Günter Verheugen
Vice-President of the European Commission responsible for Enterprise and Industry

CARS 21 High Level Group for a competitive EU car industry

Press conference CARS
Brussels, 13 January 2005

Speaking note Commissioner Verheugen

Press conference CARS

Ladies and Gentlemen,

Introduction

The European automotive industry is of crucial importance for the competitiveness of the EU and by the same token for growth and jobs. Consequently, it will play a key role in our effort to re-launch the Lisbon Agenda.

The mere fact that the car sector provides jobs for more than 2 million (!) EU citizens illustrates its crucial importance for the European economy.

The Commission's "European Competitiveness Report 2004 includes an in-depth analysis of the situation of the European Automotive Industry with regard to its competitveness, challenges and future strategies.

It shows that there is no reason for too much doom and gloom. EU carmakers have a leading position in terms of research and development.

Cars made in Europe are renowned for its cutting edge technology and innovation.

We produce every third car in the world. The industry managed to maintain a strong position on world markets, despite a difficult economic environment.

It is also well positioned in countries which have high growth rates, such as China.

Nevertheless, the situation of the European automotive industry is far from being all roses. The challenges it will have to meet should not be underestimated:

• Productivity is below the one of the US and Japan.
• Labour costs are a real problem: While one hour of labour costs 12.9 $ in South Korea, 29 $ in Japan and 33.8 $ in the US, the EU-15 average is at 32.7 $, with Germany topping the list with 36.8 $.
• It is also obvious that we are seeing substantial overcapacities in the mature EU market.
• Competition from plants in Central and Eastern Europe is putting increasing pressure on traditional manufacturing locations.

Announcement of the CARS 21 High Level Group

All this shows that the automotive industry is a key sector for growth and competitiveness in the EU. Therefore, it has to figure prominently on the political agenda. I am therefore delighted to be able to announce the creation of a high level group for a Competitive Automotive Regulatory System for the 21^st Century - CARS 21.

The group's objective is to generate recommendations to improve the worldwide competitiveness of the European automotive industry making at the same time Europe more attractive for foreign investments. It's work will thus affect every car manufacturer operating in Europe.

I would like this group to develop concrete, brave and innovative ideas and recommendations how to win the pole position in the global car race.

Let there be no mistake. Politicians cannot work wonders. I can't create jobs and growth. We can't single-handedly stop delocalisation. This high level group can certainly not change the labour costs in Europe. We cannot and do not want to compete with the hourly rates paid in certain third countries.

The fate of the industry will primarily depend on the excellence and expertise of the individual companies.

But industrial policy has an important role to play by creating a positive framework for business to thrive. And the high level group can make a meaningful contribution to sketching out the framework conditions that this industry needs to do exactly that.

More particularly, the group shall:

• Firstly, chart the way towards sustainable development of the automotive industry for the next 10 years, to avoid negative interaction and cumulative effects of the various policies.
• Secondly, define the best possible regulatory approaches, in order to improve the competitiveness of this industry. The new Commission will not hesitate to break with the past, when it comes to cutting red-tape and over-regulation.
• Thirdly, the group shall set out the necessary conditions for ensuring that Research and Development efforts translate into concrete innovation that gives our industry a first mover advantage.

The objectives of the group are reflected in its balanced composition. If you look at the participants, you will see that this is not a provincial event, but an initiative which brings together the Formula 1 of the EU car sector with prominent and competent representatives of Member States, the European Parliament, Trade Unions, NGO's, users and the Commission.

The first meeting of the group is scheduled for March 2005. Two further meetings are envisaged in 2005, with a view for the group to deliver its recommendations before the end of 2005.

The Commission will then follow-this up with a concrete action for competitive cars plan beginning 2006.

Better regulation through globalisation of the regulatory framework

I would like to announce another very concrete measure which will make life of the EU car industry easier.

In the field of approval of motor vehicles in the EU, I decided to propose to my colleagues to withdraw relevant EU Directives and replace them with the corresponding United Nations Regulations.

This will allow us to abolish the duality between UN Regulations and EU Directives. For industry, this means that it can concentrate on one set of technical requirements. In addition, third countries who have signed up to these UN Regulations, are obliged to grant mutual recognition to vehicle components that have been certified in accordance with these Regulations. This will, therefore, further strengthen the competitiveness of the European automotive industry.

Fiscal Incentives - Euro 5

Finally, I would also like to mention a working paper, published this week, dealing with emission targets for diesel engines fiscal incentives. This paper recommends an indicative particulate matter value of 5 milligram per kilometre for diesel engines. Member States can base fiscal incentives on this value, if they intend introducing them. In our view this is a realistic and justified value. On the basis of these indications, I will come up with a proposal for a Regulation on the Euro 5 emission limits that will cover all emissions of motor vehicles in the course of this year.

Conclusion

I am convinced that the EU can compete if we offer better quality, better technology and better services that come with a car.

I do not believe that the future of the EU's car industry lies in a race to the bottom concerning price, environment and safety.

"Lean, clean and safe" - this is the way forward.