Opinion on the Communication from the Commission to the Council and the European Parliament on the European Union Automobile Industry (94/C 393/34)

On 30 March 1994 the Commission decided to consult the Economic and Social Committee, under Article 198 of the Treaty establishing the European Community, on the Communication from the Commission to the Council and the European Parliament on the European Union Automobile Industry.

The Section for Industry, Commerce, Crafts and Services, which was responsible for preparing the Committee's work on the subject, adopted its Opinion on 31 August 1994. The Rapporteur was Mr Bagliano.

At its 318th Plenary Session (meeting of 15 September 1994) the Economic and Social Committee adopted the following Opinion by a large majority, with two votes against.

Foreword

Numerous documents on the European Union's automobile industry have been drawn up by the Commission, European Parliament and Council.

No Economic and Social Committee Opinion on the latest Commission Communication of 23 February 1994 (the third, following the 1990 and 1992 ones) can afford to overlook the earlier documents, at least the most recent (1990 onwards). The Council's timely Resolution of 16 May, published only three months after the Commission's Communication, should also be borne in mind.

The need to refer to earlier documents remains valid despite the fact that the onset of recession in the sector and the wider economy has modified scenarios and strategies and has accelerated the structural and technological changes already planned and in part aspired to over recent years.

Fresh discussion of the problems of the European automobile industry, sparked by the Commission's latest document, must therefore be wide-reaching so as to rectify any outdated features and to harness existing knowledge to generate more new ideas and approaches and to bolster the drive for more practical and effective action.

1. Previous Commission documents on the automobile industry

1.1. Reference to previous documents is helpful not only to trace the development of Commission thinking in the automobile industry sector, but also in order to assess how convinced the Commission is on particular issues. Conviction is signalled by the repetition in successive documents - as in the latest one, as will be seen - of its views (on, for example, the sector's importance).

1.2. In 1990 the Commission Communication on A Single Community Motor-vehicle Market lent particular emphasis to 'the opportunity presented by the existence of a large internal market in order [for the Community automobile industry] to maintain a major role on the world market', while also voicing concern at 'the growing scale of Community production of Japanese makes'. The EC/Japan arrangement had not yet been signed: this occurred on 31 July of the following year, in Brussels.

Credit is also due to the Commission for pointing, at that early stage, to the 'key element in the motor sector's competitiveness' represented by component manufacturers: 'in Japan three suppliers control 81 % of the market, while in Europe the top eleven share 76 % of the European market. In terms of average size the ratio is 1:4'.

The comment made at the time, that 'competition, far from being limited to sales, extends to supplying and managing plants', remains valid where vehicle manufacturers are concerned.

1.3. By 1992 the effects of concentration had led to an appropriately realistic approach by the Commission in all sectors: a paragraph in the May Communication on the motor vehicle industry focused on business cooperation, calling for greater 'cooperation between equipment manufacturers - which are often SMEs of a size which prevents them from taking part in research and using efficient production methods', as well as between equipment and vehicle manufacturers.

Again in 1992 the Commission devoted considerable attention to research and development policy (highlighting technological priority - TP - projects) and to training and retraining. The Commission's analysis concluded as follows:

'for the necessary changes to materialize, considerable efforts will be required from all parties directly involved. The responsibility for these changes lies first and foremost with the industry itself, including better social partnership. National and Community authorities should support these efforts and thus create the environment in which these changes can be successful.'

2. European Parliament and Council documents

2.1. In November 1993, in its most recent document on the automobile sector, the European Parliament openly voiced its alarm, in marked contrast to the Commission's more sanguine view.

Parliament, for its part, laid particular stress on the need 'to involve the social partners in developing a medium-term policy for the restructuring of the industry', and went on to support 'the call by the social partners for support policies to be developed by an ongoing tripartite dialogue'.

Highlighting the 'serious economic and structural problems' facing the motor vehicle industry, which the 'industry itself must take responsibility for solving', the EP urged the Commission and the social partners to 'deepen their dialogue', in the hope that the Commission-Parliament Conference of March 1994 would propose 'an institutional framework capable of bringing social partners together at a professional working level, on an ongoing basis'.

