Forums banner
1 - 4 of 4 Posts

881 Posts
Discussion Starter · #1 ·
This is fairly depressing, especially this quote -

"It doesn't make sense to have [component] development in the UK as cars no longer are developed in the country... It's like having production on the moon."

Local supply chain runs into trouble: Debate over job losses appears to have obscured the real problem facing the sector - the shift to sourcing components from overseas, writes James Mackintosh.

783 words
26 March 2005
Financial Times
London Ed1
Page 3
(c) 2005 The Financial Times Limited. All rights reserved
When PSA PeugeotCitroen told 850 workers at its Ryton car factory near Coventry this week that they would soon be out of a job, locals were outraged. MPs called for emergency talks with the government, unions called for emergency talks with the chief executive of the French company and the Coventry Evening Telegraph concluded that the workers' "skill and commitment count for nowt".

It is areaction that is becoming well-practised. Peugeot made 700 workers redundant last year, while production at the nearby Jaguar factory - the Ford-owned luxury marque's historic home - will end this summer.

Together with sister company Land Rover, Jaguar is getting rid of 1,150 jobs. Up the road in Birmingham the future of 6,100 posts at MG Rover, the last British-owned mass car manufacturer, depends on a rescue deal under negotiation with a Chinese carmaker.

Yet, the high profile of job losses at car factories appears to be distracting unions and politicians from the real problem faced by the British car industry: the shift of many components suppliers overseas.

Garel Rhys, head of automotive research at Cardiff University, said that in the past 10 years the value of British-made components in British-built cars had dropped from 60 per cent to 20 to 25 per cent.

As a result, total employment in the industry, including both vehicle and component factories, has dropped from 241,000 in 1998 to an estimated 197,000 last year, according to government figures - against a peak in 1970 of 525,000. "It is clear that much of the British supply chain has gone beyond recall," Prof Rhys said. "The area most in danger from that is the West Midlands."

Jobs in other regions are also at risk, as shown by the announcement last week that an air bag factory in Hampshire run by Autoliv, a Swedish manufacturer, would be moved to Turkey with the loss of 520 posts.

"It doesn't make sense to have development in the UK as cars no longer are developed in the country," Autoliv told Bloomberg at the time. "It's like having production on the moon."

Suppliers were pushed out of business during the period of sterling strength, as eurozone-based suppliers were able to undercut their prices dramatically. But sterling's fall in the past three years has done little to help be-cause low-wage east European countries joining the European Union have attracted new parts factories instead.

The experience of the strong pound - which hammered profits for both suppliers and vehicle assemblers - has also forced many British-based suppliers to accept payment in euros.

Nissan's factory in Sunderland, the most efficient car plant in Europe, pays for 70 per cent of its parts in euros, even though almost half its suppliers deliver from British factories. Even where components continue to be produced in the UK, the second and third tier of suppliers - delivering smaller parts to the main supplier - are often based abroad.

"If you are a German company and you come here to supply someone you are going to use the German second and third tier suppliers you already know well, not someone British you don't know," said Prof Rhys.

In Coventry, the sense of crisis over Peugeot's factory is being heightened by uncertainty about its future after the 206 model built there ends production towards the end of the decade. Peugeot is among the many carmakers to have opened plants in eastern Europe to take advantage of lower wages, raising fears that Ryton could eventually be shut.

"We just can't win it on cost," said Dave Osbourne, of the T&G transport union. "But wage costs aren't everything. Labour only accounts for 10 to 15 per cent of a company's total cost."

His point is underlined by recent investments in factories by carmakers whose sales are rising. Toyota in Derbyshire, Nissan in Sunderland and Mini near Oxford, are all investing in extra vehicles or raised output to support sales.

Just this week the Society of Motor Manufacturers and Traders reported that car production in February was the highest for three years, and annual output remained well above 1.5m cars a year - significantly higher than the low of 887,000 in 1982.

It is not what Coventry's politicians want to hear, but perhaps they should be concerning themselves more with helping the makers of nuts and bolts than with the assemblers of cars.

6,361 Posts
It is not what Coventry's politicians want to hear, but perhaps they should be concerning themselves more with helping the makers of nuts and bolts than with the assemblers of cars.
No, becuase without the assemblers of cars in the UK there would be hardly any suppliers left at all. The solution is to ensure support for UK car companies rather than foreign-owned ones (well there's only one at present).

It is obvious that with so many non-UK parts used by the foregin UK-based auto manufacturers - even when there's no economic basis for it (e.g. German-sourced parts) - the solution is to either give up on the automotivre sector all together, or support UK-owned manufacturers across the board.

Somehow I think the FT would rather the manufacturing got dumped. Maybe they'll cry when it's too late and their share-owning utopia turns into a nightmare once they are muscled out by foreign investors and the City is foreign-owned :eyes:
1 - 4 of 4 Posts
This is an older thread, you may not receive a response, and could be reviving an old thread. Please consider creating a new thread.