French Auto Makers
French Auto Makers
The Greek financial problems have been covered extensively in the news of late.
The government can't meet its debt obligations, unemployment is over 20% and some other European countries think that Greece should be dropped from the euro
zone and revert back to using its own currency.
This issue also has global economic implications that has the entire world
watching how this is all going to play out.
Another European problem that has gotten much less attention, is the problem that
French auto makers are having with selling their cars.
This problem has several components which collectively will be very difficult for French
auto makers to solve.
The first problem is wages.
Over the past decade the wages that auto workers in France are paid has increased by
17%.
This increase is more than twice the increase that German auto workers have
received in the same period of time.
The second problem is productivity.
At the same time that French auto workers have been seeing their wages increase by
17%, their productivity has fallen.
When wage costs increase and productivity falls that is a recipe for disaster.
The third major problem for French auto makers is that their production plants and
the IT systems used to make them run smoothly are old and in need of replacement
or upgrades.
But with wages having increased.
productivity falling and sales lagging, French auto manufactures do not have the money
necessary to make these essential improvements to their manufacturing
process.
French Auto Makers Perfect Storm
This same perfect storm has been happening to Italian auto makers as well during the past
ten years.
The question is, is this confluence of problems inevitable for European auto
makers.
The answer is no.
Competitors Of French Auto Makers Have Thrived
During this same period of time of tumult for French and Italian auto makers, auto makers in Portugal, Spain and Ireland have been able
to lower their cost per unit sold by 7% to 12%.
To compound the problem for French and Italian auto makers, is the fact that most of the vehicles they sell are on the low end of
the auto price scale.
Keeping the price of these vehicles low is essential to the success of selling them to
customers throughout Europe.
In contrast, Germany, which is known primarily for its luxury vehicles, has seen a
consistent increase in the number of vehicles its sells over the past ten years.
If French auto makers are going to solve their problems, they are going to need to start producing vehicles that have bigger sales margins, upgrade their systems and work with labor so that they can bring back the
French auto industry together.