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Lord Mandleson Backs British Motor Industry With Words

Wed, 25 Nov 2009

I was admiring the cars on display on the way in and it’s hard to disagree with Paul Everitt’s comment in the programme that they are British icons. We’ve been making motoring icons now for more than half a century.


But it’s interesting that we look back on those post-war decades as the heyday of British car manufacturing, when in fact we have twice as many motor manufacturers in the UK now than we did then. We make twice as many cars today as we did 25 years ago, even before the big Asian players revolutionised the market, and twice as many engines as we do complete cars. If you put the 1.65 million cars made in Britain last year nose to tail…they would look like a bank holiday on the M4!


My point is that we sometimes have a glib notion in this country that we don’t really make anything anymore, that we are no longer an industrial economy. The motor industry makes a nonsense of that idea. If we want a balanced, diversified economy then the engineering and technological strengths of the motor industry are a national asset of the most unique kind.   


It has been a difficult two years for the motor industry – the toughest imaginable market conditions internationally. So I want to start today by paying a very genuine tribute to the resilience of the industry and its people.


It’s easy to think that motor manufacturing is chiefly about machines, but of course its biggest asset is its people. The workers whose skills and productivity are one of the reasons why this country is one of the best places in the world to make cars and components.  The staff who have accepted limited hours to keep plants viable through the downturn. The innovators in management who have had to build strong business models around high structural costs and ruthless price competition over the last two decades.


This industry is the cornerstone of Britain’s manufacturing economy. I know you’d expect a politician to stand up here and say that – but for the last year I’ve spent more time working for the future of the UK motor industry in one way or another than doing just about anything else. The car scrappage scheme has maybe been the most visible part of that, but through our business support schemes and worker assistance schemes and Train to Gain we have made sure that you had the help you needed. 


Of course the wider government stimulus is acting like a crutch for demand as private investment has collapsed, and that helps across the economy. As the IMF stressed again yesterday, prematurely withdrawing this stimulus would put at risk the very jobs, skills and capacity that we have worked so hard to protect. So although there are some politicians who try to make a virtue of their haste to pull away support for demand, it’s clear we need an exit strategy for the stimulus, not a rush for the exits.


Now, I’m going to disappoint you here. This commitment to motor manufacturing is not because it exerts some kind of special sentimental tug on Ministerial hearts. Sorry to say it.  It’s a cold hard judgement of what this industry means to our skills base, our engineering supply chains, our niche manufacturing skills, especially in design, low carbon and ultra high tech. It’s a measure of what this business means for the UK’s industrial future.


We are very, very good at making motor vehicles in this country – everything from mass market vehicles to Formula 1. I’ve made that case in Brussels, and Japan and Germany. I’ve made it to the management of GM and Magna.


But the reality is that this is an industry at the end of the current stage of its evolution. That was the basic analysis of the New Automotive Innovation and Growth Team chaired by Richard, whose excellent report has done so much to shape Government strategy over the course of this year. Today I want to take that analysis and ask what Government and industry need to be doing to make sure UK motor manufacturing is equipped to prosper through that change.


The horizon

 
There are two big basic problems out there for the vehicle industry: decarbonisation and over capacity. The basic evolution of car making over the last century has been based around the constant refinement of the same basic technology on which the automobile was originally based – the internal combustion engine. This has given a huge natural advantage to market incumbents.


But suddenly the market is much more open.    Low carbon technologies provide a real opening for new and innovative firms to shake up supply chains and this presents real opportunities for the UK and for the UK automotive sector.   

 

The industry also suffers from longer-term structural overcapacity – an overhang of productive capacity that is probably 20% higher than demand. Even if we project huge levels of car ownership in the developing world, it is inevitable that some of that European capacity is going to have to be absorbed through consolidation.


Our challenge certainly isn’t to fight off that process of technological and structural change – if anything Government has an obligation to drive it faster both for environmental and economic reasons. Our job has to be to help you make sure that when the technological kaleidoscope slows again, Britain emerges as one of the best place in the world to makes these new kinds of vehicles and their components, to design and manufacture these new kinds of technologies.


It’s absolutely vital that that process is guided by commercial logic, not politics. That’s why I put up such a stiff fight against any suggestion that the future of plants in Luton and Ellesmere Port might be decided by political considerations rather than productivity. Now, how we do that at the European level is a difficult question, to put it mildly. But the long term competitiveness of the motor industry in Britain and Europe depends on restructuring.  


Active help from government

 

So the question we face is how we turn that process of change into something from which British motor manufacturing emerges even stronger. Some of the most important answers to that question emerged from the work done by Richard and his team and the Government’s response to it. I want to say something about three of them: the new Automotive Council, low carbon vehicle policy and the wider strategic way we see the industry and its supply chain.  


