Global Insight Perspective | |
Significance | Reports from last week's ACEA meeting claim that on the one hand, Fiat is trying to persuade its fellow European carmakers to ask the EC for a U.S.-style 40-billion-euro loan, whilst on the other hand it is threatening to leave the trade association altogether because of what it sees as injustices related to the proposed CO2 emission caps legislation. |
Implications | These two separate issues are indicative of the conundrum facing European carmakers right now; as regional new vehicle sales continue on a sharp downward trend, the industry feels it is in dire need of financial assistance. At the same time it is being required to pump more funds than ever into R&D and the fitment of expensive fuel-saving solutions as standard onto its vehicles, which is putting the industry under even more pressure. |
Outlook | Fiat leaving ACEA would be a huge blow to the Brussels-based automotive lobbying association, which has its hands tied as it attempts to act in the best interests of all of its members. This seems an unlikely scenario at this stage, however, as does the prospect of the EC doling out 40 billion euro in financial assistance to the beleaguered automotive industry. |
Financial Assistance Requested
Italian vehicle manufacturer Fiat is trying to encourage its fellow European automakers, under the umbrella of the Brussels (Belgium)-based trade association ACEA, to ask the European Commission (EC) for a 40-billion-euro (US$55 billion) loan to help them develop new, low-emission products, according to news reports from this weekend. This would be in the form of a package similar to that approved by U.S. Congress for a US$25 billion loan to the Big Three manufacturers General Motors (GM), Ford and Chrysler, which has also been done under the auspices of assisting them in their quest for better fuel economy. Speaking to the Financial Times (FT) newspaper last week, Fiat Chief Executive Officer (CEO) Sergio Marchionne, who was President of ACEA in 2007, remarked: "We will approach the European Commission for a similar idea to [that of] the US: 40 billion euro is a good number given the bigger size of the European industry. We need a level playing field."
Some of Marchionne's peers have also spoken out in favour of such assistance. Carlos Ghosn, who is Chief Executive of French carmaker Renault and its Japanese alliance partner Nissan told the FT that he thought Europe should follow the lead set by the U.S. government as well: "Other governments should take inspiration from this. Why only in the U.S.? The European Commission should perhaps do the same." Speaking to Automotive News Europe, Ghosn was also quoted as saying that European authorities need to "lay down the financial means" that will allow European carmakers to make their products more fuel-efficient. He went on to state that the auto industry is not seeking subsidies or incentives but rather "peace of mind" over the sustainability of long-term financing.
However, officials from ACEA say that no formal agreement on such a request has been reached, and as such the EC has not yet been approached. So far, the idea has only been discussed by ACEA members at a meeting last Friday (3 October) at the Paris Motor Show in France.
Rumours that Fiat May Quit ACEA
Meanwhile, Automotive News Europe, which quotes unnamed people familiar with the matter as its source, has reported that Fiat is on the brink of leaving ACEA because it is so frustrated with the lack of consensus about future European carbon dioxide (CO2) emissions legislation. The newspaper wrote that Sergio Marchionne told last Friday's ACEA board meeting that his company will leave the association if the interests of all European carmakers are not properly protected. Sources reported the ACEA meeting to be "stormy".
Marchionne has spoken out on several previous occasions against what he sees as unfair proposals which are heavily in favour of the powerful German carmakers (see Italy: 1 July 2008: Italy Steps Up Criticism of European Commission's CO2 Emission Caps Plan and Italy: 21 May 2008: Fiat Still Considering Low-Cost Car Brand, Criticises Proposed Sliding Scale for CO2 Emission Targets). Specifically, the executive objects to the fact that because Fiat already makes small, light and relatively fuel-efficient cars, it would have to reduce its fleet average CO2 emissions to 122 g/km whilst the makers of larger, heavier and less fuel-efficient cars such as BMW, Mercedes-Benz and Audi would only have to limit their fleet average emissions to around 140 g/km. The end result would be that the fleet average emissions of the entire European automotive industry would stand at 130 g/km. "Fiat Group will get to the 130g/km average fleet emission the Commission is asking by 2012, but we will not carry the burden for other automakers who are allowed greater emissions," Marchionne said earlier this year.
Outlook and Implications
These two issues are indicative of the twin challenge facing the European automotive industry right now. It is looking for the same kind of financial support that the U.S. congress has offered to its vehicle manufacturing giants. Because of the terms of that deal, only the Detroit Big Three will really benefit from the loan, which European manufacturers fear will put them at a disadvantage in what is still the world's largest new car market of the U.S. Because all of the region's car-makers are in the same boat in terms of seeing their sales slide in the two key markets of Western Europe and the U.S., they should in theory be united on this issue. Europe's car-makers are also united in the problem of being told by the authorities to dramatically lower their fleet average CO2 emissions, which will require the fitment of a number of expensive fuel-saving technologies, which manufacturers can ill-afford to add as standard to their cars in these difficult times. Where they are at odds, on the other hand, is how the fleet average emission targets should be achieved, on which subject the gulf between the powerful German carmakers on the one hand, and the French and Italians on the other, seems to be widening. The problem for ACEA is that it must try and keep all of its members happy, which is proving to be simply impossible in these extremely tough and challenging times.