Flanders powers up auto industry

Flanders, one of Europe’s most established auto manufacturing hubs, is reaping the rewards of re-engineering itself. In June 2005, the northern Belgian region convened a round table that drew up a 12-point action plan to help make the region attractive in terms of labor costs, flexibility, innovation, logistics and energy. As a result, Ford received government investment support of €32.6-million, Toyota has established an R&D center in Zaventemand and Scania Trucks chose Opglabbeek as the site for its only European warehouse.

Automotive Industries spoke to Fientje Moerman, Vice-Minister-President of the Flemish government and Flemish minister for Economy, Enterprise, Science, Innovation and Foreign Trade.

AI: What are the main outcomes of the 12 point plan for the automotive industry?
Moerman: Flanders’ automotive industry is now more competitive and innovative. Reductions in taxes on shift work (10.7 per cent on withholding tax), wage costs are currently 4 per cent lower than Germany. Labor flexibility will also increase with the introduction of the plus-minus conto (corridor model).
With Flanders’ DRIVE, a competence pool that brings the industry together with training bodies, we will capitalize on innovation in manufacturing, light materials, active safety and clean technology in coming years. I will allocate €28.8 million to these initiatives over the next four years.

AI: How will the 800 million Euro investment in the automotive industry over the next two years be targeted?
Moerman: This investment was made by the OEMs including the Ford S-MAX, Galaxy and Mondeo, the Audi A3 and possibly A1 (2009), the Volvo C30 and XC90. New investment decisions for 2008 and beyond are currently in the pipeline. These include new models for GM Antwerpen, further extension of Audi Brussels and the potential EUCD platform for Volvo Cars Gent.

AI: What advantages does Belgium offer?
Moerman: Flanders’ automotive industry has the following four strengths:
Firstly, human capital, Flanders has highly educated, motivated and industrious workers. Our education system is the best in the world (cf. Pisa study). This is seen in our high productivity figures.
Secondly, our location for logistics. 227 million consumers, representing 75 per cent of European GDP, can be reached within a radius of less than 750 km. The entire world can be reached within 24 hours.
Thirdly, Flanders can play a strong hand in terms of innovation. The Flemish government will invest several million Euro to boost the innovation capacity of our automotive industry.

AI: How are you planning to make the region more attractive as an automotive hub?
Moerman: One of my plans is to allow the use of the so-called ‘eco-combis’, or longer trucks, for transport between suppliers and manufacturers. Flanders will abolish the Elia tax, a tax on energy levied by local authorities, from 1 January 2008. This will cut the tax burden on companies and families by €83 million.

Major investments in 2006-2007 include:

– GM is investing €40 million in Opel Antwerp: expansion of its pressing facility and launch of the Cabrio Twintop;
– Ford is investing €238 million in Genk: launch of the new Galaxy and S-MAX;
– Volvo Cars Gent is investing €49 million in the launch of the new C30 and XC50;
– Volvo Trucks Gent is investing €10.6 million in the launch of the new models (Volvo FL and Volvo FE) and €15 million to set up a new Tires and Rims Department;

AI: What is the attraction for automotive companies to assemble cars in Belgium?

As regards wage costs, Belgium was the ‘poor relation’ in Europe. Following the reduction in taxes on shift work, we can now meet the standards of our neighbors. But we cannot win the wage cost battle – in comparison with low-wage countries – and that is not what we want either. Flanders’ automotive industry has the following four strengths on which we have to focus:

Firstly, human capital, Flanders has highly educated, motivated and industrious workers. Our education system is the best in the world (cf. Pisa study). That’s where we stand out. This is seen in our high productivity figures. Flanders is also flexible when it comes to labor due to the system for technical or economic unemployment, the plus-minus conto and the use of temporary employment.

Secondly, our location for logistics. 227 million consumers, representing 75% of European GDP, can be reached within a radius of less than 750 km. The entire world can be reached within 24 hours. We have good infrastructure and our ports are world class. Zeebrugge, for example, is the largest roll on/roll off ferry port in the world for vehicles. The fact that the automotive world (like Toyota and Scania) sees Flanders as a center for its logistics and distribution activities is proof of our excellent location.

Thirdly, Flanders can play a strong hand in terms of innovation. Through my project-focused and collective approach, the Flemish government will invest several million euro to boost the innovation capacity of our automotive industry. That is the key to the future and something that the automotive industry cannot overlook.

AI: Why do you think Flanders continues to attract investment from the automotive industry?

I personally have gone out to ‘sell’ the 12-point action plan for Flanders’ automotive industry to Ford and GM in Detroit, Volvo in Sweden and the European heads of GM and Ford. Our efforts aren’t falling on deaf ears in the headquarters. ‘Branding’ Flanders as an automotive region with an action-focused plan is of utmost importance. Contacts with manufacturers at international and European level are good, all of the promises that we made as a Flemish and federal government (for example as part of restructuring at Ford) have been met. In other words, the Flemish and Belgian governments are reliable partners for the automotive industry and that is a known fact. This arrangement, along with our strengths of human capital, logistics and innovation will ensure that the automotive industry continues to invest in Flanders.

AI: What are you planning to do to make the region more attractive as an automotive hub?

The 12-point action plan of 12 June 2005 is as good as implemented. But that does not mean that I will no longer pay constant attention to the sector. We are still in the early stages of innovation. The budget (for Flanders’ DRIVE) has been allocated but it is now a matter of achieving excellence at international level. We also need to do our bit in other areas, logistics for example. One of my plans is to allow the use of the so-called ‘eco-combis’, or longer trucks, for transport between suppliers and manufacturers. This technology cuts costs and is more environmentally friendly. But constant monitoring is also important when it comes to energy costs. Flanders will abolish the Elia tax, a tax on energy levied by local authorities, from 1 January 2008. This will cut the tax burden on companies and families by €83 million.

The 12-point action plan has made Flanders’ automotive industry significantly more competitive and innovative. The issues of wage costs, labor flexibility, innovation, logistics and energy costs are crucial for the automotive industry. My action plan has placed these matters on the political agenda and a real difference has been made. And I’m personally committed, as Minister, to continuing such changes