The creation of the Automotive Council is a great development and has the potential to bring a whole new strategic dimension to the self-management of the industry, and in particular to the way it works with Government. But of course, it will only be as effective as the people on it, and the ideas and energy they bring to it. It needs to represent every part of the industry – the full supply chain including the research base, and the specialist producers.


It needs to be proactive and influential and have a very clear forward strategy, based on a very frank assessment of the industry’s strengths and weaknesses. The better that it is able to set out the strategic challenges facing the industry, the better government and industry will be able to respond to them together.


Keeping membership of the Council to a manageable size has forced some hard decisions.  We have announced the membership this morning and I think it is a great list.  For example, Richard Parry-Jones and Gordon Murray are engineers of world status.  Trevor Mann is a product of the Nissan revolution in the north east of England.  Franz Josef Paefgen brings a bit of continental European class.  Andrea Paver of Leyland Trucks and Gwenne Henricks of Caterpillar show that this isn’t just about cars.  We have suppliers and scientists and SMEs and environmental expertise and the OEMs.  So it’s looking good.


Clearly one of the most important strands of the Council’s work will involve low carbon vehicle policy. Now, I recognise that there is no silver bullet solution to cutting automotive emissions. But the industry’s consensus around a low carbon road map has provided a very useful tool and was central to the Government’s own strategy for low carbon cars,which we published in April.   


As you all know, as part of the £150 million Low Carbon Vehicles Innovation Platform, this included £25 million for the TSB’s demonstrator programme for low carbon cars, £30 million for pilot infrastructure for charging ultra low carbon vehicles and £20 million for trials of low carbon vans in public fleets. We have created a Low Carbon Economic Area for ultra low carbon vehicles in the North East that will leverage the various research and production strengths in the region into a single network of mutually-reinforcing strengths.


I think we have to accept that barring a crippling new plateau in oil prices, consumer choice alone isn’t going to get us to a tipping point in decarbonising road transport fast enough. The carbon cost needs to start showing up in the price a lot more clearly. That’s why we were the first country in the EU to tie vehicle taxation to CO2.


But we are also providing positive incentives by investing in charging infrastructure and making £230million available from 2011 for consumer subsidies for the first major generation of ultra-low carbon cars – a policy that reflects closely the timetable for technology roll-out that the industry itself set out in its roadmap.


Key Tier One suppliers around the world are starting to sit up and take notice of what is going on in the UK on low carbon cars. The trick now is to make the UK the place you just can’t ignore if you’re in the low carbon motor business.


I’d like to think that it’s a reflection of this commitment to making Britain the best place in Europe to manufacture low carbon vehicles is one of the reasons why Toyota, Nissan and Ford have all made the decision to locate key parts of their low carbon operations here.


Finally, in building the industry’s future strength we need a comprehensive view of how the sector works: from the manufacturers to the Tier Ones to their suppliers and beyond.  For the future I want a determined strategy to build strength at all levels and sustain the industry’s critical mass here in Britain. The Innovation and Growth Team report left unfinished business here.


For our part, government will make sure that good suppliers can prosper here. We will actively seek out more companies to locate here. We’re supporting the research base in a big way, especially in low carbon. We’re building a new technician class through our revived apprenticeship system. And a Supply Chain Council - as part of the Automotive Council - will provide us with advice on further steps. 


But the big players in the industry need work with us in partnership – and I think this was clear in Richard’s report. We all agree that there has been some hollowing out of the supply chain in this country – and we all know who has done the hollowing out! 


My offer is partnership. A partnership in which manufacturers show their share of responsibility for the UK supply chain. There needs to be more collaborative, longer term partnerships with suppliers.  When a big player tells me, as one did last week, that it wants to source more here rather than put its faith in supply lines that stretch over the Alps or the Urals – I say, good, let’s ensure that that happens.


Conclusion

 
Right, that’s enough from me. I’ve argued today that the transition to low carbon and the challenge of rationalising European vehicle production make the next decade critical for vehicle makers in Britain.


My basic message to you today is that Government is committed to working with you to tackle that change.  This has been a tough industry to be in and it seems to me that it is only going to get tougher. 


But you know what they say: if everything is coming your way - you are in the wrong lane!


Department for Business, Innovation & Skills


The Department for Business, Innovation and Skills (BIS) is building a dynamic and competitive UK economy by: creating the conditions for business success; promoting innovation, enterprise and science; and giving everyone the skills and opportunities to succeed. To achieve this it will foster world-class universities and promote an open global economy. BIS - Investing in our future.

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