Is the French auto industry really threatened by the low wage

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Vincent FRIGANT
GERPISA & GREThA University of Bordeaux
[email protected]
Workshop on relocation and the changing relations between high wage and
low wage countries in the auto industry
29-30 November 2007, WZB, Berlin
Is the French auto industry really
threatened by the low wage countries ?
Groupe de Recherche en Economie Théorique et appliquée – UMR CNRS 5113
Communication: organisation
• Context of the French auto industry :
carmakers & suppliers
• Central European Eastern countries
• 4 big issues for the future
Carmakers in France & French
Carmakers
Carmakers: sales, employees & capital
expenditure
120
115
estimation
110
105
185 061
employees
100
estimation
95
90
190 830
employees
Employees
85
Net sales
80
Capital
expenditure
2000
2001
2002
2003
2004
2005
2006
Groupe de Recherche en Economie Théorique et appliquée – UMR
CNRS
5113
Source:
CCFA-SESSI
A recent decline of production in France
in thousand
3500
3000
2500
Vehicle production in France
2000
Foreign OEM
French OEM
Total production in France
1500
1000
500
2006
2005
2004
2003
2002
2001
2000
1999
1998
Source: CCFA
1997
0
The internationalisation of French
carmakers
World production of French OEM
in thousand
6 000
World production
5 000
Overseas
In France
4 000
3 000
2 000
1 000
1997
1998
1999
2000
2001
2002
2003
2004
2005
Source: CCFA
2006
Renault-Dacia-Samsung
Renault: world
production
Millions
2.50
2.00
Foreign
Foreign
Major evolution (2000-06)
France
-290 000
Spain
-170 000
Romania 160 000
Korea
120 000
Turkey
90 000
Russia
50 000
Slovenia
30 000
Colombia
30 000
1.50
1.00
France
0.50
France
0.00
2000
2006
Peugeot Citroën (PSA)
Millions
Peugeot Citroen : world production
Major evolution (2000-2006)
France
3.5
3
Spain
2.5
-100 000
Iran
195 000
-100 000
Czech
Rep.
190 000
China
150 000
Foreign
Foreign
2
1.5
1
France
Portugal
90 000
Brazil
90 000
Slovakia
50 000
France
0.5
0
2000
2006
The French supplier industry
French auto equipment suppliers (1)
343Z - Equipments auto suppliers
Auto suppliers
(large definition)
100 000
2001: 280 000
95 000
2002: 283 667
90 000
2003: 298 622
2004: 320 673
85 000
2005: 315 524
80 000
2006: 306 790
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
75 000
Source: FIEV
Source: SESSI
French auto equipment suppliers (2)
Type of employees
90 000
80 000
70 000
Blue-collars
60 000
Executives & White-collars
50 000
40 000
Source:
FIEV,
343Z
30 000
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
But France
Creation/reduction of employment in motor indus.(emcc)
40000
Poland
Czech Republic
Slovakia
Romania
20000
Hungary
Bulgaria
Slovenia
0
Portugal
Sweden
Belgium
Spain
France
UK
-20000
Source: European
Restructuring
Monitor
-40000
# Planned job reductions
-60000
# planned job creation
creation-reduction
-80000
Italy
Germany
Relocation of FTS
• North Africa & Turkey; old, traditional
– Tunisia, Morocco
– Turkey
• Central Eastern Europe (CEE); new
Auto suppliers : Go east !!
• Locations in CEE (2003)
– 20 000 employees
– 65 plants
• The share of CEE in internationalisation of French
Suppliers: Growing
– 1996-2000: CEE
• 30% of mergers & acquisitions (brownfield)
• 31% of greenfield
• 9.4% of Joint-venture
– 2001-2005: CEE
• 54% of greenfield
• 11% of mergers & acquisitions (brownfield)
• 12.5% of joint-venture
Valeo/Faurecia : creation/reduction jobs
(2002-07)
Faurecia : jobs creation/réduction (ERM)
(Jan 2002-Oct.2007)
Valeo : creation/destruction jobs (ERM)
(Jan 2002-Oct.2007)
Sw eden
France
Italy
Sweden
Germany
Spain
Belgium
France
Romania
Portugal
Poland
Czech Rep.
Poland
-800
Czech Rep.
-400
0
400
800
1200
1600
-1200
-800
-400
0
Source: European Restructuring Monitor
400
800
1200
Employees of Faurecia in Europe (inc.
Temporary workers)
50000
Western
Europe
45000
40000
35000
30000
France
25000
20000
Central/eas
tern
Europe
15000
10000
Source:
Faurecia
5000
0
2002
2004
2006
Faurecia : type of jobs (2006)
98%
94%
100%
90%
74%
80%
70%
63%
65%
% Travail
temporaire
60%
60%
% ouvriers
50%
% de CDI
(2005)
40%
30%
Source:
Faurecia
20%
12%
13%
14%
10%
0%
Europe Ouest
France
PECO
CEE: the place of convergence among three
logics
• Follow sourcing (PSA, Renault)
• New clients (VW, Skoda, Audi…)
• Delocalisation: low wage countries
But... not a hollowing out process…
France & Western
Europe: still the
key industrial
base of French
autosuppliers
Share of Western employees/plants in total
european employees/plants
Employees Plants
Valeo
Faurecia
75,4%
82,5%
Increase of exports
80,0%
82,4%
CEE: a surplus with Germany but a deficit
with France
1000
800
600
400
200
0
-200
-400
-600
-800
-1000
1995
1996
1997
1998
1999
France
2000
2001
2002
2003
2004
Germany
2005
Units :
Millions $
Source :
Chelem
An increase of exports following the
implantation of French carmakers
250
Begining of Kolin
(sept.2005)
Czech Rep
200
150
100
50
0
-50
-100
1992
1994
1996
X France
1998
M France
2000
2002
2004
Solde France
