Jan 06 - The European car industry has been struggling for several years, but Spain's auto assembly plants are bucking the trend, increasing production, winning new models and creating jobs. That's most welcome in Spain, beset by continued high unemployment. But as Joanna Partridge reports, analysts warn one industry won't be enough to steer the economy to growth.
Forget citrus fruits, olive oil, wine. This is Spain's biggest export. Despite not having any home-owned carmakers, it's now Europe's second-biggest car producer, behind Germany. This Ford plant near Valencia on the Mediterranean coast just one that's increased production, won new models and created jobs - even as much of the European car industry is still struggling. Over 7000 people work at the site. Pepe Perez, Communications Manager at Ford, believes the factory is a key economic driver for Valencia. SOUNDBITE: Pepe Perez, Communciations and Public Affairs Manager, Ford, saying (English): "Before Ford arrived in 1973, this was an agricultural area and there's not much activity in the industrial side. Fortunately with the introduction of Ford and as the years have gone by, there is a web of suppliers who have installed themselves,a lot of suppliers, new suppliers, so there is this German automotive industry now." Ford's only been building the Transit Connect in Valencia for three months. Its arrival along with the Kuga brought 800 million euros of investment and 1100 jobs here. And there's also a knock-on effect. It's estimated that for every job created directly by Ford, leads to another 3 three being created at a supplier. That's welcome in Spain, where unemployment still stands at an eye-watering 26%. Keen to protect jobs, the unions at the Valencia plant have accepted flexible work practices and salary freezes, says UGT union Secretary General Carlos Faubel. SOUNDBITE: Carlos Faubel, UGT Secretary General at Ford Valencia plant, saying (Spanish): "We always try to get agreements where the firm and the workers win. We always have the future in mind, we always keep our fundamental values, securing jobs, retaining the purchasing power of the wages. These are the two fundamental questions which we use in every negotiation we begin with the management." A sales slump over the past 6 years has hit Europe's mid-range manufacturers hardest. Spain's fortunes contrast especially with France's struggling PSA Peugeot Citroen. It lost 5 billion euros in 2012 and is pursuing a tie-up with China's Dongfeng Motor Group to pull it out of its downward spiral. While Spain's car industry is driving growth now, it's not the answer to all the country's woes, says Anil Valsan from EY. SOUNDBITE: Anil Valsan, Global Lead Analyst - Automotive, Ernst & Young, saying (English): "It's important for the brands, manufacturers and the government, the industry association, to drive up utilisation at these plants, to make sure that these are not just products for the domestic or the local European markets, to make sure they are producing products that can be exported to other markets. Because one of the things going forward that we will see is the emergence of a lot of hubs for producing vehicles. So that is something that Spain can aspire to become." Spanish car industry wages are around the European average - and almost double those of regional competitors like the Czech Republic. Industry experts warn that low labour costs aren't enough to keep Spain growing as a carmaker. Bringing research and development to the country will also be key for ensuring in the long term it's less dependent on its production lines.