World Economy

Further Job Cuts in Europe Auto Industry

Further Job Cuts in  Europe Auto Industry
Further Job Cuts in  Europe Auto Industry

The current downsizing of the European auto industry is hitting workers not only at the assembly plants owned by the major global automakers, but also at the corporations that supply the parts.

In an effort to slash costs, Volkswagen, BMW, Daimler and other auto companies are demanding lower prices from suppliers, which in turn are eliminating jobs and attacking working conditions, World Socialist Web Site reported Friday.

Over the next four to five years, suppliers in Western Europe will slash 75,000 jobs, according to projections made last year by the Ronald Berger Consulting Firm. “The business of suppliers will be shaped by two developments in the coming period: internationalization and innovation,” Stefan Bratzel, an auto industry analyst said.

Because of the intense cost-cutting environment on the recession-bound continent, many European automakers and their suppliers are shifting production to Eastern Europe and Asia.

In 2007, the year before the worldwide financial crisis began, a total of 16 million vehicles were produced in Western Europe. By 2016, after the shutdown of plants in Germany, France, Britain, Belgium and Spain, the number is expected to fall to 13 million.

Increasingly, major manufacturers have spun off parts production to supplier companies. Industry analysts estimate that suppliers now generate about three quarters of the value of an automobile. When auto production is outsourced in search of lower wages, the suppliers follow. In China alone, 15 new auto plants are planned, in addition to three in Russia and four in Romania.

“For the past two years, auto companies are demanding that suppliers provide parts out of Eastern Europe,” Frank Iwer of the union IG Metall in Baden-Wuerttemberg told the daily newspaper die Welt. “They suggest opening a brand new plant in Romania in their price calculation and say: on this basis, you can calculate your prices.”

Workers in Romania produce automobiles at near-starvation wages. According to the Center Automotive Research (CAR) at the University of Duisburg-Essen in Germany, hourly labor costs are 48.80 euros (US$60.90) compared to 4.80 euros (US$5.99) in Romania.

In the US, labor costs are 25.60 euros (US$31.95) per hour, while in Mexico they are 7.40 euros ($9.24). In Poland, hourly labor costs are nearly equivalent, at 7.50 euros ($9.36).