I was admiring
the cars on display on the way in and it’s hard to disagree with Paul
Everitt’s comment in the programme that they are British icons. We’ve
been making motoring icons now for more than half a century.
interesting that we look back on those post-war decades as the heyday
of British car manufacturing, when in fact we have twice as many motor
manufacturers in the UK now than we did then. We make twice as many
cars today as we did 25 years ago, even before the big Asian players
revolutionised the market, and twice as many engines as we do complete
cars. If you put the 1.65 million cars made in Britain last year nose
to tail…they would look like a bank holiday on the M4!
My point is that
we sometimes have a glib notion in this country that we don’t really
make anything anymore, that we are no longer an industrial economy. The
motor industry makes a nonsense of that idea. If we want a balanced,
diversified economy then the engineering and technological strengths of
the motor industry are a national asset of the most unique kind.
It has been a
difficult two years for the motor industry – the toughest imaginable
market conditions internationally. So I want to start today by paying a
very genuine tribute to the resilience of the industry and its people.
It’s easy to
think that motor manufacturing is chiefly about machines, but of course
its biggest asset is its people. The workers whose skills and
productivity are one of the reasons why this country is one of the best
places in the world to make cars and components. The staff who have
accepted limited hours to keep plants viable through the downturn. The
innovators in management who have had to build strong business models
around high structural costs and ruthless price competition over the
last two decades.
This industry is
the cornerstone of Britain’s manufacturing economy. I know you’d expect
a politician to stand up here and say that – but for the last year I’ve
spent more time working for the future of the UK motor industry in one
way or another than doing just about anything else. The car scrappage
scheme has maybe been the most visible part of that, but through our
business support schemes and worker assistance schemes and Train to
Gain we have made sure that you had the help you needed.
Of course the
wider government stimulus is acting like a crutch for demand as private
investment has collapsed, and that helps across the economy. As the IMF
stressed again yesterday, prematurely withdrawing this stimulus would
put at risk the very jobs, skills and capacity that we have worked so
hard to protect. So although there are some politicians who try to make
a virtue of their haste to pull away support for demand, it’s clear we
need an exit strategy for the stimulus, not a rush for the exits.
Now, I’m going to
disappoint you here. This commitment to motor manufacturing is not
because it exerts some kind of special sentimental tug on Ministerial
hearts. Sorry to say it. It’s a cold hard judgement of what this
industry means to our skills base, our engineering supply chains, our
niche manufacturing skills, especially in design, low carbon and ultra
high tech. It’s a measure of what this business means for the UK’s
We are very, very
good at making motor vehicles in this country – everything from mass
market vehicles to Formula 1. I’ve made that case in Brussels, and
Japan and Germany. I’ve made it to the management of GM and Magna.
But the reality
is that this is an industry at the end of the current stage of its
evolution. That was the basic analysis of the New Automotive Innovation
and Growth Team chaired by Richard, whose excellent report has done so
much to shape Government strategy over the course of this year. Today I
want to take that analysis and ask what Government and industry need to
be doing to make sure UK motor manufacturing is equipped to prosper
through that change.
There are two big basic problems out there for the vehicle industry:
decarbonisation and over capacity. The basic evolution of car making
over the last century has been based around the constant refinement of
the same basic technology on which the automobile was originally based
– the internal combustion engine. This has given a huge natural
advantage to market incumbents.
But suddenly the
market is much more open. Low carbon technologies provide a real
opening for new and innovative firms to shake up supply chains and this
presents real opportunities for the UK and for the UK automotive
The industry also
suffers from longer-term structural overcapacity – an overhang of
productive capacity that is probably 20% higher than demand. Even if we
project huge levels of car ownership in the developing world, it is
inevitable that some of that European capacity is going to have to be
absorbed through consolidation.
certainly isn’t to fight off that process of technological and
structural change – if anything Government has an obligation to drive
it faster both for environmental and economic reasons. Our job has to
be to help you make sure that when the technological kaleidoscope slows
again, Britain emerges as one of the best place in the world to makes
these new kinds of vehicles and their components, to design and
manufacture these new kinds of technologies.
vital that that process is guided by commercial logic, not politics.
That’s why I put up such a stiff fight against any suggestion that the
future of plants in Luton and Ellesmere Port might be decided by
political considerations rather than productivity. Now, how we do that
at the European level is a difficult question, to put it mildly. But
the long term competitiveness of the motor industry in Britain and
Europe depends on restructuring.
Active help from government
So the question we face is how we turn that process of change into
something from which British motor manufacturing emerges even stronger.
Some of the most important answers to that question emerged from the
work done by Richard and his team and the Government’s response to it.
