CONCLUSIONS AND RECOMMENDATIONS
| Future of the UK car manufacturing industry
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| 1. | Like our predecessors we see mixed prospects for companies manufacturing passenger cars in this country, and for individual plants. There were particular reasons why Longbridge and Ryton closed and for the loss of the third shift at Ellesmere Port. However, though the combination of problems experienced by these plants may have been especially acute, we heard nothing to make us believe that they were unique to these plants or their parent companies. It is therefore all the more important that both the industry and Government put extra effort into improving skill sets throughout the sector, increasing the commitment to R&D, adopting lean manufacturing techniques and strengthening the local supply chain. (Paragraph 85)
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| Worldwide automotive industry
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| 2. | At present the automotive industry still seems to be wedded to a regional approach to its markets, expanding or contracting capacity to meet regional demand. Logistical costs and the need to reflect local tastes are important factors in limiting the scope for supplying customers from plants outside the region. While we do not believe that a shift in production from Western Europe to the cheaper Asian economies is imminent, like our predecessors we believe that the closure of car plants in Western Europe and the opening of up-to-date facilities in Eastern Europe, using cheaper labour, will continue. (Paragraph 12)
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| Factors affecting individual plants
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| 3. | Unsurprisingly, the age of plants influences decisions on which factories to run down or close where there is over-production. However, it is not simply the case that if a facility is old, it will close. Some companies have invested large sums of money in developing and upgrading factories—for example, neither BMW's Cowley plant nor Ford's Dagenham one is a new facility on a greenfield site. It is also arguable that, after more than 20 years of operation, Nissan's factory in Sunderland is hardly "new". Of more importance than simple age is the degree to which plants are capable of adaptation to modern manufacturing equipment and practices, and the cost of adapting them relative to building or upgrading facilities elsewhere. (Paragraph 20)
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| 4. | It is clear that the logistical models adopted by GM and PSA have contributed to the cost disadvantages faced by Ellesmere Port and Ryton. However, other car companies are also importing significant proportions of their components and exporting most of their finished products, while still managing to manufacture profitably in the UK. (Paragraph 28)
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| 5. | We were surprised to learn that PSA considered labour costs higher in the UK than in France. We recommend that the Government study this potentially significant claim to see whether there is such an incentive to cut manufacturing jobs in the UK, and we would like to be informed of the Government's conclusions. We are also concerned about the more predictable labour cost disadvantage vis-à-vis eastern Europe. We have recently started an inquiry into the impact on UK business of the recent expansion of the EU to Eastern and Central Europe, and intend to consider, amongst other things, the synergies that UK companies could achieve through working better with their equivalents in Eastern Europe. (Paragraph 31)
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| 6. | Analysis of international energy costs suggests that the UK is not necessarily disadvantaged by the level of electricity and gas prices faced by large industrial users like automotive companies, although there was understandable concern about the volatility of UK prices. We also note that the European Competition Commissioner seems determined to continue to put pressure on Member State Governments to remove such barriers to competition in the energy market as price caps for industrial consumers. This, and the recent signs of decreases in UK gas and electricity prices, may reduce or eliminate the cost disadvantage recently felt by companies with manufacturing operations in the UK. (Paragraph 38)
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| 7. | As our predecessors suggested, skills and training are critical issues "in an industry where processes are increasingly high-tech and innovation and adaptability are crucial and where persistent skills shortages could threaten the UK's continued success". The two and a half years since our predecessors' Report is, perhaps, too short a timeframe to expect much improvement in a longstanding problem like the skills shortages in the automotive industry. The Automotive Academy, opened in 2004, was eagerly anticipated as an innovative approach to the problem, and it seems that it has represented a new commitment from all parties—the individual companies, trade unions and Government—to addressing skills needs. In fact, the Government regards it as being such a success that it has decided to build on this model for a National Manufacturing Skills Academy. The Automotive Academy is being merged into the new body. It is not clear to us what, if any, implications this has for the future of training for the automotive industry. We would welcome an explanation from the Government of the reasons for this surprisingly early change to the structure of training for the industry, with its associated risk of a loss of focus on the needs of the automotive sector. (Paragraph 43)
