FOURTH SPECIAL REPORT
The Trade and Industry Committee has agreed to the following Special Report:
GOVERNMENT OBSERVATIONS ON THE THIRD REPORT FROM THE TRADE AND INDUSTRY COMMITTEE (SESSION 2000-01) ON VEHICLE MANUFACTURING IN THE UK
The Government published its Third Report of Session 2000-01 on 8th February 2001. The Government's response was received, in the form of a Memorandum from the Department of Trade and Industry, on 26th April 2001 and is published as an Appendix to this Report.
The Committee's Report support for the work of government in its sponsorship of the automotive sector is welcomed. The motor industry is a crucial sector to our economy - a vital source of employment and wealth creation. This government is fully committed to the future of the industry in the UK; to the encouragement of further investment in the UK by British and overseas investors; and to the maintenance and growth of the world class manufacturing and design abilities that we have in this country.
The government will continue to work for a stable and sound macroeconomic environment and to develop a highly skilled and highly productive work force. We will support world-class manufacturing technologies and assembly plants, and will work throughout the automotive supply chain system to increase efficiencies and boost our standards of global competitiveness. We remain committed to top class design, innovation and research - where the UK is one of the world leaders.
Since the publication of the Report the Prime Minister has met with representatives of the automotive industry and the Society of Motor Manufacturers and Traders (SMMT). The Government made clear its commitment to the motor industry in the UK. The Government and the industry reiterated their aim to work together to maintain and develop the vehicle and component manufacturing sector in the UK. The meeting was a further step towards delivering on Government and industry's shared agenda to increase competitiveness and productivity, to encourage the development and use of new and cleaner vehicle technologies and to meet consumers' future transport requirements in an integrated transport system.
An important part of this work will be a radical new approach to boosting competitiveness in the sector. For the first time senior figures from the motor industry will come together with DTI officials to identify the challenges facing the industry and suggest novel ways of meeting them. The Automotive Industry Innovation and Growth Team (AIGT) will involve the industry in the task of developing the sector's competitiveness and promoting innovation and growth. Sir Ian Gibson has been appointed to lead this high-profile team, other members are currently in the process of being identified.
We will work with industry on a proposal for a supply chain database to track and forecast the impact on the ground of changes affecting the sector. The database will allow the industry and the government to understand better how changes affect all parts of the industry, and therefore to respond more appropriately to developments in the sector.
The Government and the industry will continue to work together to ensure the availability of low emission, fuel efficient cars and to foster the competitive economic advantage for the UK of promoting green automotive technologies such as fuel cells.
The government has approved new funding of £7.4 million (DTI) and by up to £7.5 million from the Engineering and Physical Sciences Research Council over the next 3 financial years for the Foresight Vehicle Mobility programme. This new commitment represents a significant boost to the successful Foresight Vehicle programme.
The recent car industry restructuring across Europe has highlighted the particular vulnerability of single model plants in the UK. The announcement by GM/Vauxhall in February 2001 of its plans to invest £200m at Ellesmere Port to convert to a flex plant was facilitated by HMG's indicative offer of RSA support. At Luton, although Vectra production is to be phased out, GM is investing £130m in the IBC Vivaro van project and will continue to make the Frontera 4 wheel drive vehicle.
Context and debate
(a) It is over a quarter of a century since the UK vehicle industry faced a similar sense of crisis. 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 (paragraphs 5, 8 and 9).
We welcome the comments of the Select Committee. However subsequent to the publishing of the report there have been a number developments in the automotive sector, including the recent No10/SMMT meeting and the announcement of the Automotive Innovation and Growth Team (a Government and industrial partnership to explore the way ahead for the sector), which address many of the issues raised. There have been various debates/questions on specific automotive sector issues in the House, e.g. Rover, GM Luton, over the last year. However, we would welcome the opportunity to debate these important issues further.
Cycle of models
(b) The number of vehicle manufacturers in the UK and the number of models being made means that every year the future of one or two UK-manufactured models, and by extension that of the manufacturing plants where they are assembled, is called into question. The outcome of this cycle of decision-making is of course of crucial importance to the whole industry and to those working in it. While the individual decisions are indeed affected by the prevailing economic and fiscal climate, including exchange rates, the regular cycle of decisions on the place of assembly of new models is the normal practice in the industry. We trust that the significance of this cycle is fully appreciated by all concerned, including those responsible for these issues within Government (paragraphs 68 and 69).
