Europe bids to revamp domestic auto sector

Europe is drawing up plans to protect its auto industry as manufacturers battle barriers to export markets and face up to increasingly tough environmental challenges. The industry and regulators approved Wednesday "a new action plan in favour of the automotive sector," European Union Industry Commissioner Antonio Tajani said. The plan is anchored by an extra half a billion euros of EU investment in green technologies but carmakers said the programme would stand or fall on free trade negotiations with Japan and other major competitors. Tajani said after the talks that the EU would ensure automakers could feel safe thanks to a "good trade policy, on a level playing field" with rivals around the globe. However, Sergio Marchionne, the Fiat boss who heads the European automotive industry association ACEA, said Wednesday's agreement was only "day one of a long haul going forward." With the EU about to enter free trade negotiations with Japan, the world's third-largest economy, Marchionne said this part of the plan must not be "forgotten" in Brussels. "Trade relations should deliver reciprocal benefits," he stressed. "However, the EU always appears ready to compromise on these conditions as experience has shown with South Korea and other examples," he noted. After five years of decline, the industry feels threatened by rising South Korean exports -- with brands like Kia showing regular and big sales increases, albeit from a low base, while traditional European models slide consistently. "Very clearly there are things that need to be checked," Marchionne said of South Korea and this experience was a "very good warning sign for the Japan deal," he said. Tajani acknowledged negotiations can be difficult, especially given lower costs elsewhere, the Italian using a football analogy to say European trade rules are like "11 v 11," whereas in other countries, "it's very difficult to play nine men against 13." Earlier Wednesday, a separate EU report on mounting protectionist tendencies, particularly in Russia, Brazil and India, said it expected Moscow to make it much more difficult for European companies to get their cars to Russian consumers. New car sales plummeted as the 2008 global financial crisis rocked the economy, forcing EU governments to step in with some 30 billion euros ($37.5 billion) through various "cash-for-clunker" schemes. While these and other incentives for buyers helped keep the industry afloat through the worst of the global downturn, Europe has not gone through the fundamental and painful restructuring which has allowed US manufacturers to get back on their feet. The sector acknowledges "over-capacity" in Europe but Marchionne insisted there was no call for public funds for a necessary restructuring. Access to crucial raw materials is also getting more difficult and the transition to environmentally-friendly vehicles remains sluggish. An 84-page analysis drawn up for the talks seen by AFP highlighted the dangers posed by "overcapacity, growing dependence on third-country markets, growing cost of production, cost of regulation and technological challenge." Alongside smarter regulation and efforts to open market access, Tajani said EU investment in "green" innovation between 2014 and 2020 would rise to 1.5 billion euros. With 2.5 billion vehicles expected to be on the roads by 2050, the belief is that electric, hydrogen-powered and other hybrid technologies will supercede the traditional internal combustion engine powered by fossil fuels. There would be no going back on ambitious EU climate-action goals in the interim, the participants agreed. The EU auto sector employs some 12 million people directly, contributes about 70 billion euros to the bloc's external trade balance and accounts for about 28 billion euros in annual research and development investment, according to ACEA data.