Costantino Baldissara Acceptance Speech –
ECG General Assembly 2009
Zurich 5 June 2009
Click here to download Costantino's speach (120Kb PDF document)
Members and honoured sponsors.
It is truly an honour and a privilege for me to have been elected as the ECG President, which means the responsibility to represent the interests at European level of such a prominent group of companies.
And this, indeed, will be my main task: promoting the interests of the sector with the aim of making the European Finished Vehicle Logistics a stronger, wealthier, even more professional industry. An industry worth the respect of the customers and of all the other stakeholders.
Before any consideration on how challenging the next two years will be for me as a President and for the industry as a whole, I ask you to allow me a few thanks. TO start with, I wish to thank Frits for his great leadership during last few years, and his former Company, Broekman, for having allowed him to dedicate some of his time to the common interest of the sector through ECG.
I thank Jacinto Segui, the former board member and treasurer who has decided to step down, and its company, the AUTOTERMINAL SA, for the strong support all past times long.
Then I welcome the new entering board members:
- Ray MacDowell from the ECM,
- Veli-Matti Parssinen from AUTOLINK,
- Marcus Dualo from UECC
- Konrad Zwirner, from Hödlmayr International AG
Dear new board members, I believe that for the first time as President Elected I can talk on behalf of all the ECG members in thanking you in advance for the contribution you will be able to give to the development of the sector.
Moving one, it is right and proper to thank all of the ECG office staff for the extraordinary work they are able to perform.
I thank Mark Morgan, the Executive Director, appreciating his perfect English style and his admirable knowledge of our sector.
I thank Patrycja Kulesza, the EU Affairs Officer, admiring her accuracy.
I thank Hannah Palm, the Event and Sponsorship Officer, praising her care for details,
I thank Jan Szulczyk, the Projects and Research Officer, appreciating his precision in his works and also for the multitude of idioms and languages he can understand and talk.
I thank Tatiana Wilfart for her efficiency in handling the administrative services and for taking care of us.
Thanks also to our Board advisor, Giovanni Paci, who is taking care of the communication (and not only) of the association helping ECG to keep a higher profile. Last but not least, I do thank my Company, the Grimaldi Group, to have always believed in me and to allow me to be here today.
Dear Members,
June 2009 is indeed a challenging moment to take on the Presidency of our Vehicle Logistics Association.
We all know the difficulties our sector is going through: we are in the middle of the worse crisis ever for the Automotive industry and as a matter of fact vehicle logistics companies are directly affected by the health or illness of the manufacturers. Just one year ago, in Helsinki, our focus was on how we could find more capacity for our customers who were experiencing higher-than-expected demand nearly everywhere: in the ‘old’ Europe as much as in the ‘new’ Europe and obviously in Russia, not to mention China or Brazil that are on other Continents.
Our companies couldn’t find additional transporters, ships or railway wagons fast enough to satisfy the customers. And placing orders to buy more transport equipment – which we all did – had little effect, if any, because of the long delivery times involved with the new equipment.
Then, almost overnight, it stopped.
And the name of the game completely changed: rather than finding transport capacity to deploy, the daily tasks of many of us became finding more cars to transport, slashing capacity and costs, safeguarding the financial resources of the company while trying to limit damages related to eager costumers willing to cut their costs by reducing our transport rates.
Summarising all of this in one word is not difficult: surviving For the last eight months, this is what most of our companies have managed to do – and God willing will continue to do -: surviving
There is not need for me to say how serious things are: figures put forward by International Road Transport Union indicate a decrease in road freight transport activity up to 50% during recent months and doubling of the number of bankruptcies. Not less than 140.000 jobs have gone in the Road transport sector across the EU.
The situation is not different for rail or maritime transport: the only task for the crew of hundreds and hundreds of ships is just fishing at sea because there is simply not enough cargo to transport.
Finished vehicle logistics made no exception in this panorama, rather the contrary: being the Automotive one of the sectors most badly hit by the global crisis. After eight months of crisis, however, there are some positive signs that should not be underestimated.
I know that many – even in this room – believe that we have not seen the worst yet. Well, I do not share this view at all.