We are aware of the cycle of models and will continue to work with both vehicle and component manufacturers to maximise the opportunities for UK based companies and plants in the global market place. For example, we are working closely with the SMMT and the Automotive Design Engineering Sector to determine the vehicle, engine and transmission product introductions in Europe and North America over the next seven years. This will help the design engineering sector improve its knowledge base and align its business with the automotive product intent of major car and commercial vehicles around the world. On the research side, through the Foresight Vehicle programme, we are looking at process innovations and their implications for change to the design, manufacture and distribution of vehicles in the future. Additionally, we are working in partnership with the Society of Motor Manufacturers and Traders (SMMT) Industry Forum to improve the competitiveness of companies in new product development and introduction.
Overcapacity and losses
(c) Vehicle manufacturers are either losing money on their European and UK operations or are making a very small return on their investments. Most car manufacturers are feeling the cold winds of low or negative returns on assets and are under pressure from unhappy shareholders. There is generally said to be substantial overcapacity in global, European and UK vehicle manufacturing plants. In the past, overcapacity as a result of excessively optimistic sales forecasts could be tolerated. Rightly or wrongly, however, the universal perception of overcapacity combined with the disappointing financial returns of many companies in the recent past, reflected in their share value, is now producing a worldwide pattern of plant closure, reduction in the number of models produced and reductions in the number of employees (paragraphs 70-72).
We note the Committee's comments.
Globalisation and the UK
(d) The vital decisions affecting the future of UK vehicle manufacturing and vehicle component plants are taken at a European or global level, and generally not in the UK. As the European vehicle industry is increasingly centred elsewhere in Europe, the UK is likely to suffer from decisions taken there, sometimes on other than purely economic grounds. Global companies have choices which purely national companies do not. The emergence of global producers has [also] extended the possibility of production of vehicles and components outside the traditional markets for cars, particularly in the new economies of central and eastern Europe, in Turkey and in the Far East (paragraphs 73-76).
We note the Committee's comments.
(e) The trend towards concentration on core competences challenges the future of all non-assembly operations carried out by the manufacturers, and is likely to lead to difficulties for some of the UK plants thus cast adrift. It is important that the Department is not taken by surprise by such developments (paragraph 82).
The Government agrees that the focus on core business by the vehicle manufacturers has implications for the component suppliers in the UK. We will continue to work with industry to maximise the opportunities arising. This is one of the many aspects of the changing situation of the sector in both the short and long term; it is an aspect that the planned competitiveness analysis, to be completed in partnership with industry under the stewardship of the Automotive Innovation and Growth Team, will be examining.
Flexibility and UK single-model plants
(f) Dagenham and Luton were single-model plants. It is a matter of some concern that a number of the remaining UK car assembly plants are also single-model plants, notably Ryton, Cowley and Ellesmere Port (paragraph 85).
We note the Committee's comments.
New automotive technologies and R & D
(g) We detect in the industry a fundamental uncertainty as to the medium term future of its technology. The fact that most companies assembling cars in the UK have their main engineering and development centres outside the UK does not help the industry. There would in our view be benefit in Government and industry exploring ways of ensuring that the UK vehicle manufacturing industry is in the best possible position to benefit from the exploitation of new automotive technologies. We recommend an independent review of the direction of effort in Government-sponsored or supported automotive R&D with a view to ensuring that it is more closely focused on those areas where the UK stands to gain the most from such input (paragraphs 79, 110 and 113).
A review of the use, development and deployment of technological in the sector has been identified as a subject for the recently announced Automotive Innovation and Growth Team to explore and develop an appropriate way forward for both the long and short term. The Foresight Vehicle is a partnership between Government across Whitehall, industry and academics which is developing technology route maps and a market implementation strategy for components and systems for vehicles of the future. Over 400 organisations are involved in networks and in the Foresight Vehicle collaborative research programme which is technology transfer to industry from the science base. Over £80m of research is underway with 56% funding coming from industry. The Government has just announced a £15m top-up to extend the programme for 3 more years during which time the networked knowledge management process will be evaluated and strengthened to maximise the commercial opportunities which are emerging from the research programme. Additionally we are working with SMMT Industry Forum to improve the sector's competitiveness through the exploitation of world class business and manufacturing process.
