Europe’s car industry another crisis in the making

Below I republish an excellent article posted a few months back by the CWI detailing the slowing down of the European car market. What has always been thought of an ever expanding market now appears to have dark clouds on the horizon for German, French and Italian car manufacturers. Europe’s car industry Another crisis in the making www.socialistworld.net, 27/09/2012 website of the committee for a workers' international, CWI For a European-wide and international strategy of the trade unions to defend factories, jobs and working conditions Stephan Kimmerle, CWI “It’s a bloodbath of pricing and it’s a bloodbath on margins”, Sergio Marchionne, boss of troubled Fiat and chair of the European Automobile Manufacturers’ Association (ACEA) wails about the European markets. “Europe’s auto industry has reached day of reckoning”, was the headline in the New York Times. With the slowdown of growth in China the car industry internationally faces harder times. But for Europe it’s a disaster. Sales in Europe went down from more than 15 million in 2007 to approximately 12.4 million in 2012. A further clogging up of the outlet of exports to Chinese markets will drown the European plants in overcapacity. Given the fact, that huge over-capacity already existed before the crisis, the constant cost of maintaining the factories puts enormous pressure towards the closure of around 8 to 10 plants, according to capitalist commentators. This implies getting rid of the capacity to produce at least 3 million vehicles in Europe - an equivalent of around 250,000 jobs. According to analysts, factories must operate at 75% at least to be profitable. The destruction of that capability to produce goods – not necessarily cars – and the sacking of a very skilled workforce, lining up in the ranks of the mass unemployed – is the capitalist ‘solution’ to this problem. However, so far in the course of this crisis, only a very few plants have been closed in Europe (e.g. Opel Antwerp, Fiat in Sicily) and, at the same time, new capacity has been built up in Eastern Europe and internationally. Winners and losers The developing car crisis is hitting the different mass producers in very dissimilar ways. While Volkswagen appears to have increased its share of the market (despite some problems for its Seat arm), the Peugeot group (PSA) and General Motors in Europe (Opel, Vauxhall) seem to have suffered the most. Opel has losses of €938 per car sold, Peugeot-Citroen €789. Opel is discussing whether to close factories either in Eisenach (eastern Germany) or Bochum (western Germany). Ford is considering the closure of its plant in Genk, Belgium. Peugeot announced a reduction of its 100,000-strong workforce in France by 8,000 including the closure of its plant in Aulnay-sous-Bois near Paris (in total 14,000 jobs will be lost from the global 210,000 workforce according to this plan). While the workers at Aulnay took to the streets in protest and to demand that their jobs are safeguarded, a so-called expert, on behalf of the French government, just argued to close Peugeot’s Madrid plant instead and sack the workers there. The announcement to make the workers redundant in France’s Peugeot plants in June immediately triggered protest actions across the country. On 9 October, the CGT trade union federation has called for a demonstration of car workers in Paris, confronting the bosses presenting the new models on the same day. However, delegates coming together from the different factories of Peugeot had to push the trade union leaders to take this and more decisive action, and there is no strategy to fully use the power of the combined workforce in Aulnay and other plants. While the Aulnay workers went on strike, others were not called to join in. The differences between companies also reflect the uneven effects of the economic crisis in Europe and the devastating effects of the austerity measures imposed on Southern Europe. While German car sales are stagnant, France saw a decline of 14%, Italy minus 20%, while the number of purchases went down over 40% in Greece and Portugal. The decline in sales in Southern Europe had a much bigger effect on Peugeot and Ford purchases given their car fleet and traditional markets. Ford implemented short-time work, for example, at its plant in Cologne, Germany, which produces for these markets. At the same time, workers are being blackmailed to accept worsening working conditions in a race to the bottom. The current problems in Bochum reflect GM’s decision in May in favor of their Vauxhall plant in Ellesmere Port, Britain. They forced workers to accept longer hours, losses in real wages and more flexibility, with the company dictating the times of work even on the weekend in order that production would be continued there. With this, the internal competition between the Opel plants in Germany (Rüsselsheim, Bochum) and Vauxhall in Ellesmere Port was used again in a successful way by the bosses against the workers. A