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Motor Industry

Volume 302: debated on Tuesday 9 December 1997

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Motion made, and Question proposed, That this House do now adjourn.— [Mrs. Jane Kennedy.]

11.30 pm

If something is worth having, it is worth waiting for—and I suppose that that includes Adjournment debates.

It is true that the passage of time leads us to study with great interest the pronouncements of politicians. The previous Deputy Prime Minister, the right hon. Member for Henley (Mr. Heseltine), when speaking at the opening of the 1996 Society of Motor Manufacturers and Trades British international motor show, said:
"Over the last decade and a half the UK has once again become recognised as a major player in the global automotive industry. We now have the most diverse automotive industry in Europe."

Noting that that included in the total of 22 car and 10 truck and van manufacturers located in the United Kingdom were seven of the world's largest vehicle companies, the right hon. Gentleman said:
"More automotive companies are choosing to locate in the UK than anywhere else in Europe."

How revealing that is. It is not that they are British companies; it is not that we, who have a great engineering tradition, are creating a thriving and imaginative motor car industry—it is that more and more foreign companies are choosing to locate in the home of British manufacturing.

Why should that matter? Some will say, "Look at the figures; look at the way we have kept up production. We are still managing to export cars in large numbers, so why should we be concerned? As long as jobs are being created within the industry, we should be satisfied and the ownership of the assets is of no concern." I am afraid that that is not the case. Only 10 years ago, this country still maintained a very live and real interest in its British motor car industry; now, virtually every major manufacturer in this country that is an exporter of any sort of car is owned by foreign interests.

It does not matter whether we are talking about BMW, German-owned; Chrysler, American-owned; Fiat Auto, Italian-owned; Ford, American-owned; General Motors, American-owned; Nissan, Japanese-owned; Peugeot-Citroen, French-owned; Renault, French-owned; Toyota, Japanese-owned; or Volkswagen, German- owned—in each case the assets are controlled by a board of directors and, above all, by the interests of shareholders and profits in another country. That is tremendously important.

I raise this subject tonight because of what is happening to one of the oldest and certainly the most prestigious of motor car manufacturers, Rolls-Royce. Its factory in my constituency gave the name of its product to luxury and quality, but Vickers, its owner, is happily offering it to any company anywhere in the world on the basis that it cannot continue to manufacture high-quality cars. It is important to examine exactly why that is so.

Vickers took over Rolls-Royce when Rolls-Royce had made considerable profits. It is true that Vickers' timing was bad, in that it then had two rather bad years. Unfortunately, that meant that, when Sir Colin Chandler took over as managing director of Vickers, his desire to get rid of the extraneous unit could not be fulfilled simply because the profits suddenly dipped. As I said, for the first two years, there were considerable profit problems.

The reality is that the car has continued to sell. It has not had the investment that it should have had; nevertheless, although a great deal of money has been required for the development of new motors and new models, Rolls-Royce continued to be not only one of the most successful expensive cars but one of this country's successful exports. Indeed, the figures are very interesting.

Let us consider the export figures for UK motor vehicle production between 1990 and 1997. In 1990, 72.4 per cent. of large cars were exported, rising to 76.6 per cent in 1991. The figure hovered between 70 and 78 per cent. until 1995, when it rose to 81.9 per cent. In 1996, 80.5 per cent. were exported and in January to September 1997 the figure was 78.6 per cent.

While production of the small/medium-sized range remained fairly constant over that period, the figure for the medium/large and large vehicles has grown. A substantial share of our large car sector is exported, which is clearly to our benefit. Rolls and Jaguar in particular form the major part of that export market. They are vital not only to my constituents, because of the jobs they bring, but to the country's economy. That is why I want the Government to consider carefully what is happening.

Indigenous UK producers account for a very tiny section of the industry's output. The largest UK producer is Carbodies, which makes taxi cabs. As we are already examining taxi legislation, it may be that even Carbodies will face considerable difficulties. One only has to see the names of other car producers—Lotus, TVR, Morgan and Caterham Cars—to realise what problems we will have if there are no longer any major British manufacturers.

I am delighted that any foreign firms should come to this country and provide jobs, but if we doubted whether we had control over that kind of inward investment and whether we were able to ensure that those firms were able to remain not only the creators of solid employment but the providers of considerable amounts of cash for the economy as a whole, we have only to consider what has happened today.

