Memorandum submitted by Ford Motor Company
1. Ford Motor Company ("FMC")
welcomes the opportunity to submit written evidence to the House
of Commons Business, Enterprise and Regulation Select Committee's
inquiry, Towards a Higher Value Added Economy. We have also been
grateful for the Committee's guidance as to the areas in which
information is sought and have structured our submission accordingly.
2. FMC, headquartered in Dearborn, Michigan
in the United States of America, is one of the world's largest
vehicle manufacturers, with approximately 283,000 employees in
200 markets on six continents. Its automotive brands include Ford,
Jaguar, Land Rover, Lincoln, Mazda, Mercury and Volvo. Combined
global sales were 6,600,000 in 2006. Net income globally last
year was a loss of $12.5 billion, and turnover was $160 billion.
For the first nine months of 2007, Ford Motor Company's pre-tax
results from continuing operations improved by $2 billion from
last year, and net income improved by $7.1 billion over the same
period. FMC's automotive-related activities include Ford Credit,
Quality Care and Motorcraft. FMC observed its 100th anniversary
on 16 June 2003.
3. FMC group companies in Britain employ
around 30,000 peopleapproximately one third of all Ford
Motor Company employees in Europe. 15,500 of these people are
employees of Jaguar and Land Rover. FMC accounts for some 80%
of UK automotive R&D, employing 9,500 people at technical
centres located in Dunton, Essex and Whitley and Gaydon in the
4. Three Ford Motor Company brands build vehicles
in the countryFord "Blue Oval", Jaguar and Land
5. The Bridgend and Dagenham Engine Plants
also build petrol and diesel engines respectively for Ford, Jaguar,
Land Rover, Volvo and Mazda products. In addition, Mazda and Volvo
have sales organisations in Britain, and Ford Financial EuropeFord's
financial services organisationis headquartered in the
6. FMC group companies operate over 30 facilities
in England, Wales and Scotland. A third of Ford's European spending,
and over two-thirds of Jaguar and Land Rover's total spending,
is in Britain. In total, Ford Motor Company spends around £4.5
billion in the UK each year. Jaguar and Land Rover are among the
country's largest exporters to the United States market.
Ford of Britain Manufacturing Operations
7. Ford of Britain operates three manufacturing
centres in Britain: the Ford Swaythling plant near Southampton
which manufactures Ford Transit variants; the Dagenham Engine
Plant in East London which is Ford's global centre of excellence
for the engineering and manufacture of diesel engines; and the
Bridgend Engine Plant in South Wales which builds petrol engines.
Ford employs 8,500 people in UK manufacturing.
Jaguar Land Rover Manufacturing in Britain
8. 2,200 people are employed at Jaguar's Castle
Bromwich plant, where XK, XJ and XF vehicle production takes place.
Jaguar's X-TYPE saloon and Land Rover Freelander are produced
at Halewood on Merseyside where a further 2,100 people are employed.
9. Some 5,700 people are employed at Land Rover's
Solihull plant where four current modelsDefender, Discovery,
Range Rover and Range Rover Sportare produced.
10. A further 2,900 employees are located
at Jaguar Land Rover's design and engineering centre at Gaydon,
Warwickshire and 2,000 at Jaguar's Whitley Design Centre in Coventry.
11. Research and development forms an important
part of FMC's activity in the UK and accounts for 80% of automotive
industry R&D in Britain. FMC employs around 9,500 people at
its three main technical centres in the country: the Ford of Britain
technical centre at Dunton, Essex, and the Gaydon and Whitley
complexes responsible for Jaguar and Land Rover engineering development.
R&D is also conducted into diesel engine engineering at the
Ford Dagenham Diesel Centre and among the technical teams working
in FMC manufacturing facilities. Spending on R&D in the UK
for Ford Motor Company brands is around £800 million annually.
12. Ford adopts a multi-technology strategy approach
to environmental R&D since there is no single technology that
alone will reduce CO2 emissions from road vehicles to sustainable
levels. By applying a range of technologies across our product
portfolio we will be offering customers more than 100 models and
derivatives with improved tailpipe emissions and fuel economy
performance over the next few years.
13. Last year, FMC announced a £1 billion
investment in green technologies to be delivered principally by
our UK technical centres. That investment is focusing on:
new advanced diesel and petrol engines;
advanced transmissions; and
a range of other driving efficiency
14. We believe that the hydrogen economy
is a much longer proposition, and we are ensuring we have the
technologies available when hydrogen technology becomes feasible
to implement. Ford is a leader in the design and development of
hydrogen fuelled fuel cell technology and is also researching
and testing the use of hydrogen in internal combustion engines.
