Does Ford Transit’s closure suggest there is much more trouble in store for Britain’s ebullient car industry? On the contrary, the new order of things bodes well for the UK, says the SMMT.
In the last 12-months you would need to be living under an old tractor tyre to have missed the Great British Jam Jar story.
Jaguar Land Rover, Nissan, BMW Mini, Honda, Toyota have all been in the news for the right reasons – with the occasional blip – announcing new factories here and ramping up recruitment there.
Then came Manganese Bronze who filed for administration on Monday and, more fundamentally, Ford’s decision to close its Transit factory on Thursday. Ford has been manufacturing cars and vans in the UK for 100-years.
Ford Transit’s demise is very sad but wholly expected, says a spokesman for the Society of Motor Manufacturers and Traders, the UK automotive industry’s main body representing manufacturers.
“Ford’s 2012 losses are expected to be at the $1.5 billion level. That sort of number triggers a necessary requirement to restructure its European operations,” says the SMMT’s spokesman Jonathan Visscher. “That has happened in Europe but also globally, since the recession has hit all these big carmakers. Its very disappointing for the employees concerned but Ford is making jobs available elsewhere or offering them voluntary packages.” Ford is not making any compulsory redundancies at Southampton.
The main factor is Europe, the UK’s biggest export market for cars. There is such little growth in consumer spending in this market that this week, among other signs of economic retrenchment, US healthcare company Kimberly-Clark decided to close its factory in Barton, Humberside.
Vans are comparatively cheap products to make. Ford in Southampton also manufactures them in small volumes, about 23,000 a year. The future of car manufacturing in the UK, the vast consensus agrees, is in advanced engineering and R&D .
“The UK’s strengths, in the European context, are its workforce flexibility, its engineering expertise, the level of knowledge of technicians and the amount of research and development here,” says SMMT’s Visscher. “The relevant processes that occur here lend themselves to hi-tech, high performance and high efficiency models. The Transit is not at that end of things.”
“This is ultimately a logical business decision that will help to make a stronger, more productive European automotive industry in the long term and we are seeing this process going on across Europe with other manufacturers,” says Mr Visscher.
Looking at Ford’s footprint in the UK, with 15,000 employees here, there are two vast R&D facilities at Dunton and Dagenham, and two engine plants, at Dagenham and Bridgend. The engines manufactured here account for two thirds of Ford’s global engine requirement. That is where the value is, and that is the future.
“This high tech end is what has driven the £6 billion investment in the UK in recent years,” adds Visscher. The same applies to Jaguar Land Rover; when the Indian-owned firm announced a new +£100m factory this year, the product it selected to make in Wolverhampton is an engine.
In short, van manufacture in the UK has had its day. Could small cars, also, be at risk?
Vauxhall, for example, has had its problems this year. Production ceased at the company’s Luton and Ellesmere Port plants for a full week in September due to the slump in European demand. People who buy small or mid-market cars don’t have much spare cash and people with money have found good price competition and finance with better quality marques.
Does this mean the end of manufacturing ‘functional’, everyday cars in Britain? If vans are too cheap to make profitably in the UK, the same argument could be applied to small, cheap hatchbacks and saloons. After all, Nissan stopped making the Micra in Sunderland in 2010.
Not so says SMMT. “The vehicle manufacturers base their factories near their markets. One of the best selling cars in the UK is the Vauxhall Astra,” says Visscher. “It makes perfect sense for them to build the cars where there is demand, and the Astra is always in the top 10. “
The key to small being right for Britain, is engine performance. These new small cars are very efficient. A new small Nissan hatchback, to be built at NMMUK in Sunderland from 2014, the new European hub for manufacturing, is coming here because Nissan knows that the UK and northern Europe – despite its current travails – will have strong demand for such fuel-efficient runabouts when the economy comes back. The investment in UK plants is across the board, not only for luxury cars, SMMT says.
Vauxhall is a prime example. Before the deal with General Motors with an element of intervention by Vince Cable earlier this year, Ellesmere Port’s existence looked bleak. Since that intervention, Vauxhall/Opel has pledged a new model Astra will begin production at Ellesmere Port in 2015, giving the plant a long term vote of confidence.
“The whole industry is changing, adapting to new types of demand patterns – like for 4x4s in Asia and super-efficient hatches,” says Visscher. “Because of Europe, the next six to nine months will be bumpy. But ultimately the UK is in a very good place, especially compared with some other countries in Europe and with good workforce flexibility, where we have year-on-year growth for automotive manufacturing, especially cars, and hitting record levels of production.”