MUTATIONS OF AUTOMOBILE INDUSTRY IN THE EUROPEAN UNION IN THE WORLD CRISIS CONDITIONS

PhD student Mircea Alexandru RĂDUŢEANU University of Craiova Email: [email protected]

Abstract: Global technical harmonization is considered a driver of international competitiveness of the European automotive industry, with improving global competitiveness of European industry and creating automotive jobs in terms of environmental protection and road safety. The global economic crisis, the European Union had to take some measures to protect the automotive sector, using the investment in innovative technologies to facilitate consumer credit, and financial incentives for people who choose to sell old car and buy a new one. Referring to the importance of the issues examined in Europe today, automotive industry become very substantial, competition is fierce and the pace of change is emphasized. Thus, we have presented in this paper the general characteristics of the motor car industry in Europe and how it was influenced by the global crisis, and then to review the evolution of this sector in and how they are feeling the crisis.

Keywords: globalization, automakers, crisis.

Introduction manufacturers be it European or Asian Globally, the European Union is the Americans. largest producer of motor vehicles, The global economic crisis has left producing over 18million vehicles per its mark on European Union car year and almost a third of the car. industry, so in recent years, industrial Germany is the largest European production fell and signs provide a producer, followed by France, Spain, continuation of this decline. Following Britain and Italy. These five countries, the severe global economic problems, old European Union states, the top five the auto sector crisis spread rapidly in in Europe confirms the importance of Europe. this sector in the economies of these states. European car industry In addition, the auto industry is European automotive industry closely linked to other economic sectors plays an important role regarding in Europe. Sectors such as electronics, European Union competitiveness in its mechanics, IT, metallurgy, chemistry, effort to achieve the major objective of and metals, plastics and rubber are the Lisbon Strategy: the European essential elements of this industry. 20% Union to become the most competitive of European production of steel and global economy. The mere fact that the aluminum 35% of the auto industry European Union more than 12 million goes. people work in the auto industry once Lately, Central and Eastern Europe again demonstrates the important role has become one of the favorite played in the European economy. destinations of major car producers and Sector is characterized by a very manufacturers of auto parts big role for research and innovation, 402 Management&Marketing, volume X, issue 2/2012 investing annually more than 20 billion These companies have significant euros, making it the largest private market presence in Europe, America investor in this sector. European and Japan, and made 80% of world automotive industry has a turnover of production of vehicles; 780 billion euro and value added of 140 9 modular manufacturers (Tier billion, contributing substantially to the 1). Companies located in this category GDP of the European Union. Also, the sell the product directly made exports over imports, resulting in a automobile manufacturer based on firm difference metered trade balance of $ contracts. In this category will get those 60 billion (European Commission 2011). companies that made systems such as Regarding the auto industry as a complete system or board seats or whole they present a number of electronic system. Of the companies features and characteristics (T.J. included in this category may mention Sturgeon, O. Memedovic, 2004) here: Continental AG, Robert Bosch wherever is reported in statistical terms: GmbH, Delphi Corporation, Johnson 9 is an industry characterized by Controls, Michelin Group, Lisa globalization - the global nature is Draxlmaier, Valeo, BOS Automotive, evidenced not only at the Valvetek, Johnson Controls, Sumitomo OEM. Suppliers of parts and Electric Industries Ltd, TRW subassemblies manufacturers followed Automotive, Leoni etc.; and became "global suppliers"; 9 individual component 9 is characterized by a structure manufacturers (Tier 2) (Coficab and firm focused in the idea that a relatively Contitech companies); small number of firms dominate the 9 suppliers of components and global market. Generally when we talk small assemblies (Tier 3). Companies in about the auto industry is talking about this category are small, usually with two types of companies: manufacturers local capital and are not focused of automobile and parts exclusively on the production of goods manufacturers. These two groups of for a particular sector, but achieve an companies have imposed a set of annual turnover of cars. These standards difficult to achieve by other companies often made of components companies. Alliances and/or mergers that go into the final product, different between firms take place in most cases items textile, metal, plastic or electrical within the industry; enter. Of the companies included in this 9 related industry is characterized category may mention here: by a close relationship created between SPUMOTIM, Nefer Prod, Interpart etc. different companies form a chain. Often A major role in the assembly and company producing automotive design of vehicles from the smallest of components manufacturer follows the the modular components, they have location on which it opens; systems and modules manufacturers, 9 is a changing industry, included and manufacturers of parts and the best materials, the improvement of components seeking to relocate near trying to bring in terms of design, safety, the assembly lines, to improve supply fuel efficiency, environmental protection chain and reduce inventories, thus and recycling of end of life vehicles. providing cost savings, increased In the automotive sector we find efficiency and even lower labor costs. several categories of companies: This model of economic 9 original parts manufacturers development may promote the (OEM): General Motors Corp., Ford emergence of clusters in the industry, Motor Co., DaimlerChrysler AG, Toyota as it can lead to development of strong Motor Corp.., Volkswagen AG, Honda partnerships. The main factors (J. Motor Co., Renault-Nissan, PSA etc.

