Credit Suisse has proposed a novel idea for the European car industry, one whose title we are well familiar with: Car Czar. What would make this position far more radical than that formerly held by our own Steven Rattner is that the European car czar would be tasked with managing a reorganization of the entire industry across the continent, not just in one country. It cites Lewis Booth, retired Ford of Europe CEO and global COO, as the man for the job.
The financial institution uses just 53 pages to document "how to fix Europe's broken car industry," recommending the czarist way for a few key reasons: the industry supports a total of 12.7 million jobs across Europe and can't be left to languish in its current slump, so the EU as a whole "needs to accept responsibility" and the appointment of someone like Booth leading a task force with authority across borders could create solutions not hampered by protectionism or the fear of corporate disadvantage.
Credit Suisse identifies overcapacity as the largest obstacle to profitability for European automakers. The report says that capacity would need to be reduced by ten percent just for automakers to break even, or by almost 25 percent to match the amount of capacity taken out of the U.S. industry after the financial crisis, and create real profitability. Beyond that, poor management choices and the perception that the industry "is run for the wider social good" have compounded problems.
It might be a neat idea, but we don't think Booth or anyone else needs to worry about a call-up – a pan-European car czar probably isn't going to happen. Sovereignty issues alone will see to that; France's new president, for instance, would never vote to create an office whose first priority will be to dismiss French workers. Corporate sovereignty would also factor, since there appears to be little way to compel the automakers to submit entirely to the czar. Sure, some European makers would love to receive incontestable orders to shut down factories and send home workers, but would they really let a czar reorganize their managers?
There is enough that is fundamentally sound in the industry for Credit Suisse to predict a rosy future, but only so long as deep reforms are begun now. Otherwise it predicts "Europe's car makers will be kept afloat by national governments and long-needed reform will be put off again." Based on how much trouble the EU is having with righting its financial ship, a much bigger problem at the moment, we'll bet those reforms will come a little later, rather than sooner.