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Günter Verheugen

Vice-President of the European Commission responsible for Enterprise and Industry

Competitiveness – the answer to restructuring and competition

EP debate on restructuring in the EU industry
Brussels, 4th July 2006

Ladies and gentlemen,

Record profits on the one hand, businesses shutting up shop or relocating on the other. When will it hit me and my job? When is it my turn? These anxious questions are being asked by many people in the EU today. It was understandable that entire economies collapsed and millions of jobs were lost in the transformation of the countries of Central and Eastern Europe – that was the bitter legacy of communist mismanagement.

What many people cannot understand, however, is what is happening in certain branches of industry in the old EU Member States - textiles, footwear, furniture, household appliances, pharmaceuticals, the motor industry. Sectors that used to be regarded as secure have started to falter.

Next to no one is prepared for this structural change that we are witnessing today. It is high time, therefore, to help the multitude who have lost their direction to get back on track. For this reason, the significance of today’s debate on the possible closure of the General Motors plant in Azambuja goes way beyond this disturbing phenomenon itself.

It is time certain truths were made very clear:

First: we are embarking on a new phase in competition, and structural change will continue to accelerate. We should not turn a blind eye to this or hide our heads in the sand. Competition is competition regardless or whether or not we want to be involved. Nor is it a question of whether we will survive the competition. No, the great social question of our time is how many opportunities this competition will cost us – the future of our jobs is the big issue, and we must finally look it in the face. Anyone who still thinks that other questions are more important has failed to understand the present situation and the challenges it presents: we need more growth and more and better jobs – otherwise the social face of Europe will become a cold, cynical face, and one which does not match our European aspirations to responsibility shared between the individual and society, to solidarity, and to social balance and cohesion.

The watchword for a European society in the 21st century that offers people new opportunities is “competitiveness”, since we know that a “fortress” Portugal, Germany, Poland or Europe is not an option in the open world of the 21st century. We must face and direct global competition – so that we will be in the lead with the best solutions, the best technology and the highest standards in everything.

Second: we have established a common European policy for growth and employment. We must now put this policy into action at European, national and regional level – everywhere. Otherwise we will time and time again find ourselves at our wits’ end in the face of further remnants of our social model in the form of closed factories and relocated research laboratories – yes, this has already started too. A policy on growth and employment can only be a business-friendly policy. In the economy, in businesses, jobs come into being or fall by the wayside – and no instructions issued by a State or the EU can change this. We can do one thing, however, and that is conduct a policy that creates the conditions that enable businesses to do their job – to grow, to invest and to create employment. This is what we mean by a business-friendly policy.

Third: we need more than ever before an active industrial policy that keeps industry in Europe. The idea that, at world level, industry has become a museum piece is just as mistaken as the idea that industry is primarily a source of pollution. I would advise anyone who still thinks in such terms to reconsider – since those who want to drive industry out of Europe are playing with the livelihoods of people employed in industry and working in industry-related services. They are playing with the future of the small and medium-sized businesses in the long supply chain. They are squandering Europe. We will continue to need a strong industry in Europe in the future, with businesses that are world-leaders; not European champions – no, we need leaders on the world markets, since it is the world championship that is at stake. This too is a job that cannot be done by any State; businesses must tackle it themselves. We can however give them our backing.

This was the reason behind the Cars 21 Working Party, as 12 million jobs in the EU are directly or indirectly connected with the motor industry. In that Working Party we discussed with all the parties involved what was necessary and feasible in order to keep the motor industry strong in Europe. I hope this House understands, therefore, why I urge you not to simply press ahead regardless where exhaust emissions are concerned, but first of all to assure us that our lofty ambitions for the environment are technologically feasible and affordable for the majority of people, as only then will be able to make our contribution to keeping the production and sale of European vehicles a going concern – and not for the sake of the vehicles but for the sake of the people.

One further point – an active industrial policy does not stop at the borders of the old EU; it also applies to the new Member States. The enlargement is not the bane of European jobs, nor is it the cause of the structural change. The fact is that, in 17 out of 20 sectors of industry, old Europe is very strong; it is only in three sectors that the new Members have competitive advantages. The motor industry is one of these three, and that can help us if China should become a serious competitor in this branch.

Fourth: We must make the policy open-ended. Businesses must decide for themselves whether to shut up shop or relocate, and neither the Member States nor the EU can or should interfere – and the Azambuja case is no exception.

We do, however, have a number of very clear rules, and we must firmly insist that they be kept. For example, there is the crucial issue of social dialogue. As far as I know, the Azambuja plant has no complaints in this respect. There are also aids for companies in difficulty, and this instrument was used in the present case in 2002; the difficulties facing the plant are nothing new, therefore. Everyone should know, however, that under European law a business must stay at the same location for the five years following completion of the restructuring. Otherwise it must refund the aid granted. We do not know yet whether European funds went to the plant in Azembuja. The Portuguese Government is currently looking into this at our request, but if this proves to be the case, we will also see to it that our conditions are complied with. European taxpayers’ money should strengthen the site rather than destroying jobs.

Fifth: businesses bear considerable social responsibility for Europe, and this should be made generally apparent. I do not criticise, a priori, any decision by a company that involves relocation. That is none of my business, and it would also be foolish, since internationalisation of production and research are unavoidable if we want to stay ahead in the long term.

What I do criticise, however, are those who place short-term profits above a sustainable solution. I criticise those who, under pressure, see pulling out as the cheapest answer, with no regard to the people they are putting on the street. I criticise those who pay themselves fat salaries but are not worth a cent as responsible managers. I want businesses in Europe that constantly contend for the leading position, that support innovation, that are able to change their profiles, and that train their employees to be equal to new tasks. I want European businesses and entrepreneurs that represent our values. This is also part and parcel of our new policy for growth and employment.

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