A rough ride: the Catalan car industry

Sluggish-to-stopped traffic on the rondes, and the infuriating cost of tolls and petrol were the main car-related concerns for people in the Barcelona area not so long ago. However, recent job losses in Catalunya’s automotive industry are becoming a painful reminder of the importance of car manufacturers to the region’s economy. Automobile makers generate around eight percent of Catalan industrial GDP and provide some 100,000 jobs in Catalunya directly and indirectly, according to the Consorcio de Promoción Comercial de Cataluña. If, indeed, things get worse before they get better, as most economic gurus are predicting these days, Barcelona’s venerable car industry is in for a bumpy ride.

Barcelona’s ‘Big Two’ are SEAT-Volkswagen and Nissan. SEAT is, of course, one of Spain’s most historic brands, but the story behind Nissan’s assembly plant in Barcelona’s Zona Franca actually goes back further. Ford Motor Ibérica, S.A. was founded in 1929, when Ford allowed Spanish capital to invest in their plant on Avinguda Icária. The factory produced Model-A Fords and other vehicles with the same chassis until the beginning of the Spanish Civil War, when supply lines for components were cut off. During the war, the Republicans made use of the facility to manufacture airplane parts, prompting the Fascist side to target the plant in bombing raids on the city. Later, in 1965, Motor Ibérica broke ties with Ford, and the company moved to the Zona Franca where it continued to produce Ebro trucks. The Japanese firm Nissan arrived in 1987 to establish Nissan Motor Ibérica, which came under the management of the Renault-Nissan Alliance in 1999.

The history of la Sociedad Española de Automóviles de Turismo (better known as SEAT) goes back to 1950, when the company was founded with the backing and technical know-how of Italian automotive giant, Fiat, and the financial help, in part, of a $62-million loan from the US Congress. Fiat’s clout in the matter forced the post-war Spanish authorities to choose the Zona Franca for the building site, as the Italians wanted the plant in a Mediterranean port city to facilitate logistics and cut delivery costs—not surprisingly, Franco’s regime had in mind a ‘more Spanish’ location than Barcelona. The factory was inaugurated in 1952 by the Generalísimo himself, and manufactured cars in the Zona Franca until 1993, when a larger and more modern plant was opened in Martorell. SEAT has been under full ownership of the Volkswagen Group since 1990.

While SEAT-Volkswagen and Nissan are the meat and potatoes of the car industry in Catalunya, and receive most of the media attention, together they only directly employ around 17,000 of the 100,000 people in Catalunya who work in the industry; the rest are employed by so-called second- and third-tier companies, meaning suppliers of goods and services that operate primarily on a national or local level. One such supplier is Esteban Ikeda, S.A. This assembly plant, located in El Prat de Llobregat, belonged from 2001 to the American company Johnson Controls, Inc. and supplied Nissan’s Zona Franca factory with seats for various models. As car sales began to fall, so did Nissan’s demand for components, and Esteban Ikeda finally closed its doors in January of this year, leaving 260 employees jobless and, worse yet, without severance pay. Nissan Motor Company bought Esteban Ikeda from Johnson Controls in February, but the issue of the employees’ indemnity was left unresolved.

“Those of us who’d been with the company for a long time had known that things weren’t going well for quite a while,” said Angela Garrofé, an employee for 16 years at Esteban Ikeda. “Johnson Controls’s concept of the company clashed with Esteban Ikeda’s. [Now] Johnson wants to wash its hands of the whole thing.”

In a desperate attempt to get Esteban Ikeda and Johnson Controls to sit down and negotiate their severance pay, the workers organised pickets at Nissan and Johnson’s Eurosit plant in Abrera, asked the city council in El Prat and the Catalan Parliament for help, and set 24-hour watches on the assembly plant to make sure that none of the parts or machinery would be taken out. “That’s our severance pay—if Nissan gets what’s inside [the plant], we’re dead,” explained Garrofé. “It’s surreal—you’re standing out there at night by a bonfire with your colleagues, thinking that you’ll get up the next morning and go to work as you always have, but the next day comes and nothing has changed. I knew when I joined Esteban Ikeda that I wasn’t going to retire in this company, but I never thought it would end like this.”

If the watches were disconcerting, the picket at Abrera was downright scary. The workers blocked the factory gates in order to keep Eurosit from supplying Nissan with Johnson Controls’s parts, and the Mossos d’Esquadra turned up in full riot gear. “There were no [central] labour union representatives among us, just the workers, and we’re not used to standing up to the Mossos. When they charged us, it was very frightening, it was terrible,” said Garrofé.

But the picket worked. No parts were delivered that day, and a week later Johnson Controls and Esteban Ikeda agreed to negotiate with the employees. In March, Esteban Ikeda’s works committee reached an agreement with Nissan; in exchange for two weeks of production and delivery, the 260 employees would get their severance pay.

Struggles of this sort may become commonplace if car sales fail to pick up, and the Spanish government continues to be reluctant to promise direct aid to automobile manufacturers. Agustín Muñoa, Sales Director of Nissan Iberia explained: “[The government] didn’t want to give any help to the automotive industry because they thought they’d have to help other industries as well. But they haven’t considered the total impact of our industry on the others. We’re traditionally a C-segment market [selling within Spain], so if we don’t have national demand our production will be less and less.”

There does, however, seem to be cause for at least a little optimism. Muñoa pointed out that Spain’s market is less developed than other European markets, so there is still opportunity for growth. In addition, Nissan’s Barcelona plant has been allotted the production of a new compact van, the NV 200, which is to go on line at the end of this year, and SEAT’s Martorell plant has won the rights to manufacture the new Audi Q3. Also, the Generalitat de Catalunya has approved a €57-million credit package for Nissan and SEAT, and the Spanish government has finally promised economic aid to the industry as well [see below].

It looks as though Barcelona’s car industry will survive and keep rolling down its historic path, but there are likely to be some hefty tolls to pay along the way—after all, this is Catalunya.

Money back

Government subsidies to consumers for car purchases are not new here. The Plan Prever, which ended on December 31st, 2007, provided over €1,000 off the sticker price to buyers of a new car who sent their old one—if it was 10 years old or more and used leaded gas—to the scrapyard. The plan was conceived of as a boost to the industry, but also as a way to renovate the nation’s fleet of cars with more fuel-efficient and ecologically sound models.

Almost at the same time as the plan expired, the global economic crisis struck the industry, and Spanish automobile manufacturers began calling for the government to design a new plan. After various discussions, Plan 2000E was put in place in late May this year. It provides €2,000 toward the purchase of a new car priced under €30,000: the Spanish government pays €500 of this, the government of the autonomous community where the sale occurs pays €500, and the auto manufacturer pays €1,000. In June, alone, according to the Asociación Nacional de Vehículos a Motor, 15,000 buyers took advantage of the offer. The plan expires at the end of this year.