I want to say something about three of them: the new Automotive
Council, low carbon vehicle policy and the wider strategic way we see
the industry and its supply chain.
The creation of
the Automotive Council is a great development and has the potential to
bring a whole new strategic dimension to the self-management of the
industry, and in particular to the way it works with Government. But of
course, it will only be as effective as the people on it, and the ideas
and energy they bring to it. It needs to represent every part of the
industry – the full supply chain including the research base, and the
It needs to be
proactive and influential and have a very clear forward strategy, based
on a very frank assessment of the industry’s strengths and weaknesses.
The better that it is able to set out the strategic challenges facing
the industry, the better government and industry will be able to
respond to them together.
membership of the Council to a manageable size has forced some hard
decisions. We have announced the membership this morning and I think
it is a great list. For example, Richard Parry-Jones and Gordon Murray
are engineers of world status. Trevor Mann is a product of the Nissan
revolution in the north east of England. Franz Josef Paefgen brings a
bit of continental European class. Andrea Paver of Leyland Trucks and
Gwenne Henricks of Caterpillar show that this isn’t just about cars.
We have suppliers and scientists and SMEs and environmental expertise
and the OEMs. So it’s looking good.
Clearly one of
the most important strands of the Council’s work will involve low
carbon vehicle policy. Now, I recognise that there is no silver bullet
solution to cutting automotive emissions. But the industry’s consensus
around a low carbon road map has provided a very useful tool and was
central to the Government’s own strategy for low carbon cars,which we published in April.
As you all know,
as part of the £150 million Low Carbon Vehicles Innovation Platform,
this included £25 million for the TSB’s demonstrator programme for low
carbon cars, £30 million for pilot infrastructure for charging ultra
low carbon vehicles and £20 million for trials of low carbon vans in
public fleets. We have created a Low Carbon Economic Area for ultra low
carbon vehicles in the North East that will leverage the various
research and production strengths in the region into a single network
of mutually-reinforcing strengths.
I think we have
to accept that barring a crippling new plateau in oil prices, consumer
choice alone isn’t going to get us to a tipping point in decarbonising
road transport fast enough. The carbon cost needs to start showing up
in the price a lot more clearly. That’s why we were the first country
in the EU to tie vehicle taxation to CO2.
But we are also
providing positive incentives by investing in charging infrastructure
and making £230million available from 2011 for consumer subsidies for
the first major generation of ultra-low carbon cars – a policy that
reflects closely the timetable for technology roll-out that the
industry itself set out in its roadmap.
Key Tier One
suppliers around the world are starting to sit up and take notice of
what is going on in the UK on low carbon cars. The trick now is to make
the UK the place you just can’t ignore if you’re in the low carbon
I’d like to think
that it’s a reflection of this commitment to making Britain the best
place in Europe to manufacture low carbon vehicles is one of the
reasons why Toyota, Nissan and Ford have all made the decision to
locate key parts of their low carbon operations here.
building the industry’s future strength we need a comprehensive view of
how the sector works: from the manufacturers to the Tier Ones to their
suppliers and beyond. For the future I want a determined strategy to
build strength at all levels and sustain the industry’s critical mass
here in Britain. The Innovation and Growth Team report left unfinished
For our part,
government will make sure that good suppliers can prosper here. We will
actively seek out more companies to locate here. We’re supporting the
research base in a big way, especially in low carbon. We’re building a
new technician class through our revived apprenticeship system. And a
Supply Chain Council – as part of the Automotive Council – will provide
us with advice on further steps.
But the big
players in the industry need work with us in partnership – and I think
this was clear in Richard’s report. We all agree that there has been
some hollowing out of the supply chain in this country – and we all
know who has done the hollowing out!
My offer is
partnership. A partnership in which manufacturers show their share of
responsibility for the UK supply chain. There needs to be more
collaborative, longer term partnerships with suppliers. When a big
player tells me, as one did last week, that it wants to source more
here rather than put its faith in supply lines that stretch over the
Alps or the Urals – I say, good, let’s ensure that that happens.
Right, that’s enough from me. I’ve argued today that the transition to
low carbon and the challenge of rationalising European vehicle
production make the next decade critical for vehicle makers in Britain.
My basic message
to you today is that Government is committed to working with you to
tackle that change. This has been a tough industry to be in and it
seems to me that it is only going to get tougher.
But you know what they say: if everything is coming your way – you are in the wrong lane!
Department for Business, Innovation & Skills
The Department for Business, Innovation and Skills (BIS) is building a
dynamic and competitive UK economy by: creating the conditions for
business success; promoting innovation, enterprise and science; and
giving everyone the skills and opportunities to succeed. To achieve
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