| All too often we hear the complaint that manufacturing
in Western Europe is on the way out, that its demise is inevitable. It
is neither supported by respective governments, which give it nothing
more than lip service, and cannot possible have anything to offer in the
face of stiff opposition from the East. To try and put things into perspective,
and to see whether it was really all doom and gloom, William Kimberley
spoke to Tod Evans who not only is chairman of Peugeot Citroën Automobiles
in the UK but is also current president of the SMMT (Society of Motor
Manufacturers and Traders).
“There has been quite a change in government attitude towards manufacturing
in the UK,” says Tod Evans, chairman of Peugeot Citroën Automobiles
in the UK and president of the SMMT in response to my opening observation
about the seeming lack of political interest in manufacturing. “When
the Labour administration first came into power, I think it clearly positioned
itself as saying that UK plc didn’t really have a future in traditional
manufacturing and it was much more interested in the high-tech side of
the economy. However, I think that perceptibly changed over the years
to the point where we now have the situation initially led by Patricia
Hewitt, the Secretary of State for Trade and Industry, four years ago
but now picked up by both the Prime Minister and Gordon Brown, the Chancellor
of the Exchequer, who are saying that the UK must retain its manufacturing
base.
“Automotive manufacturing in the UK is relatively strong although
all we talk about is when a factory closes,” says Evans, with the
Jaguar plant at Browns Lane still fresh in the memory. “We don’t
actually take in the global picture in UK where we have three Japanese
transplants which have made the country their manufacturing base. There
is a record of new investment announced by both Toyota and Nissan and
they are extremely strong. Nor do I think we should underestimate the
contribution that BMW has made in that it had the opportunity to leave
the UK after selling the Rover group but it retained both the Hams Hall
engine plant and the Cowley manufacturing base. So we now have engines
manufactured by BMW in the UK going to cars being made in Germany while
the Mini has been a runaway best seller around the world.”
Evans also talks about the presence of the Premier Automotive Group and
what that means to manufacturing, even if it has been in the news for
the wrong reasons of late. “On top of that you have the traditional-type
brands like Jaguar and Land Rover which are part of Ford and because the
parent company is struggling a little bit it is always get look very carefully
at the returns it gets from its manufacturing bases. It appears that it
has an overcapacity situation that they recognise in Western Europe and
therefore its plants in the UK will be looked at like any other it has
in the region. It is therefore very easy to get a distorted view about
the situation in the UK.
“We must not ever talk about a plant being successful or unsuccessful
– a factory never is. It is the sale of the product that is successful
or unsuccessful, so when it’s said that this factory is unproductive
or is losing money, it is only an end consequence of the product it is
making not being sold insufficient numbers. So quite naturally if Jaguar’s
sales are below expectations there is a rub off and you get into an industrial
situation where the closure of a plant comes up for consideration. As
long as you successfully sell products you are going to have apparently
successful industrial operations.
“The reason that Ford decided to pull out of Dagenham was that the
product that it was making at the time was not in insufficient demand
in Europe in a highly competitive segment of the market. Now if you reverse
that situation and look at Ryton, which is producing the Peugeot 206,
which is a hugely successful product, the model has now been consolidated
at this plant through the end of its life. So all we can say about Ryton
is that it is a hugely successful industrial operation for us because
the 206 is a hugely successful car.”
When asked whether joining the euro would be a good thing for the country,
Evans replies: “There has always been this question of the euro
and the pound, but I think one has to put into context what you gain or
lose in manufacturing, you have reverse a situation in terms of your imports.
Because the UK is a very large and important vehicle market, all of us
who compete here are drawing in cars, and if we are exporting cars, it
tends to buffer the impact of the currency moving around. So manufacturing
is a positive part of an agenda for a manufacturer if it is trading in
Europe and importing cars and it is quite useful to have that buffer.
Whether the UK adopts the euro is a political decision although from a
business point of view I think everybody says that the country should
be adopting it.
“The government is frustrated,” continues Evans. “It
wants to help manufacturers. This is because when it asked what it can
do there are too many people who say that more skills and better educated
people are needed, regulation is throttling us in the UK and we need a
better transport infrastructure.
“If we take the skills agenda, we have set up the Automotive Academy,
which is run by the SMMT, to raise the perception of working in the manufacturing
part of the automotive industry. People don’t want to be manufacturing
engineers nowadays and we are desperately short of them. If we can get
the Automotive Academy to accredit and introduce new courses, postgraduate
courses or courses within universities which get people accredited to
manufacturing engineering, then we will have achieved something very positive.”
Evans is also very keen to increase the awareness of schoolchildren in
manufacturing and believes the automotive industry has a large part to
play.
“When it comes to recruiting the young, we believe that creating
deeper links with schools and universities where there could be a lot
more exchanges then there are at the moment, is very important. Many car
companies do have a schools programme, but more should be done. After
all, the future health of the industry rests upon getting the young interested
and involved.”
However, it should not be assumed that everything is as rosy as Evans
would like it to appear in the UK. At a speech to the press in early November,
Jim O’Donnell, the managing director of BMW GB, gave a heartfelt
plea for the amount of government bureaucracy and interference to be dramatically
reduced, saying that “the UK is drowning under the weight of legislation.”
O’Donnell is particularly incensed about the Insurance Mediation
Directive that has been imposed throughout the European Union and which
takes effect in January. It regulates how finance and insurance products,
such as vehicle leases and extended warranties, are sold by dealers. In
the UK, the responsibility for enforcing it has been handed to the Financial
Services Authority (FSA), a body that does not have a particularly distinguished
track record, says O’Donnell.
The big problem is that there are so many grey areas in the Directive
that few people can make sense of it with the result that many countries
will simply ignore it. But not the UK, says O’Donnell. “The
French attitude is to make the legislation as grey as possible and then
ignore it completely. The UK government alone is implementing the Directive
strictly according to the legislation.”
Acknowledging that the Directive was originally intended to help protect
consumers buying finance and insurance from vehicle dealers, O’Donnell
says that the unintended result is leading the UK motor industry to spend
millions of pounds in set-up and compliance expenses. What has happened,
he says, is “a case of unintended consequence” with costs
being passed on to the consumer. “The price of warranties is expected
to rise about 25 per cent as a result of taxes on insurance and so on.
Will the consumer be happy about that?”
O’Donnell says some BMW dealers in the UK had decided simply to
get out of the finance and insurance business as the cost of complying
with the Directive was too high. However, will also have unintended consequences.
“We have a successful and profitable dealer in our network who sells
less than 100 new motorcycles a year. If he doesn’t enrol as an
FSA-authorised provider of F&I products he will, under the rules,
not be able to service a motorcycle covered by an extended warranty. What
a farce, what a cock-up! Does this mean that the FSA now determines who
can, and who can’t, service a motor bike?”
The Directive needs re-appraising, says O’Donnell, “or the
rules will become too tight to allow compliance while the costs will be
unsustainable.”
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