Restoring a strong automotive industrial base in France: what is feasible, what conditions?

Notes:

Olivier Verhaeghe, Expert, éditeur et développeur du site My-Better-Job.fr

Texte complet:

Will deindustrialisation be stopped or even reversed? This presentation is based on a report submitted in April 2021 for the Observatoire de la Métallurgie.

The trends over the last twenty years have been unfavourable for the automotive industry (AI). France used to be the second largest producer of automobiles in Europe, after Germany. Today this is no longer the case. In France, there is a trend towards a decline in the industry, with some slight stabilisation, followed by a decline in industrial employment. There is outsourcing to temporary work or to the service sector, but the contribution to GDP of AI is declining. That is to say, there is a loss of weight of the sector in the national economy.

This decline in the automotive sector is specific, as it is not seen in the aeronautical or naval industries. Moreover, this employment crisis affects all the French territories: the constructors are concentrated in a few regions, but the equipment manufacturers are distributed everywhere in the territory. Moreover, productivity gains in the automotive industry do not explain the drop in employment.

What is the evolution at the level of the sector? The weight of manufacturers in the sector is declining due to outsourcing to subcontractors and equipment manufacturers. Overall, the loss of jobs is greater among manufacturers. Those who are doing better are the electrical equipment manufacturers, due to the increase in demand.

There are contrasting developments across sectors. The loss of jobs is linked to the loss of assembly plants. For example, PSA Rennes is driving automotive employment throughout the region. Temporary work accompanies periods of growth and recovery of activity. More recently, there has been a fall in the number of temporary workers from 2019 onwards.

To sum up: there is a general deterioration in the situation. This is a French specificity, linked to the deindustrialisation cycle of French industry, where France is losing its strategic advantage.

What support reactions are there for the sector? There is a rise in the number of equipment manufacturers and subcontracting of electrical activities and IT services, even if this remains limited. In the same way, we are seeing the emergence of "green field" initiatives, with ACC. With Renault Electricity, we can also see a logic of development of electrical poles.

We can ask ourselves if there is a divergence between the two French constructors, with a strategy of industrial redeployment in the case of Renault, and maintaining the strategy of deindustrialisation of Stellantis.

There is a reindustrialisation in certain segments in which France is lagging behind, especially compared to Germany, such as gigafactories. This delay complicates the way in which catching up is carried out, particularly in terms of skills.

There are currently two scenarios.

The first, pessimistic scenario is the most likely. Like the rest of the European sector, France is facing challenges such as the drop in marketable volumes, the emergence of new actors such as China, unavoidable environmental pressure, the race for innovation, etc.

But there is a specific fragility in France: the technological environment is less favourable, despite the success of some competitive clusters. In addition, there are problems of lack of skills that can be mobilised on the labour market. In the long term, there is a problem of technological viability. Finally, the relationship between international groups distorts the relationship with the national territory (Stellantis).

In this scenario, there is no improvement in the economic environment of firms, a continuous decline in production volumes and therefore in the number of employees, with closures. There is no risk that France will no longer be a major automotive manufacturer in the 2030s? And yet, producing and repairing motor vehicles is a key issue for national sovereignty, especially in the context of geopolitical tensions.

A second, optimistic, and less likely scenario is one in which the structural problems of the French automotive industry are addressed. This supposes a mental, legal and professional revolution in practices. This would make it possible to consider neutralising job losses and stabilising employment in the sector, with a possible gain in competitiveness of French sites compared to their European competitors.

A series of risks threaten the sector today. Risk of component shortage, risk of energy shortage, etc. Risk of public debt, which could lead to acute budgetary pressures. Geopolitical risk (wars and the exhaustion of the Franco-German couple). These risks must lead to the consolidation of the industrial base, and the automotive industrial base in particular.

Questions : A car is not just an engine, many components go into making a vehicle. The French sector is also very weak in the manufacture of components, compared to Germany.
Today there are projects for battery factories. Industrially, efficiency means having battery factories at home. However, battery technology is constantly changing, the technology is not fixed. The game is completely open. Why can't a European technology win the battery manufacturing game? This means localising a complete manufacturing chain, and Europe knows how to do all that. There is a real potential for development.

The problem with production taxes is that they have no impact on investment volumes. We have to weigh up the factors that are favourable or unfavourable to reindustrialisation. Toyota is seen as the good pupil: how do they manage to do what other manufacturers cannot?

Answer:
Toyota has buried Fordism, they have a decentralised intelligence. They have methods that work. Then, Toyota in Valenciennes was built to produce what it does: it was designed to produce the Yaris, and nothing else. When Renault set up in Douai, Peugeot in Rennes, these sites were created in an oversized way. The crises of 2008 and 2020 have pushed the manufacturers to make efforts in terms of competitiveness. Toyota did not have to make these efforts. In this respect, Toyota is the good pupil in a family of overachievers.

Question: There is a golden vision of Toyota. In France it works, but in other countries it works less. You don't have to be Toyota for a factory to work, if the firm believes, hires a young workforce, is trained, etc. Moreover, the commercial vehicle works, and you don't have to be Toyota to make it work. Why does it work?
Is the automotive decline linked to the single market? The European dimension plays an important role in the decline of the French automotive industry. When a French automotive manufacturer goes into debt, they pay a lot more for it. There is also a move upmarket in French production, but this is not beneficial to French manufacturers. In the positive scenario, does the move downmarket play a role?

The LCV is a strong point of the French automotive industry. What the Germans did with passenger cars did not make sense with commercial vehicles. German manufacturers sell more and more expensive passenger cars in the segment. But the German model is reaching its limits. There will be market positioning moves to be made, particularly with electric vehicles, especially if there is a move downmarket.