Competition Hits Home

The curious residential architecture in Belgium's northern Flanders region speaks volumes about the nation's character.

Many dwellings look as if they consist of several homes put together, which is basically correct. To accommodate growing families, Belgians often add on to their homes — sometimes twice — instead of moving to larger digs.

It is part of their “can-do mentality,” suggests Eddy Geysen, former chairman and executive director of General Motors Belgium.

This is something the nation's auto industry will need to survive competition from low-wage countries, particularly in Eastern Europe, and the increasing threat of downsizing.

Belgium is on track to exceed by more than 30,000 units its 2005 vehicle production mark of 926,528. And investment for 2007 is pegged at €452.2 million ($580 million), 17.7% more than this year's total.

But the industry remains under siege.

In a bid to consolidate production of like models, Volkswagen AG will stop building its Golf small car at its plant in Brussels, home to 5,000 workers.

Meanwhile, Belgium is losing its grip on per-capita production. The nation ranked first in the world until 2005, when it was overtaken by Slovakia. Development throughout East Europe has Belgium on the offensive.

Last year, a task force representing manufacturers, labor unions and government devised an action plan that is gaining momentum. A key component targets a bottom-line item that generally creates the biggest competitive gap: labor cost.

Belgium has lowered by 5.6% the withholding tax on shift work and overtime. Next year, it will decrease another 5.1%, improving take-home pay for workers.

The result is a per-hour cost advantage of €1 ($1.26), compared with Germany.

“Historically, our labor costs were (below) German labor costs,” says Fientje Moerman, Flanders' minister for economy, enterprise, science, innovation and foreign trade. “In the last few years, collective bargaining agreements have been concluded in Germany with more work for the same salary, no end-of-year bonus and fewer holidays.

“We made sure that, through this measure, we kept our labor costs under those of other major parts of Europe,” she adds.

In addition, it is expected auto makers will use the windfall to beef up their research and development activities.

While Moerman admits Belgium can't compete on this front with countries such as Slovakia, she notes Flanders maintains a prominent position.

Courtesy of a €49 million ($62.5 million) investment, Volvo Car Corp. recently confirmed its plant in Gent will build a new small cross/utility vehicle, known internally as the XC50. As of September, this plant also is home to the brand's new small car, the C30.

Other recent beneficiaries of corporate largesse are Ford Motor Co.'s plant in Genk and General Motors Corp.'s site in Antwerp, Belgium. Ford has invested €238 million ($305 million) at Genk to accommodate production of the all-new S-Max people mover, plus the Mondeo midsize car and Galaxy minivan, both of which have been redesigned.

Meanwhile, GM has spent €40 million ($51.3 million) to retool Antwerp for the launch of the Opel Astra Twin Top. The site's stamping capacity also was upgraded and expanded.