Best bits from SMMT Annual Dinner

Last night the Society of Motor Manufacturers and Traders held its annual dinner at Grosvenor House in London.

Welcoming his guests, the outgoing president of the SMMT Nigel Stein, gave an insight ful speech which assessed what 2012 has brought to the UK automotive industry, accounted for SMMT and government work to boost prospects and tackle remaining challenges for the resurgent sector, and suggested where efforts should be focussed in the future in order to bring sustainable growth to the UK as a whole.

Below are some of the highlights from his address:

The importance of the global automotive industry

“We are privileged to work in an industry which so positively impacts the lives of millions, indeed billions of people. It is an industry which has been responsible for bringing major advances in the standard of living to countries across the world. Affordable personal flexible transport provides access to education, healthcare and economic opportunity.

We should remember that, globally, the automotive sector is estimated to account for $2.6 trillion of economic activity.”

UK automotive in 2012

“Despite the difficulties in much of Europe, we continue to move forward. On the sales front we have seen continuing strength with the output for this year’s UK passenger cars now at two million units. Four per cent higher than last year. The SMMT recently increased it forecast for the next few years.

More importantly, we expect to produce 1.6 million cars here this year and, based on the recent SMMT/KPMG report, in 2016 when capacity expansion comes on stream we could potentially rise to nearer two million units a year – beating the 1972 record and making the UK one of the larger car producers in Western Europe.

This would be a remarkable achievement for an industry which, to public knowledge, was all but dead and buried only five or six years ago.

Around the room tonight a video has been playing to highlight the steady stream of good news. Global manufacturers have committed to invest large sums of money in UK manufacturing.

In total almost £6 billion has been committed in the last 18-months.

That’s a huge vote of confidence in the UK and something we should broadcast when we talk about this great industry.

And remember, most of this is not investment by government  – although its help and support is gratefully acknowledged – but rather by hard-nosed global car manufacturers who have a choice of where to go and where to invest and who have decided that the UK is the best place to build their product.”

Room for improvement in supply chain

“The health of the industry is not just about additional assembly capacity. Although that is an important constituent, it also requires innovative technology and a strong UK supply chain to deliver.

Before the tide began turning in the last couple of years we have suffered twenty or thirty years of decline with underinvestment in plant, technology and skills.

The Automotive Council has done a fantastic job in mapping the problem and establishing a working group to come up with solutions. But let’s not kid ourselves – there is still a long way to go.

I believe that as an industry we must strongly support this effort. As without a strong supply chain our recovery could easily be undermined.

We need sustainable supplier profitability because without it, companies won’t invest.

Government help here is vital. I applaud the initiatives for both a competitive UK corporation tax rate and above the line tax credits for R&D. These will both make a real difference.

I’m pleased to say that SMMT has also played its part in supply chain initiatives by holding two successful ‘Meet the Buyer’ events. And last week we joined the gap between the supply chain and possible sources of finance at a ‘Meet the Funder’ event.

Last week Richard Parry Jones, co-chair of the Automotive Council, paid tribute to the way that SMMT work with them and contribute to the industry’s success.”

Collaboration with government for success

“The fact that the council and the SMMT speak with one voice for the whole industry has made us extremely effective and is something we must strive to continue.

Industry and government working in partnership is the best solution.

So we’re doing the right things. But don’t expect overnight success. This needs to be a sustained, consistent campaign over many years.

Keeping a voice in Europe

“I mentioned earlier that here in the UK we are managing to buck the difficult times in the rest of Europe. But we should certainly not underplay the importance of Europe – and not just because it is a market for 12 million cars.

It is in Europe that many of the rules and regulations which govern our industry are debated and decided. Brussels chooses the projects to support the industry by EU funding and in Geneva, where international standards are set and where powerful lobby groups speak for America and Japan, for China and other emerging markets, there is no UK voice. Just the EU which speaks for us.

So whatever the political considerations we must ensure that the UK keeps a strong voice in the European auto industry.”

Advice for the future to boost UK prospects

“Risk and risk taking. As an engineer/accountant from Scotland, you might expect me to be pleading the case for risk mitigation. Far from it. There are too many people in the professional ranks in the UK who make a living out of avoiding risk. There is no reward without risk.

A risk free society is an enterprise free society. And one that will slowly decline. We need to push back against this tendency and I was delighted  to hear the Prime Minister say something similar in his speech to the CBI last week.

There will always be someone to tell you why something can’t be done. We need fewer nay-sayers and more entrepreneurs.

And here’s one suggestion from me. Many of you sitting here tonight work for companies with a deficit in their pension scheme. If your company has been in business for more than twenty years it’s hard to avoid it.

The SMMT does and so does GKN.

Obviously these obligations must be met and commitments to pensioners honoured. A deficit can’t be left uncovered for too long. But the problem is that almost everything paid into a pension fund today ends up, one way or another, invested in government securities. So you are taking money out of companies and lending it to the UK government.

Is that really a way of creating value and driving growth? It may sound trivial but GKN currently pays £30m a year in this way. That’s the investment for one new UK factory every year being lent to the government.

And why? To reduce risk – in our view to reduce risk more quickly than we need to. Perhaps it is time to realise that the real risk we face as a country is a lack of risk taking and a lack of ambition.”