As businessmen we have the duty to study and analyse the market and its possible development, often with a wider angle that today’s or tomorrow’s problems. In addressing this task, we cannot afford the luxury of remaining hostages of the fear or of the negative sentiment brought in by the bad news making the headlines on newspapers. There are numerous, consistent positive signals, I said.
To start with, in May, in the brief lapse of a few weeks, the chief of the US Federal Reserve, Ben Bernake, indicated “signs of stabilisation of the economy and ease of the recession” and the president of the European Central Bank, Jean-Claude Trichet, went further on by saying that the global downturn had bottomed out, with some large economies already able to put the recession behind them and look forward to renewed growth.
At the same time – always in May this year -, the Organisation for Economic Cooperation and Development (OECD) said there were signs of ‘pause’ in the economic slowdown in France, Italy, the UK and China while a rise in business and consumer sentiment has materialised around Europe.
Always in May, in the US, the National Association for Business Economics released data according to which more than 90 per cent of the economists predict the recession will end this year and only 7% believe it will last until the first quarter of 2010. Closing the focus on to our sector, the analysis from various financial and industrial Institutions are quite clear: the new car market in Europe has buttoned and volumes are stabilising.
The general situation in Europe is quickly getting better for a number or reasons: First, the role played by the various Governments that have first supported the manufacturers to safeguard as many jobs as possible and then, within a few months if not even weeks, have started to unroll scrapping incentive schemes that are aimed at creating demand for new, more environmentally friendly, vehicles.
It is a fact that the average age of cars in Europe is growing. This may be down to better quality of build and reliability, but in any case there is a large number of old and potentially environmentally unsafe cars hat need to be changed.
Before the scrapping plans stepped in, there were in Europe well over 50 million of cars aged more than 10 years: more than 13 millions of these very old cars are in Germany, more than 13 millions of these very old cars are in Germany, 12.4 millions in Italy, 10.2 millions in France, 7.3 millions in the UK, 6.8 millions in Spain and so on.
This is the potential market for scrapping schemes. The 2.5 or maximum 3 million cars that will be scrapped thanks to the 2009 incentive in the various European market have just scratched the surface of this market.
At the moment, the only Country where the Scrapping schemes have shown their fantastic potential is Germany, who was a first mover and in the first four months is up 18% compared to 2008.
In others markets – like France, Italy and the UK – orders are picking up and it’s just a matter of weeks for the delivery flow to become more consistent. Spain, instead, seems still suffering despite the recent announcement of a 2000 Euros incentive per cars scrapped.
Scrapping incentive schemes – that as I said before may end up influencing the sale of maximum 3 million cars this year in Europe – mostly stimulate the purchase of new cars from people who normally purchases only second hand cars.
Marketing researches are quite clear in this: used car buyers and new car buyers are completely different groups with little migration from one to the other.
There are exception though: a large crisis and massive scrapping incentives are one of these exceptions.
Scrapping incentives are stimulating used car buyers to buy new cars while the other group – the buyers of new car – is not very active.
In fact during a crisis new car buyers tend to postpone the purchase of new cars until the first signs of Economic recovery.
At the same way, corporate and fleet buyers slow down fleet replacement during the crisis – and in fact they are not on the market right know. This will change only when the start of the recovery materialise.
All of this means that the market is, at the moment in the hands of used car buyers. This element should be managed carefully by Governments in order to avoid a softening of sales when the scrapping period ends.
Such a softening can be avoided – or minimised – if governments will continue to support the market through scrapping incentive during all 2010.
Forecast , in fact, indicate that the European car market will strongly rebound in 2011 after having rebuilt consistency in a progressive way starting from the second quarter of this year.
If such a building up period is supported until the end by new scrapping schemes, there is the real possibility that scrapping incentives will die exactly when the economic recovery materialise.
There is a very strict relation between consumer confidence and new car sales (graph), and you can appreciate it in this graph. Well, the latest figures for the EU 27 countries relative to the month of April and May 2009 shows that both consumer’s and business confidence index turning upwards for the first time since July 2007. Yet another element related to the economic crisis and consumer’s confidence should be kept in account.
