The following article reminds readers of industrial relations and manufacturing quality in the 1970s.
“Industry analysis at the time revealed that on virtually every measure of performance, Japanese car makers were at least twice as good as their UK equivalents, while on product reliability, the Japanese were more than 100 times better.“
You can see how Mrs Thatcher could have been persuaded that BS 5750 could restore British quality and competitiveness. This put the BSI in the position to foist the ISO 9000 series on the world. The Germans and Japanese tried to vote it down at the ISO.
Now we have global industrial terrorism by cartel inspectors.
From General Motors to Fiat and Renault, most of the big household names are struggling. Poor demand, crippling overcapacity, and increasingly intense competition from foreign entrants have combined with a structural shift in the market to premium and value vehicles to squeeze established marques.
Yet amid this tale of decline is one unexpected bright spot. Remarkably, the UK car industry seems to be enjoying something of a renaissance. So remarkable, in fact, that industry veterans – hardened by years of failure – keep pinching themselves to make sure it’s real. The full range of good-news stories over the past year is too long to list, so here is just a taste.
These announcements come hard on the heels of major new investments by JLR at Halewood, Nissan at Sunderland, Honda at Swindon and Vauxhall at Ellesmere Port. At the elite end of the industry, McLaren Automotive is also investing heavily in a new facility at Woking.
This is prompting a host of matching initiatives in the supply chain. The surge in activity is virtually unprecedented, with car production this year expected to top 1.5m vehicles, more than at any time since the late 1990s.
The previous peak for UK car production was back in 1972, when the industry sold 1.9m cars. Such has been the intensity of new investment that the Society of Motor Manufacturers and Traders is confident this record will be surpassed within three years, assuming there is no meltdown in the eurozone.
Rewind to the birth of mass motoring in the late 1950s and early 1960s and you find an industry that, although it was already displaying many of the weaknesses that would destroy it, was more than holding its own, with some fantastic examples of design, innovation (including the 4×4) and engineering excellence. UK car makers dominated their own home market, with the vast potential export market of the Commonwealth still all to play for.
This was the age of the Mini, the E-Type Jaguar, the Aston Martin DB4 – all immortalised in Peter Collinson’s comic caper, The Italian Job, a movie that was in part an unashamed celebration of supposed British automotive superiority. The original target for Charlie Croker’s heist was the payroll of the Turin-based Fiat.
It is ironic that when the film was released in 1969, the UK industry, wracked by poor management and union militancy, was already tipping into the abyss. “Think where we would be today if we had done things differently back then,” says John Neill, chief executive of Unipart. “We might, like the Japanese, have been producing 12m cars a year. Can you imagine what that would have done for national wealth, jobs, and well-being?”
The comparison to Japan is instructive – two island nations of roughly equal potential back in 1945, one defeated and in a state of ruin, the other victorious with a massive head-start and a magnificent heritage of vehicle design and production to build on. Today, Japan is the world’s pre-eminent car manufacturer, producing almost as many autos as the United States. How could the UK have so carelessly squandered its manifest advantages? What did we get so wrong?
The answer goes to the very heart of our wider economic failure. The stop-go economic policies of post-war Britain were a large part of the mischief. The motor industry became little more than a mechanism for turning the taps of economic growth on and off. World-class manufacturing cannot prosper in such an environment.
To have the confidence to invest, it needs stable economic conditions, predictably low inflation, and a ready supply of available and relatively cheap credit. Post-war Britain provided the very opposite. Like the Grand Old Duke of York, the economy was repeatedly marched up to the top of the hill, only to be marched back down again.
But the biggest problem by far was the unions, compounded by weak and ineffectual management. Both came to believe they were engaged in some kind of historic class struggle. While Japanese and even European car makers were making the big leap forward in terms of productivity, quality control, and just-in-time stock management, their UK rivals were sinking into a quagmire of restrictive practices and wildcat strikes.
Industry analysis at the time revealed that on virtually every measure of performance, Japanese car makers were at least twice as good as their UK equivalents, while on product reliability, the Japanese were more than 100 times better. When the MG factory finally closed, its warranty costs alone were running at more than £100m a year.
What went for UK car makers tended to be true of British manufacturing as a whole. One joke among foreign rivals was to ask why the British liked to drink warm beer. Answer: because they use Lucas refrigerators.
There were exceptions. Rolls- Royce, the aero engines group, managed to claw its way back from disaster and nationalisation to world-class status. In this, it was greatly helped by its position as a key defence contractor, which underpinned long-term investment. There was no such strategic protection for the consumer industries.
Mistakenly, the government thought that if it crunched all the car makers together, the industry would then have the critical mass to compete. Nearly 20 different marques were frog- marched by the government’s Industrial Reorganisation Corporation into a single entity, the British Leyland Motor Company. Predictably, it made them less competitive, not more so.
Some still blame the government of Baroness Thatcher for the final destruction of Britain’s manufacturing base. In truth, the die had been cast years, if not decades, before. Failure to modernise, combined with years of underinvestment and debilitating union militancy, meant the industry was singularly ill- equipped to tackle the onslaught of global competition. The once- captive markets of Empire were fast disappearing, too.
With the demise of the major car makers went great swaths of supply chain enterprise, from component manufacturers to foundries and commodity steel and aluminium production. What made the destruction so hard to take was that it was almost entirely self-inflicted.