Besides the fuel infrastructure, sustainable production of hydrogen
and affordability remain the most significant challenges.
15. This investment is already producing
results. At the recent Frankfurt Motor Show, Ford announced the
launch of its ECONETIC range of low CO2 vehicles and the first
product will be a Ford Focus at 116g/km CO2 available before the
end of 2007. Low CO2 products across the Ford range will be available
during 2008 including a Fiesta below 100 g/km CO2. At the show,
Land Rover also announced that the Freelander will be available
with Intelligent Stop Start technology early in 2009 saving up
to 15% CO2 emissions. This technology, along with others, will
be deployed across the Jaguar Land Rover product range in the
16. FMC welcomes recent Government statements
on the importance of research and development to the UK economy,
including the recent announcement of funds to support low carbon
vehicle development through the Innovation Platform. We also welcome
the recently announced Low Carbon Public Procurement Programme
which will assist the acceleration of "near-to-market"
low carbon vehicles.
17. FMC believes that environmental technology
development does provide an economic opportunity for the UK, but
contends that the UK cost equation and decline in supply base
presents significant challenges to investment, particularly given
the fierce global competition for R&D resources and the growth
in technical capability of India and China. Funds to support R&D
activity are very limited and the UK does not seem to be regarded
as an attractive location for R&D investment by vehicle manufacturers
other than Ford. FMC submits that a debate is urgently required
to address ways in which UK automotive R&D can be stimulated.
18. Ford acknowledges climate change as
one of the biggest issues facing society and reducing CO2 is at
the very top of the agenda for FMC globallyour single biggest
challenge going forward. Our £1 billion investment in green
technologies announced last year is one illustration of this commitment.
19. The need to address climate change is, rightly,
at the heart of EU and UK Government policy and, for the automotive
sector, the main implications are for European legislation on
CO2 emissions and national vehicle taxation measures.
EU CO2 Legislation
20. Average CO2 emissions from new cars
in the EU have reduced by 25g/km over the past 10 years. And today,
one third of all European cars sold are below 140g/km while more
than a million cars are put on the market every year emitting
120g/km or less. These are significant achievements delivered
in the face of often conflicting regulations.
21. We will play our part in achieving the required
mandatory objective for vehicle CO2 emissions that will eventually
be set by the European Union. Despite this progress we recognise
that we need to chart a course towards even lower CO2 emissions
and that will only be delivered through a combination of demand
and supply side measures. This involves a role for the regulators
but regulation can only work if it's sensibly framed and introduced
as part of a wider integrated approach. So in addition to supply
side legislative CO2 targets we also need the right legislative
framework from Governments to allow competing environmental technologies
to flourish without distorting the marketplace. And we need proper
engagement of consumers through intelligent fiscal measures and
consumer information. And finally, to achieve the maximum CO2
reductions we need a full contribution from biofuels and other
measures such as eco-driving.
22. However, the Commission's proposal that
a target of 130g/km by 2012 be achieved through vehicle technology
only is a very significant challenge for the industry. An additional
challenge will be to define equitably how to achieve this average
result over a wide range of vehicle classes, and Ford is working
constructively to achieve a fair distribution of the finally-agreed
burden across the industry through its role as a member of the
23. We are concerned about the specific
impact of the legislation on Jaguar and Land Rover. The legislation
will impose challenging targets for the entire industry but it
is likely that vehicle manufacturer groups will be able to offset
their smaller, higher volume vehicles against the lower volume,
higher CO2 emitting vehicles.
24. But when Jaguar Land Rover becomes a
separate company there will be no possibility to offset emissions
in this way and compliance with the legislation will not be possible
without disproportionate cost and damage to the business. This
is despite the fact that Jaguar Land Rover has a plan to reduce
CO2 by more than the expected industry average reduction of 18%.
25. We have therefore asked the European
Commission to build in a provision for "niche" producers
into the legislation. It would mean that companies like Jaguar
and Land Roverwhich do not produce a full range of vehicles
and whose sales volumes in Europe are relatively lowwould
have a separate target still expected to be in excess of the average
overall reduction for the industry. We would expect this target
to be very challenging and to require an aggressive programme
of CO2 reduction.
