The Manufacturing community responds…

Posted on 4 Feb 2009 by The Manufacturer

To the £2.3 billion support package for UK automotive unveiled last week.

Here is a collection of responses to Lord Mandelson’s announcement last week of £2.3 billion worth of government loan guarantees for major UK automotive producers and suppliers. Leave your own comment in the box at the bottom of the article.

Nigel Johnson, Manufacturer reader and industry professional, said:
“It really matters not what words you essentially use to describe it, but the Mandleson proposal is a bail out by any definition.
“I may be in minority here but I neither support this financial assistance to the car industry nor that already provided to the banks.

“I cannot possibly see why the tax payer should be underwriting the car industry in this manner. So it is claimed the money is to be focused on more “fuel efficient eco friendly” car development but in contrast to that, Jaguar and Land Rover are fundamentally deemed “executive” car manufacturers – that is their brand presence within the market-place. Furthermore, as we all know both these brands are owned by Tata in India it begs the fairly obvious question as to why we the tax-payer should be funding what is now a foreign owned business.

“Yet it wasn’t that long ago that messrs Blair and Brown were seen rushing into Rover Group (like knights in shining armour) but we then found out that the Rover brand and design rights had already been hived off to China. Also, you’ll have to forgive me here, but why would we support Nissan – this is a Japanese company based here in the UK.

“And what is the fate of all the field loads of cars that have already been over produced quietly deteriorating! – If the road-fund licence is to be increased over the next few years (this is what this stupid government has already committed to) who on earth would want to go out and buy any of these cars that are probably a year old anyway. It’s a bit of a no brainer that these cars will inevitably sink in value (depreciate) faster than the Titanic sunk all those years ago.

“I have already lost my job in the machine tool market which services both automotive and aerospace but I have absolutely no appetite to support the car industry. If the government continues with this policy then it sets a precedent for every business currently struggling and should any particular business go under their argument or defence at an Official Receivers investigation will simply be that “well certain business sectors” were granted financial assistance in preference to others.

“Finally, I struggle to understand as to how the governments concept of persuading or encouraging the public to take on even more debt buying a new car when most people that have money will hang on to it (even if they do have a job) just in case they get made redundant and as for those already maxed-out (financially) surely no bank or lender would be prepared to increase their burden or exposure. Would that not be irresponsible lending – the very reason we got into this mess in the first place.

“It would be very easy for any business to rely upon government to provide funding to underpin continuity of manufacture, but what would be the point of carrying on stock-piling more goods if you haven’t sold what you have already produced.

“The whole strategy is completely flawed and I am afraid it was doomed to failure from the very moment the banks were underwritten.

“No I’m not cynical – just a realist!”

Julian Wilson, director, Matt Black Systems, said:
“This loan for manufacturing is welcome as long as the capital is applied to productive endeavours (investments- with real returns).

“If it is misapplied then it will add fuel to a fire already out of control, it will just add the interest costs to the already overloaded cost base of the business.

“In a world suffering from over capacity, applying capital is a difficult endeavour.

“But, think not of the pounds, think of the people who are in charge of this capital; the ones who make the decisions.

“Their track record of employing capital has been shown to be pretty poor; short-term-ism has resulted in long term losses.

“Where are they going to get the skills from to do it properly now?

“The realist in me feels that the capital will be employed using the skills they have- short-term-ism. This provides a dire prognosis.”

Dawn Kups, Engineering secretary, Laurens Patisseries

“Like any other manufacturing the car industry should be governed by supply and demand if the public are not buying so many new cars at the moment what is the point of continuing production they should tighten their belts and do short production runs, the car industry have stock piled for years with fields full of cars around the country.

“I don’t understand the governments answer to lend them more money surely they must realize the amount of debt in this country is one of the reasons we are in this decline many, many people are at their credit limit or worse in serious debt; this action will not make people purchase new cars so what will happen to all the cars produced? More stock pile! More debt!”