We are told today that there is a consolation—Britain has lost a car plant because the new Toyota small car is to be made in France, which means that the plant at Burnaston has missed out on thousands of new jobs, but the engines will possibly be built at the facility in Deeside in north Wales. Anyway, we are told, we should be reasonably content because we are all Europeans now, and the reason that the jobs are being exported is that the new small car is meant above all for the market in the south of Europe. That is the logic of moving a car factory and facility.

The situation is more serious. If a country consistently loses its manufacturing base in a product as important as motor cars or lorries, it has to import large numbers of small parts and become a fitter together of other people's work. If the situation is allowed to become even worse, it becomes simply an importer of manufactured goods from another part of Europe or another part of the world. There is a suggestion that the growth of motor manufacturing in Brazil and Latin America will result in Britain and other European countries increasingly importing motor cars from elsewhere.

That is absurd. The Transport Research Laboratory alone gives us a high-powered telematics industry, producing high-quality new science and ideas for new motor vehicles. We have scientists and research engineers. We have not only imagination and verve, but intelligence, constantly committed to the creation of new ideas, yet we are prepared to step quietly aside and let Rolls-Royce look for German masters because it does not want to put more money into new vehicles and it cannot afford the research on emissions that will be necessary for the American markets, so someone else must be found to take over the last real British motor manufacturer.

The Society of Motor Manufacturers and Traders is not happy about the situation. It does not regard it as intelligent or responsible economics. Anyone examining where our industry is going cannot have any confidence for the future.

I was told today that one of the engineering unions said that the problems were happening because we did not have a single currency. I dismiss that argument out of hand. It is rubbish, and it is important that we should say so. The situation has nothing to do with a single currency. It has far more to do with the attitude of British management, who, when faced with any circumstances in which they can sell the gold and run away somewhere else with their assets, are quite prepared to do so.

Vickers claims not to be like that, but to be a highly responsible defence firm that has given a long commitment to the United Kingdom, pouring money into defence jobs. Well, yes and no. Vickers has also taken over large numbers of state assets and closed down some of the jobs in the defence industry because it did not want competition in certain areas, such as tanks. It has also taken large amounts of money for research and development from this country.

When I said that before—you may find it difficult to believe, Mr. Deputy Speaker, but I am basically quite cruel—Vickers got very upset with me. I was told that what I had said was untrue, and that my views had been "noted with deep concern". Vickers claimed to be
"deeply committed to the British manufacturing industry… Vickers has invested very significant sums of money to ensure the survival of the business. Since the low point of the last recession, we have invested heavily in both new products and much improved facilities".

If that is so, why is Vickers holding on to its new cars until February and doing its best to move out of its existing models? Presumably it wants to hand over to the new buyers not only a new fleet of cars, but a new, sparkling product that will make the firm attractive and a good buy for a German manufacturer.

Almost all the engineering facilities in my constituency have been handed over to foreign buyers in the past 10 years, some of whom walked away with large sweeteners.

There was the American who bought all the railway freight with £240 million of taxpayers' money, and there was the British Rail workshop that now depends on repair work and will be wiped out totally if we import American locomotives. Now Rolls-Royce is saying that only with BMW or Mercedes-Benz is there any future for what remains one of the best motor cars in the world. That is irresponsible rubbish. It is nonsense.

The jobs belong in Crewe. They were first created by the high standards of workmanship, the commitment of the people on the shop floor and years of people working for lower wages than elsewhere in the engineering industry. The people working in the factory care about Rolls-Royce. They call it Royces. They care about engineering and the quality of their jobs. They are now less important to the firm that now owns them than a golf course tucked away somewhere that could be sold off to any passing itinerant buyer. That is the problem we are facing in Crewe.

If the Government are serious about using research and development facilities, creating jobs and not losing them and using taxpayers' money to look for new outlets, the first thing that my hon. Friend the Minister should do tomorrow is ask the management of Vickers what they think they are doing. He should ask them what prospects there are for the factory, and he should tell them not only that it is absurd for them to talk in such terms, but that we need to know what they are proposing.

The rumours are that BMW has already sewn up a deal, and that, irrespective of what is said in public, BMW engines are being used and BMW is the preferred company, irrespective of many other factors that should be taken into account.

When my hon. Friend has done that, he should talk to his colleagues in other Departments. He should talk to Ministers in the Department of Trade and Industry and find out what Rolls-Royce represents in terms of exports, and what would happen if that specialised unit were moved, closed down or put at risk. When he has figured that out, he should sit down with his colleagues and say that the Government have a responsibility to maintain not only jobs but the manufacturing base of a very high-quality product that will move into the next century with innovative technology, imagination and, above all, such quality that people will be proud to identify Rolls-Royce as a British name.

