MONDAY 26 JUNE 2006

GENERAL MOTORS

  Q140  Mr Hoyle: What is that in percentage terms of the car build?

  Mr Browning: I do not have that number to hand.

  Q141  Mr Hoyle: Would it be possible to have that, because obviously that gives an indication?

  Mr Browning: Again, let me take that one away and see what we can provide to you. We have certain items that we purchase in the UK, there are others that we bring in and the sourcing of components is done on a global basis, not just a European basis, so a lot of those components come from literally around the world. Therefore, the logistics differences that we were referring to were simply on a comparable basis between the sister plants of Astra and Ellesmere Port in the UK versus the Western European plants. When I talked about a logistics disadvantage in the region of €19 million it was on a like-for-like basis for the other Astra plants.

  Q142  Mr Hoyle: It is not based on the components?

  Mr Browning: It is not, because those components are the same for all the Astra plants.

  Q143  Mr Hoyle: They are bought in dollars rather than pounds, presumably?

  Mr Browning: Again, it depends from where that sourcing comes.

  Q144  Mr Hoyle: If it is the world, you use your dollar premium, presumably to ensure that you have got a long-term competitive price?

  Mr Browning: Again, it depends, which currency, which market, which supplier and how the contracts are written.

  Q145  Mr Hoyle: If it is possible actually to achieve a breakdown, to say, UK supply, so much of components to the Astra market, if you could?

  Mr Browning: Let me see what we can do.

  Mr Hoyle: That would be very useful. Obviously, part of our worry is not only is it job losses in the car industry but the knock-on effect is where there is an effect on the components industry and, particularly, from our point of view, the UK components sector, as being an important part of manufacturing, we are just wondering where that market is going. Possibly you could be able to help with that. Of course, you did say you would let us know the GM cars sold in Belgium, Poland and Germany as a future figure, and could you break that down a little bit further, I am just wondering what each Government actually procures from GM?

  Chairman: Let me explain that Mr Hoyle has a view, which the Committee may or may not share, I think probably I would agree with it, that the British Government is not always good enough on its public procurement policy, in terms of supporting domestic manufacturing industry.

  Q146  Mr Hoyle: I would like to see your arm twisted a little; that is it, basically.

  Mr Browning: I will certainly provide the data in terms of the total market. Again, I will need to look at the confidentiality of who those customers are.

  Mr Hoyle: I will be quite honest with you, I do not think you can hide behind that, because these are Governments which are procuring, using taxpayers' money, so I would not like you to try to use that argument that is not actually standing up, or otherwise we would have to use the powers of the Committee.

  Q147  Chairman: I suspect this information is in the public domain, because we know what the Government buys.

  Mr Browning: It depends which customers you are talking about; earlier you mentioned some national governments, you have mentioned some other fleet types of customers. In terms of the national governments, no problem.

  Q148  Mr Hoyle: Can I just clear this up. I mentioned fleet customers, but only procured using taxpayers' money, so it is as simple as that, which will be in the public domain, or it should be, and I do not think it is one that you can hide behind and I would not expect you to. I am not asking you to give me the detail of what people pay, it is just the volume and money spent?

  Mr Browning: If it is for public procurement, absolutely no problem. You seemed to be indicating earlier fleet customers as well; that was where the confusion was.

  Mr Hoyle: I called the Post Office "fleet," but it is part of the Government.

  Chairman: This Committee is looking at doing possibly a later inquiry into public procurement and the way in which it is used in this country to support or not support British manufacturing industry, so we may come back to you for some more detail later. It is a matter of concern to the Committee.

  Q149  Rob Marris: I was pondering this logistics question, actually; it is not really what I am going to ask you, just as a comment. The logic of it is it may be, given that the UK, in one sense, is peripheral to Western Europe, that you will be shutting down your production in Michigan because everybody lives in Florida and California, which are considerably further away than Western Europe, which is quite small, but anyway, leave that aside. Our predecessor Committee, in 2004, concluded that the UK industry was basically pretty strong but more was needed to be done to improve skills and investment in automotive R&D as a strength in the UK, I think. Given our previous assessment, from where you are sitting, would you agree with that assessment, and, secondly, if you do not agree with it, should we change it, and in what way?

