Uk Vehicle Manufacturing – Allan Dabbagh

Peter Campbell writes about the dire state of UK Industry which is similar to what Austral has gone through. Good Read

June 8, 2019 8:59 am by Peter Campbell in London

As Bridgend reels from the proposed closure of Ford’s engine plant in the south Wales town, the government is facing mounting questions about whether it is doing enough to secure the future of UK carmaking.

Ford’s announcement on Thursday that it would shut its Bridgend factory with the loss of 1,700 jobs in 2020 comes hard on the heels of Honda’s plans to close its Swindon car plant, and Nissan cancelled production of several vehicle models from its Sunderland facility.

Britain’s car industry was revived by a raft of inward investment — led by Japanese carmakers — in the 1980s and 1990s, but it is now struggling to secure new capital spending to safeguard existing factories amid Brexit uncertainty.

And the sector also risks losing out in the far-reaching transition from petrol and diesel cars to electric vehicles.

Next week, ministers will attempt to boost the industry’s prospects with £23m of government funding for electric car battery development, according to people familiar with the details.

The money will go on a number of projects, including one by Jaguar Land Rover, the UK’s largest carmaker, to improve battery performance. This comes on top of £246m of government funding for a swath of ventures focused on battery development.

But David Bailey, professor of business economics at the University of Birmingham’s business school, said the £23m was a “token gesture”. “Governments are investing heavily elsewhere, as well as companies,” he added. “The scale of investment elsewhere dwarfs what we are trying to do here.”

Ian Henry, visiting professor at Birmingham City University’s centre for Brexit studies, said: “If the government is going to put money in, it’s to be welcome, but this is pitifully small beer compared to the tens of billions being spent by private sector companies in Germany and Japan.”

Ford’s decision to shut its Bridgend factory — based on losing a contract with JLR and dwindling demand for its car engines — has served to throw the spotlight on other struggling plants.

They include Ford’s last UK manufacturing site at Dagenham, which produces diesel engines for vans and pick up trucks. Like Bridgend, Dagenham has lost a key JLR contract, but Ford is more bullish on the Essex site’s fortunes because the engines its makes for commercial vans are popular.

Meanwhile JLR, owned by India’s Tata, faces questions over the future of its Castle Bromwich plant, which makes Jaguar saloons that are recording falling sales. Last month, JLR chief executive Ralf Speth told the FT’s Future of the Car Summit that the company “has a plan” for the Midlands site, which has long been rumoured to include making electric vehicles.

The company intends to make battery packs in the UK and last week signed a deal with Germany’s BMW to develop new electric vehicle technology that JLR expects to manufacture in Britain.

Everyone has to understand decisions are not made in the UK, with the exception of JLR,Ian Robertson, former BMW board member

Vauxhall’s Ellesmere Port plant looks the most exposed because it imports three quarters of its components and exports 80 per cent of the vehicles made there to Europe. Vauxhall’s owner, France’s PSA, has repeatedly said it wants to keep the Wirral site open, and has cut almost 1,000 jobs and moved to a single shift to try to improve efficiency.

The Ellesmere Port plant’s future will hinge on rewinning the Astra when a new version of the car is finalised within the next two years: something made harder by how other PSA plants in France also have the capability of manufacturing the vehicle.

The looming decision on the Astra highlights how carmakers revamp their vehicles roughly every seven years, with manufacturing location decisions made typically two to three years before production starts.

That means car plants are in a constant battle-ready mindset, conscious of the need to out-do rival sites within the same company to stay viable.

Greg Clark, business secretary, told the Financial Times there were “grounds for optimism” with the British car industry, noting how Toyota decided in 2017 to invest £240m in new tooling equipment at its Burnaston plant in Derbyshire. “When we are in contention, we can win, and we did there,” he added.

Mr Clark also insisted the UK industry could survive and prosper in the move to electric cars. “It is not the case that we took a bet on diesel and petrol and are being left behind, quite the reverse,” he said.

But the government has limited influence over the future of the sector: key decisions about British car plants are being made by owners scattered across the world. “Everyone has to understand decisions are not made in the UK, with the exception of JLR,” said Ian Robertson, an industry stalwart who spent a decade on BMW’s main board.

Right now, the biggest factor weighing on the UK’s attractiveness as a location for carmaking is Brexit.

The uncertainty unleashed by the UK vote to leave the EU is putting the squeeze on new investment, which has fallen by 80 per cent over the past three years, according to the Society of Motor Manufacturers and Traders, the trade body.

Mike Hawes, chief executive of the SMMT, said: “This ongoing uncertainty is corrosive, both on the operations of car plants and on their reputation.”

Manufacturing steeled for further trouble

It is not just Britain’s car industry that is under pressure. Two of the country’s oldest manufacturing names — British Steel and what was Short Brothers, the Northern Ireland aerospace business now owned by Bombardier — are up for sale, prompting questions about the state of the sector as a whole.

British Steel, owned by private investment firm Greybull Capital, went into liquidation last month and the official receiver is now in control and seeking a buyer for the business.

Bombardier last month puts its Belfast operations — focused on making fuselages and wings for aircraft — on the block after spending years trying to break the stranglehold that Airbus and Boeing have on the production of passenger jets.

In both cases the uncertainty unleashed by Brexit has played only a partial role. If the catalyst for British Steel’s woes was the delay to the UK’s departure from the EU — it led Brussels to suspend the award of carbon credits to British companies, leaving the steelmaker facing a shortfall — the roots go much deeper.

Other factors that have contributed to the steelmaking sector’s difficulties include a glut of production, partly driven by China, as well as high levels of imports into the EU that have depressed prices for the metal. Steel producers also complain that industrial energy prices in the UK are much higher than in many other EU countries.

Bombardier had warned about the impact of a hard Brexit on its operations in Northern Ireland but the company did not mention it when the Belfast operations were put up for sale.

Bombardier’s interests in Northern Ireland date back to the late 1980s when it bought Short Brothers, one of the oldest names in aviation.

The main plant makes wings for what was previously called the C-Series aircraft, which Bombardier hoped would break the hegemony of Boeing and Airbus at the smaller end of the passenger jet market.

But Bombardier struggled to secure orders for the C-Series and was bailed out in 2017 by Airbus, which took a controlling stake in the project for C$1 and renamed the jet the A220.

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