Car Factories Offer Hope for Spanish Industry and Workers

Four years of economic turmoil and the euro zone’s highest jobless rate have made the Spanish labor market so inviting — an estimated 40 percent less expensive than in Europe’s other biggest carmaking countries, Germany and France — that Ford Motor and Renault recently announced plans to expand their production in Spain.

Even before those announcements, other carmakers had committed this year to new plants or expansion totaling as much as €2 billion, or $2.66 billion.

Some experts say such gains in competitiveness and investment are exactly what Spain needs for its economy to recover, and to remove any doubts about whether the country can remain in the euro currency union.

Because Spain, as a euro zone member, no longer has its own currency to devalue as a way of lowering the price of its exports, it is having to find its competitive advantage in lower labor costs. Many economists have argued that societies cannot survive such painful downward adjustments.

But Spain, for now at least, seems to be defying that argument. Its trade deficit has been shrinking — down 28 percent for the first 10 months of this year, to €28 billion, compared with that period a year earlier, according to newly released government data. That is the lowest level since 1972.

Although part of that trade improvement reflects lower imports, it is also a sign of better competitiveness, as employers have been able to impose wage cuts without unleashing violent social unrest. (Protests, yes. Riots, no.)

Automobile executives recognize that the financial crisis provided a wake-up call for a sector whose productivity fell from 2000 to 2007, a period when the Spanish economy was instead driven by a real estate boom.

“From 2008, we suddenly realized that we had lost a lot of competitiveness and needed to work very hard to improve things, particularly in terms of labor issues and logistics,” said José Manuel Machado, who heads Ford’s business in Spain and is also president of the Spanish carmakers’ association, Anfac.

Anfac forecast this month that Spain’s car production would rise 11 percent next year, to 2.2 million vehicles.

Over all, Spain’s unit labor costs — a measure of productivity — are down 4 percent since 2008, according to Eurostat, the European statistics agency.

And in a related measurement, the most recent Eurostat data put Spain’s average hourly labor cost at €20.60, which was well below Germany’s €30.10 and France’s €34.20.

Unlike most other Spanish industries, car manufacturing has no sector-wide collective bargaining agreement with unions. As a result, each carmaker has been able to adjust working hours with its own employees, in response to changing demand.

In return, the companies have promised workers that they will not be subjected to the huge layoffs that have been made in other parts of the economy, which have helped to lift Spain’s jobless rate to a record 25 percent. Since the start of the crisis in 2008, car factories have cut their work force by about 9 percent, compared with 21 percent for Spanish industry as a whole.

“We have lost some jobs, but it has been a proud resistance compared to the massacre in some other sectors,” said Manuel García Salgado, who is in charge of the automotive sector within the Unión General de Trabajadores, one of the two main labor unions in the country. “I don’t want to give lessons to anybody. But at such a delicate moment for Spain, showing that we believe in flexibility and consensus has certainly been highly valued by the carmakers.”

The car sector employs 280,000 people in Spain, including parts suppliers, and accounts for a tenth of the country’s economic output. About 85 percent of the industry’s workers are on long-term contracts.

“When you look at the car manufacturers and suppliers in Spain, a lot of the fat has been cut out since the start of the crisis and what is left now is a very strong skeleton and muscles,” said Marc Sachon, a professor of operations management at the IESE business school in Madrid. “Ford and Renault are now giving further proof that companies are changing their European manufacturing footprint and moving away from places where costs are higher.”

Article source: http://www.nytimes.com/2012/12/28/business/global/car-factories-offer-hope-for-spanish-industry-and-workers.html?partner=rss&emc=rss