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Goldsmith, 2008) behind the mobility of the assembly lines, to improve supply these companies are: chain and reduce inventory. This 9 a need for proximity in relation provides cost savings, increased to the automotive manufacturer efficiency and even lower labor costs. (OEM). In most cases the implantation Relocation of production facilities of a car manufacturer in a particular for motor vehicles or motor assemblies location attracts numerous location in to other areas is not an easy decision the area of automotive components and does not guarantee rapid gains for manufacturing companies, they create companies in the automotive industry. even more jobs than manufacturing The question that arises most often is company it self; that the process be moved? First, the 9 a competition to increase relocation decisions into account the productivity draws a series of efforts by activities that are based on labor. So the companies to face competition, which activities transferred to the new takes the form of the variety of production unit activity related to innovative processes even using an production of assemblies and sub- automatic system of production; assemblies, and the industrial 9 a cost and training human engineering. Also, for some companies resources are major factors underlying the transfer of activities related to back- the decision to locate, especially in office would bring substantial savings. cases where you have chosen the best These components transfer option for the company; activities aimed at targeting sectors 9 a superior technical preparation such as IT, accounting and began weighed increasingly more administration. Activities that are based location decision and to be growing on high competence, such as research demand by companies producing and product development are the last components for the automotive transferred to the new location. With the sector. In this respect often are sought company sells products in the new partnerships with local community and location is important for her to set its education (technical colleges and/or sales and after sales operations universities) that can provide various (service or maintenance). specialized programs: Six Sigma certification programs and the master Sector migration to Central and/or training point (for example, using and Eastern Europe CNC machines). In addition are Last period, especially after joining becoming increasingly popular research the European Union, Central and centers and research projects Eastern Europe has become one of the conducted at local and regional level; favorite destinations of major car 9 existence of an adequate producers and manufacturers of auto transport infrastructure to ensure a high parts manufacturers be it European or degree of mobility is an important Asian Americans. requirement for companies Before 1989, Hungary had its manufacturing components; territory or a factory to produce 9 locating a site for development cars. Poland was second in Warsaw and potential facilities can convince and Bielsko-Biala, Czechoslovakia companies of the component produced Skoda in Mlada-Boleslav manufacturers are under pressure plant in, and in Yugoslavia there were mattered in terms of competitiveness, three production units, Novo Mesto, invest in a production unit. Slovenia territory today, Sarajevo, It is important to note that Bosnia-Herzegovina, and factory manufacturers of systems and modules, Zastava, near Belgrade. components and looking to move near

