Payment Periods in Europe - Euler Hermes

More documents

Recommendations

Info

Euler Hermes Economic Outlook n° 1182 | Special Dossier | Payment periods Automobiles and automotive components: the problem for subcontractors 14 Relations between subcontractors and their clients have been difficult for a long time. Major contractors enjoy unchallenged bargaining strength, benefiting from their powerful positions to the detriment of their subcontractors and imposing very long payment periods. We note that the automotive components sector in France (number two in Europe, behind Germany) accounts for more than 40% of subcontracting in the country. Acceptable payment periods in the automotive sector. This is the sector with the shortest client payment periods (at 37 days on average), proof of the cooperation between major contractors and subcontractors, notably in Northern Europe. With the implementation of industry round tables in France, the sector is working to harmonise payment periods in order to avoid harming subcontractors. A very good example is automotive components, with supplier payment periods of 53 days. With supplier payment periods longer than client payment periods, the automotive sector shows cash flow surpluses of varying sizes, depending on the country. However the countries where these surpluses are the biggest are those where supplier payment periods are much longer than average. We can distinguish two different groups of countries in the auto sector. ▶ The good students of Northern Europe. At the top of the class are Germany and the United Kingdom, with client payment periods of 22 and 31 days’revenue respectively, and supplier payment periods of 34 days in both cases. The cash flow surpluses in 2010 were the equivalent of 13 days’revenue in Germany and 3 days’revenue in The United Kingdom. In France there was a sharp fall in payment periods in 2007, followed by very sharp fall in 2008, when client payment periods dropped to 32 days and supplier payment periods fell to 41 days, in anticipation of the implementation of LME. However, 2009 saw a clear lengthening in payment periods, with client payment periods increasing by 50%. This was a response to the crisis by automakers to support their concessionaires, the latter heavily burdened with stocks of unsold vehicles. In 2010, payment periods shortened again, dropping to 41 days for client payment periods and 49 days for supplier payment periods, thanks to good cash flow management, showing an 8-day surplus. ▶ The countries in Southern Europe as well as Belgium are drawing on supplier credit. The countries in Southern Europe as well as Belgium are drawing on supplier credit to ensure a positive cash flow to offset their weak cash flows or low shareholders’equity. Italy shows a significant cash flow surplus, generated by very long supplier payment periods (at 75 days, more than twice as long as in Germany). At the same time, client payment periods there are 37 days, within the European average, generating a very large positive cash flow for Italian automakers. The European Directive, whose aim is to reduce and control payment periods (to a maximum of 60 days) will therefore be hard to implement in Italy in this sector. ◾◾◾
Economic Outlook n° 1182 | Special Dossier | Payment periods Euler Hermes Client payment periods: automobiles 60 Client payment periods in days’ revenue, 2010 50 40 30 20 10 US 42 SE 19 ES 48 NO 45 IT 37 BEL 41 FR 41 DK 40 DE 21 GB 31 0 -110% -60% -10% 0% 10% 40% 60% Change Supplier payment periods: automobiles Supplier payment periods in days’ revenue, 2010 100 90 80 70 60 50 40 30 20 US 79 IT 75 FR 50 10 Change 0 -100% -50% 0% 50% 100% Source: Euler Hermes Indicator of change in client payment periods: automobiles NO 47 ES 56 SE 37 BE 69 GB 34 DK 45 DE 34 Cash flow Tension Indicator: automobiles 50 20 40 10 30 20 0 10 -10 0 -20 -10 -20 -30 -40 2007 2008 2009 2010 France Germany Spain Italy United Kingdom Belgium -30 -40 -50 2006 2007 2008 2009 2010 France Germany Spain Italy United Kingdom Belgium Source: Euler Hermes Source: Euler Hermes Client and supplier payment period gap: automobiles Italy 0 22 Belgium 4 16 Spain 3 11 France -3 5 United Kingdom Germany -19 -19 -15 -5 -25 20 -15 -10 -5 0 5 10 15 20 25 Client payment period difference from average of 37 days Supplier payment period difference from average of 53 days Source: Euler Hermes 15
Page 1 and 2: no. 1182 Special ”Dossier” Paym
Page 3 and 4: Economic Outlook N° 1182 | Special
Page 5 and 6: Economic Outlook n° 1182 | Special
Page 13: Economic Outlook n° 1182 | Special

Payment Periods in Europe - Euler Hermes

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?