Among other points, Parliament also asked the Commission 'to set up ... working parties, with participation on a professional basis', together with 'a co-ordinating committee between the various Commission Directorates-General to integrate policy affecting the motor vehicle industry'.

It is also interesting to note Parliament's call for the 'Commission to analyze and draw lessons from the recent trends in the US motor industry'.

2.2. In May 1992 the Council, in its turn, recognized, amongst other aspects, that:

- 'all parties concerned will have to make considerable efforts';

- 'the industry needs to make additional efforts in the area of research and development';

- 'the Community and the Member States must ... press ahead with: efforts to ensure that international trade functions smoothly; the systematic use of the relevant economic, technical and social data; optimization of research efforts; and promoting in-service vocational training and education in line with the present and future needs of the industry'

and called upon the Commission to 'report regularly, and at least once a year, on the progress achieved'.

2.3. On 16 May 1994 (), three months after publication of the present Commission document (February 1994), the Council adopted a Resolution in which all the earlier ideas were forcefully restated, and the Commission was invited to 'encourage ... the structural adjustment process of the industry which is vital to its improved competitiveness', and in particular:

- to enhance efforts relating to training at all levels in order to anticipate the effects of restructuring on employment, and make changes economically efficient and socially acceptable;

- to coordinate and organize its programmes in the field of R & TD (facilitating access to programmes, assistance for component supplier/vehicle manufacturer consortia, dissemination of research results, closer dialogue with industry);

- to encourage industrial cooperation by SMEs in the components sector;

- to reach a decision on how Regulation (EEC) 123/85 on selective distribution should be applied after validity has expired (June 1995);

- to continue to promote better environmental and safety performance of automobiles (standards applicable in a realistic time schedule, taking account of their impact on the industry's overall competitiveness);

- to propose coherent policies e.g. in the infrastructural sphere;

- to continue to apply the EU/Japan arrangement;

- to draw up a list of barriers impeding access to third countries, and to prepare a plan on this basis;

- to promote industrial cooperation and business contacts with third countries;

- finally, to report on the progress achieved by December 1995.

The highly specific and detailed Council Resolution, containing clear references to specific cases, is practically a condensed version of the Commission Communication, but supplemented by the explicitly-stated political aim of pressing the Commission itself to be more actively involved in coordinating, organizing, promoting, implementing and stimulating 'within the horizontal industrial policy framework adopted by the Union, the structural adjustment process of the industry which is vital to its improved competitiveness and thereby to its future'.

One reason why the Council sets out these clear markets for the Commission is its belief that 'the role of the public authorities is to provide the industry with a clear, stable and predictable framework for their activities and to ensure an environment favourable to competitiveness'.

The Economic and Social Committee fully shares the Council's belief; in this Opinion it sets out to expand upon it and provide further arguments.

3. Summary of the Commission Communication of 23 Feb

ruary 1994

3.1. The document begins with a summary introduction with a rather more political and strategic slant, one third of the length of the Communication proper, which also contains ten interesting statistical tables.

3.1.1. The Commission's analysis opens with an initial description of the current situation, the challenges ahead and strategy, moving on to observations regarding the sector's well-known problems, presented as follows:

a) Internal market

a) Pinpointing a number of critical issues:

a) - a competitive market;

a) - the distribution system;

a) - harmonization of taxes;

a) - improvement of vehicle safety;

a) - measures to promote environmental sustainability.

b) EC policy in the field of structural interventions and human resources

a) Identifying interventions intended to 'ensure the competitiveness' of the motor vehicle industry.

c) Research and technological development

a) Highlighting the important role of the public authorities in supporting 'the research and development efforts of the industry', and recognizing that 'the investment in research and development by the European automobile industry is immense'.

d) External trade policy environment

a) Subdivided into two areas:

a) - EU-market:

two sections on unfair practices and market disruption; to highlight the need to avoid such situations through the deployment of existing Community instruments;

a) - access to third markets:

reviewing the EU position concerning Japan, the USA and South Korea, together with third country markets with preferential access (EFTA, CEEC, Turkey).