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If we look today we see these economy depends on this sector (Ernst countries as Czech Republic, Hungary, & Young, 2011). Poland, Slovakia and Slovenia have Along with European companies in managed to attract major automotive Central and Eastern Europe have manufacturer’s name. In countries like established a number of Asian Slovakia and Hungary factories were carmakers. Strategy of many Asian built from scratch, and in Poland and manufacturers was to consider Eastern the Czech Republic, existing was Europe as a bridgehead for the privatized. In Hungary came prestigious conquest of the continent. Basically, if brands Audi, Opel and Suzuki. Poland we take into account and Daewoo units has privatized the existing factories with in Romania and Poland, Asians have Fiat and Daewoo, but also benefited representatives in all regions: Toyota from massive investment. (Czech Republic), Suzuki (Hungary), Volkswagen has two production Chevrolet (Poland), Kia (Slovakia) and facilities in this country, and Isuzu, Opel Daewoo (taken between and Toyota - one. In Slovakia there time Ford)(Romania). were built new manufacturing facilities Lately area of Central and Eastern of PSA, near Trnava, and Volkswagen Europe became interested in the idea of in Bratislava. In Slovenia it produces the locating and American car new generation Renault Clio. Belongs to manufacturers. Thus, General Motors the Volkswagen plant in Sarajevo, and develop the Chevrolet brand in Poland, for that of Serbia, Zastava, to find a and Ford acquired the plant in Craiova. solution for assembling Fiat Punto car. Czech Republic is the main Crisis on the automotive producer in Central and Eastern Europe sector in Europe area, followed by Poland and The global economic crisis has left Slovakia. Even if there is a whole its mark on the car industry in the debate on Turkey Memberships in this European Union. In recent years, space must not be lost sight of the industrial production fell and signs capabilities of this country. Thus, Turkey provide a continuation of this production facilities are located in the decline. The recession has directly following manufacturers: Renault, affected the auto industry decline of Toyota, PSA, Hyundai, Honda, Ford, 20% which is the most important of all Fiat, Iveco, Mercedes. industrial sectors. If we make a synthesis of Following the severe global automotive manufacturers located in economic problems, the auto sector countries of Central and Eastern Europe crisis spread rapidly in Europe. In we can say that here we find factories response to the negative effects of the that produce these brands of cars: crisis, Renault, France's second Skoda, Peugeot, Citroen (Czech carmaker after PSA Peugeot Citroen Republic), Audi, Fiat and Opel announced in early December that it (Hungary), Fiat , Opel, Volkswagen, would lay off 6,000 people in Europe, of Volvo (Poland), Peugeot and which 4,900 in France. Also in Volkswagen (Slovakia), Renault December the group several plants (Slovenia), Renault, Ford (Romania), were closed for several weeks. Fiat and Volkswagen (SEBI). About Daimler announced in November 12% of European car production is that will reduce the number of generated in this region. So far, employees in factories in Germany, due Slovakia has been the main country that to financial crisis. Daimler has a total of has attracted investment in the 167,000 employees in Germany and automotive industry, but at present the 2,500 temporary workers. market is saturated. 30% of Slovakia's

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As for the Fiat group, he closed all Characteristics of the the factories in Italy between December automotive industry and the 15 and January 11, while the 48,000 impact of in Romania on crisis on technical employees to become it unemployed or take their vacations. In the context of an economy in full Volkswagen has suspended production trend, Romania auto industry is in German factories during Christmas, characterized by an effervescence as they announced the other competing generated on one side of the infusion of companies. foreign capital attracted by cheap labor, BMW has announced that as of well qualified, modest cost, experience February about 28,000 technical in dealing with foreign partners, desire workers will become unemployed as a and willingness for collaboration and result of drastic cuts in production at development of Romanians, on the four factories in Germany. other hand the Romanian auto parts Niche British manufacturer Jaguar, manufacturers. The latter was in full sent 3,500 employees home to plant in restructuring activity, the process of Castle Bromwich, for a period of two certification according to requirements weeks. imposed by European legislation, and In turn, Europe Central, felt prospectus market continued to increasingly more economic crisis, auto establish new contacts, new makers in the region are increasingly commitments to conclude with foreign affected, in spite of cheap skilled labor partners. and at the same time. Thus, car In Romania, production of manufacturers in the region, regardless automotive components segment is the of country of origin, are forced to cut most important growth industry, this production and adapt to declining growth is stimulated by means of road demand. These measures are taken transport industry dynamics. The main given the circumstances of the moment. business of these companies is Czech manufacturer Skoda Auto, manufacturing components of metal, part of Volkswagen, has practiced, plastic and rubber, and electrical and during January-June 2009, a four-day electronic components. work week due to lower demand, Companies have transferred the primarily in the major markets of completed actions taken by industry Western Europe. components of the degree of innovation In Hungary, Audi has stopped and competitiveness of products to production for a month in the factory in ensure sustainable development Gyor, having already dismissed 160 context. employees. Here, Suzuki fired 1,200 of Romania has a long tradition in the 5,500 employees, after he decided automobile production. Our country to substantially reduce its production produced in 1989 a number of vehicles, target for 2011. from martin up to heavy trucks, In Poland the situation is also especially for the domestic market but difficult to General Motors reducing for export. Pitesti car factory existed, working hour’s only two shifts to three, Craiova, Campulung-Muscel, Timisoara the factory in Gliwice. Meanwhile, GM and Brasov. Of these, only two more has moved production from Antwerp are viable today - Craiova and (Belgium) to Gliwice where labor costs Pitesti. Both were bought by large are three times less. international producers and therefore survived. After 1989, several automakers, including Mercedes, Audi, Hyundai, Volvo, Toyota and Peugeot

