The realpolitik of Clepa and the political over-investment of the 2026 deadline

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The European situation is now structured by the 2035 deadline and one might have the impression that the hesitations, procrastinations and debates are now over. In fact, because certain issues such as heavy goods vehicles remain open and, above all, because a sort of "review clause" has been provided for in 2026, the opponents of electric vehicles are pretending to adhere to the agreement but have not said their last word. An explanation of the text of the Clepa secretary-general's editorial published on 2 November shows this to be true.

Representing the interests of small and large European companies in the upstream automotive sector, Clepa has redoubled its political activity in recent months. After publishing a report (by PwC) on the future of employment in the powertrain sector in December 2021 and another (by Roland Berger) on the impact of electrification on the aftermarket in September 2022, Clepa, through its new secretary general, Benjamin Krieger, reacted on 2 November to the decisions announced in Brussels at the end of October. In his editorial in the organisation's newsletter, he states in the title of his text: "The success of the Green Deal is directly linked to European competitiveness".
The political intelligence of this position consists in not questioning - on the contrary - the ambition of the agreement, defined in terms of decarbonisation and included in the famous "green deal" which aims at carbon neutrality by 2050, and only discussing the management methods of this transition.

The text thus follows these three sentences:
1/ "Automotive suppliers support the objective of climate-neutral mobility and have the technologies to make it a reality."
2/ "However, the most ambitious electrification target will not be met unless it is accompanied by policies to ensure charging and refuelling infrastructure, green energy, access to raw materials and a just transition."
3/ "Environmental objectives must take into account the social and economic dimensions."

Clepa's secretary general backs up his remarks with an opinion survey called "Pulse Check" conducted every six months by McKinsey for its organisation among the heads of equipment companies in Europe.
The study found that despite the short-term measures they have taken, 23% of suppliers expect to make a loss in 2022, with 27% expecting to make a loss in 2023. Pointing out that 70% of suppliers will operate well below 5% Ebit margins, the study shows, says Krieger, that "financing the green and digital transition is becoming increasingly difficult". If they survive, companies may not be able to afford to invest in R&D or human resources and leave it to others to develop the technological means to meet the requirements Europe has set for 2035. His first conclusion is that without providing equipment manufacturers with "access to affordable energy in the EU and fair burden-sharing of inflation costs along the supply chain, competitiveness", the meeting will be missed.

This amounts to asking politicians to intervene financially if necessary and at the same time to put pressure on manufacturers not to asphyxiate their upstream "partners" at the worst possible moment. On the second aspect, we understand the reasoning that consists in stressing that if the manufacturers need to share the burden of the transition with their suppliers, then they should not only be concerned about reducing their costs but also about ensuring the economic sustainability of the companies concerned.

We know how important these "industry solidarities" are and we remember that at each crisis the progress to be made in developing them is underlined. We also know that the declarations of intent or charters signed in these areas have very little influence. Insofar as the reductions in activity associated with electrification have a fairly heavy impact on manufacturers whose mechanical factories are no longer needed, the temptations to re-internalisation are strong and obviously hardly correspond to the idea of solidarity. Consequently, either very strong constraints or fears of no longer being supplied after having killed their suppliers would have to be present for manufacturers to develop other purchasing practices.

In this context, it seems unrealistic to expect manufacturers to bet on solidarity, and Clepa must therefore rely either on the famous Fair Transition Fund for companies and employees in the sector, the creation of which was promised in the agreement of 27 October, or on more "conservative" measures that would be obtained on the run during the evaluation/review scheduled for 2026
More specifically, together with all the stakeholders in the sector (ACEA, IndustriAll, Transport and Environment, etc.), Clepa had signed a text prior to the agreement calling for "a fair transitional framework within the framework of the new rules that will accelerate structural change in the industry".

The agreement, without being very precise on this subject since the Fund's missions and endowment are to be defined in 2023, therefore satisfies this request. In the same way, it provides for support for the charging station deployment programmes called for in the text. It also opens a renegotiation window in 2026 which is more problematic as evidenced by the differences between this very consensual text and the editorial by B. Krieger.

These differences make it possible to grasp the issues on which industry and NGOs such as Transport and Environment disagree: for Clepa (and ACEA), the 2026 review clause is interpreted as corresponding to what can still be negotiated downstream of the text, which will ban new cars equipped with combustion engines from 2035; for T&E, it is absolutely necessary to nip these hopes in the bud.

In fact, around the mention of the 2026 deadline, the industrialists seriously threatened by electrification reiterate all the reservations and criticisms they expressed before the agreement was reached. B. Krieger writes about 2026 that the assessment to be conducted then "will not only address the deployment of zero-emission vehicles, but also charging infrastructure, availability of green energy and fuels, affordability of vehicles and the impact on industry". "This review must be an opportunity to rectify the situation if necessary," he adds, clearly suggesting that the need for this future rectification is not in doubt for him and his organisation's industry. And, in fact, in the lines that follow this evocation of what will be examined in 4 years, the rather formal character of Clepa's adherence to European policy is apparent. Thus, all the "anti-electric" arguments calling for technological neutrality (or "diversity") are reaffirmed, as well as an in-depth examination of energy policies and the reality of the decarbonisation associated with electrification, and a serious assessment of its economic and social consequences, including its impact on European automobile foreign trade. Similarly, the issue of e-fuels and the need not to manage the decarbonisation of heavy vehicles by promoting the solution of battery electric vehicles are clearly the options favoured by Clepa and opposed by T&E.

Behind these differences of interpretation of the agreement and the "just transition framework" that each pretends to support, there is a rather radical opposition in the ways of "taking into account the social and economic dimensions". Insofar as the industrial and social damage for the equipment manufacturers is, in the GMP sector (engines and transmissions), significant and amplified by the re-internalisation strategies led by the manufacturers and rank 1s, the fair transition for Clepa is the one associated with the most partial and slowest possible electrification: the balance in terms of jobs is negative and the jobs gained will not be in the same companies or in the same countries or regions.

Since it will only be possible to escape this reality by being selfish and by favouring, for example, one's own manufacturing or national interests to the detriment of those of the other components of the sector or of other nations, it is quite logical that a European equipment manufacturer's union should reason in this way and place a lot of hope in the 2026 deadline.

For environmental NGOs, the climate emergency and the propensity of manufacturers to relativise its importance and/or to overestimate the technological, economic and social difficulties associated with decarbonisation are symmetrically the two fundamental parameters of the political deal. Each organisation is in its role and tries to promote the emergence of a compromise that is as consistent as possible with the mandate given to it. Since the Volkswagen affair, the balance has obviously not been tipped in favour of Clepa.
 

07/11/2022

The weekly column by Bernard Jullien is also on www.autoactu.com.

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