3.1.2. The summary draws to a close with a conclusion, underlining the importance of structural policy instruments, joint research and development programmes, and the need for 'removing market access barriers' in a number of markets. The summary ends as follows: 'it goes without saying that the primary responsibility to effect the changes necessary to improve its competitiveness remains with the industry itself'.

3.2. The Communication from the Commission to the Council and to Parliament follows the pattern set out in the summary introduction in section D of the second part Improvement of the Business Environment - the Union's Response, while the first part concentrates on The Reaction of Industry to Past and Future Challenges, discussing company organizational and internal restructuring problems, relations with suppliers and distributors, and the responsibilities of the social partners.

3.2.1. The final section E Conclusions begins by acknowledging that 'the EU automobile industry is presently going through its severest test since the war', and finishes 'the Commission believes that the combination of the internal and external measures outlined in this paper provide a supportive policy framework against which the industry should be able to restructure successfully. The industry should aggressively take advantage of the Community programmes designed to facilitate this process and which should contribute in an important way to ensuring that the industry emerges from the present crisis strengthened for the challenges ahead'.

4. General comments on the Communication of 23 Feb

ruary 1994

4.1. The state of the sector is described thoroughly, with abundant statistical and factual data.

Although it recognizes the sector's importance, and the existence of an as yet unresolved crisis, the Commission does not share the sense of urgency with which the Council and EP repeatedly express their concern at the drastic job cuts and the increasingly cyclical nature of the market - now an established fact - requiring ambitious structural changes.

4.1.1. The Commission Communication arises from a particular set of arguments and texts, flowing in the past from a number of quarters, including the EP and Council, as indicated earlier. This must be taken into account in assessing the Commission's current stance.

4.1.2. The analysis contained in the latest Commission document is not accompanied by specific proposals for action - which the Council moreover swiftly indicated (see paragraph 2.3 above). The recommendations addressed to the industry (to boost productivity, etc.) are obvious: in any case the industry has long been working along the lines indicated in the text, which have in fact been taken from earlier documents.

While perhaps the analysis could not have been conducted otherwise, more courage and imagination should have been displayed in mapping out the medium- and long-term guidelines proposed. The encouragement provided by the Council - which the Committee endorses - is a step in this direction.

4.1.3. In any case, it is the responsibility - perhaps the special responsibility - of the public authorities and, on a Community level, the Commission itself, to take a long-term view and develop a reference framework which goes beyond the everyday problems of running a business: companies must necessarily deal with emergencies on a day-to-day basis, and from a short-term point of view.

4.2.

The importance of the automobile sector

4.2.1. The Commission declares that 'The European automobile industry is a key industry in the EU'.

In all, the automobile industry directly or indirectly employs an upstream and downstream total of more than 15 million EU citizens (upstream, direct - steel, tyres etc. - and indirect suppliers; downstream, direct - distribution, parts, accessories, repairs - and ancillary activities - fuels, road maintenance, insurance, passenger or goods transport).

This is the most significant factor confirming the urgent need to concentrate the utmost attention on everything affecting the automobile industry.

4.2.2. The scale - in both absolute and relative terms - of the figures generated by the sector as a whole (manufacturing, trade, share of GDP formation, etc.), which the Commission quotes accurately, should, however, banish any purely superficial view of Community economic problems (in fear, perhaps, of favouring one sector over another), and instead encourage greater sectoral efficiency among existing horizontal instruments, as well as stimulate the capacity for targeted, timely action.

4.2.3. Furthermore, vehicle and component manufacturers have reduced their workforces over recent years (job losses among manufacturers over the last 30 months alone can be calculated at more than 120,000).

It is generally accepted that this is due not only to the more sharply cyclical nature of the market, but also to new technologies, new production and organizational methods and the resulting greater company flexibility.

It is also a fact, however, that the automobile industry has expanded its capacity to generate employment outside the sector, a trend which is set to increase in the future.

4.2.4. The concept of an 'automobile world' is not an abstract one, since infrastructures, services, traffic, mobility, the environment, safety, comfort, the quality of life and culture combine to make up a composite, complex 'world'.

Consequently, how manufacturing companies fare is nowadays linked not only to the views of the customer (safety and comfort), but to those of society as a whole and its problems (traffic mobility and congestion, environment and quality of life).

