The first-quarter results are promising. In an interview with Automobilwoche VDA President Bernd Gottschalk, president of the VDA, German Association of the Automotive Industry, also discussed politicians' demands for new exhaust emissions levels and the euro-dollar exchange rate.
Q: Mr. Gottschalk, economists recently noticed some signs of a slight improvement of the German economy. Do you agree?
A: Definitely. Due to the number of orders that have been received, we are becoming more confident. Orders for new models have grown significantly during the past few weeks. In December 2003 the domestic order situation for German-made cars reached a historic low -- only 285,000 units. In March 2004 it had risen to 405,000 autos. That means that there is definitely an interest in new automobiles in Germany. However, I do not expect a boom in new registrations for the time being, but rather a slow increase. The basic conditions for a boom are still not there.
Q: What conditions do you mean?
A: German consumers are still very insecure. They are hesitant to make a purchase. Other important west European markets, such as Spain, have got more momentum within their auto business. Great Britain has had great results for four years in a row. German manufacturers' market shares there have grown significantly. In this respect I believe that our export figures will continue to grow -- despite their all-time high last year.
Q: Regarding the high level of exports to the USA, is the VDA still worried about the dollar-euro exchange rate?
A: At the moment the euro is worth less than $1.20, and when comparing the fundamental data I'd say that is where it should be. Many bankers are warning against making a hasty judgment. However, I never believed those irresponsible forecasts that said the euro might rise to up to $1.50. People were and still are speculating too much, which has an effect on jobs at the end of the day.
Q: The month March is a significant indicator for the development of the automobile business. Based on the current figures, are you sticking to your 2004 forecast?
A: Yes. Of course, the 12.4 percent drop in registrations in January in comparison to the previous month was a shock. However, the positive development in March and April give us hope that we might be able to reach the 3.35 million new registrations that we forecast. That would be around 3 percent more than last year.
Q: To reach their high unit-sales targets it looks as thought manufacturers will need to start more discount offensives.
A: Fortunately in Germany we do not have these extremely expensive incentives that they have in the US. However, the virus is spreading in this country. Changed consumer behavior, increasing competition, over capacities, all those factors contribute. Customers increasingly look at the price-performance ratio. However, industry and trade have become more sensitive to discounts. German manufacturers have already significantly reduced the number of so-called day registrations.
Q: Do you believe that the German automobile industry will be able to stop offering financial incentives for auto buyers in future?
A: We have to remain realistic. If the markets do not grow the competition will increase and no one can escape from that. I am sure that the situation will improve a little once a large number of new, attractive models is launched on the market and people start to consume more again.
Q: Regarding the European Union expansion eastwards: the German auto industry has been manufacturing engines and cars in Hungary and has been producing whole model series and components in Slovakia and Poland for a long time. Does the "Made in Germany" seal still have any legitimacy and worth?
A: More than ever. Even if the foreign share in the added value per vehicle is increasing. "Made in Germany" is part of the German brands, even if components are produced across the border. We are a global industry. That, by the way, also secures jobs here. We should be proud that German manufacturers have adapted themselves to the east European markets in a timely manner.
Q: Many employees here fear more jobs will be moved. Is Germany's position as a manufacturing base in danger?
A: I do not understand why German politicians have so little self-confidence when it comes to this subject. We have strong locations and an incredibly powerful automobile industry -- and it will remain incredibly powerful. We are making investments in Germany and abroad. Every seventh job here is connected to the auto industry. When it comes to research and development expenditure, we are at the very top with 15 billion euros per annum. New plants in Leipzig, Dresden or Koelleda should be proof of what our view is on Germany as a production location.
Q: Why then do managers within the auto industry constantly demand new reforms from politicians?
A: Because our labor costs are too high, the pressure is increasing and our competitors' low eastern European costs are undercutting our high West German labor costs. We need opening time clauses and longer working hours. This is not about having Rumanian wages in Germany but about lower labor costs. More flexibility is needed.
Q: What do you think about the proposal to demand payments from companies that have too few apprenticeships?
A: This is a central management mentality. The automobile industry, including the automotive trade, offers the most apprenticeships of all German sectors. We are attractive to young people and our training is very extensive. Threatening to make laws that create more burdens certainly will not create more vacancies for apprentices.
Q: The EU commission plans to further reduce emission limits of pollutants starting in 2008. How are the negotiations on the regulations proceeding?
A: We have made a good deal of progress with the French. However, I don't foresee a quick adoption of the new regulations by the EU. First we will get a new commission. The European manufacturer association, ACEA has developed specific ideas and has submitted them to Brussels. We still have some time to prepare for the Euro 5 norm, which takes in 2010.
Q: An increasing number of new-car buyers are purchasing diesel cars. Is there an end to this trend in sight?
A: No. At the moment the diesel market share in Germany is 44 percent. Experts expect a further increase. Many of the imported brands used to have a very small diesel share. But now they have many diesel activities, which shows how positive everyone is in respect to the future prospects for diesel engines in Germany.
Q: The IAA for commercial vehicles in Hanover takes place this year. Is there hope for state of Lower Saxony that the automobile IAA will also take place there starting in 2007?
A: I already said in my last interview with Automobilwoche that we are bound by contract to Frankfurt until 2005. I still have nothing else to say about this subject.
Interview by Franz W. Rother and Henning Krogh