whole series of deals involving workers giving concessions to save their jobs have been implemented in the past. Now, despite the ‘guarantees’ given to the workers that their jobs would be safe until 2016, the Bochum factory is faced with the danger of closure, and Rüsselsheim will see huge over-capacity as soon as the next changes of models are fully introduced. Unfortunately, instead of developing a joint fight back, the trade union leaders in Britain and Germany always justified the concessions, sharing a very narrow view on defending jobs in the framework of their nation state or even only looking towards saving one plant against another. Strategy of the bosses: following the US example? The bosses’ attempts to make workers pay for this crisis are obvious. But what is their plan to organize a way out? Billions of euros were spent after the crisis hit in 2009 to bail out the car industry in Europe. Looking from a US point of view the New York Times commented: “But instead of using that money to ease painful downsizing of plants and payrolls, governments provided financial incentives for people to trade in older models for new ones, or subsidized worker salaries to dissuade companies from cutting jobs.” (New York Times, 26 July) That’s what happened in the US. In an act of state intervention, the Obama administration took effective control of GM and Chrysler, two of the three big US car companies and organized a massive restructuring in order to restore profitability to the shareholders. The restructuring involved the shutting down of dozens of plants across the Midwest, the loss of thousands of jobs and getting rid of the historic gains of decent wages, pensions and health care for newly hired workers. Their wages of new hires are now at half the previous scale. This ‘restructuring’, at the expense of auto workers, was only possible with the active cooperation of the leadership of the United Auto Workers (UAW), the once mighty trade union of US car workers. A part of the trade union bureaucracy has turned more into managers to run the shares controlled by the UAW at GM and Chrysler, as well as the management of their $1bn Wall Street ‘strike fund’, and of the health plan for retirees which is controlled by the UAW. As part of the longer process of reorganizing the terms of exploitation, a sharp decrease of the wages of US car workers was implemented. The traditional factory bases in the north of the US, with a high level of trade union organization and traditions, have been gutted with production moving towards the US south, where trade unions are hardly present in the auto industry. Several Japanese and German companies now have low-wage car manufacturing plants in the US, which increasingly is seen as a low-wage manufacturing centre. That is the actual restructuring plan that is taking place under the Obama administration – a devastating blow to the living standards and conditions of US workers in the auto industry under the pretext of ‘saving jobs’. But the main objective was to cut costs in order to restore profits for the shareholders. Given the huge over-capacity in this industry in Europe, Sergio Marchionne, Fiat chief and current president of the European auto makers’ association, Acea, called for such a US-style method on an EU level to deal with the problem: “[Europe] needs to provide a unified, concerted road map to get this done,” Marchionne said. “Look at what happened with the steel industries in the ’90s, and copy that example.” That means factory closures, sackings and worsening working conditions for those who keep their jobs, organized by the governments of Europe. Will the European capitalists implement a US-style plan? Unable to solve the fundamental crisis of the car industry, will the European bosses be able to go the way of the US? The different nation states will try to act as in 2009. But it’s more than unlikely that the European capitalists could find a joint approach. In 2009, the different nation states put forward schemes like ‘cash for clunkers’. Formally they dealt with the different producers in a neutral way, but the design of the different schemes was made up of competing national interests. If Fiat and Peugeot are the losers of this crisis, the German state, from a capitalist point of view, does not bother too much. It may even open up new opportunities for Volkswagen. In the logic of capitalism, the tensions and differences between nation states and the companies based on nation states increase. That does not rule out that, in a joint interest to stabilize the economy or to prevent an escalation of protests, some joint actions could be decided on. But, as the euro crisis shows, the nation states in Europe are the tools of the different capitalist classes. They cooperate as far as it is in their interest, but the contradictions are increasing. And the use of their nation state is a one way street for them and does not oblige them to do anything. Two-and-a-half years ago, Fiat chief Marchione argued for