makers have suffered this year, Marchionne, who also serves as president of the ACEA, the European automobile manufacturers’ group, tells the gathering of industry executives and politicians the best way to help the auto industry is for the EU to take a long-term approach.

He suggests laying out a strategy on environmental and trade initiatives, so that auto makers are not surprised by twists in policy turns, such as tighter emission standards. But a more helpful approach, he says, would be to prevent national governments from intervening to protect their own national auto industries, which would be damaging.

“I have advocated the intervention of the EU in this matter because I think this issue needs to be handled at European level and not at the national level,” Marchionne says.

Stressing that he is expressing his own views that might not represent other auto makers, he says he fears intervention from EU member governments could disrupt and distort the automotive market, which already is distressed.

“Nobody is looking for money or financial support,” says Marchionne, who believes the EU car industry can still stand on its own financial feet.

What the ACEA wants is coherent and predictable policies on environmental laws and trade, he says. That includes no more free-trade agreements, such as the recent deal with South Korea, before auto makers can improve productivity.

“This is not the time to conclude FTAs. It really is not,” Marchionne insists. “The European market has lost roughly 3 million cars since 2007. None of us is currently in great shape.”

What’s more, he claims the European Commission is failing in its duty to protect its own. “The EC’s primary responsibility is the maintenance of the (EU’s) single market. If it doesn’t intervene now, it would violate its own obligations towards the single market.”

Marchionne’s comments come as negotiations on an EU-Japan FTA are expected to start by the end of the year. Ukraine’s announcement last week it will apply new import tariffs against EU cars adds to the industry’s struggle.

“Obviously, we are against it,” says Ivan Hodac, the ACEA’s secretary general, adding he hopes Ukraine will apply the tariffs for the shortest time possible if it decides to go forward with the measure.

If they want to help the struggling automotive industry, the European Commission and the European Parliament should avoid imposing detailed regulations now and reschedule their enactment for better times, Iveco CEO Alfredo Altavilla suggest during a debate at the conference.

EU climate action Commissioner Connie Hedegaard disagrees. “The (automotive) sector should not ask us to postpone regulations, but provide predictability in the regulatory framework at the same time,” she responds.

However, there is agreement on the need for more innovation, with many saying European auto makers are world leaders. “Twenty-five percent of all research and development investment (in the EU) is coming from the car industry,” says EU Environment Commissioner Janez Potocnik.

“But innovation should stay affordable for the customer,” Altavilla asserts. “We can’t succeed if we do it and nobody can buy it.”

DAF Trucks CEO Harrie Schippers provides an example of overly expensive innovation: “The introduction of Euro 6 has been a major achievement, with pollutant emissions slashed to near-zero levels,” he says. But in these tough economic times, people are holding on to their trucks for much longer, keeping older and more-polluting trucks on European roads.

“In Italy, for example, 55% of the trucks on the road right now are Euro 0, Euro 1 or Euro 2 (compliant),” he adds. “In France, this is 45%, and in countries like Germany and the U.K. it’s still approximately 20%.”

The pre-Euro 3 fleet produces about 50% of all emissions of particulate matters in Europe, Schippers contends. “Europe must make the most of the solutions brought to the market by the industry right now by encouraging fleet renewal.”

Hedegaard is convinced innovation, even if it makes automobiles more expensive, will pay off through improved energy efficiency in the longer term. “It’s not always bad to push the industry to do more than what the industry would do by itself,” she says.