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| 8. | We note that the whole issue of 'low carbon' transport is being addressed again in the context of the Government's Energy Review. We hope that this will lead to a consistent and long-term approach to research funding. We also seek the Government's views on GM's and Ford's suggestions about how to improve the R&D base. These are subjects to which we intend to return in a future inquiry. (Paragraph 46)
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| 9. | We are delighted that the industry wishes to build on the highly-regarded research facilities in this country, and note that even companies which have been closing production facilities, such as Ford and GM, are using the UK as a research base for their worldwide operations. We note that the Ford Motor Company claims to account for "some 80% of UK automotive R&D"—whether by staff numbers or value is not specified. While welcoming Ford's commitment to the UK, this does make the efforts of the rest of the sector appear less impressive. We recommend the Government to review whether the UK is really still at the forefront of innovative design and technology in the automotive sector, or whether research facilities are being used for work to support technological developments elsewhere in the world. Again, this is a subject to which we intend to return. (Paragraph 47)
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| 10. | There is a lingering suspicion that companies strongly connected by ownership, management headquarters or production capacity with a particular country will, unless countervailing arguments are overwhelming, choose to err in the direction of axing jobs overseas rather than at home. It is possible that the Japanese companies which have shown such strong commitment to the UK have been, at least in part, motivated by the fact that the UK has been their 'home base' within Europe. (Paragraph 48)
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| Ryton and Ellesmere Port |
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| 11. | The job losses at Ryton and Ellesmere Port appear to have resulted from a combination of causes. The fundamental one, for volume car producers, is the excess production capacity in areas of the world (including Western Europe) where demand is stagnant or falling. This does not mean that the UK automotive industry is doomed; but it does indicate that individual plants which are old-fashioned and inflexible, are simple assembly plants, are remote from the company's supply chain, produce only one main model, and have productivity or skills problems will be vulnerable. There may be large-scale job losses, such as those seen at Ryton and Ellesmere Port, in the UK automotive industry in future. It is therefore all the more important that lessons are learned from the experiences of dealing with the mass redundancies arising from the collapse of MG Rover. (Paragraph 52)
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| Lessons from the MG Rover Task Force
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| 12. | We note the differences in estimates of the employment rate of former MG Rover workers. Some former employees never claimed benefit or used any of the Task Force services, 'disappearing' into the general population. Even amongst those who did take advantage of support, advice or training, there was no requirement for them to keep the Task Force, or subsequently Advantage West Midlands, informed of their situation. Leaving aside actual numbers, it seems reasonable to conclude that the majority of those made redundant have found new jobs, but many have had to take a cut in salary, and some are doing less skilled work than they did at Longbridge. However, some of those forced to choose entirely new careers have found greater job satisfaction, even though the pay is lower. (Paragraph 68)
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| 13. | The NAO's report made recommendations on a number of issues, including the need for those providing training and employment advice to take into account the experience and requirements of all staff employed (managerial, unskilled, shopfloor, technical, office and support) and not to concentrate on one section (in the case of MG Rover, on manufacturing and engineering staff) rather than the others; and the need to ensure that the support and information provided on training and employment opportunities is "made available at a time and is delivered in a manner which is most beneficial to the recipients". We endorse these recommendations. (Paragraph 78)
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| 14. | On balance, the Task Force was a success, though, as with most disaster management, a number of areas—in particular, training provision—could have been improved if more time had been available. Useful lessons have been learned in how to address large-scale redundancies in future, and we detected that the relevant public bodies and PSA and GM appeared to have absorbed some of them in their longer-planned approach to the job losses at Ryton and Ellesmere Port. We look forward to hearing from the Government how it intends to address the specific weaknesses raised by our witnesses, especially those resulting from conflicts between training and benefit policies, such as the 16 hour rule. (Paragraph 84)
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