1. How to achieve sustainable growth in the automotive industry within an enlarged European Union H.J. Keulen Trade Union Official

2. Developments automotive industry Highly competitive market due to huge overcapacity. Consumer market, big incentives (more demands for less money). Increasing demands regarding environmental and safety issues. Shorter time to market and life cycles. Negative exchange rate effects due to strong Euro.

3. Developments automotive industry Cost pressure within the value chain and declining financial results. Profit margins OEMs under pressure. Price cutting within the value chain from OEMs towards suppliers. Stronger demands from OEM towards suppliers regarding product development. Shifting financial risks from OEM towards suppliers.

4. Scenarios future European automotive industry Key drivers *Demand *Consolidation rate OEMs and suppliers *Capacity *Competition/introduction new players *Production locations *Outsourcing *Technology *Legislation (environment, safety, taxes, social standards)

5. Scenarios future European automotive industry Limited growth new car sales in western European markets and eastern European markets. Demand in eastern European markets will develop but especially in the used car segment Limited consolidation OEMs, continuous consolidation process suppliers Overcapacity maintains Risk of new players entering European Market regarding current investments in new capacity in Asia\China More stringent legislation especially on environmental and safety issues

6. Scenarios European automotive industry Development of new production locations in new markets in central and eastern Europe. Suppliers will (have) to follow. Smaller production sites which will produce more flexibly in smaller volumes. Continuous process of outsourcing. Overall employment probably will decline.

7. Undesired scenario “Laissez faire” policy of the European Union and individual member states. A development of the European automotive industry only driven by cost optimalization in the value chain. Massive reallocation of labour. Negative spiral in the income and other working conditions within the enlarged EU. Member states competing each other by created cost advantages. Risk of further reallocation to even cheaper production sites.

8. Challenge To achieve sustainable growth within the European automotive industry in an enlarged Europe. A European policy encouraging further development of the industry in the new member states and preserving and further developing the industry in the original member states. A European policy in which social, economic and environmental interest are in balance.

9. Consensus model An European consensus model should be developed to achieve sustainable economic growth within an innovative climate, stimulating the development of employment. Innovation of products, processes and organizations. Important actors: Industry, academic/R&D institutes, unions and politicians on a European, regional (cross-border) and national level. Lisbon Agenda Car 21 initiative European Commission

10. Framework for fair competition within European Union Harmonization of legislation. Minimum standards for taxes and subsidies. Minimum standards for working conditions.

11. Improvement innovation capability Innovation will ultimately be a more important driver for competitiveness and consolidation of the European automotive industry than costs. New member states should not only focus on their low wage advantage as this is only temporary. Cooperation between OEM, suppliers, unions and research and academic/R&D institutes in cross border clusters within the several European automotive regions. Example: coordination of investments in fundamental research/R&D programs and facilities.

12. Improvement cooperation in value chain Current business model within value chain is mainly driven by cost and does not support the necessary drive for innovation by suppliers. Lack of cash flow. Risk: further consolidation and transfer of knowledge to USA/Japan A new business model is desirable in which besides cost effectiveness innovation within the value chain is encouraged. System suppliers will be the driver in this innovation process. Especially electrotechnical system innovations using embedded systems and nano technology have high global potential. Pre seed and seed capital has to be available to encourage these innovations, especially those supporting safty and environmental targets. Should be part of EU en national policy.

13. Professionalized relationship companies - employee representatives No unfounded protectionism but realism. Open discussion between companies and employee representatives on a national and European level on investment planning and production allocation, based on a dynamic total costs account. Life long learning. More flexibility within working conditions.

14. Contribution Unions/EMF Exert influence on EU politics for an integral European policy on industrial development. Start up dialogues with OEM and supplier confederations. Encouraging development European works councils and support. Creation, development and support of employee representation structures within the new member states. Encouraging development of employees on all levels in the member states to enable and contribute to innovation targets.

15. Sustainable growth let’s do it the smart way Some developments are inevitable regarding the globalization of the world economy and the automotive industry. We can manage to cushion the negative effects of these developments by finding an European way for sustainable growth. Sustainable growth is achievable if we manage to cooperate within the enlarged EU and find smart, knowledge-based solutions in competition.