As the pandemic causes the deepest recession in most of a century, the European Union has proposed a €750bn recovery package that includes aims to ensure “strategic autonomy” in key sectors and stronger value chains within the EU.
European leaders have talked of bringing manufacturing back to member countries to avoid the type of crises that quickly followed the initial outbreak in China. The shutdown of auto parts factories there sent Europe’s vehicle producers scrambling for replacements to feed assembly lines. Europe’s dependence on foreign-made health-care protective gear such as masks and gowns also became painfully clear. But shortening logistics routes is not part of Valeo CEO Jacques Aschenbroich’s plans to steer his company out of slump that has pushed European car sales to record lows.
Aschenbroich says “Our final customers and auto parts clients aren’t ready to pay more if our supply chains were relocated, so if neither of them put a value on the risk, there is no chance that supply chains will be relocated”. He added, “We should pay homage to these supply chains that have shown extraordinary resilience after withstanding successive shocks like Fukushima, flooding in Thailand and now COVID-19”.