Vehicles, and the automobile sector, are intrinsically of a multi-disciplinary and multi-sectoral nature.

4.2.5. For all the above reasons which, though general, are essential in order to understand the various problems involved, the Commission is right to conclude its Communication by arguing that 'a wider consultative process encompassing a multi-sectoral and multi-disciplinary approach ... could be initiated'.

Here, the Economic and Social Committee would recall the European Parliament's repeated calls for coordination and dialogue with all interested parties in order to establish and develop close long-term cooperation, and would urge the Commission to make more specific proposals to this end.

5. Specific comments

5.1.

A broader, more comprehensive view of the market

5.1.1. Clearly the 'market' is the primary factor in competitiveness and development. But today it comprises a whole range of elements which all, to varying ways and to different extents, shape demand for vehicles.

Indeed, not only the geographical scale, number of inhabitants or potential buyers, or average per capita income are involved: there is the degree of efficiency of the economic and productive system as a whole, infrastructures and services, reasonable technical regulations and standards and an acceptable quality of life (traffic congestion and environmental pollution in particular), to mention only a few.

5.1.2. Many factors other than mobility and the requirement for mobility therefore influence market demand.

Transport, communication and trade requirements are increasingly creating a demand for more complex products (here, the motor vehicle, seen not only as a means of transport but also - in urban areas - as able to deal effectively with traffic and parking problems, ensuring user safety and the lowest possible level of pollution).

5.1.3. Beyond vehicle quality, safety and comfort, competitiveness therefore also hinges upon quality of use.

This of course depends on the manufacturer, who must offer the market less polluting and safer vehicles, but also on the public authorities, whose task it is to guarantee and improve the way in which the product is used, the necessary infrastructures and its social acceptability, by adopting a more specific and accurately-targeted comprehensive support policy.

Electronics and telematics applications are among the most obviously innovative aspects designed to improve the way vehicles are used and boost appropriate, stable demand.

5.1.4. The 'market' - which creates and shapes demand for vehicles - should therefore be seen in broader terms, so as better to understand the critical aspects - both specific (to the product and sector) and general (ecological system and society as a whole) - mainly attributed nowadays to the automobile sector but which in fact relate to the wider system/society.

5.1.5. The question of public transport, for example, cannot be ignored. Indeed, consideration of the relationship between private and public transport - in both quantitative and qualitative terms - is absolutely essential and cannot be dissociated from the automobile industry issue.

Tackling the problem of public transport in large cities by reducing, for example, the number of private cars in city centres does not necessary entail reducing demand for private cars. Action is needed on the quality of car use, together with the quality of life in general: this could have a highly diversified effect on the level of demand for cars.

5.1.6. This represents a further aspect of the need for cooperation between manufacturers and public authorities. The Commission, in particular, with its longer-term view, should assume the task of establishing benchmarks for use well beyond the year 2000.

A high-level working group (including scientists) should be set up to assume the ambitious task of envisaging possible ways of meeting the demand for mobility twenty years hence.

5.1.7. The compilation and interpretation of the annual statistics for new registrations and production, together with figures for the corresponding upward or downward trends and, above all, forecasts (where the Commission in fact appears over-optimistic) should therefore reflect the complex nature of the requirement for mobility - an indicator of any modern society's vitality and potential for growth and progress.

5.1.8. There is also a geographical and territorial aspect to the market, seen as an outlet.

The Commission is quite right to reflect at length on the 'internal market'. The sections on Strategy and the Challenges ahead extend the 'market' to the major, traditional economic and trade areas of Japan and the USA, to which Korea and Turkey are added.

There is, however, no mention of the extensive new markets, of immense potential, in the Russian area and China.

5.1.9. The Economic and Social Committee urges the Commission to devote particular attention to this vast potential automobile market, which might be a natural outlet for future Community automobile production. Work on identifying the necessary conditions, examining particular aspects, forecasting trends and fostering compatible trends should therefore get under way immediately.

5.1.10. The high-level study group advocated by the Economic and Social Committee should be responsible for this aspect of the great project, i.e. of looking some 15-20 years ahead, and beginning, as of now, to gradually and consistently adapt all action, standards and forms of support.

