The demise of contract manufacturing in Europe
By: Martin Kahl, Friday, April 17, 2009, AutomotiveWorld.com
The news that Heuliez has been placed into administration represents yet another blow to Europe’s once glamorous contract manufacturing industry, where classic European names like Bertone, Karmann, Valmet and Heuliez have given cars an added a sense of flair over many decades.
Last week, Karmann was declared insolvent, having failed to line up any new contracts to replace the work it carried out for Audi and Mercedes-Benz. Bertone went into bankruptcy at the turn of 2008, and has not yet found a buyer to rescue it. Pininfarina has effectively exited the contract manufacturing business; it has a joint venture with Bolloré to build and market a lithium metal polymer battery-powered electric vehicle from 2010, but this is apparently on an exclusive basis, rather than a true contract basis.
Fortunately, there is one welcome exception to this trend - Magna Steyr - which despite losing assembly of the Chrysler Voyager and the BMW X3, has recently added to its portfolio the forthcoming Aston Martin Rapide sedan (2,000upa from late 2009), the Mini 'Crossman' crossover-SUV (65,000upa from 2010), and the replacements for the Porsche Boxster and Cayman (from 2012).
This is the second time in as many years that family-owned Heuliez has hit the rocks; in July 2008, Indian contract manufacturer Argentum Motors stepped in and took a 60% share in Heuliez, seemingly rescuing it from bankruptcy. The Indian firm, led by BVR Subbu, is understood to have invested, or promised to invest, up to €25m, with a French state contribution of up €5m.
In mid-March 2009, and weeks after Heuliez’s proud second appearance at a motor show (Geneva) as an electric vehicle manufacturer, Argentum pulled out of the deal, leaving Heuliez with insufficient funds. At least €45m was said to be required to keep the company operating and its 1,000 or so employees in work. Half the money had been promised by the French government – the remainder was to be found elsewhere.
Heuliez has a long history of contract manufacturing and coachbuilding, but most recently has been known for the production of the Opel/Vauxhall Tigra TwinTop, which entered production at the Heuliez plant in Cerizay, France in July 2004. However, the production numbers for a company with the capacity to build up to 50,000upa on three shifts, tell the story. In the second half of 2004, the company assembled 14,900 units. 2005, the first full year of production, saw 37,700 units roll off the line, before output began to dip: 14,451 in 2006, 11,770 a year later, and in 2008, the last full year of Tigra TwinTop production, only 8,840 units. The end of production in 2009 had always been expected; what the company had yet to do was secure a sufficiently large contract to replace the GM model. Argentum appeared to offer the solution.
As early as 2006, the company had been seeking outside funding to help it reorganise in the face of falling sales, and the company began to reinvent itself as an electric vehicle (EV) specialist. The partnership with Argentum – which in hindsight may have been too good to be true – would have seen Heuliez build Argentum’s EVs for sale in Europe. The volumes in question were optimistic, as were the prices, and indeed the appearance of the vehicles. However, to say that Heuliez was reinventing itself as an EV specialist may do it some injustice; the company has for decades been building EVs, albeit on a low-volume scale, and had most recently partnered with Michelin for use of its Michelin Active Wheel system which incorporates a motor, brakes in-wheel electric suspension.
Heuliez had planned to begin production of the first of three electric vehicles, as displayed at Paris and Geneva shows, in mid-2009. The Friendly is understood to have been slated as the first to roll down the line, going to market a year later. Contracts with local governments in France had secured some business for the company, but this is thought to have been in volumes of hundreds rather than thousands. The company reportedly needed a sales rate well into five figures, at a price of over €10,000 per vehicle, to make any money.
In a market thought by many to be on the cusp of widely accepting electric vehicles, the fortunes of Heuliez were very close to turning - if only funding could have been sustained. The demise of yet another classic European automotive contract manufacturer – and an electric vehicle manufacturer at that - will be viewed as a sad development by many.
The opinions expressed here are those of the author and do not necessarily reflect the positions of Automotive World Ltd.
Published on Friday, April 17, 2009
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