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EU Committee warns of recession aftermath

A key advisory body within the European Union (EU) has warned that UK and other European dealers may have to import more cars in future from Asia, north America and elsewhere.

The European Economic and Social Committee fears the
recession may cause structural under-capacity amongst EU
manufacturers.

The committee, a long-established expert consultative group, warns in a formal opinion that governments must not “equate structural problems with over-capacity alone”.

It noted that Europe has already seen sharp reductions in manufacturing capacity in Spain, Portugal and Britain in recent years. 

And while “to some extent, overcapacity is inherent in the system (changes of model and internal competition, for example)”, there is “a danger that the crisis might cause a massive reduction in capacity, resulting in under-capacity and hence increased imports when demand increases once again”.

As a result, the committee has called on the EU’s industry-led CARS 21 high-level group to examine this risk and come up
with solutions.

It said that while order books remain thin, the European auto sector needs not only to be supported with government and private financing to stave off bankruptcy, but to use slack trading periods to retrain and retool so that it can meet increased demand once economic recovery arrives.

One way the EU can help, said the committee, is through its European Globalisation Adjustment Fund, which is designed to retrain workers whose skills become obsolete through worldwide trade flows and market shifts. 

The committee said the EU should make €1 billion available through the fund for grant applications by automakers.
One particular concern of the committee is preventing hard-pressed US manufacturers from focusing their down-sizing efforts on their European arms. 

“The EU must press the USA and General Motors to give the European arm (Opel, Vauxhall and Saab) a chance to survive,” its report stressed.

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