5.2.

The industry - vehicle manufacturers, suppliers, component manufacturers

5.2.1. In the Commission's view, its February Communication indicated the main guidelines corresponding to the objectives set out in Article 130 of the Treaty, although explicit reference is never made to them.

Article 130 is in fact considerably more binding, specifying the conditions the EU must provide if Community industry is to be sufficiently competitive:

- speeding up the adjustment of industry to structural changes;

- encouraging an environment favourable to initiative and to the development of undertakings;

- encouraging an environment favourable to cooperation between undertakings;

- exploitation of the industrial potential of innovation, research and development.

The Commission cannot do everything, but it does have a specific mandate and role to fulfil within the framework of a strong industrial policy.

5.2.2. The Commission implicitly acknowledges that the automobile industry has not sufficiently penetrated the markets of its main competitors: persistent obstacles to trade - some tax-related - lie at the root of the European industry's exports difficulties.

The first consequence of this is that competition is intensifying dramatically on the Community market - where, according to the Commission, 80 different brands are competing - and which in 1993 contracted 16 %, the greatest fall since the war.

The Commission itself admits that the forecast of a modest 4 % growth - actually rather optimistic - will certainly not be enough to redress the balance.

5.2.3. The 'regional' nature of the Community automobile industry - essentially restricted, as it is, to 12 member countries - is principally a result of the notorious difficulty of penetrating non-Community markets.

Here, it is up to the Commission to launch a more determined trade policy and not just formulate declarations which events subsequently render meaningless. If there is to be a genuinely level playing field, the principle of 'substantial' reciprocity in trade and on the different markets must be implemented more rigorously.

5.2.4. Automobile manufacturers have, for their part, already implemented thorough-going changes. The efforts deployed and results obtained thus far should spur the Commission to press ahead with a more active, carefully targeted and consequently more effective industrial policy. While much has been done, substantial investment and adequate financial efforts are still needed.

The functionally-structured 'conventional factory' has moved on through 'high automation', which decentralized products and production, to reach today's 'integrated factory', which has formalized processes.

The main tool of the 'new company' in the car sector is flexibility.

5.2.4.1. All company areas are involved:

- suppliers are no longer upstream of manufacturers, but are now side-by-side with them in planning, producing and selling;

- 'just in time' is a new supply technique: it ensures not only lower costs, but fits in with the new production systems. The most recent car manufacturing plants reflect this new thinking;

- new methods are being used in design and planning (process and product co-design, simultaneous engineering etc.), producing an integrated way of working at the development and industrialization phase.

5.2.4.2. With regard to production structures and the organization of work - an aspect of which the Economic and Social Committee is particularly aware - the so-called 'elementary technological units' are, in the most advanced companies, the symbol of production flexibility, team management and the combining and dehierarchization of working activities.

5.2.4.3. Human resources, however, constitute the key factor in these changes. The primary requirement in achieving flexibility is that individuals be prepared and be capable of adjustment.

No effort should be spared by companies - or by schools and the public authorities - to promote education and training geared to understanding and managing change.

The automobile industry is exemplary from this point of view.

5.2.4.3.1. Basic education for young people is no longer meeting employers' needs.

The new climate engendered by the process of company transformation is marked by 'new requirements' which should lead to the gradual adjustment of educational content, cultural awareness of new roles, broader knowledge of languages and innovatory teaching methods, ensuring wider and decentralized dissemination.

5.2.4.3.2. The rapid process of structural adjustment will have a profound impact on both skill requirements and manning levels: a real leap forward in quality will be needed.

Retraining must above all enable supernumerary workers to be found new posts. The task of Community and national institutions must be to facilitate the movement of workers to a new employment setting, at reasonable cost, and free of unwarranted State support.

5.2.4.3.3. The European Union should therefore develop a genuine training policy, to be implemented in conjunction with the Member States, but with common priority objectives and regionally and industrial sector-based horizontal measures (the importance of the automobile sector being unarguable). This should be backed by funding for research into European-level interdisciplinary training.