(h) It must not be forgotten by those who own and manage the industry that a large measure of the success of the industry over the past decade should be attributed to its workforce. They are now entitled to some return for their efforts and their loyalty (paragraph 86).
The Government recognises the contribution made by the workforce to the success of the industry in recent times. It believes the companies also have responsibilities to their workforce, including in times of change.
(i) Our attention was drawn by all the trades unions representing the workforce in the industry to the alleged ease with which employers can shed surplus labour in the UK, in comparison with the situation elsewhere in the EU. The allegations made to us, not only in this inquiry but also in relation to the UK steel industry as well, that British workers are losing their jobs because it is easier to sack them than their European counterparts is sufficiently grave to justify the devotion of some time and effort to examining it. We had already been minded to recommend a general review of employment legislation with a view to identifying those elements of other European systems of employment protection and of the proposed EU directive which could and should be extended to the UK (paragraphs 87, 91 and 94).
Review of labour legislation
(j) We have to sound a note of caution about the proposed terms of reference of the review announced on 13 December 2000 and again on 18 January 2001. The justifiable criticism over both the Dagenham and Luton closures and the BMW decision on Longbridge was that the workforce were given no opportunity to comment on the proposals being developed and to come up with alternatives before final decisions were made and announced. There is evidence that viable alternative options overlooked or summarily dismissed by management can come out of such consultation. Prior consultation can make good management sense. The proposed review must explicitly address this point. It has to go beyond "fine-tuning" of the law and practice of redundancy if it is to carry any credibility. Nothing must be ruled out, including primary legislation. The review must also be conducted transparently and swiftly. We recommend early publication of a date for the conclusion of the review. Subject to those observations, it is in our view a welcome development, although too late to save jobs recently lost in the car industry (paragraph 95).
Luton: separation terms
(w) In the absence of comparative figures we are unable to confirm that the [separation] terms are comparable to those to be offered to employees in a similar position in Germany or Belgium. The employment laws in those countries seem to offer workers' representatives a greater opportunity to negotiate the terms of separation (paragraph 33).
Composite Response to recommendations (i), (j) and (w)
The government agrees that the Review announced on 18 January should be a wide-ranging one. The government wishes to look at all aspects of the information and consultation process in the light of the issues raised by recent events such as those examined by the Committee. The Review is considering whether the effectiveness of consultations about collective redundancies could be improved, including through measures such as greater pre-consultation as raised by the Committee. The Review is also looking at the effectiveness of European Works Councils. The Review is being conducted as swiftly as possible, consistent with a thorough examination of the facts and will consider recent restructuring in the motor industry.
As part of the Review, the government will examine the view that British workers are losing their jobs because it is said to be easier to sack them than their European counterparts. The Review will identify what the arrangements are in other EU Member States compared with the UK, and what are the effects of the differences. Broadly speaking, the Collective Redundancies directive imposes common minimum standards of uniformity throughout the EU with regard to the timing and degree of consultation about collective redundancies within the scope of the directive, and also the speed with which proposed redundancies can be effected following their notification to the public authorities. In the UK, the direct costs of redundancies are determined principally by the minimum statutory requirements for redundancy payments, whereas in other Member States these costs may have to be negotiated as part of a Social Plan (and which therefore makes them less predictable). The Plan may also contain an agreement for the re-training or redeployment of employees, and it may require the approval of the public authorities. In practice many UK companies offer employees packages which contain re-training elements or help to find new jobs, and also financial compensation above the statutory minimum. These packages may be no less generous than those offered in other Member States.
In recent cases such as Ford and General Motors it is noteworthy that job losses have occurred in other Member States besides the UK. This suggests that any differences in labour law are not a decisive factor in the determination of the location of redundancies when these are being considered on a European-wide scale. The government is also aware of the argument that the perceived flexibility in UK labour law is a factor in attracting investment and jobs to this country which might otherwise go elsewhere. But the government wishes to consider these issues as part of the Review.
