UK automotive: get your motor running

The UK’s motor industry is now one of the most productive and profitable to be found in any advanced economy – at the OEM level, at least. Ruari McCallion has been taking it for a spin.

The past 18 months have seen a series of announcements in the UK’s automotive industry that indicate a sector in rude health – almost an embarrassment of riches.

Automotive PQThe investment announcements recorded by SMMT (Society of Motor Manufacturers and Traders) that quantified the new jobs being created – not safeguarded or maintained, but being created – amounted to a total of 5,295 positions.

Other announcements that did not put employment numbers will have added more. The total financial investment picked up amounted to more than £1.6bn, including £200m from Honda into Swindon for manufacture of the new generation Civic 5-door, even before Jaguar Land Rover’s (JLR) announcement of its £3.5bn investment in the UK’s supply chain.

The sector employs more than 770,000 people nationwide, 160,000 working in manufacturing, and global investment in the sector is strong, according to the SMMT.

More than £8bn has been ploughed into UK automotive production since 2013, with one week in March this year seeing more than £1bn committed into British auto manufacturing.

Healthy competition

It’s almost as if the OEMs were vying to outdo each other with their public commitment to the UK.

An Astra in production at Ellesmere Port
GM Europe has announced 550 new jobs, split between Ellesmere Port and Luton.

JLR’s might have been the biggest number but GM Europe announced 550 new jobs, split between Ellesmere Port (300 new positions for production of the new Astra) and Luton (250 a second shift for Vivaro van assembly); London Taxi Company expects to create around 1,000 new jobs in ultra-low emission taxi production; Bentley is to become the Centre of Excellence for VW’s W12 engine and needs another 100 people to take production to 9,000 units a year; and Rolls-Royce started 2014 by announcing 100 new positions at its Goodwood manufacturing plant.

It’s not just at the OEM level, either. Demand at the top end is boosting the supply chain, as evidenced by Brose UK, which announced in mid-2014 that it was creating 300 new positions in order to meet parts demand for the Nissan Qashqai.

Lear Corporation hired another 100 as it stepped up to meet increased demand from Nissan and JLR, and Covpress Holdings sought to recruit 150 new people after investing £15m in expanding the factory and installing state-of-the-art robotic and laser equipment.

David Keene, managing director of RDM Group
David Keene, managing director, RDM Group.

Henrob in Flintshire has been hiring (100), as has TRW in Sunderland (130) and RDM Group in Coventry (25), among others. Even Cornwall has seen an uptick in activity; European Springs and Pressings moved to a larger manufacturing facility and boosted its workforce by approaching one-third during 2014.

The sweet smell of success

In the bus and coach sector, Alexander Dennis signed a £100m contract to produce 600 vehicles for National Express over the next five years, which it says will safeguard more than 2,000 jobs.

It was also involved in an interesting demonstration of a possible “next generation” low-emission passenger transport vehicle: a so-called “poo bus”, developed for Reading Buses, which carries its own anaerobic gas production cell on its roof.

As Mike Hawes, SMMT chief executive, observed, things are looking pretty good, “In recent years the UK automotive industry has performed very well,” he said.

“Last year, 1.53m cars were built in the UK with nearly 80% of them exported to more than 100 countries. The automotive industry is amid a true renaissance and in just a few years we expect production output to have surpassed the current record of 1.92m cars set in 1972.”

Things are generally looking good but it’s not without any problems or issues and skills are towards the top of that agenda.

“More than 50,000 existing engineering jobs that will require replacements by end of this decade, Hawes said – and that’s before any other new jobs that will be created.

Lord Bamford, Chaorman, JCB
Lord Bamford, Chaorman, JCB.

Membership of the EU is set to be a hot topic for the industry and SMMT argues that UK membership “is fundamental” to the success of the industry – but that is not the only view in the sector.

