ACEA

ACEA President Marchionne calls for transparent and balanced regulatory framework

INTRODUCTION

Strasbourg, 11/07/2007

Dear Mr Chairman, dear Malcolm Harbour, Dear chairman of the working group automotive of the Kangaroo Group, dear Alexander Radwan, Distinguished Members of the European Parliament, Ladies & Gentlemen, Thank you for inviting me to address you here, today, in Strasbourg.

I will try and deliver some thoughts on current affairs from my perspective as an international businessman, as CEO of Fiat Group which makes some of the most truly European brands in automobile manufacturing from Fiat to Ferrari and one of the founders of the European industry – which today celebrates it’s 108th birthday. But most of all, I will speak to you in my capacity of president of the European Automobile Manufacturers’ Association, ACEA, which is our industry’s trade association in Brussels. The automotive manufacturers are the “engine of Europe” and maintain a constant dialogue with the EU institutions, the many other stakeholders of society and the public-at-large.
I believe continuous interaction between business, other interest groups and legislators is of utmost significance. Dialogue enriches us all, intensifies integration and facilitates growth.
I am delighted to be here, in the European Parliament, and to meet so many, distinguished members of this important EU body. The European Parliament is increasingly credited with the role that a legislative body should have in a democratic society.
I also feel privileged to be able to speak to you at such a significant point in the maturing of the EU: the European Union is larger, stronger and more active than ever. The Union is also seeking to show leadership in areas that will define society and industry in the coming decades: energy supply, energy security and climate change. I would like to share with you today the European automotive industry’s views on these important developments.

IMPORTANCE OF THE INDUSTRY

This year, the EU is celebrating the 50th anniversary of the Treaty of Rome. The founding of the Internal Market is a cornerstone of Europe’s prosperity and has affected citizens and businesses alike. The Internal Market has opened up greater opportunities for producers and consumers, nurtured economic integration between European regions and ensured higher levels of growth and cohesion. I would especially like to recognise the remarkable achievements of the Kangaroo Group in its endeavour to create a real European market for citizens and businesses. We appreciate the efforts of this Group to help ensure a regulatory framework in the EU that improves the competitiveness of European industry in a global context. Having said that, it is important to realise that we still do not have a fully functioning Internal Market. This affects many industries, including the one I represent. This can
be seen, for example, in Member States applying different taxation rates or enforcing EU regulations such as the Directive for End-of-Life vehicles in different ways. This, I believe, must change!
The automotive industry is a key element in the fabric of the European economy and society. Our industry contributes enormously to the health and wealth of the EU, and it is vital for the future of its near 500 million inhabitants that this sector retains its competitive and innovative edge. Here are some basic facts:

• In the EU27, the car industry provides jobs to 2.3 million people and indirectly to another 10 million.


• Europe is the world's largest vehicle producer. Of the 50 million cars produced globally, one third are manufactured here in the EU.

Allow me to also list some of our industry’s achievements, since they somehow seem to be often forgotten or just taken for granted:

• Take, for example, the highly important subject of road safety. Traffic casualties have been halved in the last two decades, as road transport has tripled. This dramatic progress is primarily due to improved vehicle safety.
  The introduction of seatbelts, airbags and ABS alone has reduced by 80% the number of fatal or serious injuries; and all this with car manufacturers’ efforts which have gone beyond legislative requirements. Clearly, better road safety is a never-ending battle, and the 40,000 casualties occurring each year on European roads are an unbearable toll for our societies, but the automotive industry cannot be considered the only actor in this area. If we want to further improve safety, we need an “integrated approach” that also addresses infrastructure flaws, enforcement of traffic laws and driver behaviour.


• Our environmental track record is equally impressive. The European automobile manufacturers have drastically reduced the impact of their products on the environment. Noise levels of motor vehicles have been reduced by 90 % since 1970. One average car built back then produced as many pollutant elements, such as NOx and other toxics, as one hundred cars manufactured today. We could say that the problem of pollution has been solved in modern vehicles, but that this will only be visible in some 10 years from now when the 3 various generations of older vehicles have started to disappear from our roads. We have also made tremendous progress in the recycling of our products. And we have significantly improved our industrial processes, in terms of waste management and savings of water and energy.

