Just weeks after President Hollande made an unspecific commitment to protecting the French automotive industry, PSA has made one of the first significant cuts to overcapacity in Europe.
Whilst news of the end of car production at Aulnay-sous-Bois in 2014 may have come as a surprise to those outside the industry (indeed, the company said a year ago that it “currently” had no plans to close the plant), analysts have long questioned the future of the factory.
Now that PSA has made the cut, its new strategic partner will be watching industry reactions closely
For several years, PSA has pursued manufacturing efficiency rather than capacity utilisation. At Aulnay, this involved the permanent shut-down of one of its two production lines, adding a third shift and reducing the physical footprint of the manufacturing area. Cutting a line left the plant dependent on the Citroen C3, its only model once C2 production ended. PSA’s other plant in the Paris region, Poissy, also builds the C3, alongside the DS3 and the new Peugeot 208, and, no matter how much efficiency improved at Aulnay, it came down to numbers: Aulnay built just 135,787 cars in 2011, less than a third of total C3 output, and down considerably from the 218,500 units it built just two years earlier and almost 413,000 units in 2003. Poissy built 238,000 cars in 2011, but that included the outgoing 207; it is currently ramping up output of the new 208 and the DS3, and will absorb Aulnay’s production after 2014.
Now that PSA has made the cut, its new strategic partner will be watching industry reactions closely. The future of GM‘s Bochum plant beyond 2016 remains uncertain. There is no mention of plant closures in GM Europe’s current restructuring plans, but it would be highly surprising if the now acting head of European operations, Steve Girsky, did not have the streamlining of manufacturing operations at the top of his new to-do list.
Cutting capacity in Europe is also of primary concern to Fiat‘s Chief Executive. Indeed, Fiat is one of the few OEMs, along with PSA and GM, to have closed a major plant in Europe in recent years – Fiat closed its Sicilian plant in 2011; GM closed Antwerp in 2010; and PSA closed Ryton in 2006. (The recent sale of Mitsubishi’s NedCar to bus manufacturer VDL Groep ended years of under-utilisation of a plant which many analysts often already discounted from capacity analysis.) Fiat and PSA recently confirmed that their Sevelnord LCV joint venture will cease vehicle production at the end of 2016, and as Automotive World reported earlier this month, Sergio Marchionne said Fiat will resort to another plant closure if it cannot come up with an economically viable way of addressing the issue of overcapacity.
PSA may have made a painful incision, but, sadly, the industry remains in need of deeper surgery
Meanwhile, Europe’s premium OEMs are in need of extra capacity. Earlier this year, Dieter Zetsche told Automotive World that Daimler is “at the other end of the spectrum, suffering from a lack of capacity!” BMW is also looking for extra capacity. Indeed, the sale of NedCar came just as analysts expected an announcement on BMW’s use of the plant as a satellite facility for its fast-growing Mini production network.
It’s hardly revelatory to point out the difficulty of closing a (European) car plant, but this was underlined in a confidential AutoAnalysis report seen recently by Automotive World. Two things are striking in the assessment of the ‘closability’ of each of Europe’s car plants: first, the sheer number of assembly plants in Europe and second, the importance of almost every plant to its parent company’s brand and production strategy – in fact, very few rank as ‘easily closable’, even before the social impact of a plant closure is taken into consideration. However, with European overcapacity widely agreed to be in the area of 20%, the urgency to deal with the problem will only increase. PSA may have made a painful incision, but, sadly, the industry remains in need of deeper surgery.
Martin Kahl is Editor of AutomotiveWorld.com.
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