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“For large European groups, sharing the risks with their subcontractors is the only way to ensure stable supplies”

Lsoaring energy prices in Europe lead to a major migration of energy-intensive industries to countries where energy prices are lower? The current price explosion is putting many sectors of activity in difficulty. Germany is hit hard. In France, companies like Duralex or Arc, in the glassware sector, have already reduced their production. The metallurgy is generally struggling. Everywhere in Europe, steelworks are shut down.

Some of these industries sell directly to consumers but, in reality, the first buyers of glass, steel, metal parts or other energy-intensive products are the major European groups in the building, aeronautics, automotive, food industry…

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Faced with the sharp rise in energy prices in Europe, and therefore in the production costs of their usual subcontractors, will these major players in the economy turn to other suppliers, resorting for example to American producers who today benefit from half-price electricity, or to Asian or South American companies, which are also less affected by the rise in energy prices?

Interest in showing solidarity with its suppliers

Even if the cost of transport can slow down the desire to change supplier, the optimization of purchases is a natural reflex in large groups, usually without great qualms for their subcontractors. However, European principals may have an interest in showing solidarity with their suppliers, as shown by the study of certain practices during the Covid-19 pandemic (Philipp Sauer, Minelle Silva and Martin Schleper, “Supply chains’ sustainability trajectories and resilience: a learning perspective in turbulent environments”, International Journal of Operations and Production Management, flight. 42, no. 8, 2022).

The few large groups which, during the period of health crisis, “played collectively”, taking into account not only their shareholders and their employees, but also their suppliers, including distant ones, were indeed winners in the end. By supporting them, through their financial might, they have enabled these contractors to get through the ordeal with less damage, and this has improved their own resilience as the economy picks up again.

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Those who had “dropped” their suppliers from the other side of the world, forcing them to lay off their staff without compensation during the confinements, found themselves very helpless when the time for recovery struck. The employees of these suppliers had evaporated in their regions of origin, taking with them their know-how. The situation today is different.

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