Select Committee on Trade and Industry Appendices to the Minutes of Evidence


Memorandum submitted by The Royal Academy of Engineering


  1.1  The Royal Academy of Engineering welcomes the opportunity to submit evidence to the Trade and Industry Committee's inquiry into "Vehicle Manufacturing in the UK". The response which follows is a collation of personal views expressed by Fellows with direct experience of the vehicle manufacturing and automotive components industry. The views are not necessarily representative of all Fellows of this Academy. One Fellow, Professor D R Towill FREng, provided a more detailed response and this is included in its entirely as Annex 1.

  1.2  Fellows commented on the challenge posed by the breadth of the inquiry, embracing the current state and future prospects of vehicle manufacture in the UK. The absence of a sharp focus to the Committee's Terms of Reference for this inquiry has thus contributed to the general nature of the statements made herein. The comments made are applicable to the manufacture of cars and commercial vehicles.


  2.1  Manufacturing is a very important area of economic activity as it is a source of wealth, long term economic success and provides benefits to society. The most successful organisations—anywhere in the World—are those that invest their efforts and their money in getting everything 100 per cent correct, so that the real costs of manufacture are held down as low as possible, thereby maximising the benefits to all. The connection between vehicle manufacturing in the UK and employment, both directly and at suppliers, is well recognised. This relationship is understood also in terms of political success for constituencies based in the industrial areas of the Midlands.

  2.2  The history of vehicle manufacture in the UK mirrors that of much industry, small family dominated companies attempting to compete in an increasingly capital-hungry industry with too little investment. Recognition of this in the '70s resulted in consolidation driven by State intervention but the industries remained uncompetitive in quality, design and cost.

  2.3  The provision of public money to inefficient producers, thereby disrupting the market and spoiling the efforts of relatively unaided market leaders, is viewed as being generally a counter productive process. The panacea of a huge injection of public money has been given often to overcome the failures of management yet there has been little attempt to attack the root cause of the problem.

  2.4  There is a view that political decisions cannot resolve industrial problems. Political intervention, based on a short-term optimistic viewpoint, results in an imbalance in the decision process causing failure in the long term. Decisions taken to save jobs, whilst politically and socially understandable, often fail to take into account a balanced long-term view of the viability of the company. History reveals a trail of destruction and demotivation arising from the predilection of Governments and politicians for social engineering in preference to industrial efficacy.

  2.5  It is industry's role to consider:

    —  Product—design, quality, sales potential;

    —  Price—fix a competitive product price to ensure a viable and sustainable business;

    —  Productivity—employee performance together with appropriate capital investment;

    —  People—industrial relations, training;

    —  Profit—to ensure the future of the company.

  2.6  It is Government's role to ensure:

    —  level playing fields—within this country, within the EU, comparison with practices in other countries offering grants and subsidies;

    —  support—through subsidies if necessary, where external factors beyond the company's control but within the influence of Government pertain;

    —  assistance—in the case of foreseen long term failure, through staff training for alternate employment and not simply funding of a temporary measure to shore-up ailing companies to preserve employment in any given area.

  2.7  This inquiry raises the wider political issue of what, in the national interest, should be the level of manufacturing industry in the UK. Rather than chasing the maximum short term personal or financial gains, due consideration must be given to those decisions whose consequences may have very serious long-term implications on a large number of our people and our national capability.


  3.1  Vehicle manufacture in the UK has some history of economic success, especially in specialised markets, implying that there should exist some potential for economic activity in this sector within the UK. The racing car industry is highly successful and should be commended but there is immediate spin-off from the technology employed to the common motor vehicle.

  3.2  The UK is good at vehicle design and technology with the design school at the Royal College of Arts being particularly successful in placing its graduates world-wide and securing an international reputation. However, this does not produce wealth for this country.

  3.3  The design, development and manufacturing of automotive components remains a UK strength but, in many cases, the outstanding firms have been bought by overseas companies eg Lucas and T&N. Existing UK companies which need to be encouraged and nurtured include GKN and Pressac.

