Ford, Renault, Volkswagen, Honda, Hyundai. Although a single name emblazons each vehicle, component suppliers today provide about three-quarters of every finished vehicle. More than ever, it takes many names to fabricate each automobile. So it’s no surprise that for every person working in assembly, another three people manufacture components. As car makers shift production to other geographic areas, seismic industry shifts occur, too, as the legions of auto industry suppliers follow.

Europe is a current proving ground for this trend; while western Europe holds steady, central and eastern Europe enliven the overall European auto market with a steady stream of new assembly plants and even newer supplier facilities that support their nameplates.

This article is the final in our series that has surveyed auto industry trends and experts’ predictions. The first and second installments appeared in the previous power@work issues and discussed global and Asia-Pacific trends in depth. This final installment reviews industry trends, data and predictions for Europe. Figures and forecasts appear courtesy of CSM Worldwide, a firm that tracks global vehicle forecasts and provides adjunct data that support Rohm and Haas’ transportation adhesives business.

Poland and Czech Republic Lead the Geographic Shift
Car maker and component supplier migration from western to central and eastern Europe actually began more than 10 years ago, and today production continues to pick up speed. Poland, Hungary and the Czech Republic felt the influx first, as companies leveraged low-cost, skilled labor, high unemployment rates, robust customer bases and proximity to western Europe.

Now, eastern European countries like Romania and Ukraine are experiencing the most rapid industry growth, presently at more than seven percent annually, providing the major impetus for the modest 1.6 percent auto industry growth across all of Europe. Car makers and suppliers are speeding ahead in eastern Europe, but the support infrastructure is ramping up more slowly. “Transportation and distribution networks to connect assembly plants, suppliers and auto buyers are still developing here,” says John Channon, marketing director, Packaging and Building Materials, North America. OEM (original equipment manufacturer) accomplishments in this newer region, however, are spurring investment. Through a joint venture with the local Dacia maker in Romania, for instance, Renault built the very popular, economical Logan model – a success that other companies want desperately to emulate.

Eastern and central European customers favor economical vehicles, so car makers and their suppliers expect earnings based mainly on volume growth there. Yet, sales figures will be affected by a still substantial demand for used cars. Automakers, however, are excited by the lucrative luxury car market fast developing in oil-rich Russia. “After India and China, Russia is becoming the most dynamic economy in the world,” comments Stefan Katzenmayer, commercial manager, Transportation Adhesives, Europe.

Data Reveals Trends
For the more established western Europe market, growth will mainly come from value-based buyers who elect options like active safety control systems, fuel economy and hybrid technologies. For now, western Europe remains the base for OEM research and development talents. CSM data reports confirm these Euro auto market trends. Light vehicle sales for all of Europe – 20.4 million cars in 2005 – are expected to reach 20.8 million units in 2006. CSM forecasts light vehicle sales to total 23.9 million units by 2012, an average annual growth of about 2.3 percent.

However, in just the first three quarters of 2006, eastern European light vehicle demand posted almost a 15 percent sales increase over 2005. The major increases came from purchases in Russia, Turkey, Ukraine and Romania. Sales in Russia alone increased almost 21 percent in the first three quarters of 2006 over 2005 numbers.

With demand soaring eastward, manufacturing capacity also continues to march in the same direction, increasing, for example, 47 percent for the Czech Republic, and 33 percent for Slovakia. These increases are supporting expected production for all of Europe of 20,261 units for 2006, which is a 1.6 percent increase over 19,946 for 2005. By 2012, CSM expects total European production to reach at least 23 million units.

Continuous Customer Communication Paves the Road to Healthy Growth
As a global leader in developing and supplying adhesives for anti-vibration, sealing and headliner components, Rohm and Haas carefully eyes the road ahead. “The auto industry in Europe should stabilize in a manner similar to the United States and much sooner than China and India,” Channon notes. Additionally, Channon expects design capabilities to shift eastward in the long-term, with demand for local styling assuming more importance among central and eastern European buyers.

As the industry achieves equilibrium, Rohm and Haas implements and maintains the personnel, skills, facilities and procedures to help deliver success for its customers – by deploying its tools in the right places, clustering design teams in western Europe for now, and concentrating technical support eastward. “We maintain superb technical service,” says Stefan Dehnicke, technical manager, Transportation Adhesives, Europe. “Our specialists not only coach workers on procedures, but problem-solve expertly.” For instance, Dehnicke continues, Rohm and Haas scientists can often pinpoint the exact reasons for bond failure, even years after the part was made.

With 50 percent of its transportation business concentrated in Europe, Rohm and Haas also emphasizes responsive customer communication. Many problems from design through execution, Katzenmayer asserts, can be averted through better communication. Toward that end, the company leverages its wellestablished distribution and sales network across Europe as a communication conduit for customers. “It’s one more service we see as crucial to our customers’ growth here,” says Channon. “We’re fully prepared for more responsibility.”