Apocalyptic forecast for Europe's car makers

Europe's car-making industry could be wiped out in 50 years, the head of Volkswagen warned yesterday, as the European Commission launched a controversial bid to revitalise the sector.

Europe's car-making industry could be wiped out in 50 years, the head of Volkswagen warned yesterday, as the European Commission launched a controversial bid to revitalise the sector.

The EU's industry Commissioner, Günter Verheugen, promised a bonfire of red tape after a review of rules on competition, emissions, intellectual property and recycling to decide whether they stop European car makers competing with the US and Japan.

But his initiative is being watched closely, with critics concerned it could reverse recent liberalising measures from the EU in favour of rules designed to prop up large car-makers.

At a press conference yesterday Bernd Pischetsrieder, the chief executive of Volkswagen and president of the European Automobile Manufacturers Association, gave an apocalyptic warning, saying: "If we do not now make our industry more competitive in terms of costs in the world market, in 50 years' time it is hard to see any automotive industry left in Europe." He pointed to impending competition from China, saying: "If we do not reverse that trend [on competitiveness], in 50 years there will be no car industry in Europe".

The industry wants concessions from Brussels over as many as 90 laws, which, it says, hit profits and tie the hands of EU producers. Car making employs 2 million Europeans directly and 8 million indirectly, but the challenges facing the sector are massive. Labour productivity in the 15 old member states is 25 per cent lower than in the US and 30 per cent lower than in Japan.

A 20-member committee, launched yesterday, will draw up recommendations by the end of the year. The team, chaired by Mr Verheugen, includes Mr Pischetsrieder, Margaret Beckett, the UK's Secretary of State for the Environment, Food and Rural Affairs, Max Mosley, the president of the Fédération Internationale de l'Automobile, Lewis Booth, the chairman and chief executive of Ford of Europe, Leif Johansson, the chief executive of Volvo Group and Sergio Marchionne, the chief executive of Fiat.

Mr Verheugen said an impact study was required before any fresh legislation from Brussels. "It will never again happen that the [European] Commission will create proposals without knowing exactly what the implications of the proposals will be in terms of costs," he said.

More controversial is the issue of whether Mr Verheugen's committee will seek to throw back measures designed to free up competition in the sector. These include a decision - opposed fiercely by the German car makers - to break the exclusive links between car producers and showrooms by ending gradually car makers' exemption from competition rules.

"The most important argument was that prices would fall," said Mr Verheugen, who opposed the new rules when they were put forward. "I want to see whether consumer prices went down or not - I have some doubts."

His comments suggest he is unlikely to back proposals outlined last year by the Commission to strip car makers of their exclusive right to sell spare parts such as bumpers, bonnets and headlights.

However Mr Verheugen said the future of the European industry did not lie "in a race to the bottom concerning price and safety".