A calculated 100,000 automotive jobs will disappear across Europe over the next 12 months due to the COVID-19 outbreak, and nearly half will be in the supplier sector, according to parts cluster body CLEPA.
Secretary general Sigrid de Vries (right) has pulled together the figures from manufacturers and industry observers and said the conclusions show how important it will be for Governments to prepare for the change in their economies as well as pursuing green or low carbon agendas. The industry is also required to reduce investment in R&D, further impairing the ability to shape the change and achieve the climate and digital goals and is a real problem because the global leadership of the sector role depends on innovative technologies and manufacturing excellence.
Last month, Ford Bridgend Engine Plant closed after 40 years and 1,700 employees went as the company sought to cut losses in Europe.
The CLEPA overview is based on public announcements made by companies across Europe. The actual numbers are likely higher, especially given that in the supply sector, many smaller announcements do not make the national press coverage.
In addition, many in the sector are still benefiting from the various government programmes for temporary or ‘technical’ unemployment, indicating levels of hidden unemployment that may well become visible in official figures sooner rather than later.
As an illustration, in Germany, 24% of automotive industry employees are still relying on the state’s wage support scheme, with the automotive industry ranking second after the metal industry.
Market watchers are increasingly speaking of a double dip for the European economy, as recovery continues to lose steam. The first survey and mobility data for September shows that weakness in the service sector is leading to a stagnation of the economic recovery, led by a contraction of ‘business-to-consumer’ sectors post-summer holidays.
A double dip could hit suppliers hard. Recent publications by financial analyst and management consultancies suggest that some automotive suppliers may be better positioned than others, with liquidity issues highlighted as the main concern.
Automotive suppliers in Europe employ about 1.7 million people directly, in addition to the 1.2 million employed by vehicle manufacturers. Supplier jobs add up to about 5 million when taking the longer value chain into account. The steel industry, for example, delivers 18% of its output to the automotive industry.
A recent study from the Boston Consulting Group suggests that the long-term employment impact of electrification could be mitigated if Europe manages to safeguard European battery cell production, and suppliers succeed in reskilling their workforce. In the process, we may see a shift of part of the supply chain to Central and Eastern Europe.
The share of component production expressed in total labour hours will fall from 54% internal combustion engine to 47% BEV battery electric vehicles. Suppliers may be able to capture ground from vehicle manufacturers in the field of integrated electric engine systems.
It is worth noting however, that about 30% of the value of a car is in the powertrain, and that there is a clear dominance of suppliers in this part of the overall vehicle assembly. In other words, large shares of the employment, revenues and innovation capacity in Europe rely on powertrain manufacturing. This is why managing the transition responsibly is so crucial.
The market for electric and hybrid vehicles is growing fast, but is still low as a proportion of total manufacturing. The CLEPA overview shows that since March 2.500 jobs were created in this field, in line with the direction of travel but in stark contrast to the overall numbers that need to be managed.
“In our view, it’s time to focus on the needed action,” said de Vries.
“The key question remains not if, but how to achieve the climate objectives, as well as secure innovation, manufacturing, and employment in Europe. The challenge we face – as automotive industry and society – is to manage the transition to safe, smart and sustainable mobility in an ambitious, realistic, and inclusive way.
“Automotive suppliers are providing the technology solutions that will help realise the ultimate goals. But the current legislative approach, setting tailpipe-only targets that drive all efforts towards just one type of solution, electrification, is not the fittest for purpose.
“We are, to put it bluntly, worried that the transformation will turn into a disruption. That the sector’s capacity to innovate, invest, and maintain employment will be crippled. This is why we make the case for an ambitious, as well as reliable, and technology-neutral regulatory framework to achieve its objectives.”