Motor industry action plan yields positive results

The Belgian automobile industry is to invest €800 million in the sector during 2006 and 2007. These positive results have partly been achieved by the efforts of a tripartite task force, working since 2004 to optimise industrial policy in this economically important sector.

In 2004, Ford’s restructuring of its Genk manufacturing plant (BE0311305F) prompted the setting up of a tripartite task force in the Flemish region, aimed at improving industrial policy for the automobile sector. The sector has largely contributed to the region’s economic growth since the 1950s and 1960s. The seven vehicle manufacturing plants of Ford and Volvo Cars (both Premier Auto Group, PAG), General Motors (GM)/Opel, Volkswagen AG (VW), Volvo Trucks and two other bus manufacturers, as well as suppliers and related business services, represent about 100,000 jobs in Belgium. In all, the sector accounts for 14% of the region’s export business.

Task force composition and objectives

The task force for the Flemish car industry is a tripartite committee, involving all the top managers in the sector, several trade union leaders, senior civil servants and key cabinet staff members of the Flemish government. Its mission was to outline an optimal policy for the sector and to issue a final report proposing concrete policy measures aimed at keeping vehicle assembly plants in the region. The action points concern labour costs, flexibility, innovation, administrative support, training, logistics and cost-savings in energy. In June 2005, the task force published its first report outlining an action plan for the sector, entitled Twelve actions for the car industry ([Twaalf actiepunten voertuigindustrie (in Flemish, 107Kb PDF)](http://www.eyes-e-tools.com/customer/flandersdrive/Nieuws/upload/Twaalf actiepunten voertuigindustrie.pdf)). Since the report’s publication, several of the proposed policy measures have been adopted.

Labour costs and flexibility measures

The sector’s industrial relations actors – the trade unions and the employer federation Agoria – play an important role in the ‘labour costs and flexibility’ working group of the task force.

Wage costs in the sector is an issue of particular interest (BE0512304F). There was a concern that the Belgian car industry could lose its wage-cost advantage over Germany, where Opel and Volkswagen, among other important car manufacturers, also have large operations. Moreover, competition is set to increase with new assembly plants being opened by the major automobile companies in eastern European countries, such as Slovakia.

Consequently, one of the task force’s measures proposes tax cuts on shift work. In Belgium, additional wage bonuses that workers receive for doing night or shift work are currently liable for payment of social security contributions whereas, in countries like Germany, these wage bonuses are exempt from social security tax. To counteract this national disadvantage, the Belgian federal government has decided to lower social security contributions on shift work: these taxes will be reduced by more than 10% by 2007, in three stages.

With regard to flexibility, the trade unions and Agoria reached an agreement in principle in May 2006. The agreement introduces two measures to achieve greater working time flexibility in the sector: working time savings accounts and a six year ‘plus–minus account’. Belgian working time regulation already allows for the annualisation of working hours. In a system of annualisation, the employee can work the collectively agreed working time (38 hours per week) on a yearly average basis rather than on a weekly basis. The provision of a plus–minus account extends this period by up to six years.

The longer timescale of several years follows the production and sales cycle of a car model, and makes it possible to adjust to peaks and troughs in the labour cycle. A working time savings account also gives a worker the opportunity to save leisure time throughout his or her career. Both forms of working time flexibility are already practised by German automobile manufacturers, but are relatively new in Belgium. However, the agreement will only become effective once changes have been adopted in Belgian working time legislation and company agreements have been reached.

Commentary

For 2006 and 2007, the Belgian automobile industry is expected to invest more than €800 million in the sector. Meanwhile, the Ford manufacturing plant in Genk was granted production of the new Mondeo model. However, it is doubtful whether this is a direct outcome of the task force after only two years in operation. The Belgian CEO of Volvo Cars, Frederik Arp, summarises the situation as follows: ‘Active support of the public authorities for the sector sets an important signal for these international companies. It may not be thanks to the task force that the car industry in Belgium still exists, but without the task force it is less certain that it would be there.’

With regard to industrial relations, it remains to be seen how the agreement on new forms of working time flexibility will be transposed into practice. This could represent a milestone for a new type of measure creating greater working time flexibility in the Belgian industry.

Guy Van Gyes, Higher Institute for Labour Studies (HIVA), Catholic University of Leuven