REGULATION AFFECTS COMPETITIVENESS

Ladies and Gentlemen,
Today’s market place is fiercely competitive and this simply means that the automobile industry must retain technological leadership to maintain its strength. The European automobile manufacturers are world leaders in many fields of expertise and continuously strive to be at the top. ACEA members invest 4% of turnover yearly, or 20 billion euro, in R&D; they are the largest private investor in R&D in the EU, accounting for one fifth of total private EU R&D investments. There is no doubt, society needs to nurture our sector to the greatest extent possible. And here, a special task is designated to the EU institutions. The automotive industry is one of the most regulated sectors in Europe, due to the technological complexity of the automotive product itself and because of the implications of the use of motor vehicles with regard to the environment, safety and mobility.
Today, there are roughly 80 European directives and 115 UN/ECE pieces of legislation that concern automobiles. Clearly, regulation can both be an enabler and a burden. It is crucial that the EU institutions establish a regulatory framework in which the automotive industry can continue to thrive and fulfil its economic and societal role.
The European Commission has put growth and jobs at the heart of its re-launched Lisbon strategy and recognises that, in order to revitalise the EU’s economic performance “the EU and Member States need to further develop their approach to regulation to ensure that the defending of public interests is achieved in a way that supports and does not hinder the development of economic activity”. This important statement clearly recognises that the cumulative costs of regulation considerably affect the competitiveness of the automotive industry.

TAKING CARS 21 A STEP FURTHER

Two years ago, at the initiative of the European Commission, it was decided that urgent action was needed. Since then, CARS 21 (Competitive Automotive Regulatory System for the 21st century), a multi-party project to improve EU automotive regulation, has put an important process in motion.

• CARS 21 acknowledged that an integrated approach is needed to CO2 emission reductions and to road safety improvements.


• CARS 21 also aimed to further simplify legislation, improve third market access, enforce intellectual property rights and prioritise R&D activities towards renewable fuels, clean and intelligent vehicles.

Now, it is time to implement these recommendations with precision and care.

In February 2007, the Commission sent a Communication on CARS 21 to the EU Council and the European Parliament to take the whole initiative a step further. The Commission’s Communication gives many reasons for optimism but also for doubts.

• The Commission clearly emphasises the necessity of sharing responsibility when dealing with important societal challenges such as road safety and 4 improving the environment. It recognises that all relevant stakeholders – the industry, legislators, infrastructure providers, road users and drivers – have to play their part to achieve an effective, and more importantly, a cost-effective result. This acknowledgement forms the heart of the CARS 21 High-level group recommendations, and are therefore of utmost importance.


• Still, the Commission’s Communication has not fully incorporated the original recommendations. It has not consistently adopted cost-effectiveness as guiding principle, and the proclaimed policies are not holistic in a true sense. Too often, policies focus in essence on vehicle technology only, without having a factual basis for this choice.


• Most importantly, and despite their critical weight in the context of a competitive regulatory framework, “better regulation” principles have not been given enough importance. The “better regulation” principles provide industry with a coherent and transparent policy process. But although the Commission has made “better regulation” one of its priorities, this is not accurately reflected in the automotive regulatory framework. Too many examples show that policy measures do not build on methodical assessments of their potential impact on the competitiveness of the European economy.


• Finally, planning certainty and proper lead-time are of crucial importance to the automotive industry, because of long development phases, extensive investments and lengthy production cycles. The ten-year regulatory road map, developed by the High-level Group, meant to provide a sound basis for policy-making over the upcoming years. But unfortunately it has not been taken on board.

REDUCING CARBON EMISSIONS

The CO2 emissions dossier is one of the most important challenges the automotive industry faces today. The CARS 21 recommendations from the High-level group sketched a framework to balance economic and environmental interests. These interests are not conflicting: they should and can be addressed in a comprehensive, cost-effective way, leading to the results society demands. Regrettably, the integrated approach to CO2 emission reductions, as adopted by the CARS 21 High-level Group, has been reduced in scope by the Commission’s proposal on CO2 emission reductions from cars. This proposal focuses mainly on vehicle technology and does not respect the inherent
elements of the integrated approach: infrastructure measures, fiscal incentives and, eco-driving.
This matters a lot, because it makes it unnecessarily difficult to combine environmental and economic interests. Our industry is fully aware of the challenges of climate change, and fully committed to reducing carbon emissions.
We have signed the 1998 Commitment to reduce CO2 emissions from cars to contribute to achieving the EU community’s Kyoto goals. Between 1995 and 2005, emissions from new cars have decreased by over 13%, mainly through vehicle 5 technology.