(k) This sacrifice of a car plant by a multinational intent on improving its short term profitability does plainly raise the question of to whom the directors of public companies such as General Motors should owe their duties. The lessons of this decision, and of Ford's very similar decision, must be fed into the company law review process, to see how changes in the legal duties of directors might have lead to a different outcome (paragraph 49).
The Company Law Review, launched by Government in 1998, is an independent exercise being conducted by a Steering Group comprising company law experts and business people. The Steering Group has considered the question of those to whom directors should owe their duties in a modern company in some depth. Following wide and open consultation it has concluded that the law should include an inclusive restatement of directors' duties which recognises that a company should be run to promote the success of the company for the benefit of its shareholders in a framework which takes proper account of the longer term, of business relationships on which the company depends (including employees, suppliers and customers), and of relevant community, environmental and reputational impacts. In reaching this conclusion the Steering Group has recognised and taken account of the increasing globalisation of trade, and has sought to create a framework of company law that supports the creation, growth and competitiveness of British companies while promoting an internationally competitive framework for business - so that the UK continues to be an attractive place to do business - in line with the terms of the reference given to it by Government. This conclusion has attracted wide support. Ministers have indicated that they will consider the Review's conclusions and their implementation when they receive a final report from the Steering Group later this year.
(m) The industry can only survive if the skilled personnel are there to sustain it. At the level of engineering skills, there are worrying signs of failure, not least as a result of the obstacles placed in the way of existing employees increasing their skills and so becoming able to use new technology. We recommend consideration of a link between training grants and incentives for investment in new technology, so that investment in skills attracts comparable public funding to investment in new technology (paragraph 116).
Boosting UK skills is a key element for both inward investors and companies with existing UK operations. As the nature of manufacturing changes, industries rely far more heavily on workers with management and knowledge processing skills, who are capable of generating new ideas and who are able to adapt to new technologies. This requires a constant development of skills. That is why we have invested heavily in skill development. The UK has one of the most flexible qualifications systems in Europe, and the Government has recently introduced graduate apprenticeships, which combine relevant, vocational training with the University qualification that talented individuals expect to gain.
Skills development needs to be approached at two levels: at a sectoral level, developing frameworks that will enable an entire industry to increase competitiveness; and at a regional/local level in terms of supporting individual employers.
Learning and Skills Councils around the UK have a mandate to direct funding towards industry priorities and there is already significant involvement from the automotive sector in a numbers of LSCs. We have created a University for Industry to take forward our aims to stimulate and meet demand for lifelong learning. It is why we have 700 'learndirect' centres open for business across the country, with more planned. Another example of this is the Automotive College, which works with small and medium-sized component suppliers and which is receiving DTI support to target this important group.
Our investment in Modern Apprenticeships, 15% of which are in engineering and 8% in vehicle repair and sales, is of interest to the automotive industry. These are very important sectors and are providing high levels of training for young people - all thanks to support from the industry. We want to see a higher level of achievement for the young people in this sector and also a more representative workforce with more young women, people for ethnic minorities and more young people with disabilities provided with opportunities to train.
In addition to the above sectoral measures to increase the skills of the workforce, we are also asking RDAs to work with key agencies in the development of new Regional and Local Employment Action Plans. The Plans will form an integral part of the Regional Strategy, and will ensure a coherent, integrated approach to employment in the region, which links action on skills to grants and incentives. Employment Action Plans will offer the opportunity to develop regional agreement about what constitutes a healthy labour market, to agree appropriate quantitative and qualitative targets, and to clarify the roles and responsibilities of each of the partners. The plans will also provide an effective focus for the gathering and use of labour market information and intelligence to help forecast trends in skills needs; and agreeing protocols and procedures for dealing with emergencies such as large-scale redundancies and major skills shortages.
An important aspect of the Plans will be the provision of a seamless service to employers seeking help and advice on workforce skills and other issues. The employer will benefit from a single point of contact, a Case Officer representing all the agencies who will work with them, and an integrated, flexible, tailored package of assistance with structured links to local partners.
