The Role of the European Foundry Industry for the Auto­mot­ive Sec­tor dur­ing COVID-19

CAEF calls for a stim­u­la­tion of demand while com­ply­ing with the CO2-emis­sion goals of the EU Green Deal

COVID-19 remains not only a ser­i­ous pan­demic threat­en­ing per­sonal health but has fur­ther­more dragged Europe into an unpre­ced­en­ted reces­sion. While com­pan­ies had to deal with dif­fer­ent degrees of shut­down for sev­eral weeks, ran­ging from enfor­cing strict hygiene stand­ards to full plant shut­down in virus hot­spots, the main prob­lems still lie ahead. Like many indus­tries, the foundry industry sig­ni­fic­antly depends on con­tinu­ous pro­duc­tion, not only to sus­tain eco­nomic effi­ciency but also to ful­fil its envir­on­mental respons­ib­il­ity by oper­at­ing facil­it­ies in the most effi­cient way.

How­ever, cur­rent cus­tom­ers’ restraint from pur­chas­ing new vehicles rein­forces the already grave fin­an­cial dis­tress. Sales across Europe have recently declined by high two-digit mar­gins: In Italy and Spain by over 90 per­cent in March and in Ger­many, the key mar­ket in Europe, by more than 50 per­cent in May. From the 16.8 mil­lion tons of cast­ings annu­ally pro­duced by CAEF mem­ber states more than half goes into new vehicles. In addi­tion, the pro­duc­tion of machines and other engin­eer­ing com­pon­ents from cast­ing adds to the share of car manufacturers.

Moreover, com­pan­ies in our industry are vital for the region­al­ity of the European industry sec­tor. 70 per­cent of the approx. 4.700 foundries with 290.000 employ­ees rep­res­en­ted by CAEF are con­sidered small- and medium-sized enter­prises (SME), oper­at­ing mainly in regions, already hav­ing suffered from indus­trial decline in recent years. In the light of a recent sur­vey among Ger­man foundries, reveal­ing that approx. 50 per­cent already suf­fer fin­an­cial dis­tress, sur­vival of many import­ant regional employ­ers in these regions is at stake.

Without fin­an­cial incent­ives ded­ic­ated to sup­port­ing private con­sump­tion, com­pan­ies will run out of cash before the expec­ted eco­nomic recov­ery. Insolv­en­cies, unem­ploy­ment of indus­trial work­force with very spe­cial­ized qual­i­fic­a­tion could be the imme­di­ate con­sequence. There­fore, the main ques­tion is how to stim­u­late demand without jeop­ard­iz­ing the ambi­tious but cru­cial CO2-emis­sion goals of the EU Green Deal, where foundries are con­sidered as “Ena­blers” to pro­duce cast parts ded­ic­ated to sus­tain­able industry activities.

We appre­ci­ate the yet to under­take policy meas­ures that have been announced by national mem­ber states and the EU. The Commission´s exten­sion of the State aid Tem­por­ary Frame­work, its applic­a­tion of fully flex­ible EU fiscal rules and its ongo­ing nego­ti­ations con­cern­ing pos­sible fiscal meas­ures to stim­u­late demand are highly acknow­ledged by CAEF and its mem­ber states. Along this path, we here­with encour­age the European Coun­cil to ensure addi­tional actions dir­ec­ted towards recog­nising the auto­mot­ive sector’s crit­ical role for fast and full eco­nomic recov­ery, pre­ser­va­tion of regional employ­ment, and ulti­mate respons­ib­il­ity for trans­form­ing mobil­ity towards climate-neutrality:

• To sup­port the auto­mot­ive sec­tor in their ramp-up efforts after the shut­down, we ask the European Com­mis­sion to develop a uni­lat­eral frame­work and coordin­ated meas­ures across all mem­ber states. This is par­tic­u­larly import­ant to pre­serve the fric­tion free flow of mater­i­als and ser­vices and to sup­port resi­li­ence in EU value chains.