Lord Bamford, chairman of JCB, the earthmoving equipment company, said in May that the country “should not fear” an exit from the EU. He was reporting results slightly down on the previous year but boosted by increased construction activity in the UK – and having weathered the impact of sanctions on Russia, where JCB has a strong presence.

Diversity, even of economic and political opinion, has often been seen to be Britain’s strength. “We have a strong mix of volume brands – e.g. Nissan, Toyota, Honda, General Motors – and more prestige brands such as Jaguar Land Rover, MINI, Bentley and Rolls-Royce,” said Hawes.

“This means we have strong demand for all types of UK-built cars all around the world, helping the sector account for 11.2% of all UK exports – more than ever before.”

Productivity is also up, thank goodness; recent SMMT figures show that 11.5 cars are built per person employed in the automotive manufacturing sector.

It is well worth noting that the figure is an average, across high-volume manufacturers such as Nissan in Sunderland (Europe’s most productive car plant); Vauxhall; BMW Mini; Toyota, and Honda; JLR, which is a “volume-premium” producer; and high-price, low-volume brands like Bentley; Aston Martin; Rolls-Royce, and (let us not forget the country’s largest domestically-owned manufacturer) Morgan.

Cool Running

Dearman is developing “clean, cold power” engines, including a solution focused on refrigerated transport.

Refrigerated transport vehicles are a familiar sight on Britain’s roads. Transport refrigeration units are the workhorses of the cold chain, ensuring temperature controlled transport and preservation of perishable goods and pharmaceuticals across the UK, and around the world.

Without a cold chain, food perishes before reaching the point of sale – as happens in India, where cold chains are rudimentary and up to 50% of harvests spoil before reaching market.

However, the image of fresh, frozen food delivered in a controlled environment is, to an extent, undermined by the reality.

According to technology company Dearman, diesel transport refrigeration units in the UK and across the EU are poorly regulated, powered in the main by diesel and account for up to 20% of a truck’s total fuel consumption.

They can emit up to six times the NOx and 29 times the particulate matter of a Euro 6 truck engine.

The solution, the company argues, is the Dearman engine: a piston engine powered by the expansion of liquid nitrogen. The only emission from this engine is cold and power, which should make it particularly attractive for applications requiring cooling, such as transport refrigeration.

The first application of the Dearman engine is a zero-emission transport refrigeration unit, which would replace diesel-fuelled technologies. The application is currently in on-vehicle trials at MIRA, with commercial trials commencing in the coming months.

The company sees this as not just a solution for an identified problem but also an illustration of how technological development will take industry forward – so long as the infrastructure is there.

“The UK will not succeed by striving to produce commodity components at the cheapest price,” said Michael Ayres, group managing director, Dearman.

“By focusing upon new technologies, as Dearman is with clean cold, it will be possible to create an increasingly strong domestic network of OEMs and, underpinning that, a robust platform of high-quality technology suppliers.”

JLR exports the overwhelming majority of its vehicles and it makes a lot of money doing so.

Supply chain and skills

If there is any cloud on the horizon it is about the supply chain. Fifteen years ago Prof Garel Rhys of Cardiff Business School, an established commentator on the auto industry, expressed concern about the country’s supply chain.

A lot of component sourcing was being moved overseas; this was the time of the boom in the Danube Valley, with production being outsourced to the emerging economies of Eastern Europe.

In the 1970s, more than 90% of components for cars built in the UK were sourced here; today, it is about one-third. A fair chunk of that is tier one suppliers such as Lear Corporation but smaller companies are involved as well.

At the time that MG Rover was teetering on its last legs, Accelerate West Midlands found that a large number of small “metal-bashing” companies did not realise that the fading Midlands giant was their ultimate customer.

The question is: has the supply chain been “hollowed out”, as Prof Rhys feared, or has it been pulled back from the brink?

“As a company that is looking to bring a new technology to market, one of the core challenges will be how we can source high-quality, reliable and cost-effective components, ideally from the UK,” said Michael Ayres, group managing director, Dearman Engine, which is developing clean “cold power” solutions [See Left Box].