In Crewe, we are proud of Rolls-Royce and those who work in it. We are proud of the men and women who have given their lives to it—although, from time to time, they have been treated with total contempt. Let me say to my hon. Friend the Minister tonight: "Do not tell me that you cannot subsidise Rolls-Royce—I have not asked for that. Do not say that the Government are not involved, because they are." Every time we lose a large manufacturer, we put all such units at risk. If my hon. Friend does not believe me, he has only to remember what happened in Derbyshire, and the effect of moving those jobs to France.

It may be that we are all such good Europeans that we can stand quietly by while our economy is devastated, until it is devoted entirely to service industries. I do not see the future of my constituency as a series of garages providing fuel for other people's Rolls-Royces, and I expect the Government to take the same view.

11.48 pm

I thank my hon. Friend the Member for Crewe and Nantwich (Mrs. Dunwoody) for initiating tonight's important Adjournment debate. I share her deep concern for the future of manufacturing, engineering and technology. The British manufacturing base has declined from 58 per cent. in the late 1970s to 22 per cent. of the economy. My own city of Leeds has depended on engineering for an entire century. In recent decades, the decline in engineering has been precisely in those supported manufacturing industries.

Although we are certainly watching what is happening, the Government strongly support the automotive industry, including the component sector. We want to see it grow and prosper.

We want to build and consolidate the manufacturing base to help it compete successfully in Europe and the rest of world. Our automotive sector is the largest manufacturing industry in the world. In the UK, it generates 3.4 per cent. of gross domestic product, and employs 310,000 people directly and a further 440,000 throughout the supply chain in very many small and medium-sized British enterprises. There is strength in depth in the industry.

There are diverse, large multinational companies in the UK, such as Vauxhall in Luton and Ellesmere Port, Ford in Dagenham and Halewood, the Rover Group in Longbridge, Nissan in Sunderland, Honda in Swindon, Toyota in Burnaston—which is still there—and Peugeot in Ryton. Between them they employ almost 100,000 British workers. We must take account of the fact that the industry is highly linked. Our share of car production in the European Union has risen from less than 9 per cent. to—in 1996—just over 12 per cent. British factories are exporting Nissans, Rovers and Jaguars to Japan, and, even now, Cadillac engines to Detroit.

I simply make those points because the industry operates in a global market. Competitors are no longer those in the next town or even in the same country. The automotive world is global. To compete globally, the industry must be competitive globally, which means we have to face the challenges of the new world. That means that vehicle manufacturers have to find innovative ways of working—perhaps even with competitors—to secure the economies which can result from joint engineering and design and common componentry, to ensure that they are able to meet the challenges of the world market.

As we said in the recent report "Benchmark for Britain", the UK automotive components industry has some world-class performers. It has made impressive strides in recent years. It is well placed in world terms. The Department of Trade and Industry is working closely with the UK components industry to help win new business and safeguard existing operations.

We are supporting the Society of Motor Manufacturers and Traders industry forum initiative, which is an ambitious and practical programme to help industry improve its ability to compete and win in a global marketplace. The industry forum is a good example of Government and industry working together, with industry taking the lead to raise quality and demonstrate that the UK can bridge the performance gaps that are starting to emerge.

I recently visited an automotive company with which the industry forum had been working to improve performance and productivity and reduce floor space to ensure that it is in a strong position to remain in the UK and remain supportive.

There are seven multinational car manufacturers with substantial production operations in Britain, and five truck manufacturers. Rover has invested in a £400 million plant in the west midlands. Jaguar is investing in another £400 million plant for the production of the new small saloon car. Vauxhall is investing £300 million in upgrading its Ellesmere Port facilities. Nissan is investing £200 million in the Sunderland plant. Although Toyota's announcement today is, of course, a disappointment, as we have spelt out, it has so far invested £1 billion, underpinning 3,000 jobs, backed up by 60 UK components manufacturers. So the story is not all bleak.

I do not apologise for listing those projects. That level of investment is not only of direct benefit to car manufacturing but permeates much deeper into the British manufacturing industry, which has a beneficial impact on the automotive components supply base.

My hon. Friend mentioned research and development. It is not true that the car industry in Britain consists only of manufacturing operations. In fact, the automotive sector in Britain came second only to pharmaceuticals in its share of civil research and development spend, and spending increased by 16 per cent. in real terms last year. Much of that is accounted for by substantial vehicle engineering operations. Nor should we overlook the highly skilled and dynamic independent engineering companies, such as Lotus, Ricardo and others.

