The crisis in the global automotive industry as a new challenge for logistics – part 2
The crisis in the global automotive industry as a new challenge for logistics – part 3
Causes and effects of the crisis in the global automotive industry
Peter Drucker, who was well-acquainted with the problems of automotive production management, once called the automotive industry the “industry of industries.” Especially today, when the global crisis has brought this sector to its knees, this phrase takes on particular significance. After all, it is this branch of industry that has for generations been the initiator of new production techniques, increased levels of automation, efficiency, and the internationalization of corporate structures. Few industries can be attributed such a dimension of strategic and political importance.
The global automotive industry is currently in a state of recession. At the same time, the industry is forced to carry out a new technological revolution aimed at producing more environmentally friendly vehicles. The current challenges are therefore enormous, and for many companies, they even pose an existential threat.
Car production is one of the main pillars of the European economy, on which more than 12 million jobs depend directly and indirectly. Globally, the importance of the automotive industry is highlighted by the total sales value, amounting to approximately 1,900 billion euros. More than 8 million people are employed worldwide directly in the production of cars and spare parts, which means more than 5% of all those directly employed in industrial production.
The financial and economic crisis is strongly affecting the automotive industry on a global scale. In the European Union alone, from the beginning of 2008 to the end of 2009, the decline in production volume was estimated at around 20%, which in terms of net results means a loss of profit reaching 60 billion euros.
The European Union was the world’s largest car producer with an annual production exceeding 18 million units. Every third passenger car produced in the world came from Europe. The industry directly employed 2 million workers, and 12 million were dependent on this sector. The automotive industry therefore plays a key role in the EU, which, with an annual turnover reaching 780 billion euros and a generated value (net production) exceeding 140 billion euros, makes a significant contribution to the creation of the Community’s gross product.
In a 2003 study prepared by well-known research units, titled Future Automotive Industry Structure (FAST) 2015, the significant economic importance of the automotive industry was pointed out. Offering 8.8 million direct jobs at car manufacturers and their suppliers, the industry had a 15% share in the global gross product. It was assumed then that value creation in the areas of production and development (excluding sales, spare parts management, and service) would grow over the next 12 years by an average of 2.6% annually – from 645 billion euros to 903 billion euros in 2015. The forecast for the growth of annual car production from 57 million in 2003 to 76 million units in 2015 seemed obvious. As late as 2006, investments were estimated at 2 trillion euros to increase annual production from 62.8 to 76 million vehicles.
The deep crisis in the global automotive industry began in the autumn of 2008. Nowhere did it have such a violent course as in the homeland of car production, the USA. Passenger car sales fell in November and December 2008 by almost 40% compared to the previous year. In mid-December, 3 car companies: General Motors (GM), Ford, and Chrysler decided to close their production plants for many weeks, and the gravity of the situation was evidenced by statements from members of the Senate, who claimed that it was not about help for the automotive industry, but about the entire economy. The crisis in the leading branch of the economy significantly strengthened other negative trends of the global crisis in the real economy, as well as in the financial sector (financing of production and car sales).
One of the causes of the crisis in the automotive industry was the stagnation in the sales market in the USA. To understand the situation at the end of 2008, one must point to the nature of the changes in the years 1999 – 2007, when, despite a good economic climate, a significant decline in car production was recorded in the USA (by about 17%). At the same time, production in Japan grew on almost the same scale. Japan overtook the USA as the country with the largest car production. During this period in Europe, growth amounted to 4.7%, which resulted primarily from the doubling of production in Central and Eastern European countries.
Overproduction caused a decline in profit margins and the creation of losses, layoffs of employees, the closing of some plants, and the reduction of social privileges in the industry. It should also be emphasized that the automotive industry has traditionally had great importance in the USA, as it is the largest branch of production, with a million employees. The American market is larger than the European one, and 40% of global revenue from passenger car sales until recently came from the USA.
The article comes from the magazine “Logistyka” 4/2010.