Select Committee on Trade and Industry Third Report


The Trade and Industry Committee has agreed to the following Report:—



BMW, Rover and Longbridge

1. On 14 March 2000 the story broke in a Bavarian newspaper that BMW was proposing to dispose of the Rover Group, a story confirmed two days later by the company. We undertook an urgent inquiry into the circumstances surrounding this decision and its implications, and reported to the House on 11 April 2000.[1] The Government responded on 20 June 2000.[2]

May 2000

2. A month later, on 12 May 2000, Ford announced the termination of Fiesta production at Dagenham in early 2002, thus bringing to an end after many decades the production of Ford-badged cars in the UK. This proposal, the outcome of a review by Ford of all their European operations, was not a surprise, as it had been widely trawled in the press. It was, however, a serious blow to vehicle manufacturing in the UK. In the same month, Vauxhall announced major investment in their Luton and Ellesmere Port plants: Honda revealed details of their plans for a new production line at Swindon: and Nissan gave repeated warnings that there was a distinct possibility that the new Micra might not be assembled at their plant at Washington near Sunderland. In view of these and other developments, we decided to undertake a broad-ranging inquiry into vehicle manufacturing in the UK.


3. We heard oral evidence from Ford on 24 May 2000, the day after we had paid an informal day's visit to Ford's plant at Dagenham. We heard oral evidence on 27 June 2000 from Vauxhall and Peugeot; and on 24 October 2000 from national trades union representatives. We have made a number of informal visits to car manufacturers' plants: to Honda at Swindon, to Toyota at Burnaston near Derby, to Nissan at Washington near Sunderland, to Ford's Transit plant at Southampton and to Vauxhall's Ellesmere Port plant. On these visits we held informal discussions with management, with workforce representatives, and on occasions with component suppliers, as well as visiting the plant. We are most grateful to all those who assisted in making these visits so instructive. In addition, we received valuable written evidence from a number of sources, which is printed together with the oral evidence. We have also drawn on the transcript of the hearing held by the Greater London Authority (GLA) on 24 July 2000 at which members of the GLA questioned Ford management about the Dagenham decision.


4. This Report was in an advanced state of preparation, awaiting the decision from Nissan expected in January 2001 on whether to assemble the new Micra at Washington, when General Motors announced on 12 December 2000 that they would be ceasing production of cars at Luton in early 2002. Neither the evidence we had received in June 2000 from Mr Nick Reilly, the Chairman and Managing Director of Vauxhall, nor the informal meeting with Mr Reilly and other senior Vauxhall management in October 2000 during a visit by Members to Ellesmere Port had given the faintest suggestion that car production at Luton was at risk. We decided to visit Luton at the earliest opportunity and hear further evidence. We visited Luton on 11 January 2001 and heard oral evidence at the Town Hall, as well as visiting the plant and holding informal discussions with management and workforce representatives.

25 years ago and now

5. It is over a quarter of a century since the UK vehicle industry faced a similar sense of crisis. In the 1970s, productivity and industrial relations gave cause for concern throughout the industry. In 1973-74 the giant British Leyland Motor Corporation (BLMC) faced collapse.[3] It was at that time responsible for around half the total UK output of cars. In December 1974 the Government gave the company a guarantee of £50 million to keep it afloat, pending a thorough investigation of its affairs and its prospects by a team led by Sir Don Ryder. The team's report was published in April 1975, recommending public investment on a massive scale, to provide for production of over 1 million cars in all sectors of the market by the mid-1980s. By July 1975 British Leyland was in effect nationalised. Meanwhile, Chrysler, the owners of the former Rootes Group, were making losses on their UK operations and were bailed out by the Government in December 1975. Vauxhall too were in difficulties. Of the four volume producers, only Ford were profitable.

6. In 1975 the Central Policy Review Staff (CPRS) conducted a review of the British motor industry. There were at that time formidable problems: the future of British Leyland, overcapacity, labour relations, the quality of vehicle and component production. A change in attitude was seen as urgently required, together with a more stable fiscal environment. The prospect of increasing import penetration by Japanese car manufacturers was made only marginally more palatable by the pious hope that at least some of the traditional export markets for British cars might be recovered. The report of the CPRS dismissed out of hand the idea that overseas companies might produce cars in the UK.[4] Looking ahead, it saw a best case scenario as production of 2 million vehicles in 1985 and a worst case scenario of less than half of that. Over the next ten years, production slumped to a level below the worst scenario set out. The trade deficit in cars rose alarmingly.

7. Our predecessors 25 years ago on the Trade and Industry Sub-Committee of the Expenditure Committee devoted much of their attention for two years to the affairs of the motor vehicle industry. Between January and June 1975 they held over 20 sessions of oral evidence on the motor vehicle industry, and produced a Report of over 120 pages in August 1975.[5] Following the authorisation of public financial support for Chrysler in December 1975, and the publication at the same time of the CPRS study into the motor industry , the Sub-Committee embarked between January and June 1976 on a detailed study of the Chrysler decision, involving over 20 sessions of oral evidence. Its Report of over 130 pages was published in July 1976.[6]

8. A quarter of a century later, production had risen to record levels of around 1.8 million cars. While imports number 1.5 million, exports exceed 1 million. Three Japanese manufacturers produce almost a third of vehicles produced in the UK, and export most of them to other EU destinations and even to Japan. BMW are producing at Cowley a Mini aimed at the North American and mainland European market. Ford will end car production at Dagenham — for many decades their flagship plant — but are to produce Jaguars at Halewood, a plant with a troubled history, as well as continuing their production of Jaguars at Coventry. Their purchase of Land Rover from BMW seems to offer a promising future. Vauxhall are to cease car production at Luton, but plan to continue and perhaps increase production at Ellesmere Port. The Ryton plant, formerly owned by the Rootes Group and then by Chrysler, has taken on at least for the time being a new lease of life under Peugeot. The commercial vehicle sector is doing well. There is a thriving automotive design and technology sector. Little or none of this was or could have been anticipated in the reports produced 25 years ago by the CPRS or our Committee predecessors. A review of the vehicle or any other industry cannot reasonably be expected accurately to identify the likely trend of developments in the medium or longer term.

9. The UK vehicle manufacturing industry is seen by some as in the midst of a crisis which could lead to the meltdown of a significant part of the UK's manufacturing base. Others emphasise the good news, which is rarely given the same attention. A select committee cannot usefully or properly comment on the prospects of large publicly quoted companies. What we can do is to set out what we have been told and try to present a balanced view of the current situation, and some pointers to future developments. In view of the great interest in the House in the subject, an early debate in the House on UK vehicle manufacturing would be welcome.

1  Eighth Report, BMW, Rover and Longbridge, HC 383 of session 1999-2000 Back

2  Eighth Special Report, HC 634 of session 1999-2000 Back

3  BLMC had been formed in 1968 by a merger between British Motor Holdings, comprising the British Motor Corporation (Austin-Morris) and Jaguar, and Leyland Motor Corporation, the owners of Standard-Triumph and Rover. Back

4  CPRS Report, IV, 18 Back

5  Fourteenth Report from the Expenditure Committee, Session 1974-75, HC 617 Back

6  Eighth Report from the Expenditure Committee, Session 1975-76, HC 596 Back

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Prepared 8 February 2001