Units :
Millions $
Source :
Chelem
France-Romania:
Exchanges of parts & components
Launching
Logan
Launching
SuperNova
180
160
140
120
100
80
60
40
20
0
1992
1994
1996
X France
1998
M France
2000
2002
Solde France
2004
France-Slovenia:
500
Acquisition of
Revoz
450
400
350
300
250
200
150
Units :
Millions $
Source :
Chelem
100
50
0
1992
1994
1996
1998
2000
2002
2004
X France
M France
Solde France
France-Poland:
300
250
200
150
100
50
0
-50
-100
-150
1992
1994
1996
1998
2000
2002
2004
X France
M France
France
Groupe de Recherche
en Economie
Théorique etSolde
appliquée
– UMR CNRS 5113
Units :
Millions $
Source :
Chelem
Not a clear susbtitution effect with other
traditional area
– Stabilisation of imports from Spain (20% of
French imports of autoparts)
– Increase of imports from Portugal (with
inversion of trade surplus/deficit) (around
3% of French Imports)
– Sharp growth of exchange with Turkey
(around 2% of imports; 3,5% of exports)
France-Spain : Exchange of auto parts &
components
4000000
3500000
3000000
2500000
2000000
1500000
1000000
500000
0
1996
Source : OCDE
1997
1998
1999
Imports
2000
2001
Exports
2002
Solde
2003
2004
France-Portugal : Exchange of auto parts &
components
400000
300000
200000
100000
0
1996
1997
1998
1999
2000
2001
2002
-100000
-200000
Source : OCDE
Imports
Exports
Solde
2003
2004
France-Turkey: Exchange of auto parts &
components
600000
500000
400000
300000
200000
100000
0
1996
Source : OCDE
1997
1998
1999
Imports
2000
2001
Exports
2002
Solde
2003
2004
A complexification of the international
division of work of suppliers
• Relocation in low wages countries of activities:
– Module : final assembly (JIT plants and/or
dedicated plants)
– Simple components : FTS & 2th/3rd Tier
Suppliers (SME)
– Some RD activities (eg. Faurecia, Poland)
But…creation/stabilisation of activities in Western
Europe
- RD: global RD centers
- Large part of production in Western Europe
(economies of scales, complex production +
assembly of final modules)
An extraordinary increase of flows without a clear
movement of delocalisation
Confusion among two movements :
(some) delocalisation
AND extension of production capacities close to
carmakers
Decrease of employees in France is partly the result:
of delocalisation
AND decrease of carmaker production in France
(conjonctural difficulties) the French carmakers have
not closed any production plants in France and very few in
Western Europe (Renault-Vilvoorde, Belgium (1997) ; PSARython, UK in 2007)
• Delocalisation threat : an tool for pression
on employees
– Renegociation of « 35 hours aggreement »
Future: 4 questions
• Novelty of process : difference between French/German
carmakers new)
– Some relocation or failure because French suppliers lack of
volume… but with the increase of production capacity in
CEE: amplification of movement?
• Purchassing policy of French carmakers: Increase the Low
cost country content in total purchasing spend :
– Eg. PSA:
• 15% in 2005, 19%-2006,
• 23%-2007, 47% in 2010
– Two ways:
• Local supplier for assembly plants in LCC
• Indirect via delocalisation of traditional supplier…
• Pressures by French buyers:
– Carmakers: Selection in panel of carmakers:
Quota of sourcing in LCC and/or a strategy of
delocalisation/sourcing in LCC (Peugeot : Leading
Competitive Countries…)
• … a pure rule without analysis of the supplier’s situation
(association of suppliers + suppliers)
– First Tier Suppliers: imitation of carmakers :
• Valeo: 70% in 2010 (26% in 2006) of sourcing in LCC
• Faurecia : 40% (25% in 2005)
By relocation of its own plants and subcontracting abroad
• Renault-Dacia strategy
Production of Renault-Dacia-Samsung (units)
Thousand
2 500
Samsung
Dacia
Renault
15
117
2 300
118
81
55
57
118
95
172
161
73
188
2 100
1 900
1 700
1 500
Excl. Traffic II
1980
1990
1998
1999
2000
2002
2003
2004
2005
2006
Renault-Dacia project
• The project Dacia: the conquest of new markets
– Logan : a car for emerging countries
– One platform : several models :
• 2004 : Logan
• 2007: Logan MCV + VAN; Sandero (South-America,
Europe in 2008)
• 2008: Pick-up
• 2009: 4X4
• 3 or 4 others version between 2010/2012
– A production in emerging countries (with imports
for developed countries – In 2006: 51 countries)
• 2004: Roumania
• 2005 : Russia, Maroc, Colombia
• 2007: Iran, Brazil, India
Production of Logan (different models)
Source: Renault
• The threat : RD center of Renault in Romania (but also in
India for very low cost car (under 3000$):
– Romania : The center of development of Low cost car
• But : the core of Renault production again in France :
extension /no subsitution
• … but…
– a competitive pressure on Renault-Centers of RD : Renault,
Samsung, Dacia, Nissan
– Has Renault the capacity to follow 2 strategies: Low cost
car & « traditional » car?
– Imports of Samsung High segment car (end of production
in France)
Thank you…

Is the French auto industry really threatened by the low wage

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