Excess Capacity Viewed as Excess Quality — The Case of French Car Manufacturing

Abstract

Since 2008, the European car crisis has been presented as a consequence of significant manufacturing overcapacity. This overcapacity was linked, on the one hand, to the arrival of new entrants who built factories to produce automobiles close to their new markets and, on the other, to the stagnation and decline of saturated and hyper-competitive European markets. Certain automobile manufacturers have sought to adapt by reducing manufacturing capacity in high-wage countries while maintaining or developing their output in Central and European countries that pay lower salaries. The automobile output of new member states has been growing significantly over the past 15 years (Jullien & Pardi, 2013), and capacity has been added more recently in Turkey, Morocco and Serbia. France and Italy have been particularly impacted by this move to lower cost countries (Jullien & Lung, 2011). France, for example, still manufactured 2.88 million vehicles in 2000, but only 1.46 in 2013 (CCFA, 2014).