He is confident that with initiatives such as the Catapult network; the Manufacturing Technology Centre; the Proving Factory [See Bottom Box], and initiatives such as the Advanced

Manufacturing Supply Chain Initiative (AMSCI), the company will be able to identify suppliers and help them to develop their skills.

“This can be viewed as a challenge, but also as an opportunity to provide new technical training and future employment for apprentices and skilled employees.” SMMT broadly agrees that there is an opportunity – and that it is in an essential area.

“A strong domestic supply chain is critical to the success of the UK automotive sector,” said Hawes. “Vehicle manufacturing in the UK is undergoing rapid growth – British car production has increased by more than 50% since 2009, and this is creating new opportunities for domestic suppliers.

Figures from an Automotive Council report published in March show that domestic component makers sold 19% more products to UK vehicle producers last year than in 2013.” The whole industry seems to have come back from the brink and to be moving forward strongly.

Investment in automation is being led by the automotive sector, along with increases in productivity and profitable exports. Long may the good news continue – although it won’t happen by itself.

A leap of faith

A small company that comes up with a great idea will inevitably be faced with a huge hurdle: how to get from garage-scale production to commercial levels. Richard Bruges told Ruari McCallion how the Proving Factory can help businesses to break out of the vicious circle of no-funding-without-scale-and-no-scale- without-funding.

Richard Bruges Proving Factory
The Proving Factory’s Richard Bruges.

It is a situation that is far from unknown in UK industry. A small business has a brilliant idea, which is going to change the world as we know it. Or just a pretty bright idea, which could help to save time, material and labour and make a big difference to costs, time to market, cycle time and competitiveness.

A likely customer spots the potential and becomes pretty enthusiastic about it. And then comes the problem: can it be produced in volume, on a commercial scale?

The innovative business considers its somewhat shabby offices and draughty workshop, with its dozen or so enthusiastic and overworked employees, and undertakes to come back as soon as it can.

It goes to the bank in quest of finance to buy or rent larger premises and a production line. But the bank won’t commit without orders – which the business cannot get until it has proved it can deliver.

It’s the most venomous of vicious circles: just when the glittering prize is within reach, the biggest barrier of all blocks the way forward.

That’s how it has been but Richard Bruges believes that the Proving Factory, which he founded in 2013, offers the way out of the trap. “The Proving Factory started as a project in which we were trying to find the solution to getting new technologies into production,” he said.

The Proving Factory PQThe Proving Factory is a collaborative venture between Bruges’ company and a number of other companies, including Tata Steel. It seeks to identify technologies that OEMs want to adopt and co-invests with the developers to bring the technology forward.

“We provide services; we develop the manufacturing and assembly processes that are required,” he explained. Those processes can include APQP, the auto industry’s Advanced Product Quality Planning structure.

The challenge for the developer is that their need is not properly understood by banks, venture capital or private equity sources. “It’s a technology play, not a production play,” Bruges continued.

The concept is familiar in the pharmaceutical sector but there are no case studies or examples in manufacturing. “We have taken the gamble that we can crack it. We have a portfolio of propositions – 20 in all – and are actively working with five at the moment. Three are very close to production.”

Dr Vince Cable congratuates founder Richard Bruges on the Proving Factory's success
Dr Vince Cable congratuates founder Richard Bruges on the Proving Factory’s success.

The Proving Factory does not take an equity share but has a stake in the future development. It has funding of just about £22m, including £6m of loan and £8m of grant (subject to final confirmation).

It is currently working on an advanced project with JLR, co-funded by the Advanced Propulsion Centre (APC). It seems to be unusual, if not unique in the world.

“We have yet to find a similar business model although there are similarities with environments elsewhere, such as Frauenhofs in Germany,” he said. “With the Automotive Council, the APC, the Catapults and ourselves, I believe we have a pretty good cocktail in this country – if we can keep it all joined up.”