As for foreign ownership, we ought to stress that we have a vibrant and increasingly successful automotive industry. That has been brought about largely by British companies and a British work force.

Ford and General Motors have both operated in Britain since the early part of the century, and that does not reflect a transient commitment to the UK. The additional investment that has continued to be brought to manufacturing operations is essential for the growth of industry and jobs here. We cannot be opposed to inward investment, because it underpins whole sectors of the industry.

Decisions on ownership and investment have to depend on sound commercial judgments. Any change in the ownership of a UK car company that might give rise to a qualifying merger would fall to be investigated under the Fair Trading Act 1973. In such cases, it would be for the Director General of Fair Trading to consider the merger in the first instance before giving his advice to Ministers.

My right hon. Friend the President of the Board of Trade has said that her policy will be to refer cases to the Monopolies and Mergers Commission primarily when there are competition concerns. Each case must be considered on its merits. The President of the Board of Trade may block a merger that is referred to the MMC only when the MMC finding is that it would act against the public interest.

Alternatively, any change in ownership may fall to the European Commission for a decision under the EC merger regulations. As a member state with a vital interest in such a merger, the UK would be involved in the decision. As a member of the European Union, we would have the right to go to the European Commission, as we have done for other industries.

It is fair to say that Vickers has invested heavily in Rolls-Royce, and the company is not in difficulties. Inward investment in the UK automotive sector can have a positive effect, and the sale is not the end of the road for the 2,500 employed at Crewe. That is too pessimistic a prognosis at this stage, and the company could continue to stand for engineering excellence in Britain.

We face challenges in the future. We have a successful vehicle manufacturing industry in the UK, but it is dependent on having a strong, competitive supply chain. Although all the studies suggest that Britain has some of the best suppliers, work must be done to ensure that the British supply chain is improved and strengthened. We will work with that sector, through the industry forum, to ensure that that happens. By providing the right kind of environment to help the industry consolidate and thrive, we will bring together capacity in one location and locate new investment. The quality of our engineering, backed by a strong supply chain, will underpin jobs in the automotive industries.

We will go further. The environment must also be high on our list of priorities. The Government will work with the industry to introduce technologies that will bring further environmental benefits. Only last month, the Prime Minister announced a joint initiative between the Department of the Environment, Transport and the Regions and the DTI to set up the cleaner vehicles task force. The president of the SMMT, Ian McAllister, will chair the panel—and my right hon. Friend the Minister of Transport and I will sit on it—which will address the future issues for the automotive industry, to ensure that it has a future based on the skills and excellence that have been developed here.

We must try to ensure that quality of life, integrated transport strategies—my hon. Friend mentioned taxis—and the generation of wealth, which underpins jobs, can go hand in hand. Environmental pressures are becoming the major drivers of innovation and competitive advantage and we must be in a strong position to address those challenges.

By addressing such matters as the need to develop cleaner, more efficient and smarter vehicles—and building the partnerships with industry to enable such development—we can ensure a future for a strong automotive sector in Britain, supplied and supported by a back-up chain that employs many thousands of highly skilled and trained British workers and engineers. We must also ensure that such workers continue to emerge from the educational system to provide a ready supply of skilled workers for what is still one of our strongest economic sectors.

My hon. Friend may feel that the key question is that of ownership. I think that it is a question of strategic investment and ensuring that investment backs British jobs and engineering so that we can deliver the best from our traditions of skilled engineering and technology. Our track record is second to none in Europe. In the mid-1980s, less than 20 per cent of UK production was exported. Now, more than 50 per cent. is exported, much of it to the EU. Our trade is more locked in to the EU than it has been before, and that is not a disadvantage—it underpins the lock-in of jobs here.

The decisions of recent months—some of which have been disappointing—do not undermine the fact that there has been substantial investment in the automotive sector. We should welcome that, as it underpins the supply chain, which in turn underpins the quality of British jobs.

We will watch the situation carefully, but the sale of particular companies is a commercial matter for those companies and their shareholders. The Government are not a shareholder in the companies, and, if the sale proceeds, it will be considered by the appropriate regulatory authorities. That is the traditional system for checking these matters, and it will be a matter for the President of the Board of Trade—

The motion having been made after Ten o'clock, and the debate having continued for half an hour, MR. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at Twelve midnight.