In Germany, for example, Aachen serves as a centre for automotive technology. Car tyres roll off the assembly belt and safety glass for the automobile industry is made. There is ongoing research at Aachen University Institute of Automotive Technology into the designs of drive line, bodywork and chassis.
In another example, Ford is well entrenched in Cologne. In 2003, it invested about E410m for the production of Ford Fiesta cars; and in 2005, it will begin to produce V12 Aston Martin Motors there.
In Netherlands, OEMs and subcontracting companies recently joined forces with Dutch universities and institutions to create the Automotive Technology Centre, an initiative to stimulate the growth of automotive technology in the country.
R&D in the field of intelligent vehicle safety systems (IVSS) is ongoing in Sweden. An $80m programme to study IVSS is open to international companies and partners. It has already attracted leading Swedish and international companies and universities, and will run until 2008. The programme is expected to generate access to unique competences that will be valuable for research and education, and design and testing.
In Switzerland, new solutions are being studied for electric vehicles. The most important transport-related project has been the six-year, large-scale fleet test of lightweight electric vehicles in Mendrisio in the Italian-speaking Swiss Canton of Ticino. The project is due to run until 2005 and promotes all kinds of energy-efficient vehicles throughout the canton.
In Wales, major Tier 1 companies make the automotive sector the region’s largest industry. Car engines for Ford are manufactured in Bridgend; Toyota is expanding operations at its Deeside engine facility; and Robert Bosch Gmbh recently opened a 500,000 square-foot plant near Cardiff, its biggest plant outside Germany.
Yet scaring auto manufacturers in western Europe has been the high cost of labour and unions, coupled with heightened competition from Japanese and Korean OEMs that have entered the European market with a vengeance.
“Only in the past 12 months have companies dared to break with labour union contracts,” says Mr van Herwaarden.
A case in point is GM, which recently announced a massive restructuring that will slash its workforce by 12,000 in Europe. Workers took to the streets in protest, particularly in the German city of Bochum, where 4000 jobs at GM’s oldest European plant are expected to be made redundant.
“In Germany, we have the highest wages in the world in the car industry,” says Ferdinand Dudenhoeffer, director of the Centre for Automotive Research in Gelsenkirchen.
Mr van Herwaarden describes actions by companies like GM as akin to a caged lion trying to break out of its chains. “We are seeing signs across Europe, where unions are now realising that they have to step down from demands for benefits. But the question is how fast can this happen to make labour more competitive,” he says. “This change is not only happening in Germany, but in France and Belgium as well. In the meantime, people want cheaper cars.”
Higher-end auto manufacturers still desire to remain loyal to their roots due to national pride, tradition and a need to satisfy shareholders. Instead of opening its new plant in eastern or central Europe, BMW, for example, turned to the former east German city of Leipzig.
Viewed by some observers as the “politically and corporately correct” thing to do, BMW executives say they were attracted to Leipzig because of its available skilled labour, infrastructure, and transportation links to BMW facilities and suppliers in the south of the German state of Bavaria. Real estate costs in Leipzig were also cheaper than in other locations, such as Arra (France), Rolin (Czech Republic) and Augsburg and Schwerin (Germany), all of which were on BMW’s shortlist.
With Rolls-Royce synonymous with British excellence, the BMW Group likewise is planning to build a new manufacturing plant and head office for its Rolls-Royce project in Goodwood, in the county of West Sussex. The Ł60m development is part of a major investment in Rolls-Royce by the BMW Group, which took over full business and production responsibilities in 2003. The planned facilities will produce a new luxury saloon model, the first of a new generation of authentic Rolls-Royce automobiles. The plant is expected to employ about 350 people and produce an average of 1000 cars a year.
But, underlining efforts to remain nationalistic, Asian manufacturers, particularly the Japanese, are giving all OEMs in Europe a run for their money. Since the EU removed restrictions on Japanese car imports in 2000, Japanese manufacturers have increased their investment in new, state-of-the-art plants throughout both western and eastern Europe.
Toyota has stepped up production in Europe to the point where it has overtaken Mercedes and Audi in market share. In 2003, sales rose 35.3% to $19.5bn, while operating profit soared nearly ninefold to $654m. Half of the Toyotas sold in Europe are built in Great Britain, France and Turkey. In 2005, a joint venture in the Czech Republic between PSA Peugeot Citroen and Toyota is expected to increase production by 60%. The goal is to sell 1.2 million cars in Europe by 2010.
Toyota already runs a highly efficient shop in Valenciennes, in France, and Burnaston, in the UK, and it increased production capacity in the second quarter of 2004 by adding a third shift at each plant. The decision to increase capacity is consistent with Toyota’s philosophy of building cars where they are sold in order to respond better to customer expectations.
“Toyota plans its operations very well,” says Mr van Herwaarden. “Its executives are dedicated to making things work. They involve parallel tasking, perform detailed analysis and are very prudent. They never compromise on quality and they respect time lines.”
Following a similar philosophy, Nissan invested E400m in its Nissan Motor Iberica SA plants last year for the production of two new vehicles: a 4x4 sports utility vehicle (SUV) and a pick-up, as well as a new 2.5 litre common rail diesel engine. Production is due to begin in 2005. The investment in the Spanish city of Barcelona is part of Nissan’s strategy to develop its Zona Franca plant as a 4X4 and light commercial vehicle hub, combining vehicle, engine and gearbox manufacturing. All of Nissan’s R&D activities in Spain are being consolidated to one single location in Barcelona. The company plans to begin a gradual winding down of its engine assembly operations in Cuatro Vientos, Madrid, over a three-year period.