26. Ford has sought support for such a provision
from the UK Government, the European Commission and Members of
the European Parliament.
27. We do not believe that the intent of
this legislation is to put premium manufacturers out of business,
but without such a provision Jaguar and Land Rover would be left
28. Like many EU Member States, the UK Government
is using fiscal measures to influence consumer demand for vehicles.
Ford recognises the role that green taxes can play in influencing
consumer behaviour but believes the Government should guard against
proposals which distort the market and threaten UK premium manufacturing.
Tax proposals should also be "technology neutral" and
should allow competing environmental technologies to flourish.
There is a need for a tax structure that helps reduce CO2 over
time and across the range of vehicle sectors so that the overall
fleet CO2 reduction can be maximised. Disproportionate measures
aimed at targeting specific car sectors will not achieve sustainable
29. In this context, FMC was concerned at recent
media speculation that the Government was considering punitive
tax levels for vehicles in Band G (ie over 225g/km CO2). It seems
that a new purchase tax combined with higher levels of Vehicle
Excise Duty are under consideration.
30. The potential impact on Jaguar and Land
Rover is significant because 63% of Land Rover and 31% of Jaguar
UK sales are currently in Band G and the UK is Jaguar's largest
and Land Rover's second largest market.
31. We urge the Government to develop proposals
which allow the appropriate signals to be sent to the consumer
while avoiding market distortion and disproportionate impact on
UK premium automotive manufacturing.
32. FMC is also concerned at increasingly
wide variations in taxation schemes across EU Member States. We
are seeing different taxation break points, different tax bandings,
varying amounts of tax payable for the same vehicle in different
countries and different exemptions. In short, a confused and inconsistent
picture which makes product planning, engineering and homologation
for vehicle manufacturers in the EU increasingly problematic.
Even within the UK, we are beginning to see a significant variation
at local level in terms of parking schemes and congestion charge
33. We call upon the Government to hold
discussions with other EU Members to secure a greater level of
consistency in vehicle taxation and to act in the UK to avoid
the emergence of numerous and widely varying local approaches.
34. FMC currently supplies vehicles across
the public sector, including to Government Ministers and officials,
the police and emergency services. We value this business both
on its own terms and for the symbolic support of Government it
implies. We fully accept that Ministerial vehicles should be both
competitive on cost and environmental performance and Jaguar,
for example, meets both criteria through its X Type diesel and
XJ diesel vehicles. However, little account currently seems to
be taken of the level of British content in either the design
or production of a vehicle or indeed the life cycle CO2 emissions
generated by vehicles manufactured abroad and transported to the
UK. We believe that these criteria should apply for vehicles purchased
using British taxpayers' money.
Potential sale of Jaguar and Land Rover
35. On 26 July 2007, FMC confirmed that it was
talking in more detail to a smaller number of interested parties
about the possibility of a sale of the combined Jaguar Land Rover
business. Ford Motor Company has stated for well over a year that
it has been assessing a number of strategic options for all of
its operationsas would be expected of any responsible business.
This step on Jaguar and Land Rover is directly in line with this
review and is consistent with Ford's transformation plan. The
plan will lead Ford to automotive leadership and create profitable
growth for all in the future. Its elements include:
aggressively restructuring to operate
profitably at the current lower demand and changing model mix.
accelerating the development of the new
products that customers want and preferwith advancements
in safety, quality, environmental innovation and design.
financing our plan; and
working together, especially in terms
of developing a more unified global brand identity for Ford "Blue
36. Any decisions we make will be in the
best interests of Ford Motor Company and Jaguar Land Rover. The
objective of any sale would be to provide Jaguar Land Rover with
the ownership, technology and investment structure it needs to
allow it to reach its full potential, while enabling Ford to concentrate
on its core business strategy.
37. As the largest employer in the UK auto
industry, Ford fully understands its responsibilities not only
to its employees but also to its local communities. Ford recognizes
the significant connections between Ford Motor Company and Jaguar
Land Rover in terms of component supply, engineering and manufacturing
and any potential sale would need to take full account of this.
38. The Company has now completed an extensive
phase of due diligence with interested parties leading to firm
bids received at the end of October. Bids have been assessed on
a number of criteria, including financial terms, business strategy
and stakeholder concerns, particularly those identified by unions,
Government and local MPs on issues such as employment contracts
and pensions. A further factor is the ability to have a strong
relationship with Ford including long term arrangements concerning
technology, component sharing, engine supply etc. Finally, there
needs to be certainty of achieving closure for any deal.