5.2.4.3.4. The Fourth Framework Programme earmarks ECU 138 million for socially and economically oriented research. This money should be used without delay and to good effect, without red tape or theoretical year-by-year allocation.

Similarly, the European Social Fund should focus as far as possible on industrial restructuring and reconversion, while taking account of the severity of the problems, including those which are of a cyclical nature (these persist within the automobile sector).

5.2.5. The Commission urges more and better cooperation between manufacturers themselves.

The establishment on 27 May 1994 of EUCAR (European Council for Automotive Research and Development) by the main car manufacturers is a practical move towards a more comprehensive and strategic approach to research and development.

The initiative will also draw in components suppliers, materials producers, research centres and universities.

5.2.5.1. As far back as 1980, manufacturers displayed their willingness to cooperate in practice, by setting up the JRC (Joint Research Committee), for joint research in pre-competition sectors.

In its Communication to the Council of 16 June 1981, outlining its stance on the structures and prospects of the European car industry, the Commission explicitly stated that this initiative merited support.

5.2.5.2. Another initiative, along the lines indicated by the Commission, was the commitment on 12 April 1994 to the principles of cooperation between European manufacturers (ACEA: Association of European Automobile Manufacturers) and components suppliers (CLEPA: Liaison Committee for the Automotive Equipment and Parts Industry).

The importance of this agreement derives from the fact that more than 50 % of automobile components are outsourced.

The aim is to achieve greater integration, covering co-planning, the adoption of modern, efficient production processes, enhanced quality and a more transparent correlation between component costs and prices. This closer cooperation is to be based on a new spirit of mutual trust.

5.2.5.3. Another initiative earlier this year (28 April) concerned an agreement between three manufacturers to withdraw and recycle used vehicles recuperated in part exchange or which would otherwise go to the scrapheap.

At the time, the Commission noted there was less need to legislate at Community level when industry took upon itself to reduce the ecological problems of car use.

In connection with this aspect, the Economic and Social Committee would, however, call for a harmonized Community-level policy to promote coherent recycling initiatives, compatible with current and future environmental and ecological policy.

5.2.6. The car industry must seek to interpret client attitudes and behaviour relating to its products, in the light of the growing legal restrictions on emissions and all the new Community technical standards.

Research is always geared towards higher quality and continuous innovation. The most successful companies are unarguably those able to read the trends and always capable of coming up with something new.

Product maturity and market saturation are facts which need to be interpreted in a dynamic way. 'Fragmentation of consumer taste' is currently opening up new product/market niches.

5.2.6.1. Under the pressure of present circumstances, a number of more or less radical changes to motor vehicle architecture, for instance, may be expected in the longer term.

Today's cars embody the optimum compromise providing for the widest possible use. This means they must combine all the requirements for long-distance travel (facilities, comfort, safety) and symbolic and status-related values, together with the handling, economy and acceleration performance needed for urban use.

The dramatic rise in car-use has multiplied the impact on traffic and the environment, not only in the big cities, but increasingly in medium-sized towns. Problems are unquestionably aggravated by the low specific suitability of many of the vehicles in use.

5.2.6.2. The various scenarios offer specific opportunities for highly specialized urban vehicles capable of minimizing environmental damage and achieving better efficiency.

It follows that many requirements for long-distance travel are of less importance than other qualities more suited to urban traffic conditions, such as easy handling, low consumption, low pollution levels, etc.

This might be a long-term possibility for the high-level group to examine: a reference model for the next twenty years could be devised.

5.2.7. The above brief comments lead to the conclusion that the Community automobile industry is continuing, as in the past, to spare no effort in favour of modernization and restructuring.

5.3.

Distribution

5.3.1. The distribution of motor vehicles has always been regarded as a critical phase in the design-production-sales chain, since the extent to which the final product can compete in the market-place (with its competitors) and win approval (of customers) becomes clear at the distribution stage.

The role of dealers is of primary importance to clients, given their responsibility for after-sales service, intended to provide customer security and peace of mind.

The automobile distribution system has a long tradition in the European Community although practices vary from Member State to Member State. Despite this relative lack of homogeneity, Europe's distribution system, based as it is on exclusiveness and selectiveness, has been the subject of an ad hoc Regulation which is due to expire in the near future (June 1995) after having been in operation for a decade.