The LSC is the new body being set up to replace the TECs and the FEFC, and will be responsible for planning learning provision to meet the skill needs of individuals and employers across all industry sectors. The aim of the LSC will be to drive up the skills of the workforce by working with employers to identify skill gaps and skill needs, and to ensure that up to date and relevant courses are available to meet these needs. The LSC will also work with industry to set clear targets for improving the skill levels, and will consult widely with business and other partners on the targets and measurement in its first workforce development strategy, which it will publish as a consultative document in June 2001.
We are also creating a strengthened sectoral skills focus through a reformed network of National Training Organisations. Over the next 3 years the Government is investing an extra £45m in a smaller, stronger network of NTOs, with real authority and business leadership in their sectors. Each will be responsible for auditing sector skills needs, and designing and implementing initiatives to meet them. They will work closely with the LSC on both planning and implementation.
The Government agrees with the Committee's view that the automotive industry will only survive if the skilled personnel are there to sustain it. The inaccurate portrayal of an industry in decline has made recruitment difficult and initiatives such as the SMMT Industry Forum's Youth Showcase, the Imagineering Fair, Formula Student and Formula Schools are important in giving young people the chance to experience the challenge and excitement of automotive engineering at first hand. The Government will continue to support these and similar programmes.
(n) The vehicle industry illustrates the arguments for and against UK membership of the euro, particularly because of the global alternatives open to the assemblers and to the major component manufacturers, and the high proportion of vehicles which are traded in intra-European trade (paragraph 97).
The Government understands the concerns of the motor industry, particularly those trading primarily with Europe, about the weakness of the euro and about the need for exchange rate stability as we look ahead. What matters for business is stability in all aspects of the economy. Sound public finances and low inflation will promote exchange rate stability, consistent with HMG's objective of a stable and competitive pound over the medium term. It is also important to keep open the option of joining the euro provided that the five economic tests set by the Chancellor are met and entry is supported by the British people in a referendum.
(o) The continuing presence of vehicle assembly operations in the UK is a crucial condition for the survival of the UK component industry. From our discussions and from evidence presented to us, it is indeed evident that the UK content of vehicles assembled in the UK has fallen, is falling and is likely to fall further, almost entirely as a result of the weakness of the euro. Those in an advanced stage of planning for new models or who have recently introduced such models have shifted towards sourcing from elsewhere in the eurozone or outside it. The danger with this trend is that it is not readily reversible, even if and when the euro strengthens against sterling or if the UK were to join the euro in due course. The loss of component manufacturing capacity cannot always be replaced, in particular in small firms with insufficient other markets for their products (paragraphs 99 and 104).
UK vehicle assembly and the component industry are strongly inter-dependent. A number of factors, not just currency levels, influence the UK content of any specific model. For example, certain assembly techniques may require modules to be put together close to the assembly plant; some components may be based on propriety technology owned by a company manufacturing on the European mainland. As new technologies emerge, companies currently operating in other sectors in the UK are likely to come into the automotive supply chain. The emergence of Johnson Matthey as a major supplier of catalytic converters is an example of this process at work. Overall it is likely that the process of globalisation will involve a fall in the UK content of vehicles assembled here and an increase in exports of components from the UK provided the component sector continues to move up the value chain. The Foresight Vehicle programme is developing new alternative technologies which should ensure the continued expansion of the component sector in the UK.
Engines and powertrain
(p) There would be advantage in seeking to attract more engine and powertrain manufacture to the UK. Building on the existing business, and on the UK's design and engineering strengths, we recommend an active policy of encouraging by a variety of means the development and production in the UK of engines and powertrain for UK-assembled vehicles and for export (paragraph 107).
The UK has a major powertain industry with a strong balance of trade. Approximately 4 million units will be manufactured in the current year.
Recent major industry investment is strengthening the UK's position as a key European centre for engine production, Dagenham is to become Ford's European centre of excellence for diesel engine production with US$500m investment. Ford's Bridgend plant is already its European centre for Zetec production and in February 2001 Ford announced plans for further potential £240m petrol engine expansion investment at Bridgend, subject to EC clearance of an RSA grant.