On the way to the bottom, many attempts were made to save what remained of these historic names. Car-making is an industry where hope and romance spring eternal. At one stage, BMW was persuaded to swallow Rover whole, a transaction that veterans of the previous owners, British Aerospace, still talk about with the same glee as the practised conman. “We sold the Germans a dog,” one delights in recalling.
The indigestion proved so violent it very nearly killed the German car maker, which routinely referred to its new charge as “the English patient”. What remained of Britain’s home- grown volume car industry hit rock bottom with the grubby little private equity acquisition of Rover from BMW by the so-called “Phoenix Four”.
Duly stripped down to the last light bulb, the company was eventually sold out of administration to the Chinese, who took the designs, engineering and capital equipment and shipped the lot off to Shanghai. It was a somehow suitable end.
One of the great ironies of the current renaissance is that it took the Japanese, the UK motor industry’s nemesis, to begin it. First came Honda, persuaded under the Thatcher government into a joint venture with Rover.
That was never going to work. The cultural divide, not to mention the problems with quality control, proved too much for the Japanese, who determined to transplant their own facilities to the UK instead – with Japanese management, Japanese quality control and Japanese levels of productivity. Other Japanese car makers soon followed.
“They wanted a doorway, or launch pad, into the highly regulated European market”, recalls Lord Battacharyya, chairman and founder of Warwick Manufacturing Group, which provides support services to improve industrial competitiveness. “They came to Britain because we spoke English, we made them feel welcome, and because of our flexible labour markets.”
At the start, these were mainly “screwdriver” plants, mere assembly operations for parts made in Japan. BMW sold Rover but kept the Mini, which likewise became a largely German product – German-designed, German-powered and substantially made up of German kit.
But it was a beginning, and in time this new foreign-owned industry spawned its own suppliers here in the UK. Having killed the UK motor industry off, foreign interests then became its salvation, bringing their own technology, innovation and processes with them.
Highly demanding requirements have in turn helped inject new discipline and vigour into the supply chain. Today, UK car makers account for just 20pc of the home market – against nearly 50pc when British Leyland was formed – but some 80pc of the production is exported. Foreign ownership, leadership and money has transformed a once-moribund industry into a globally competitive powerhouse. Nor is it just a foreign phenomenon. All who visit McLaren are blown away by this uniquely successful example of British high-end engineering.
Most positive of all is the transformation of Jaguar Land Rover (JLR) that has taken place since Tata of India bought the famous British marques from Ford in early 2008. At the time, it was widely assumed they would go the same way as Rover, with production shipped off to fast growing emerging markets.
Tata said it wouldn’t do this, and despite media scepticism, it has been as good as its word. Instead, it has invested heavily in new models and design, and is now reaping the rewards. There is a sense in which Tata is prouder of the quintessentially British nature of its newly acquired assets than we are ourselves. Certainly, it has proved an inspired custodian of them.
“There was never any shortage of engineering ability and capacity,” says Lord Battacharyya, who is often credited with having persuaded Ratan Tata, titular head of the sprawling Indian business empire, to buy JLR. “What was missing was capital, vision and leadership.”
And outside money. For as the credit crunch intensified and the British banking system stopped lending, Tata was able to draw on facilities provided by the State Bank of India to stay true to its vision and keep investing heavily through the very depths of the cycle.
Sometimes it seems that foreign money is keener to invest in Britain than we are ourselves. Today, JLR is one of the biggest investors in research and development in the country, channelling a full £2bn a year into ensuring that its models remain globally competitive. The Range Rover Evoque, which is taking the sports utility vehicle market by storm, is powerful evidence of what can be achieved.
Luck has played its part. Structurally, Britain’s automotive industry has found itself extraordinarily well placed to ride both the emerging market boom, and the move upmarket to more aspirational, premium models. Some of the big European volume car manufacturers now tragically find themselves going the same way as British Leyland back in the 1970s. Failure to modernise has made them vulnerable to the same slow death by a thousand cuts.
Is the resurgence of UK car- making sustainable? Yes, but only if Britain learns from past mistakes. Says Ralf Speth, a former BMW apparatchik who now heads Jaguar Land Rover: “The industry’s renaissance will only be sustainable if the UK creates a globally more competitive environment and better investment incentives, for instance in R&D and advanced manufacturing, as a key element of economic growth.
“Such actions could help rebuild the automotive supply chain, attract further foreign investment, and install the latest technologies. We need to plan and act now if we want to continue our success tomorrow.”
Those who worry about foreign ownership, take note. Without Japanese, German and Indian support, Britain would have no automotive industry to speak of. Encouragingly, Britain’s automotive industry rebirth has also been based largely around exports, particularly to fast-growing emerging markets.
There are big lessons in this tale of destruction and rebirth for other industries, and for some of our public services, too. Without modernisation and change, the National Health Service – still a source of immense national pride, as Danny Boyle’s Olympics opening ceremony showed – will eventually follow our once-pioneering motor industry. Other countries will end up with better health care for less money.
The most powerful lesson from the history of UK car making is that to survive and prosper, industries must adapt, change, invest and, above all, remain globally competitive. Britain forgets these lessons at its peril.