  3.4  Reasons given for the downturn in the performance of the UK vehicle manufacturing sector inevitably focus on the quality of the staff. A management culture where the individual is expected to make a success of any activity, without any real knowledge or understanding of the underlying process, has resulted in the loss of competent engineering staff who previously carried the knowledge base. In labour intensive assembly activities there is a poor level of numeracy and literacy, below that in Germany, Belgium or Spain. There has been a failure in attracting and retaining bright, young people within the industry. There is a need to maintain the motivation of people to discourage them from joining the service sector if the vehicle manufacturing industry in the UK is to prosper.

  3.5  That motor vehicles are needed in this country in very large quantities is seen as a continuing state for many years to come. The development of the engineering design of the vehicle is an urgent and continuing competitive need. This country has a tradition manifested by examples such as the Mini, Range Rover, Jaguar, of inspired creations arising from the work of a group of people at a single location involving component suppliers. These products become a marque which overseas buyers strive for. The existence of such marques serves also as an attractor for young people wishing to pursue a career in vehicle manufacture.

  3.6  Original Equipment Manufacturers (OEMs) have embarked on a trend of limiting their activities to vehicle assembly operations. In the past, these companies provided much support to the education sector and there is a fear that narrowing of their sphere of interest will have repercussions for the University sector. To replace the loss in funding, Universities will have to embrace overseas-based companies to a greater extent than before. However, this OEM scenario presents significant opportunities for the more active component manufacturers as they acquire the potential to serve much larger markets. It seems unlikely that anyone will be in a position to dictate where to draw the line between vehicle and component manufacture, not even Governments, but the future for world class component manufacturers could be excellent.

  3.7  The fostering of the growth of the free-standing component supply industry has resulted in some of the larger companies becoming as big as, if not bigger, than some of the OEMs. This specialisation in the supply base affects the demand for personnel in any one country where a particular group of components might be sourced. It also limits the longer-term flexibility of sourcing patterns with significant impact on future industrial capability. The loss of a single large component company or group of similar companies will inevitably mean that sector of the industry is lost forever.

  3.8  Today, there is over-capacity in the world vehicle manufacturing industry. Many well established manufacturers exist in other countries and there is little point in trying to re-enter this market. There is neither the need nor the economic justification for huge numbers of differing vehicle platforms in the world. The UK needs to be strongly associated with vehicle building in different countries in order to secure economies of scale in platform and component design, as well as component manufacture.

  3.9  The loss of the controlling ownership of a manufacturer to an overseas buyer results in the loss of control of the product, its development and procurement from suppliers. A consequence of these decisions being made overseas may be a reluctance by a supplier to invest or vice-versa. This is especially disadvantageous with increasing globalisation as the suppliers must remain in the top league if they are to be successful.

  3.10  Virtually all leading companies claim to operate integrated design/development/manufacturing functions but a key item is the location of the control centre for any operation. Although not important from an operational standpoint it is relevant to the percentages of personnel from each participating country. This in turn impacts on the output from the tertiary education systems in each country hosting a major site. Moving a major operating unit from one country to another has long—as well as short-term implications which need not necessarily be identical.

  3.11  Vehicle manufacture has a lower limit of size below which it is uneconomic to operate. There is no formula to determine this limit as the complexity and type of product will have a direct bearing on the equation. In the past, many of the now defunct UK operations failed to recognise this in their planning with unfortunate consequences. Any consideration of Government (or any other) aid must consider carefully this factor, ahead of any decision. It must be in prime position in the decision-making process.

  3.12  The UK vehicle manufacturing industry has the potential to make a major contribution to the economy but its image must change. It must return to a position where product and process knowledge is treated with respect. Long term support is required for technological development but this is unlikely to come from anyone other than Government because of the "one year at a time bottom line culture". (Perhaps a legal requirement to list the capital value of product knowledge on company balance sheets would be an encouragement?) The injection of large sums of money as short-term palliatives will result in much the same position as the present one in a relatively short period. Hard lessons need to be learnt from past mistakes and the necessary people issues faced in the short-term. Management and work practices must be brought up to "World Best Standards". Only then will there be a chance of success.

June 2000

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