As soon as the crisis will ease and the confidence returns, demand will restart to grow in all the new, emerging markets, where the request of mobility is high and unsatisfied yet. This is not only Asia, where China’s car market will be positive already this year as well as India.
No, this is going to materialise in Europe too: the he density of cars per inhabitant is low also in the newer EU member countries where there is potentially a large demand. When all these elements are put in a line, one after the other, there is little room for pessimism.
This is why I believe that the question in this moment in time is: What is next? And, most important, When?
The answer to the first question seems to me relatively easy: next is growth again. Starting from a much lower basis and may be more weak and slow than we would like to see it, but the is now doubts: potential growth is there.
The second answer is a bit more difficult. It is not easy to predict how the global Automotive Industry in general and the European situation will look like in 2-3 years time and beyond.
No one can be sure how quickly we will return to the volumes of 15million cars sold in the European Union in 2007, but if we look at the marketplace as it is in these days, well, we know that de-stocking is nearly over after 1.8 million cars were de-stocked in Europe over the last two quarters.
Recent discussion with OEM’s and suppliers reinforce the convictions that inventories will soon be back to normal levels.
Production is therefore resuming nearly everywhere, may be at a reduced pace but cars are again going to be produced.
Some important manufacturers announced higher production schedule in Q2-09 compared with Q1-09 and other have called back workers from temporary lay-off. I repeat, all the indicators are positive.
We should not, however, fool ourselves. It is not going to be all positive as from tomorrow.
There will be some more insolvencies and bankruptcies in the automotive industry and also within transportation service providers - but markets and the automotive industry will recover and come out of this crisis even stronger.
We cannot say yet which shape the Automotive industry will have in the medium term. For sure there is a substantial production overcapacity: in order to remain competitive automakers will be forced to work more closely together. Some will disappear from the market or be taken over by others. Some other may merge, or may not.
Whatever the outcome, only one fact can be given for granted: cars will continue to be built and after production they need to be transported to a customer. This, at least, cannot change.
The future of the transport companies in general is therefore not at risk, although it is very, very likely that only the strongest, fittest and the most competitive ones will survive. We are therefore back at the starting point: survival exercise.
Transport companies – we - for the time being can only do one thing: doing our best to survive for the next 12 month without major damages so to be ready and fit for the upturn of economy to follow the crisis.
One thing is for sure:
Although it could be environmentally friendly, with a marginal CO2 emission that would qualify in any Country for the highest level of ecological car incentives, this is not the future of the Worldwide Automotive Industry:
The real future is coming and still ahead of us. And this will require strong and capable transport companies.
I firmly believe that this future is not far away and that it is the duty, of all the decision makers involved in the industry at large and in the logistics chain in particular, to start now to consider the impact of a recovery and moving on planning.
This is absolutely necessary because the size of the task ahead of us will be many times harder than the capacity shortage issues that we faced in the past.
Starting to plan the future when still in a very difficult business environment may be difficult, but this is exactly what the industry should do now, both from our side and from the costumer’s side.
This is critical because it involves that customers – who are having their problems too, we should not forget – should start to think about on how they can ensure to have healthy suppliers basis.
A suppliers basis able to help them when they need it. Today and tomorrow.
The crisis has resulted in slashing down transport capacity by an averaged 25% to 30% across the market. Today there are less, much less railway wagons, trucks and ships available than only 8 months ago.
The current capacity has been adjusted and dimensioned to the lowest level reached during the crisis.
Therefore, it should be clear to everyone that even a relatively small increase in volumes can – already now, not in the far future – result in an under capacity of transport assets available the market.
This situation, already critical, can only worsen if our best companies are forced to continue to the capacity disruption exercise.
This is particularly true if capacity is disrupted not because of the deterioration of the market but because of the deterioration of the rates well below industrial cost.
We, as logistics service providers can do our best to survive the – hopefully short – time remaining before the market trend reverses.
They, as costumers have the interest to do their best to allow the economic conditions so that no further capacity disappear from the market.
This is indeed one of the tasks of my Presidency: to make sure that manufacturers focus on how important is a healthy supplier base.