406 Management&Marketing, volume X, issue 2/2012 wanted to produce cars in Romania or (Hungary) to produce class A and B to buy one of the domestic companies. cars. The first company to produce cars Open economy in Romania has not in Romania interested in being coincided with when the major heard. Dacia takeover negotiations manufacturers of automotive were initiated by Audi in 1993 and even components have been established in reached far enough there are technical our country, they prefer originally discussions between the two parties surrounding countries. However today, and a series of agreements that have the auto industry is one of the favorite nearly perfected. However, the German targets of foreign investors in Romania. carmaker Audi came not as Romania Whether the wheels, engines, considered too risky for gearboxes, electronic circuits, tires or business. Finally, Audi chose Hungary wheels, airbags, seat covers, lamps, because there have been greater and even automotive software, however facilities and a more stable business we find the famous brand labeled environment. Currently, in the "Made in Romania". neighboring country, in town Györ Auto industry in Romania is an occurs TT Roadster V6 and V8 engines industry of "cluster", and this attracted for the entire Volkswagen an auto manufacturer Renault and a lot group. Currently, Audi plans to expand of suppliers who must produce Hungarian plant considering that is one according to its specifications. This of the most profitable of the Volkswagen Renault Pitesti drew and traditional group. providers of, who were implanted Another attempt to take over Dacia around the new plant, investing in in the early '90s was the Korean facilities that produce not only for Dacia- company Hyundai. Koreans have made Renault, but also for clients outside a proposal to take over the entire Romania: Auto Chassis International industry in Romania: Dacia, Oltcit and (car deck), Valeo (PCB), Johnson ARO, and Roman and tractor. The main Controls (seats ), Cortubi (exhaust intention Accent target assembly model system), Euro APS (and thermoformed in the Dacia plant. Talks have stalled plastic parts), Valeo Climate (air- due to denial by the government of that conditioning). period on charges for facilities and However it should be noted that car monopoly position which he held a parts factories in Romania do not work Koreans. Hyundai went to Russia, exclusively for Dacia. These businesses building a factory in Tangarog. have contracts and are subcontractors In trying to find a strong partner for manufacturers of systems and among world producers of cars, Dacia modules of the great car companies or has initiated talks with Peugeot. The international networks of spare first sounding dates from 1993-1994. As parts. Therefore, we here investments with other negotiations, talks between in Romania of foreign corporations with the Romanian and the French have global ramifications: Continental, SNR, reached an advanced stage, but they Dura Automotive, Delphi, Lisa made some mistakes, and the deal was Draexlmaier, INA Schaeffler, Timken, not concluded. Since then, Peugeot has Koyo, Sumitomo, Yazaki, Leoni, Lear, never considered Romania as a Takata Petri, Faurecia and others, potential place for investment and or clients of major automobile oriented Czech Republic and Slovakia. manufacturers Ford, BMW, Daimler Last attempt by Mercedes to come Chrysler, Peugeot, Citroen, Fiat, to Romania was in 2008, the Western Mercedes Benz, Volvo, General Motors, region of all embodied Unfortunately, Toyota, Subaru. the preferred place Kecskemet

