Job losses mount as industry calls for a recovery plan

29 May 2020

29 May 2020

As European trade unions and automotive bodies call for an ‘ambitious recovery plan’ to support workers in the economic turmoil caused by the coronavirus (COVID-19) pandemic, carmakers are already taking the difficult decision to cut jobs to shore up their finances.

Ceemet, ACEA, CLEPA, CECRA, ETRMA and industriAll Europe, the European business organisations and trade unions for the sector, have called on the European Commission for a bold industrial recovery plan. Such a plan should be based on two objectives. First of all, bringing the industry back on track by stimulating sales and reviving production, and secondly, supporting the industry in its journey towards a carbon-neutral future, based on the Green Deal and Europe’s climate objectives.

The group notes that the economic and social impact of the COVID-19 crisis on the automotive sector is particularly severe. Workers, although supported by short-time arrangements, have seen their incomes reduced, and companies are facing cash drains as their revenues have disappeared. Currently, there is little visibility on what the future holds. If this situation persists, the sector risks a meltdown with large-scale bankruptcies and restructuring.

Between 2008 and 2013, the European automotive sector lost 440,000 jobs (in car production and the aftermarket) due to the financial crisis and subsequent recovery period. If no measures are taken, this number risks being dwarfed with the prospect of a recession that may be much deeper.

Too late

The call for support will come too late for some, however, as carmakers look to launch recovery drives in anticipation of the financial hit that COVID-19 will have on their businesses for the rest of the year, if not longer. While manufacturing is slowing recovering, the shutdowns in March and April, together with plummeting sales in those months, will cause profits to fall, while the continued economic turmoil will only exacerbate the problem.

In its recent financial results, Nissan stated that Europe is no longer a ‘core market’ for the business, and the carmaker will simply look to sustain its presence on the continent. As part of a turnaround plan, the business will cut production capacity by 20% and has announced its Barcelona plant will close as a result, along with its site in Indonesia. The company’s UK facility in Sunderland, often rumoured for the axe, will remain open as the manufacturer’s only European facility.

Renault has launched a transformation plan, which aims to achieve savings of more than €2 billion over three years and to lay the foundations for new competitiveness. The draft plan will strengthen the company's resilience by focusing on cash flow generation and will focus on rigorous management of resources and an efficient approach to operational activities. As part of this, there will be 10,000 job losses globally, of which the carmaker expects around 4,600 to come from France. This workforce adjustment project would be based on retraining measures, internal mobility and voluntary departures and would be spread over three years, the company said.

Renault and Nissan will look to their Alliance partnership to help each other as the two companies get their finances in order. Together with Mitsubishi, the companies will share out leadership responsibilities for new products and development. They will also look to share more components beyond platforms that are currently co-used.

Racing pedigree

Sportscar manufacturer McLaren has also announced a streamlining of its workforce, with 1,200 redundancies expected, including 70 from the Formula 1 team. While its sales are affected by the COVID-19 pandemic, the niche carmaker also gets much of its income from sponsorship and prize money won in motor racing. The first 10 F1 races of the season have, however, been called off due to the global pandemic.

‘We deeply regret the impact that this restructure will have on all our people, but especially those whose jobs may be affected. It is a course of action we have worked hard to avoid, having already undertaken dramatic cost-saving measures across all areas of the business. But we now have no other choice but to reduce the size of our workforce.’ said Paul Walsh, executive chairman of McLaren Group.

With Formula 1 introducing a cost-cap over the coming seasons, McLaren was already expecting to make redundancies from its racing team.

‘McLaren Racing has been a proponent of the introduction in 2021 of the new Formula 1 budget cap which will create a sustainable financial basis for the teams and lead to a more competitive sport,’ said Walsh. ‘While this will have a significant impact on the shape and size of our F1 team, we will now begin to take the necessary measures to be ready to run at the cap from 2021 onwards, to challenge again for race wins and championships in the future.’