French Auto Makers

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French Auto Makers
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The Greek financial problems have been covered
extensively in the news of late.
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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.
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This issue also has global economic implications
that has the entire world watching how this is
all going to play out.
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Another European problem that has gotten much
less attention, is the problem that French auto
makers are having with selling their cars.
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This problem has several components which
collectively will be very difficult for French
auto makers to solve.
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The first problem is wages.
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Over the past decade the wages that auto workers
in France are paid has increased by 17.
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This increase is more than twice the increase
that German auto workers have received in the
same period of time.
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The second problem is productivity.
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At the same time that French auto workers have
been seeing their wages increase by 17, their
productivity has fallen.
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When wage costs increase and productivity falls
that is a recipe for disaster.
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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.
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But with wages having increased.
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productivity falling and sales lagging, French
auto manufactures do not have the money necessary
to make these essential improvements to their
manufacturing process.
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French Auto Makers Perfect Storm
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This same perfect storm has been happening to
Italian auto makers as well during the past ten
years.
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The question is, is this confluence of problems
inevitable for European auto makers.
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The answer is no.
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Competitors Of French Auto Makers Have Thrived
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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.
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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.
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Keeping the price of these vehicles low is
essential to the success of selling them to
customers throughout Europe.
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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.
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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.