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Automotive manufacturers are also Another French company Valeo touched by the financial crisis, (M. Serban, 2009) supplier for Dacia depending on production cuts announced it will cut about 5,000 jobs at beneficiaries of their products. Several plants around the world. parts suppliers have stopped production Lisa Draexmaier, manufacturer of in Romania or partial layoffs have electrical systems and interior car, turned to staff following the steep reduced activity at the plant in decline in orders, a consequence of the Hunedoara. collapse of local and international car For two factories in the town of market. The decision affected both Deta, Timis County, Romania suppliers Tier 1 as well as levels 2 and Automotive (M. Serban, 2009) Eybl 3 (which do not produce directly for the group, a specialized producer of builder, but for other manufacturers of upholstery and leather steering wheel automotive components) which makes and the other in leather gear changing, parts for both domestic manufacturer notifications were submitted to CEA on , as well as for export. Timis dismissal of employees. Until now announced a series of One tire manufacturers in Romania, measures manufacturers of automotive Continental (M. Serban, 2009), in an components and systems areas and tire attempt to avoid layoffs resorted to manufacturers. reducing production costs by reducing Manufacturer of automotive safety overtime or temporary closure of local components and systems Takata-Petri factories. Availability was affected by (L.Cotu, 2010), the third producer of staff leasing division. Recently the auto components market in Romania group has decided to increase the last year reduced the working hours of capacity Continental Timisoara to employees in three factories, due to reduce costs at the whole group financial crisis that has already made its (transfer of production). mark the global automotive industry. Sumitomo Electric Wiring System Conclusions (SEWS – C.Gubandru, 2011) Romania Quality workforce in the former which has about 4,500 employees at communist countries and low wages are three plants in Deva, Alba-Iulia Orastie the main factors required for workers and produce electrical wiring for various who moved to Central and Eastern automobile manufacturers. Reduced Europe automotive industry. If we orders from manufacturers to translate consider Central and Eastern Europe as the temporary reduction of production one market, the states that compose it activity and sending employees in can be analyzed differently, depending technical unemployment pay 75% of on the role they play in this salary. Auto parts maker Delphi ensemble. The following types: (A. Anghel, Delphi 2011), which owned 9 centers of the major two factories in Romania, the Great and manufacturers: In this category fall the Ineu Sânnicolau, has restricted its countries that invested most and the activities, leaving only one plant in Ineu production are mainly export oriented the following registration of a reduction (over 75%). In this category can be in orders. assigned to the Czech Republic and Manufacturer of automotive cables, Slovakia, countries that may become Leoni Wiring Systems has closed one of the European hub for export, ensuring the two factories it owns in Arges county the needs of European market, as well laid off or relocated 228 employees who as the local market; worked in that unit. Also, the company 9 centers of large local producers: was reduced activity in Arad. this category includes countries such as Poland or Romania, producing massive

408 Management&Marketing, volume X, issue 2/2012 domestic market, with a degree of and Slovakia). They would in 2012 to absorption of over 100 000 new cars produce 3.46 million cars, which will be per year. These states have the chance 4% of global production of cars. to become major exporters to the extent It also provides for further that they can produce a good offer expansion over the South East Europe comparable existing in Europe, but with and the Ukraine. Already in Central competitive advantages; Europe salaries soared and the 9 centers for automotive advantage of cheap labor disappears manufacturers: they usually coincide gradually. On the other hand, local with the locations chosen by the vehicle capabilities are already significant, and manufacturers. However, the decision additional investments in these to locate car parts manufacturers can conditions no longer justify too. At the stay and other factors: low labor cost, same time in South East land is still highly qualified human resources, the fertile. existence of universities with well- Auto industry in Romania is developed research departments, characterized by an effervescence etc. In this category, we find countries generated on one side of the infusion of such as Czech Republic, Poland, foreign capital attracted by cheap labor, Hungary or Romania. well qualified, modest cost, experience Regarding the next period is in dealing with foreign partners, desire anticipated by 2012 will exceed Eastern for collaboration, and on the other hand Europe Western Europe regarding the the Romanian auto parts number of cars produced. Much of the manufacturers. The latter was in full production will go to export. Information restructuring activity, the process of provided by the study by Price certification according to requirements Waterhouse Coopers company talking imposed by European legislation, about an increase of production studying market continuously, to capacity for at least four five of the establish new contacts for conclusion of Central and Eastern Europe (Czech new commitments with foreign partners. Republic, Poland, Romania, Hungary

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