39. Based on these assessments and further
discussions with bidders we have selected a smaller number of
bidders to proceed to more detailed discussions. There are still
many detailed issues to work through, but we are confident that
any one of the bidders would be a strong owner for the business
40. The process is being conducted according
to strict confidentiality rules and FMC has not made any statements
as to the names or numbers of parties with whom we are working.
We anticipate that discussions with interested parties will culminate
in an agreement no later than early next year.
41. Throughout this process we have maintained
very close ongoing communications with our union colleagues, Government
Ministers and officials, Members of Parliament with a strong Jaguar
and Land Rover interest and other stakeholders.
42. We are committed to maintaining close
contact with union colleagues and other stakeholders as the process
continues. We do not disclose the content of any discussions with
unions, Government or Members of Parliament.
43. In previous submissions to the Committee,
FMC has drawn attention to concerns over our ability to recruit
sufficient numbers of skilled people to support our engineering
activities in the UK.
44. In our submission of June 2006 to the Committee's
Inquiry into the UK Automotive Industry, we stated:
"Ford believes we must do more in the UK
to raise teaching standards in mathematics and science, and improve
the image of technology and engineering. Industry and government
need to work more closely than before in order to achieve this
One difficulty companies like Ford face is accessing
funding for basic skills and retraining activity. The existing
training delivery structure is unnecessarily complex and there
is a need to simplify and secure greater ease of access to training
45. While we welcome the Government's recognition
of these problems and some initiatives to address them, these
remain significant issues facing our business in the UK.
46. We welcomed the recent Leitch Review
of Skills and particularly the recommendation that the UK skills
system be demand-led with qualifications that deliver the skills
that employers and individuals need. We recognise that the implementation
of this recommendation poses significant challenges but call upon
all stakeholders to redouble their efforts in this area.
47. Ford has historically been a strong
supporter of the Automotive Academy and is pleased to see it form
the blueprint for the National Skills Academy for Manufacturing.
NSAM aligns with Ford's philosophy of employer-led training and
skills delivery and Ford hosts the NSAM London spoke at the Centre
for Engineering and Manufacturing Excellence in Dagenham. FMC
is also represented on the Board of SEMTA, the host sector skills
council for NSAM. FMC will look to the new Commission for Employment
and Skills to provide strong and effective leadership in this
area and would want to assist in any way it could.
48. The weakness of the US dollar and present
strength of sterling continues to have a significant adverse impact
on North American revenues for Jaguar and Land Rover (and other
dollar based export markets) as these markets represent roughly
a quarter of Jaguar Land Rover's revenue base. Despite significant
weakness of the US Dollar there has not been any trend to higher
competitive pricing in the US market over this period, therefore
the ability of Jaguar Land Rover to offset these structural currency
impacts is limited to internal cost improvements and its ability
to redirect volume/increase our sales in other non-dollar markets,
particularly in growth markets such as Russia and China. Over
the short-term clearly we have also used currency hedging to smooth
currency, which has mitigated some of the direct bottom line effect
over the last few years, but is not a long term solution.
49. The weak dollar has had a relatively small
direct effect on the Ford brand business in the UK as most of
Ford's business is transacted within the European Union with the
exception of some lower volume export sales to dollar markets
in the Middle and Far East. Clearly of concern to us however is
the strength of both the Euro and Sterling against other global
currencies such as the Japanese Yen, Korean Won and Chinese Yuan,
which clearly gives a significant cost advantage to competitive
brands importing into the European market from non-EU manufacturing
50. We continue to believe however that
participation in the North American premium market, the largest
worldwide, is critical to the future of the JLR and therefore
continue to develop appropriate products and distribution for
that market and manage our cost structure as best as we can until
a return to more favourable currency conditions comes about.
Land Rover Manufacturing
51. Over the past three years Solihull has
faced the challenge of raising its quality levels to match those
set internationally by Jaguar and to become truly world class
and is on target to achieve its goals. Substantial progress has
been made and the plant recently recorded a significant improvement
when audited as part of a statutory Ford Production Systems Integrated
System Reviewan important milestone in its efforts to reach
those goals. However, there remains a need for further improvement.
52. Solihull continues to produce all Land Rover's
top-selling models except for Freelander 2the Defender,
Discovery 3, Range Rover Sport and Range Roverand is the
source of over 60% of total global production and sales. It continues
to contribute significantly to the £4 billion worth of Land
Rover exports each year.