  Mr Browning: I think that the analysis and the focus from that time are still essentially true and correct. I think we need still to continue to develop the right skills in the UK and make sure we nurture the environment in which some of the historical engineering strengths of the UK motor industry continue to be maintained and developed, so I think that is a very important part. I think, when you talk about some of these short-term structural adjustments that you see the industry going through, you have to separate those from the longer-term opportunities for the UK really to take a lead in some key areas of technology or key areas of infrastructure. I think, when you talk about the automotive sector specifically and look further into the future, the whole question of the hydrogen economy and the next levels of technology that the automotive sector will move on to are areas that we should be addressing specifically now, for the UK to keep a capability, to maintain, nurture and grow that research and development and engineering specialist skill set that we do have in the UK. We need to separate, as I say, some of these more tactical, short-term restructuring actions from the longer-term focus of how we continue to ensure the engineering skill set is appropriate for the automotive arena well into the future.

  Q150  Rob Marris: Historically, a classic measure of a branch plant economy, if you look at GM production in Michigan versus GM production in, say, Ontario, is that in the branch plant economy the research and development budget is a far lower proportion of the operations budget. How much R&D is Vauxhall allowed to do by GM in the United Kingdom and how much of it is done, say, either in Germany or in the USA, or whatever?

  Mr Browning: I think it is important to understand, when you talk about research and development and product development within General Motors, that is part of a global system of development and research, and so everybody is collaborating in developing global projects, of whichever physical location they happen to be part. In the UK specifically, we have a Vehicle Engineering Centre at Millbrook which focuses on the commercial vehicles and has a particular specialty in that area, but the entire global resource is sharing work on projects around the globe and it is not just focusing on products that are specific to that country or that region, it is a global product development system.

  Q151  Rob Marris: Would you anticipate that there will be more or less automotive R&D carried out in the United Kingdom ten years from now? I am not asking just about GMC but generally.

  Mr Browning: I do not see that as necessarily a pre-determined direction. I think there are areas of great opportunity, particularly in terms of vehicle propulsion, where the UK could take really a leading edge. As I say, if you talk about long-term opportunities, focus on innovation, particularly innovation around the hydrogen economy, it is a field which is still relatively open within the global automotive industry.

  Q152  Rob Marris: Are you putting in a bid for that then, for the UK?

  Mr Browning: I think the UK needs to think about where the opportunities are, in terms of developing the skills, having the research capability in place to feed the entire global industry, it is not just about Vauxhall Motors or GM, for that matter.

  Q153  Rob Marris: Can I put it this way then, as I see it, you are saying, and this is perhaps putting words in your mouth, and tell me if I am wrong, hydrogen is like one of the next big things, automotive, what would the UK need to have in place to persuade General Motors Corporation to invest a significant amount in something like hydrogen propulsion research in the UK?

  Mr Browning: I do not think it is so much a question of GM investing, I think it is the automotive industry globally having a need and how does the UK present itself as a great resource for the development work and ensuring the infrastructure is in place at the right time. Whether it be in terms of technology corridors in some of the heritage we have, in terms of automotive engineering, particularly around the M40 and up through the Midlands, whether it be in terms of specific capabilities, at universities, Warwick, for example, whether it be in terms of government policy that looks at helping to see the infrastructure that ultimately a hydrogen economy would need, I think those are all the sorts of things that can be planned well in advance to help create the right environment for the UK taking a leading role in that arena.

  Rob Marris: I wonder if you would be prepared to let us have, and you might not be, with commercial confidentiality, or whatever, a brief written assessment of what is in place, in that scenario that you have just outlined, already in the UK and what is lacking? I would find it helpful.

  Q154  Chairman: This is an SMMT point as well. This really goes to the heart of our inquiry; what two or three things do we most need to do to ensure, in the broadest sense, there is an automotive industry in this country for the next 30 or 40 years? It would be really interesting to have your perspective on that, now or later, or through the SMMT more generally, because I am still not quite clear, I think I know some of them but what the full list is?

  Mr Browning: Yes, certainly we will do that.

  Q155  Miss Kirkbride: I hope your prediction was right as that would directly affect my constituents, who sit on the M40, or just about on the M40 anyway. I want to ask you just one thing, to respond to the previous witness, the union representative, in more direct terms than you have been asked so far, which is this view that he has and the union has that we have lost jobs in the United Kingdom because our employment laws are so flexible that companies like yours, and others, cut jobs in the UK because it is easier than doing it in Germany or elsewhere?