Paul Everitt, chief executive of the Society of Motor Manufacturers and Traders, said:

“This is an important announcement that recognises the strategic contribution of the motor industry and follows action in other EU member states, the US and Japan. The UK motor industry is productive and globally competitive with a long-term future at the heart of the low carbon agenda.”

Richard Lambert, CBI Director-General said:

“The UK’s automotive sector is among the most efficient in the world, a major employer and a critical part of our manufacturing base, but it has been crippled by a lack of credit at a time of a very steep reduction in demand.

“This announcement is a positive first step but it is unclear how quickly any new funding will be made available or how many hoops car-makers might need to jump through to become eligible.

“The industry relies on credit to complete customer purchases. Without access to that credit, car-makers will continue to scale back production and cut jobs.”

EEF Chief Economist, Steve Radley, said:

“This is a long awaited and welcome package which recognises the unique circumstances affecting one of the key sectors of manufacturing. It will also provide a degree of certainty for their important supply networks which are also integral to other manufacturing sectors. The next step has to include short term measures to help companies hold on to workers. While addition funding for training will help secure the skills manufacturing will need for the eventual recovery, this should be linked to more flexible support for companies implementing short time working to tide them through this difficult period.”

Tony Woodley, joint general secretary, Unite said:

“Today’s statement will come as a massive disappointment to the tens of thousands of workers employed in or dependent on this vital industry. Two billion pounds sounds like a lot of money, but at least half of this will be taken up by Vauxhall and Jaguar Land Rover alone, leaving little or nothing for the hundreds of component companies.

“This is a fraction of the support being given by almost every other government in Europe. Ministers need to more than double the money available, and do so immediately. Make no mistake, we will be continuing to fight for more assistance from government for this industry.

“The spectre of redundancy is still hovering over thousands of skilled jobs. We desperately need to see creative action, such as reduced hours with pay losses made up by the state. Support for the credit arms of the car companies is also vital to keep product moving.”

His colleague, Derek Simpson, joint general secretary, Unite added:

“While we welcome any support for technological change in the future, this money from Europe is months away. There could be little left of the industry by the time it arrives. Britain needs those factories and skills there for when the economic revival comes – if they go, they are gone forever

“This package is too little. But it is not yet too late. Ministers must leave behind the failed free-market philosophy once and for all and intervene decisively now. The principle of government intervention to support strategically vital industries, such as the car industry, has now been established, and we will be pressing to ensure that we build on this from here on in.”

And one from the other side of the big river…

Bernard Jaeger, a toolroom superintendent at Diversified Machine, Inc., Indiana, said:

“Our company supplies auto related components to the tier 1,2,3 suppliers of the OEM base-both domestic and transplants. Our sales are down 70% from last year and we are on staggered layoffs both hourly and salary. We do not see an up-tick, unless massive cash infusions into the hands of the people are given, until 2011/2012.

“In a nutshell, even though the problems are more complex, what I see transpiring is this: The fallacy of deficit spending by govt and consumers is coming to light. Social progress agendas, relaxed loan regulations, and corp greed have led to the housing/mortgage crisis. Unregulated/diminished regulation, illegal betting, CDS, and greed has lead to the banking/investment/broker crisis. We are waiting for the commercial credit, consumer credit, & auto credit crisis and all off-balance-sheet entries, to flush thru the financial system. Printing more money puts the US deeper into debt, subject to more private regulations via the private bank-FED, and produces inflationary prices in the future.

“I’m not in favor of govt bailouts because the company becomes beholden to the lender. The savings of prudent Americans are robbed and we become enslaved to pay taxes to reduce the deficit. All because we can’t control our spending; we can’t say no to lobbyist and special interest groups. It appears our democratic republic has transformed, since the 1970’s, into a corporate fascist state, where business dictates over the will of the people.

“In my opinion, if you don’t run your company correctly or honestly, try Chapter 7 or 11. Flush out the bad, restart anew with honest numbers. I predict the stock market to fall below 6,000 before we start anew. In the meantime, I would not trust all the numbers coming from the govt and their talking heads. Sorry for rambling, but I’m mad that our country has gone down this road despite the will of the people.”