Sector focus: Automotive

Posted on 3 May 2013 by The Manufacturer

OEM car assembly in the UK is booming. But there’s work still be done to optimise the UK’s economic benefit finds TM.

If you ask manufacturing leaders, the national press is notorious for undermining public perceptions of the health of British industry; forever focussing on factory closures and industrial action rather than contract wins, job creation and investment.

But the last couple of years have presented a challenge for such naysaying hacks reporting on automotive manufacturing.

Since 2010, around £6bn of inward investment has been made into automotive OEM manufacturing capacity and capability. And the newly kitted out plants are not standing idle. In 2012 1.46 million cars were produced in the UK and of these, 1.2 million were exported.

Furthermore, these figures, provided by automotive trade body SMMT, exclude strong growth in vehicle segments other than cars, such as construction and agricultural equipment. Home-grown British manufacturing icon JCB is thriving in the former, reporting its strongest ever results in 2012, and Fiat owned CNH UK last year increased production by 20% on healthy 2011 levels. 92% of production was exported.

CNH UK’s productivity, though reliant to some degree on high tech investments, is grounded on its culture of World Class Manufacturing, a Group improvement system. A similar story is true across UK-based automotive OEMs who have embraced lean manufacturing principles and persisted in finding improvements well after the proverbial ‘low hanging fruit’ was picked. Will Stirling’s report from Toyota’s Deeside factory in this sector focus gives a compelling insight into the enduring relevance of lean improvement to UK automotive competiveness (p38).

Nissan body in white on the production line in Sunderland
Nissan body in white on the production line in Sunderland

“Since 2010, around £6bn of inward investment has been made into OEM manufacturing capacity and capability”

Powerful proof of UK automotive success abound, flying in the face, not only of national perceptions that UK manufacturing is dead, but also of crisis in the market across the channel in mainland Europe.

Still fragile

But while we should celebrate and trumpet UK automotive success, we must not be complacent. In 2009, UK automotive was on its knees.

Looking back at archived news stories it is staggering to haul up accounts of campaigns in Westminster led by MPs and Jaguar Land Rover employees protesting at plans to close sites at Solihull and Castle Bromwich. And beneath such doom laden headlines from OEMs, the supply chain was disintegrating. At the close of 2008, credit rating firm Experian issued a sector health report which branded UK automotive companies with a 79.6% chance of failing in the following 12 months.

And this weakening of the supply chain still poses a threat to sustainable automotive productivity in the UK. At the SMMT annual dinner last year, then president Nigel Stein said: “The health of the industry is not just about additional assembly capacity, 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 suffered thirty years of decline with underinvestment in plant, technology and skills.”

Mr Stein pledged then to ensure that SMMT and the Automotive Council would continue work in 2013 to rehabilitate the automotive supply chain in the UK. He said that problems had been mapped but admitted “there is still a long way to go” to find effective solutions.

A problem remains, it seems, in supply chain visibility for OEMs who are keen to support the growth of local capability and capacity. SMMT reports that automotive OEMs based in the UK spent £11bn with local Tier 1 suppliers in 2012 out of a total supplier spend of £31bn.

Sector Statistics

  • Globally, the automotive sector is responsible for an estimated $2.6 trillion in economic activity
  • In 2012 the UK automotive sector turned over £54bn
  • There are around 2,350 manufacturers in the UK which are classified as automotive suppliers
  • The sector employs 82,000 people

An SMMT spokesperson assured TM that this “represents a significant level of domestic supply”. But with most Tier 1 suppliers being global companies, there is little assurance that those billions are trickling down to domestic tier 2, 3 and 4 suppliers.

At present, SMMT values the automotive supply chain in the UK at £4.5 billion and says the UK has the capability to supply 80% of all component types required for vehicle assembly. However, last year it also published a report, Capturing Opportunity, which stated there is an additional £3bn worth of opportunities for automotive suppliers in the UK to deliver for “specific and urgent” OEM and tier 1 requirements.

Seizing hold of such opportunities is critical if the UK economy is to reap the full rewards of its automotive renaissance. But this will require radical action and innovative support for the rehabilitation of the industry’s skills pool and the fast-tracking of investment in new technologies and greater capacity.

There are positive signs that this requirement has now been acknowledged by government and industry support bodies. In the industrial strategy announced by the Department for Business Innovation and Skills in September last year, UK automotive manufacturing was labelled a priority sector for investment. Subsequently, the sector has seen many millions of pounds pledged to its development via the Employer Ownership of Skills scheme, the Advanced Manufacturing Supply Chain Initiative, the Regional Growth Fund, Technology Strategy Board Competitions and more.

“The focus for the automotive council this year is to see the launch of a sector strategy for the car industry, reminiscent of that which has brought huge benefit to UK aerospace”

Nissan Leaf power train ready for installation
Nissan Leaf power train ready for installation


With regards to industry skills challenges, this sector focus reveals the dedication of Jaguar Land Rover to mitigating the negative impact that its success has had on some suppliers – a problem Jose Lopes, head of technical excellence at the OEM, openly acknowledges (p36).


An equally complex topic is that of access to finance, for which the industry has struggled to take ownership. Despite assurances from banks that they are eager to lend to UK manufacturers, it still remains difficult for SMEs to find appropriate finance packages.

Again, Government and industry support networks are making strides to change this with the Supply Chain Finance Scheme encouraging OEMs to intervene by communicating the approval of invoice payments to banks (p37). It’s a welcome initiative which should result in better finance conditions for SMEs – though some would argue that and endemic culture of late payment in the UK means that working capital will remain stretched (p18).

Other work to help SMEs win and deliver on contracts is being led by SMMT and the Automotive Council. The SMMT Industry Forum is supporting increasing numbers of collaborative bids by UK SMEs on contracts which they could not win alone – a positive development which can make a group of suppliers greater than the sum of their parts in terms of supply chain clout.

SMMT Meet the Buyer events are growing in popularity and the trade body held its first Meet the Funder event in November last year to try and close the loop between identifying demand and realising the ability to deliver. The event was attended by 125 automotive companies who met with finance providers to discuss and justify their specific requirements for support.

The focus for the automotive council this year is to see the launch of a sector strategy for the car industry, reminiscent of that which has brought huge benefit to UK aerospace. Publication of this strategy is expected this summer.

Overall, the prospects are good for UK automotive manufacturers. But collaboration, between companies, government and support bodies, will be the watchword in safeguarding the sector’s dazzling but still precarious recovery for the long term.