  Mr Browning: I would like to correct a couple of things that were said. First of all, that we were sacking people at Ellesmere Port, which is not true; we have put in place a voluntary separation programme and we have already received a very significant number of applications for the voluntary programme that we have put in place. I would say, in the specific case that we have been talking about today, Ellesmere Port, the comment about ease of dismissing people in the UK is entirely irrelevant because it is not what we are doing in the UK, it is a voluntary separation programme. Secondly, I do not see that as an issue for the UK in terms of the decisions that are being taken around the automotive industry, at least in the case of General Motors. The decisions are based on the economics, the long-term economics of a particular operation, a particular facility, and it is the underlying competitiveness of that operation which really is at the heart of the decision-making that is taking place. When you look at whether it is the investment in new facility or the adjustment of an existing facility, there are many factors that are taken on board; cost obviously is a very important piece, the local regulatory environment, the degree of support for the automotive industry in that market, in that environment, is very important as well. It is not, as perhaps has been characterised on occasions, simply an assessment of where it is most simple to dismiss people.

  Q156  Miss Kirkbride: I want to finish off on the Rover Task Force and say now what I should have said before, which is, as I sat on it, I declare an interest. In respect of that and the voluntary redundancies that are taking place at Ellesmere Port, has there been any approach to or from Government as to what help might be available to those workers in these circumstances?

  Mr Browning: We were fortunate enough to have, as you are probably aware, both the Chancellor and the Secretary of State for Trade and Industry actually to come to the plant on the day that we were making the announcement of the removal of the third shift, and so there was very visible support, in terms of the focus of the local agencies to help, in terms of the transition of those people who did take the voluntary separation programmes. There has been a lot of work going on with the North West Development Agency, in terms of making sure there is as much of a transition programme put in place as possible, as much assistance. Also, we have been encouraged by the number of local employers that have been contacting the plant, interested in the people that were going to be leaving the operations at Ellesmere Port as well. I would say, both from what we have been able to do internally and the local agencies, there has been good collaboration in terms of making what is obviously a painful transition for ourselves, and for the families concerned, as smooth as possible.

  Q157  Miss Kirkbride: From the company's point of view, is there anything else which could be done, offered by ministers or quangos, paid for by the taxpayer, which could be offered, which has not been offered so far, which you would like to see put in place?

  Mr Browning: I would say the response so far has been very positive. I think both the collaboration at a national and a local level has been encouraging. We are focused very much on working our way through this current transition but then putting a very great degree of focus and energy on the future investment proposals as well. We are working together with those same agencies on the future investment as well as the short-term transition, so nothing that is specifically outstanding, no.

  Q158  Miss Kirkbride: Perhaps you would like the taxpayer to be more generous?

  Mr Browning: I think it is important not just from a taxpayer's perspective to say how we are competing but also some of the international macroeconomic factors. In the written submission we talked about some of the, let us say, unfair competition in terms of exchange rate manipulation and that is a very significant element, in terms of competitiveness of manufacturers from some parts of the world versus manufacturers in other parts of the world. When you look at a potential competitive disadvantage of the magnitude of €3,000 per vehicle versus a vehicle imported from Japan, in that particular case, there are many local competitiveness issues, in terms of how we manage the economy in the North West of England, in the UK generally but also global macroeconomic policy issues as well, which all have to be addressed collaboratively.

  Q159  Chairman: Mr Browning, thank you. Is there anything else you would like to say to the Committee?

  Mr Browning: No. I appreciate the time that you have taken. I can just reinforce what I said earlier, that we are proud of the heritage of Vauxhall and General Motors in the UK, the length of time we have been operating here and it is our strong desire to maintain that going forward, but that has to be on the basis of a very competitive operation, and that is what we are looking to deliver.

  Chairman: In that case, it is time to apply the brakes to this session. I do want to repeat my gratitude to you for your willingness to come here and give evidence. We particularly look forward to, if you can, some additional evidence on the energy question, which will be very helpful, and, through you, perhaps I can say to your colleagues elsewhere in the industry, although this inquiry is born out of the failure, the difficulties, the challenges facing different parts of the sector, we are very anxious to build a prosperous future for it too, so some policy suggestions to help achieve that would be very welcome from you and your colleagues. Thank you very much indeed.