   

• While the pur­chase of elec­tric vehicles is a move in the right dir­ec­tion, we need a tech­no­logy-open premium. Pro­mot­ing vehicles with hybrid or elec­tric drives alone will only have a minor envir­on­mental effect. Unfor­tu­nately, industry and polit­ics have not devoted enough efforts in products and com­pon­ents such as bat­tery cells and a func­tion­ing char­ging infra­struc­ture. The bot­tle­necks in bat­tery cells lead to cur­rent deliv­ery times of 6 to 8 months for new elec­tric vehicles. There­fore, short-term pro­mo­tion of e‑mobility has only a weak effect on fos­ter­ing eco­nomic recov­ery and secur­ing employ­ment.

   

• For the replace­ment of internal com­bus­tion engine cars with mod­ern EURO 6 and above pet­ro­leum- and diesel-fuelled cars. If registered Euro 3 and 4 vehicles could be replaced by low-emis­sion cars, a sig­ni­fic­ant reduc­tion in CO2 emis­sions could be achieved. Based on a fleet limit of 95 grams of CO2/km, the sav­ing is as high as 43 per­cent. This sig­ni­fic­ant reduc­tion is thus also pos­sible by pro­mot­ing the pur­chase of state-of-the-art gas­ol­ine and diesel engines. The envir­on­mental effect would also be fostered by busses and trucks.

   

• Invest­ments into hydro­gen-based mobil­ity solu­tions – be it fuel cell or e‑fuels — are another import­ant driver for the long-term suc­cess of the European industry and auto­mot­ive sec­tor. Without clear legis­la­tion, many com­pan­ies will remain reluct­ant to invest into related tech­no­lo­gies, ham­per­ing the trans­ition towards cli­mate-neut­ral mobil­ity. In this regard, it is import­ant to express the import­ance of sup­port­ing the hydro­gen roadmap for busses and trucks and homo­gen­iz­ing pub­lic trans­port across Europe.

   

• The foundry industry is com­mit­ted to the Paris Cli­mate Accord and con­sidered as “Ena­bler” accord­ing to the EU tax­onomy on sus­tain­able fin­ance. Through cast­ing of wind energy tur­bines and thermal energy parts, mainly by using recycled mater­i­als, European foundries sup­port the shift towards renew­able energy. While strong invest­ment decisions towards mit­ig­at­ing cli­mate change have already been under­taken without gov­ern­mental sup­port, com­pan­ies increas­ingly face the risk of insolv­ency. In this light many had to refrain from invest­ment activ­it­ies to mit­ig­ate this risk and to avoid imme­di­ate per­son­nel lay-offs. The short-time-work schemes intro­duced in many mem­ber states are an import­ant polit­ical meas­ure, yet not suf­fi­cient in the long-term. We ask the European Coun­cil to develop a plan to sup­port invest­ments towards cli­mate neutrality.

CAEF is aware of its duty to sup­port the trans­ition towards more sus­tain­ab­il­ity by ful­filling its role as recycler for iron, steel, alu­minium and other metals. No other mater­i­als have higher recyc­ling rates than those. Up to more than 90 per­cent are reused for sev­eral applic­a­tions. Without the foundry industry, the trans­ition towards cir­cu­lar eco­nomy is not pos­sible. As our industry is highly cap­ital-intens­ive, many com­pan­ies will face sig­ni­fic­ant liquid­ity prob­lems in the short- to medium-term. This might lead to insolv­en­cies of many foundries.

After the crisis, a strong industry will be essen­tial to ensure Europe stands ready to tackle the socio-eco­nomic con­sequences of the crisis and rekindle Europe’s eco­nom­ies. There­fore, CAEF and its national mem­ber asso­ci­ations aim to pre­serve as many foundries and jobs as pos­sible through this sig­ni­fic­ant crisis and to rebuild our economy.

We stand ready to work with the European Com­mis­sion, national gov­ern­ments, and other stake­hold­ers to trans­form the auto­mot­ive sec­tor towards meet­ing sus­tain­ab­il­ity tar­gets and uphold­ing bor­der­less mobil­ity across Europe.

CAEF Con­tact:

Sophie Stef­fen
phone: +49 211 68 71 — 301
sophie.steffen@caef.eu