They have to be persuaded that it is their best interest to have a reliable supplier base still alive in the medium term, when volumes pick up again.
The right place for this kind of discusison is the ECG Logistics Directors Forum, that will, gain new impetus.
ECG will therefore continue to promote these meetings and make sure that they are as effective as possible.
Talking with the manufacturers to make sure they have a clear picture of the market from our standpoint, do not exclude working together with the manufacturer to achieve common targets for the benefit of the industry.
A stronger relationship with ACEA is something I believe in and it is my intention to pursue it for the benefit of the ECG members.
ECG will put in place all the possible measures its lobby power, but it should not be forgotten that our is a very peculiar association indeed.
ECG has something unique in the panorama of the Industry’s group of interests in Europe.
In addition to being a lobby body, ECG has managed to become – and be recognised – as the single umbrella-organisation for finished vehicle logistics.
This you should have clear: ECG is de facto, the number any stakeholder calls whenever there is an European-wide issue. The latest one being the shooting issue.
Calls are made not only by members – who in reality are those who call less – but from all the other players in the field, suppliers and costumers to start with.
I am proud of what ECG has become. And it is my intention to strengthen this position further.
In order to continue along this path, however, ECG however, needs the support of its members. Your support.
We need to know timely what is happening on the different marketplaces and it any support can be given by ECG. We need a more proactive approach from your side.
This is what the members from UK and Spain have done in recent months for issues related to the impact of the crisis on their respective local markets.
Such activities are aimed at improving the understanding of just how bad things have become and how important the sector is to the automotive industry.
The British and Spanish cases are good example, but we can and must improve further the support we can give to members in a number of different field.
In order to be able to do it properly and timely, I invite members to get more involved in ECG activities: working groups, regional meetings or even only a phone call or emails to point a particular issue. If you alert the Association, we will react indeed.
Another area on which I want to focus my Presidency is Standardisation. Our sector is one where standardisation is not very much spread around. On the other hand, Standardisation reduce operational costs and speed up the movement of vehicles through the supply chain. In the past year we have achieved substantial results in this field and now we are extending the scope of our action at Global level, My aim is to increase the scope of the co-operation so to create with AIAG a global finished vehicle body to further develop up this process.
Alliances, however, can make ECG stronger even on our home turf: Europe. Already in the coming weeks ECG will therefore start to sever the ties with the existing national Finished Vehicle Logistics associations in Europe.
Continuing the work of my predecessor, Frits Mehrtens, I would like to build on the Common Efficiency Improvement Programme specifically with the development of a load exchange system. This is not a new idea but the efficiency savings possible are huge and we can not ignore the possibilities any longer.
As you may have appreciated by what I said so far, the is a consistent amount of work to be done.
This is why today we have voted in a larger. The Board all work for free, and we thank their companies for supporting them and us.
I will be writing to all members in the next few weeks to tell you about the roles that the Board members will have and how you can get involved in making the association work better for you and your company.
My final target is perhaps the most important.
We talk about investments in assets such as railway wagons, road transporters, ships, port and inland terminals and so on.
The one area that I don’t think we spend enough time considering is the investment in human capital – our people. And it is an investment, because in the same way you consider the return that a truck, a train or a ship can provide you over its lifetime, we should consider the return that our people could give us if we invest in them correctly.
People have the ability to achieve great things if they are given the right tools or training.
Management is asked to use their brains rather than their muscles to solve the problems or get more profit from the resources that they are responsible for managing.
But typically they will carry on doing something in the same way until someone shows them a better way.
Yesterday night we have all attended the graduation ceremony of the third course of the ECG Academy. The Academy represents a unique experience where enthusiastic young people from many different companies and many different countries come together to learn from very experienced professional logistics managers and university professors.
They share and learn new experiences and techniques.
Ask anyone, any company, who has sent someone on the course and they will confirm that the investment is well spent.
Tomorrow you will need to do things differently than yesterday and the best companies will benefit whilst the weak ones will not survive.
I highly recommend that you consider sending your future senior managers at the Academy now – tomorrow will be too late!
This is it, dear friends and colleagues, distinguished guests and sponsor, I thank you for being with us today and look forward to talking with you all later.