53. Production of Freelander was successfully
transferred from Solihull to Halewood with the introduction of
a second-generation version, the Freelander 2, in the summer of
2006. It has served to enhance the reputation of the plant, rated
as one of Ford's best facilities on a global basis, with the new
car winning an international reputation for quality as well as
capability and helping Land Rover to what will be a third successive
year of record sales in 2007.
54. Freelander 2/LR2 is playing a significant
role in broadening Land Rover's customer appeal in traditional
and emerging markets. Its impact has recently been further enhanced
by the introduction of an automatic diesel version, announcement
of a new luxurious range-topping model and plans to achieve even
greater economy by the introduction of a stop-start system as
standard on many models from early 2009.
Land Rover Carbon Offset
55. Land Rover launched a Carbon Dioxide
Offset Programme in September 2006 to balance emissions from its
manufacturing operations and the first 45,000 miles of UK customer
use. The offset provider is Climate Care, a company chosen after
a lengthy period of due diligence.
56. The programme is overseen by an independent
board of governance, formed from leading experts on climate change
and environmental issues.
57. The offset projects currently in place
are fully verified and validated by an independent third party
against the recognized international Kyoto standards, or equivalent,
such as the Voluntary Gold Standard. The projects involve alternative
or renewable energy sources such as wind or hydro, energy efficiency
and technology change. The projects do not involve tree planting.
58. Land Rover customers pay from £85
to £165 depending on model and will be able to track exactly
where their money was spent.
59. Land Rover takes its responsibility
to the environment very seriously and the CO2 Offset Programme
is just one part of an integrated approach to tackling climate
change. We have already reduced vehicle emissions with the use
of new, efficient and clean diesel engines. We have a multi-million
pound investment programme to bring forward new technologies to
make further, significant improvements. We are developing a hybrid
and lightweight models. However, cycle plans in the automotive
industry are measured in years and the CO2 Offset Programme enables
us to make a real and measurable difference now.
60. The first projects include providing
hydro-electric power to a remote area of Tajikistan and funding
a wind farm in China. We are also helping to supply 20,000 efficient
cooking stoves a year in Uganda. These projects are part of a
developing portfolio, and will additionally bring social and environmental
benefits to thousands of people.
Environmental Manufacturing Performance
61. All FMC manufacturing plants are ISO
14001 accredited and work to environmental target reductions that
include water use, energy use, VOC emissions and waste. Since
2000 FMC has reduced its global operational energy use by 27%.
Our manufacturing energy efficiency target is 1-2% year on year.
UK operations achieved a 5% absolute reduction over the 2002-06
timeframe through the UK Emissions Trading Scheme.
62. Passenger cars typically emit 85% of their
life-cycle CO2 during the in-use phase. Manufacturing, distribution
and sales accounts for 10% of life-cycle CO2 and end-of-life processing
the remaining 5%. The End of Life Directive determines the recycling
targets for passenger cars which are currently set at 85%, rising
to 95% by 2015.
63. Ford has established London's first
large-scale wind farm at Dagenham, transforming the Thames Gateway
skyline in the process. The two 1.8MW turbines provide all the
electricity needs of its new diesel assembly hall and annually
displace 5,762 tonnes of CO2, 67 tonnes of Sulphur Dioxide and
20 tonnes of Nitrogen Oxide. A third wind turbine is being planned.
Bridgend Engine Plant had the UK's largest solar array at launch.
Mounted on the roof they provide enough electricity to light the
Ford's UK Strategy
64. Ford of Britain's manufacturing presence
in the UK is concentrated on engine and transmission (through
Ford Getrag) production, supported with powertrain engineering
at the Dunton Technical Centre. The UK also produces the Ford
Transit, again with development support from Dunton. Ford aims
to produce over 2 million engines annually by 2009, providing
one quarter of Ford's total engine requirement and some 80% of
Ford of Europe's engine needs. Dagenham already supplies more
than 50% of Ford's global diesel engine demand.
65. Assuming a satisfactory outcome to the current
Jaguar Land Rover sale process, Ford will retain a strong presence
in the UK, remaining UK market leader, a substantial investor
in R&D and a significant employer. Jaguar Land Rover and Ford
will be the UK's two largest automotive employers and Ford will
continue the supply of engines and technology support to Jaguar
Land Rover and Aston Martin. Ford's UK activities will also continue
to make a significant contribution to the company's global presence.