Bloomberg: European auto industry forced to lay off employees Europe still sells three million fewer cars annually than before the pandemic, Bloomberg reports. Due to the decline in demand for electric vehicles and increased competition from the US and China, factories are forced to cut costs and operate at less than full capacity. This threatens to close more and more plants and lose jobs. Bloomberg, USA The largest automakers are not fully utilizing the production capacity of some European companies. Volkswagen AG has threatened layoffs in Germany and warned for the first time that it could close plants in the country. This is a harsh reality in the anemic European car market, where the closure of new plants is inevitable. Last year, almost a third of the passenger car plants of Europe’s five largest automakers – BMW, Mercedes-Benz, Stellantis, Renault and Volkswagen AG – were operating below full capacity. They produced less than half the number of cars their carriers were designed to produce. This is evidenced by the figures of the Bloomberg News agency, which studied data from the industry magazine Just Auto. If factories start closing, the region faces a long-term downturn because of its competitive disadvantage. Annual sales in Europe are flat — three million vehicles below pre-pandemic levels. Production capacity is underutilized, putting thousands of jobs at risk. Volkswagen on Tuesday ended job guarantees in Germany that workers had enjoyed for decades. A sudden slowdown in demand for electric cars and increased competition in key export markets in the United States and China mean manufacturers must cut costs to stay competitive. When Tesla’s Model Y SUV became the continent’s best-selling car last year, Chinese manufacturers led by BYD Co. have been making inroads into Europe. “More and more carmakers are fighting for a piece of a small pie,” said Matthias Schmidt, an independent auto market analyst in Hamburg. “Some factories will definitely have to go.” The threat of factory closures in Europe has grown significantly in recent years as labour shortages have driven up labour costs and energy costs have risen due to the armed conflict in Ukraine. If left unchecked, the European economy will take a major hit, with the auto industry accounting for more than 7% of the EU’s GDP and employing more than 13 million people. Car assembly plants are often the backbone of societies, providing employment to countless local businesses, from engine parts suppliers to haulage companies and bakeries that provide staff canteens. The situation is particularly dire in Germany, where carmakers and their suppliers are suffering from the shift to electric vehicles after years of prosperity when they were leaders in producing quality combustion-engine cars. BMW AG warned on Tuesday of a profit hit due to brake problems at Continental AG’s parts and components plants and a drop in demand in China. Just hours later, Volkswagen AG confirmed it was ending job security in Germany, kicking off a long battle with unions. The company felt the wrath of workers last week when it announced layoff plans. Thousands of workers at Europe’s largest plant in Wolfsburg strangled management when they spoke out. The company had complained of declining sales, leading to two plants being cut. Carmakers in Europe are under “intense pressure to consolidate production,” said Fabian Brandt, an industry expert at consultancy Oliver Wyman. “Underperforming plants will be assessed and others will be closed,” he added. A car plant’s capacity utilisation must be such that it can generate profits. This can vary depending on a number of factors, including what products it makes and whether management can cut shifts, staff and costs to offset production losses. During the pandemic, carmakers have cut costs to reduce downtime. If a factory operates at less than 50% of its capacity, it becomes unprofitable, according to Bloomberg Intelligence analyst Michael Dean. The picture is mixed among automakers, and new models can fill up a plant very quickly. Mercedes-Benz Group AG, which has lagged BMW in electric-vehicle sales because of high prices and controversial design decisions, is preparing to introduce several new models to stimulate demand. The luxury carmaker has said it has a highly flexible global production network that provides benefits, and its workers are protected from mandatory layoffs until at least the end of 2029. Volkswagen has been the best at increasing production since the pandemic, but because of a long expansion that includes the purchase of Skoda in the Czech Republic, Bentley in the UK and Lamborghini in Italy, it has the most factories in the region. Two years ago, the maker of the iconic Beetle announced plans to build a new €2 billion electric-vehicle plant in Germany, saying it was pushing harder than anyone else in the industry toward electrifying cars. Then last year, Volkswagen shelved the project as sales began to fall. Two months ago, the company said it could be forced to close its Brussels plant because of weak demand for the electric Audi Q8 e-tron it makes there. The cuts in electric car production are creating a chain reaction. Carmakers such as Volkswagen and Volvo have scaled back their electrification ambitions, leaving suppliers in the lurch. The chief executive of cost-cutting firm Stellantis, Carlos Tavares, has come under intense pressure as profits at makers Peugeot and Fiat fell sharply in the first half of the year. In the US, a Jeep SUV plant is in trouble, and Volkswagen and its German peers are in big trouble in China, where local manufacturers are gaining ground. Renault has been streamlining production in recent years. Its chief executive, Luca de Meo, says the company is using 90% of its capacity this month and is hiring. Renault overhauled its model range last year, and that has affected output at some plants in France. Business closures in Europe are nothing new. Honda Motor Company three years ago, it closed its plant in Swindon, England, where about 3,000 people were shot. But that’s usually a last resort in a region where unions and politicians wield considerable influence over corporate decisions. Volkswagen’s plan to close the plant must be approved by a supervisory board dominated by local politicians and union leaders. The French government, which owns 15% of Renault, has launched a transformation of the northern region, aiming to turn it into a battery supplier. In Italy, Tavares is at odds with Rome over plans to move production outside the country to cheaper locations. This summer, Stellantis halted production of electric vehicles at its Mirafiori plant for several weeks after output there fell 63% in the first half of the year. “Carmakers want to close some plants to cut costs and improve competitiveness,” Schmidt said. “But the problem is how to get the unions to agree.” Stefan Nicola, Albertina Torsoli, Tom Fevrier, Demetrios Pogkashttps://inosmi.ru Subscribe to our Telegram channel to stay up to date with all the most important materials we publish: https://t.me/russiapost
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