These results could have been better, had there not been the counter-productive effects of EU regulations, market trends and low demand for fuel-efficiency: counterproductive effects that amount to almost 15 grammes of CO2 per kilometre. They have to be taken into account; and were agreed to be taken into account in the 1998 Commitment.
We have delivered CO2 reductions and we will continue to deliver. But I need to be clear: a target for the vehicle industry of 130 grammes CO2 per kilometre by 2012 is not feasible. It will force our innovative industry out of Europe,
without benefiting the environment in an even vaguely to sufficient way. CO2 emissions from new cars have decreased significantly over the past decade. The majority of emissions today are caused by an aging car fleet on Europe’s roads, by growing congestion, by a lack of traffic management and by a rise in mileage. It is very important that governments and the public at large understand these developments and design a policy that addresses the true challenge, maximising results in the most cost-effective way.
The industry will continue to take many incremental steps, again delivering significant CO2 reductions in the coming years. But additional requirements on the car industry cannot be implemented before 2015. The production of cars is planned well ahead and only very limited changes can be made afterwards. But far more importantly: vehicle technology alone will not solve the problem. Vehicle technology should therefore not be the only focus point of future policy framework.
It is absolutely crucial to implement an integrated approach to achieve the ambitious targets society wants, combining vehicle technology with a larger use of alternative fuels, intelligent traffic management, changes in driving style and implementation of CO2-related taxation, to shape consumer demand.

CONCLUSIONS

Ladies and Gentlemen,
An integrated approach involving all stakeholders will lead to larger cost-effective CO2 reductions, delivering more for the environment at lower costs to society. There is no doubt that CO2 will be a major test for the overall value of the CARS 21 process, with implications for the credibility of the High-level groups as such. Similarly unbalanced, and therefore not genuinely holistic, is the approach adopted for road safety, with its focus on vehicle improvements and underestimation of the role infrastructure measures can play.
Translating the integrated approach into real-world improvements requires the balanced implementation of vehicle technology, infrastructure measures and education, information and enforcement. Cars need to remain affordable if the desired environmental and safety improvements are to be achieved. The impact of the cost of technology to reduce carbon emissions needs to be appropriate compared to the price of a car. The CARS 21 recommendations stressed that affordability of new vehicles and, consequently, fleet renewal, are key to achieving environmental and safety improvements.
The main environmental and safety challenges arise not from new vehicles, but from the large aging fleet on the road. The annual fleet renewal rate in Europe is already lower than 10% and this fact is not sufficiently taken into account. 6 Overall, EU policy should be consistent with the Lisbon strategy: one cannot fight for jobs and growth at the one hand and propose, on the other, solutions that endanger the competitiveness of an industry supporting 12 million jobs in the EU. The industry should not be put in a position in which it could lose strength compared to its major trading partners. External aspects of regulation must be evaluated and impact assessments are of utmost importance. It is vital for the international competitiveness of the automotive industry that the recommendations, agreed in 2005 by the High-level Group members of the Council, Commission, European Parliament, automotive industry, environmentalists, trade unions, suppliers, consumers and the oil industry, are implemented by all stakeholders.
A mid-term review of the CARS 21 recommendations and of the roadmap should be conducted in 2009. We count on the European Parliament to guard and give impetus to this important matter.

We live in a world of many challenges. The European automobile manufacturers are responsible companies with a long- standing tradition of innovation and sustainability in social and environmental terms. Our industry wants to play its full part in society and contribute to future prosperity. The EU has a fundamental interest to nurture this important sector. Not least in this respect, the CO2 dossier will prove to be key for many years to come and we count on your support to ensure that it handling does not cause irreparable and irreversible damage to one of Europe’s thriving and growing industries.

Many thanks for your attention.

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