Europe Has 18 Factories' Worth of Overcapacity
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Bloomberg recently ran a story about the PSA factory at Aulnay, near Paris, which was recently after 40 years. The 3,300 workers protested until the very last moment, but to no result.
Statistics from IHS Automotive show that that factories in Europe, including the ones in Russia, have the capacity to make 26 million cars, about 7 million than they are currently making. They suggest that's what 18 factories the size of PSA's Aulnay would make. That's not a precise way to view the problem, but 7 million cars sounds like a problem.
Aulnay is closing as part of a wider plan from the French carmaker to cut 11,200 jobs by 2015. Ford is making a similar move by closing its factory in Belgium. As a response to this, employees even went as far as to hold a factory manager hostage. GM and Fiat are also facing similar problems with overcapacity.
Our say: Economies are like nature, nothing is lost, nothing is gained. Overcapacity means more competition for the existing customers who get better deals, better products and better customer care. The downside is all those laid off workers are a huge burden to the economy.
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comments written so far
On 29 October 2013 at 04:56 UTC, Colin F. said:
Companies must do whatever is necessary to remain successful and competitive. It is pointless employing people if turnover does not justify. I heard on UK television last night that the railway workers union said that if 18,000 jobs had not been cut, then the lines would have opened a lot quicker after the recent storm - where's the logic in keeping 18,000 people employed just in case there might be a big storm!!! The key for me is that if a company needs to reduce it's capacity and workforce, then it must be done in a sympathetic way. Such as the recent loss of 400 jobs at the Schaeffler plant in Schweinfurt, Germany. They gave their workers ample notice and many were able to take up early retirement packages or options for alternative employment. Schaeffler will now continue on a path of success. It's not what you do, but how you do it that counts.
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