In addition BMW's new £400m factory at Hams Hall (West Midlands) opened in February 2001. The world's most advanced engine plant, it will produce a range of 4 cylinder petrol engines and supply 50% of BMW's total world engine demand.
DTI works closely with the UK's independent design engineering sector to help them maintain their world-class competitive edge. In addition Foresight Vehicle, through its thematic powertrain work is assisting UK centres of excellence to operate at the forefront of technological development. These activities will help ensure that the UK remains an attractive location for automotive powertrain investment.
In the area of alternative powertrain, the Foresight Vehicle agenda is to stimulate and help create new supply chains to take advantage of the new opportunities afforded by the emergence of hybrid and fuel cell electric vehicles.
(q) We recommend that the departments concerned review the overall policy towards diesel engine use in cars in the light of objective study of modern diesel engine technology and its environmental effects (paragraph 109).
The Government continually reviews its policy towards diesel engine cars to ensure it is based on the latest scientific and technical evidence about their relative environmental performance compared with petrol cars, taking into account technological developments by motor manufacturers in this area.
We have always recognised that greater diesel car sales could provide useful climate change benefits: new diesel cars are substantially more fuel efficient and produce less CO2 emissions than their petrol equivalents, especially since the widespread introduction of direct injection diesel engine technology. But even following the introduction of much tighter emission standards over the last decade, new diesel cars still tend to produce substantially more emissions of NOx and PM10 - the two air pollutants of most concern - and a major switch to diesel in the new car market would have adverse air quality implications, especially if these vehicles were predominantly used in urban areas.
The Government is keen to see further substantial reductions in NOx and PM10 emissions from new diesel cars, so that the climate change benefits of diesel can be gained without any air quality penalty. The mandatory introduction of tighter Euro IV standards from 2005 should reduce emissions from new diesel cars, but we want to see the eventual introduction of even cleaner diesels which will have a comparable emission performance with the cleanest petrol cars. We welcome, therefore, the recent voluntary action of some manufacturers to introduce to their latest diesel models advanced emission abatement technologies, such as particulate filters which substantially reduce PM10 emissions.
This policy of encouraging cleaner diesel technology is reflected in the treatment of diesel in the new CO2-based graduated Vehicle Excise Duty and company car taxation regimes. Details of both regimes were announced clear in the 2000 Budget. Under the new company car tax regime, drivers of all diesel cars are likely to pay lower taxes than those with equivalent petrol cars due to their lower CO2 emissions, even with the modest diesel supplement; and diesel cars meeting Euro IV standards will be exempt from this supplement. The equivalent diesel supplement in graduated VED will also be kept under review as diesel vehicles become cleaner. This aspect of both reforms has already been widely welcomed by the motor industry.
(r) The position of the UK as a desirable centre of vehicle assembly would be considerably enhanced by improvements to the reliability of cross-Channel transport links as well as by reductions in their costs, and by generally improved transport infrastructure (paragraph 117).
We have established the Strategic Rail Authority to take forward the details of that investment. Its Strategic Agenda, published on 13 March, includes a substantial element for freight, including investment in increased capacity on key routes, upgrading of freight routes to major ports and to the Channel Tunnel, schemes to eliminate strategic bottlenecks on the network, an improved freight grant regime and better integration with other modes through new freight interchanges.
(s) We recommend that the SMMT examine with its member companies the obstacles in the way of greater use of rail transport, and seek in discussion with commercial rail freight interests to identify what could be done by all concerned to encourage greater use of rail freight in the automotive industry (paragraph 118).
We note the Committee's comments.
(t) It is not our view that the UK vehicle industry has any complaint of much substance against the Government's policies. There are limits under international and European laws and conventions to what even the most interventionist Government can do to assist a national vehicle industry. We recommend that DTI Ministers discuss with the Society of Motor Manufacturers and Traders and other trade bodies means of demonstrating the reality of Ministerial support for the UK vehicle industry, going beyond reactive commitment at moments of crisis (paragraph 121).
It is noted that the report was supportive of the government's policies and that the sector has no complaints of substance relating to said policies. The Prime Minister has held a productive meeting with representatives of the sector and its Trade Association the SMMT; it is planned to have other Government/SMMT meetings. The formation of the automotive innovation and growth team with a high profile chair will also contribute towards joint planning and activities demonstrating the government's commitment to the automotive sector.