what he called an ‘investment plan’ in Fiat’s Italian factories under the name ‘Fabbrica Italia’ (Factory Italy). (The origin of the word ‘Fiat’ is: Fabbrica Italiana di Automobili – Torino). Playing on the Italian card, he argued for state help and massive concessions by the workers in the working conditions and wages. Today, he just argues that an international company (now making more money with the Chrysler arm) needs to re-adjust the plans according to the market developments, despite some repetition of empty phrases of protecting Italian interests. Workers in Italian factories have already been forced onto short-time working linked to loss in pay – some even down to only 4 days of work a month. Perspectives However, it is far from certain that the current winners, e.g. German car producers, will just continue to be on the gain. After the crisis in 2009, it was mainly the Chinese markets that helped to overcome the problems for European car makers. Given the sales in Asia, the higher range cars – the German Daimler, BMW and Audi – has still not been hurt by a new crisis yet, but a slowdown is there. Even booming Volkswagen announced to its suppliers in Germany the possibility of a fall of 10% in production. Daimler announced further programmers to reduce costs. The attempts at increased cooperation between companies increased (e.g. Opel with PSA, Daimler with Nissan). The failure of the Daimler-Chrysler fusion is still a warning, however, that the pressure on companies is immense and that further fusions, as well as the collapse of whole companies, are on the table. The best option the companies are hoping for at the moment is that the decline in Europe is cushioned by markets in the rest of the world. It is very open as to whether this scenario materializes. Even then, it would be linked to further reductions of plants and jobs. An even more severe development cannot be ruled out with a hard landing in China (a growth rate falling to 5%) and other emerging markets being hit by global downturn. Trade union strategy In the first days of horror that greeted the car crisis in 2009 the fear of losing jobs and factories enforced a debate about a change of the whole industry towards electro cars and ‘green mobility’. However, this was quickly forgotten as soon as sales in China increased and cash-for-clunker schemes evolved. Trade unions like the mighty IG Metal in Germany signed agreements that workers had to accept short-time working with severe losses of pay. Contract workers lost their jobs and the core workforce paid a heavy price. Trade union leaders accepted a continuation of a "two-tier system", where younger or new workers are employed on much lower wages and worse working conditions. Trade union bureaucrats in Germany accepted – off the record – to play the same role as their counterparts during the decline of the German steel and coal industries: organize the end of jobs and companies with some minor concessions, avoiding bigger upheavals. The crisis is starting again to bite for car workers. It’s urgent to avoid a repetition of these developments on an even worse economic basis compared to 2009. A trade union strategy is needed to coordinate resistance all over Europe and internationally to defend all jobs and factories and to end the playing-off of workers in one plant or country against others. A unified struggle is needed to fight against all cuts, concessions, job losses and closures. All factories where workers are threatened with redundancies have to be taken over by the states and run under workers’ control and management. But, given the links between the factories, the inter-dependencies and the over-capacity in the industry in general, the struggle for nationalisation cannot be limited to those factories the bosses do not need any more. The whole industry needs to be put under state ownership and democratic management by the workers, the unions and the state to start a transformation. A plan is needed for how to reorganise the car industry and use this well-educated and skilled workforce in the interests of working people in Europe and internationally. If necessary, that might require switching the production to other socially necessary products, reducing the hours of the working week and linking it to a plan to overcome the economic crisis in general – not by cuts, unemployment and poverty but by reorganising the production in the needs of working people. When Marchione calls for a “unified, concerted road map” to slaughter jobs and plants, the workers’ and trade unions’ answer should be united and concerted. To open this road, the trade unions also have to be transformed into fighting organisations, based on internal democracy, building close links of workers European-wide and internationally. A militant movement in the workplaces and trade unions is needed to struggle for these changes, developing direct links of workers’ representatives between factories and countries and overcome the barriers towards a joint fight back.