5.3.2. The Commission announces that it has begun reviewing the problem and then sets out its own thinking on the matter, confirming:

'the extent to which the Regulation contributes to improving distribution and increasing inter and intra-brand competition.'

5.3.3. Having reaffirmed the importance of a selective and exclusive distribution system, the Commission goes on to recognize 'the need to foster close partnership relations between all elements of the distribution chain' and calls on car manufacturers to 'establish, with their distributors, sound partnerships'.

5.3.4. The Economic and Social Committee shares this eagerness to study the problem in considerable depth and trusts that it will be consulted in good time.

6. Research and development

6.1. Only from the Third Framework Programme onwards has the automobile industry really been able to benefit from Community funds earmarked for research and development in industrial sectors.

6.2. The Commission acknowledges that 'the investment in research and development by the European automobile industry is immense'.

6.3. Under the Fourth Framework Programme, Community action will have to be 'more selective and more concentrated'. The Economic and Social Committee agrees with the Commission and re-emphasizes the multi-technological, multi-sectoral and multi-disciplinary nature of the projects which the automobile industry has presented, and will no doubt be presenting, for funding.

6.4. There is no question of giving automatic priority to automobile industry projects; it is merely a question of acting in keeping with the European Union's commitment to foster 'joint research and technological development between companies within the industry' as well as on a 'wider multi-sectoral basis'.

7. Structural Funds

7.1. The Economic and Social Committee fully agrees with the Council's statement in point 9 of its Resolution of 16 May 1994, viz:

'Community horizontal instruments can support the industry's own efforts, notably through Structural Funds ..... in particular in the framework of industrial mutations, and through the use of appropriate Community initiative programmes.'

7.2. This is further confirmation of the essential role such instruments can play in the structural adjustments taking place in Europe's automobile industry.

Such instruments should therefore be implemented effectively as soon as possible, and should be tailored to the sector's specific needs.

8. State aid

8.1. The Economic and Social Committee agrees with the Commission that the success of the automobile industry hinges on its ability to restructure and improve its competitiveness, thereby reducing costs and improving the potential for, and quality of, innovation.

It also needs to be borne in mind, however, that such restructuring efforts are by their very nature sweeping and call for a major drive in terms of investment and a willingness to change - all this at a time when all players involved (manufacturers and the public authorities) are equally involved on other fronts, particularly traffic congestion and the growing level of pollution.

8.2. The system for public aid to the automobile sector goes back to 1988, since when it has remained unchanged even though the competitive and market environment has undergone a profound transformation and thrown up new problems and needs since the late 1980s.

In particular, it has now become apparent that there is an urgent and pressing need to restructure by installing new plant and equipment or radically modifying existing plant.

Given this requirement, the current system needs to be reviewed and completed;

8.3. A major investment drive in Europe is in fact still needed to restructure the industrial infrastructure so that it can cope with changed conditions of competitiveness.

In addition to non-physical investment, physical investment therefore also has a key role to play today in boosting the competitiveness of European industry.

What is involved here is a sophisticated and ever-changing production apparatus that will enable Europe to stand up to international competition - in which costs, quality and marketing are currently the main factors.

8.4. The Economic and Social Committee trusts that it will have the opportunity to engage in an in-depth debate and formalize its own ideas on this important problem which is part of the wider question of 'competition policy' on which the Committee delivers an Opinion each year.

9. International competition

9.1. The Community market has now achieved a 'high level' of openness, which is reflected in great sensitivity to changes in trade with other countries, particularly the USA, South Korea and Japan. Hence the increasingly urgent need for substantial reciprocity in relations with non-Community parts of the world. The continuing, and totally unacceptable, barriers to trade - sometimes in the form of tax discrimination - cannot be overlooked.

9.2. As far as Japan is concerned, the agreement of 31 July 1991 on the gradual opening up of Japanese exports to the five European Union markets (subject to restrictions) needs to be applied vigorously.

In particular, more careful monitoring is needed to ensure that quotas match actual market trends, in keeping with the spirit of the agreement.

