Crisis and the automotive sector

ILO meets with high-level experts to discuss the crisis and the future of the automotive industry

Against the backdrop of the global economic and social crisis, senior experts on the automotive sector from Europe, Asia and the Americas met here on 20-21 May with top officials of the International Labour Organization (ILO) to discuss the state of the automotive industry and its future directions.

Press release | 22 May 2009

GENEVA (ILO News) – Against the backdrop of the global economic and social crisis, senior experts on the automotive sector from Europe, Asia and the Americas met here on 20-21 May with top officials of the International Labour Organization (ILO) to discuss the state of the automotive industry and its future directions.

Citing alarming employment forecasts for the automotive sector, which had prompted this ILO initiative, Director-General Juan Somavia said, “The automotive sector was one of the first casualties of the financial crisis … job generation needs to be at the heart of every government’s response to the crisis”.

By the end of 2007, the automotive manufacturing sector employed almost 10 million worldwide. Today, with 2.5 million cars unsold in Europe and another 4 million in the United States, around one million jobs are expected to be lost in the industry itself, with knock-on effects going well beyond the assembly and leading component firms.

In Germany, employment in the automotive industry is expected to decline by 10 to 15 per cent over the next two years and in the United States the crisis will have huge short-term employment impacts for the country’s three major car manufacturers. In Japan, over 100,000 workers lost their jobs in 2008, according to Koji Endo, a Japanese analyst of the automobile industry.

However, employment in the sector is expected to be less affected in developing countries than in industrialized countries. In China, auto sales went up by 4 per cent in the first quarter of 2009, according to Wayne W. J. Xing, editor of China Automotive Review. Countries like India and Brazil also seem to be less affected by the crisis. On the contrary Thailand, as a country producing cars and car parts predominantly for export, has seen automotive production declining by 54 per cent in the first quarter this year resulting in the loss of 59,000 jobs, according to Nobuya Haraguchi from UNIDO.

At the same time, however, experts also indicated that a crisis of such magnitude also opens opportunities for dramatic changes. The roundtable concluded that the crisis in the automotive industry was systemic, rather than cyclical.

“There had been a crisis before the crisis”, Somavia stressed. “The question remains, how to link long-term strategies to short-term solutions”.

“We need more than a financial bailout. The challenge at hand is to forge a new social contract for the auto industry, to understand the workplace and to engage workers, employers but also other stakeholders”, said Thomas A. Kochan, speaking through a video-link from the MIT Institute for Work and Employment Research, United States.

Dr. John Wormald from autoPOLIS stressed the need for a new business model with longer product life cycles that would reduce the cost of a new car by up to 30 per cent. The roundtable had extensive discussions on trends affecting the auto industry in the future: emerging new markets; global warming and dependence on oil; a rapidly ageing population; urbanization and alternative modes of transportation.

Confronting these changes requires good understanding of the situation and a willingness to work together. The European Partnership for the Anticipation of Change in the Automotive Industry, a joint project by the European metalworkers’ Federation and the European Association of Automotive Suppliers, aims to create an early warning system to avoid the negative effects of restructuring and to maintain a sustainable industry creating quality jobs.

“There is a need for a fundamental change in what the automotive industry builds and how we build these products, but also in the social relations between employers and unions”, concluded Barry Bluestone, moderator of the debate and Professor of Political Economy at Northeastern University, United States.

The ILO Summit on the Global Jobs Crisis to be held on 15 and 16 June, during the International Labour Conference in Geneva, will address a global jobs pact, including industry and enterprise-level strategies for dealing with the jobs crisis.

The “proposed Global Jobs Pact is aimed at placing employment and social protection at the centre of recovery policies in order to accelerate employment recovery, ensure inclusive access to employment through specific measures for disadvantaged groups, broaden the coverage of social protection and enhance security”, Somavia said.