Troubled times in the UK car industry but SMMT still positive

Posted on 27 Sep 2012

Despite poor sales in Europe, automotive manufacturing in Britain is forecast to grow 9% per year to 2.2 million vehicles in 2016, according to trade group the Society of Motor Manufacturers and Traders.

Released against a background of falling vehicle sales across Europe and the decision to stop production for a week at Vauxhall’s plants in Ellesmere Port and Luton, the report outlines the global reputation the UK vehicle manufacturing sector has attained.

Highlighting the investment that has poured into the sector from multinational companies such as Nissan and Ford, SMMT chief executive Paul Everitt said: “With robust global markets and a diverse mix of models produced here, we are more resilient than other countries to eurozone weakness, a key factor in encouraging businesses to invest in the UK.”

His comments follow research conducted by industry analyst ACEA that revealed sales of new cars in Europe had hit a 22-year low in August.

Add to this the fact that Vauxhall workers downed tools for a week at two of its UK factories and the announcement from Ford that it will be cutting 500 jobs across Europe after facing losses of $1 billion on its European operations this year, and the picture doesn’t look as positive as the SMMT report claims it to be.

Ford confirmed in a meeting with Unite on Tuesday, that 275 managerial, supervisory and engineering jobs will be cut at its Wharley headquarters and Dunton development centre due to higher than expected losses.

Unite’s national officer for the automotive industry, Roger Maddison said: “Ford has said that it has excess capacity in these areas and we have to recognise the challenging economic conditions that Ford is facing.”

Although automotive manufacturers have stopped production in the UK for a week in the past (including Ford and Nissan), it is a clear sign that demand has shrunk in the wake of Eurozone troubles.

While Ford suffered the most with sales dropping by 29%, BMW, Renault, Peugeot-Citroen and Fiat all saw their sales of new cars fall in August.

Business Minister Michael Fallon claimed that the report sends a positive message to would-be investors, and that investing here “makes good business sense”.

“We have some of the most productive plants in Europe, a highly skilled and flexible workforce and one of the lowest corporation tax rates in Europe,” said Mr Fallon. “However, there is no room for complacency. Government and industry are working together to make sure our supply chain companies exploit the £3bn of opportunities that have been identified by the Automotive Council,” he added.

While the report was positive in its overall outlook, included were some cautionary notes. They mostly pointed out that continued investment in the sector and action from the Government is critical to maintain the sector’s strength.

It also highlighted the need to pay attention to the domestic parts of the automotive supply chain; i.e. smaller companies with their operations overwhelmingly located in the UK.

“While 80% of parts required for automotive manufacturers can be sourced in the UK, the capacity and ability of these suppliers to meet demand is not at the required levels,” it stated.