(u) There is no reason why individual consumers, including businesses, should not exercise their freedom to choose which vehicles to buy in such a way as to assist the UK car industry. There would be advantage in consumers being aware that there is a UK-assembled car in almost every segment of the market, and that buying such a car is one way of supporting the national industry and of conveying to the companies concerned that the British public does wish to maintain an vehicle industry in the UK (paragraph 123).
The comments of the Committee are noted.
Luton: choice of plant
(v) It does seem to us an anomaly that, in the absence of simple information [on profitability at plant level] being available to management, unprofitable plants may be retained at the expense of profitable plants.
In broad terms, it would seem that the weakness of the euro against sterling played no significant role in this decision.
If it is indeed intended to produce as many as 160,000 new Vectras at a flex plant, it calls into question the rationale given for the closure of Luton.
Luton is in effect paying the price of GME's pessimistic view of the sales prospects on the continent of the new Opel Vectra. Luton was the plant producing the wrong model at the wrong time. It was the only way General Motors Europe could take out a significant amount of capacity in the short-term (paragraphs 41, 46, 47, 52, 53).
We note the comments of the Committee.
(x) The complex network of national and European funding should be flexible enough to ensure that support is available when and where needed. If it is not, the Government Office for the Region must ensure that any procedural logjam is broken. We also expect the partnership to be as loud as necessary in its call for sufficient funding. It is essential that means be found to ensure that those who genuinely seek retraining are not excessively financially disadvantaged as a result of that retraining, compared with those who choose to remain in well-rewarded employment at Vauxhall until the bitter end; and that those midway to a recognised qualification are able to complete their courses. We look to the Partnership to engage in dialogue with Vauxhall on these matters of immediate practical importance to the workforce (paragraphs 55 and 57).
The new Job Transition Service - currently under development in the Employment Service - will play an important role in bringing together key players in the area who understand the needs of those affected by large-scale redundancy. The service will offer personalised advice and support to all those affected directly and indirectly. It will work closely with the employer making the redundancies, and with employers who can offer jobs to those being made redundant, to ensure that individuals get the support they need to move into sustainable new jobs.
Ellesmere Port: successor to Astra
(y) The threatened ending of car production at Luton is bound to have some effect on the future of Ellesmere Port, the principal remaining site of Vauxhall operations in the UK. The future of the Ellesmere Port plant largely depends on the successor to the Astra being assembled there, from 2003/2004 onwards. An undertaking that this would be the case was included in the 1998 Agreement with the trades unions. The worthlessness of such an undertaking is now all too apparent. GME may feel that it is open to do to Ellesmere Port what they are proposing to do to Luton, and that it will be easier to close Ellesmere Port than comparable plants in Germany, should similar circumstances arise for the Astra model in a few years time. A plant with only one model, on the geographic edge of the European market, and in a country whose labour laws make closure potentially easier and cheaper than elsewhere in the EU, would obviously be vulnerable to the "hawks" (paragraphs 39 and 40).
Ellesmere Port: new Vectra
(z) It is crucially important that the DTI and the Government's representatives in Brussels do all they can to ensure both a swift and a favourable decision on the proposed RSA grant: and that the Government make every effort to assist the eventual production of the new Vectra at Ellesmere Port (paragraph 42).
Composite response to y and z.
We agree that if Ellesmere Port were to remain a single model plant producing the Astra, it would be very vulnerable should similar market conditions occur in 2-3 years time when decisions are due on the location of the replacement Astra. That is why we are pleased at the news (announced 5th February) that Ellesmere Port had won the £200m investment to convert to a flex plant with a share of new Vectra production.
We were able to make an indicative offer of RSA support, which, we understand, was a key factor in the plant's success. The offer is subject to EC approval, which we are currently seeking. We are confident that, as GME's only flex plant in this market sector, Ellesmere Port now has an excellent prospect of winning the replacement Astra model (in 2004).
1 Third Report from the Trade and Industry Committee, Session 2000-01, Vehicle Manufacturing in the UK (HC 128) Back