9.3. As far as South Korea is concerned, it is unacceptable that this country should benefit from preferential treatment under the Generalized System of Preferences when its car exports to the EU have reached almost 100,000, while car imports from the EU total only a few hundred.

9.4. The Commission must continue to monitor the US-Japan accords closely, with special attention to probable repercussions on the Community market and possible distortion of competition.

9.5. In paragraph 5.1.8 above, the Committee underlined that given their importance, the Commission should pay special attention to the new eastern markets.

10. Conclusion

10.1. The Economic and Social Committee agrees with the Council and the European Parliament that the Commission must be asked to carefully monitor the situation in the automobile industry, which is an important sector of the economy. The Commission's views should nevertheless be set out in a shorter, more functional document, with fewer descriptions and more proposals, even if the document is obviously expected to set out the key points to emerge from the most up-to-date analyses possible.

10.2. That the automobile industry is a key sector of the economy is a conviction expressed by institutions and experts alike in all quarters and on all occasions. The Commission should reflect this conviction by adopting more carefully-targeted measures within the framework of the Structural Funds or more specifically-tailored initiatives.

10.3. The Committee's aim in this Opinion has been to highlight aspects of the many problems of the European Union automobile industry from a long-term standpoint, specifically in order to relaunch a strong, more determined and effective industrial policy.

10.4. The Committee is nevertheless fully aware of all the difficulties affecting European Union manufacturing industry, especially the automobile sector. Each of these problems must be evaluated carefully, and the requisite action taken rapidly.

More specifically:

10.4.1. The employment problem demands constant vigilance, as a priority. No effort should be spared in safeguarding jobs wherever possible.

10.4.2. Greater financial resources should be channelled to training and retraining, in order to face up to the major challenge of restructuring.

10.4.3. The environment/automobile industry relationship needs to be enhanced constantly. All scientific resources should be brought to bear in order to make cars more acceptable and compatible with the environment and society as a whole.

10.4.4. On-going dialogue - 'based on mutual trust, at the appropriate level, and according to national practices' as the Council states - between the social partners and all interested parties must go hand in hand with a greater flexibility and willingness to change on the part of everyone.

10.4.5. Tax harmonization should be pursued with greater energy in order to overcome the persistent discrimination and disparities between Member States. More action must be taken - if only on a temporary basis - to boost Community exports to the rest of the world, including stricter application of the principle of reciprocity or equivalent measures.

10.4.6. Harmonization of technical standards should be continued 'in a stable and predictable regulatory policy environment', always taking account of 'their impact on the automobile industry's overall competitiveness'. Here, the Economic and Social Committee endorses the Council's recommendations to the Commission.

10.5. The Committee agrees with the Council on the need for the automobile industry to 'continue to adapt its products to meet societal demands for clean, safe, efficient, quality and value cars'.

10.6. The restructuring process currently taking place in industry, and the technological changes - now affecting all economic sectors - nevertheless need to be seen as being part of a wider scenario of new and significant developments in (a) society in general, (b) national and regional socio-economic systems, (c) major trade and financial flows, (d) cultures and cultural exchanges.

10.7. All problems must therefore be seen in the context of this dynamic view of today's world - a view which foreshadows the world of tomorrow - so that ideas and decisions can keep abreast of the quickening pace of progress.

10.8. The setting up of a high-level group which would construct a new model compatible with progress and quality of life, and would be focussed on the 2020 horizon, might well offer a new, serious approach to solving the many problems of today and the multitude of problems tomorrow.

10.9. The authorities - meaning primarily the European Union but also the Member States and the various institutions most appropriate to this type of study and challenge - must understand that the mere process of identifying a more acceptable and compatible model for living is a stimulus.

10.10. The Economic and Social Committee, which is increasingly sensitive to problems in these areas and will be keeping a particularly close eye on developments, is prepared to assume responsibilities in the fields of monitoring, stimulating and promoting to ensure that a key industrial sector such as the car industry develops under optimum conditions.

Done at Brussels, 14 September 1994.

The President

of the Economic and Social Committee

Susanne TIEMANN

() OJ No C 149, 31. 5. 1994.