Spanish Auto Industry Threatened By Eastern Competition

Spain's car industry is set to slump in the face of tough competition from eastern European producers, industry observers said. "With an expanding Europe, diminishing profit margins and growing consumer demands, Western European car production is under threat from low-cost labor not only in Asia but also in neighboring Eastern and Central Europe," according to the Automotive News Europe Congress.

The congress, looking ahead to its May 4-6 meeting in Barcelona, warned that Spanish production could drop 30% within five years from its current level of three million units annually.

"Spain's main problem is the entrance into the European Union of ten new countries that have low wages and are well situated," the Congress quoted Joaquin Ruiz de Velasco, a university professor of business strategy in Madrid as saying.

The congress noted that Spain no longer enjoyed the competitive wage advantage it had when it joined the European Union in 1986, and suffered from having plants a long distance by road or rail from its EU neighbors. The arrival of mainly eastern EU newcomers had exacerbated the problem, the congress said.

Copyright Agence France-Presse, 2005

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