December 15, 2011 / 1:15 PM / 8 years ago

British car industry bucks gloomy economic trend

SUNDERLAND, England (Reuters) - It’s noon at Nissan’s car assembly plant in northeast England, and the men on the early shift have already made 210 Qashqai cars from scratch.

Nissan technicians prepare doors for the Qashqai car at the company's plant in Sunderland, northern England November 9, 2011. REUTERS/Nigel Roddis

Only another 169 to go before they can head home.

Dressed in grey jackets embroidered with their names, the trim-and-chassis team members scuttle between the shells of silver cars gliding along a conveyor belt with bonnets and boots raised, their windows yet to be glazed.

Pop music is playing as they press rubber piping into car door frames, attach windscreen wipers and push the upholstered underside of the roof into place.

They’ll be making an extra three Qashqais an hour next year as the Sunderland plant increases capacity to cope with strong demand for the crossover model, which combines elements of the SUV and hatchback.

Their colleagues on the Juke production line will also ramp up production in 2012 — by some 10,000 units of the mini crossover car — which means another 200 jobs to achieve the new targets, according to Kevin Fitzpatrick, Nissan vice-president for manufacturing in the UK.

Britain’s car industry is seeing a revival — a bright spot in a country grappling with a record trade deficit, falling employment and a faltering economy — as its leaders make manufacturing a key part of their strategy to rebalance the economy away from an over-reliance on financial services.

Prime Minister David Cameron took the opportunity of Toyota’s announcement in November that it would invest more than 100 million pounds in its British operations to call for “a more balanced economy, one with manufacturing, innovation and exports at its heart.”

“The automotive sector is leading the way in helping us achieve this — it is an extraordinary success story,” he said as Toyota committed to building its new generation C-segment family hatchback model in Britain, creating 1,500 jobs at its car plant in Derbyshire.

The British car industry, which employs more than 700,000 people, is largely foreign-owned after Margaret Thatcher’s Conservatives enticed big Japanese carmakers to open plants in the 1980s and pick up the slack from what at the time was an inefficient, unproductive and declining indigenous industry.

While Britons have long lamented the demise of national champions like iconic carmaker British Leyland, Deloitte automotive specialist David Raistrick told Reuters foreign ownership of the country’s car industry was a testament to its strength, not a sign of weakness.

“All the major players are foreign-owned so they have made a conscious decision to base themselves in the UK ... one of the reasons for this is that the UK infrastructure and skilled workforce allows us to have some of the most efficient car production plants globally,” he said.

There are plenty of challenges ahead.

“The component supply sector is still wobbly — it’s much easier to manufacture components in eastern Europe or even further afield so that part of the automotive industry still has a long way to go to find a long-term strategy for itself,” IHS analyst Ian Fletcher said.

Other potential problems include currency fluctuations, a shortage of skilled labour and the economic uncertainties in Europe, which imports nearly three quarters of the cars Britain exports.

“The biggest issue at the moment from a British manufacturing point of view appears to be the sovereign debt crisis in Europe. Although it doesn’t look as if a cold is going to be caught elsewhere as yet, all it takes is another Lehman-style collapse and everything grinds to a halt again,” Fletcher said.


Nissan has yet to feel the chill in Sunderland — Fitzpatrick said the facility, which exports to 92 markets, simply cannot make enough of the Juke and Qashqai models.

The car plant, Britain’s largest and Europe’s most productive, secured 420 million pounds ($656 million) worth of investment last year to build Nissan’s LEAF electric car from 2013 and produce the lithium-ion batteries used in the hatchbacks at a specially built factory in Sunderland as of 2012; 350 jobs were created.

“The plant’s a good thing, bringing plenty of work to the area — Sunderland would be a ghost town without it,” said Hugh McMillan, a 53-year-old porter at the local hospital. The plant currently employs a record 5,300 people compared with 450 when it opened in 1986.

The Japanese carmaker said in June that it would invest 192 million pounds to design, engineer and build the next version of the Qashqai in Britain, which ranks 12th globally in worldwide vehicle output with 2.4 percent of the market.

The value of automotive exports from Britain came close to an all-time high in 2010 and the latest data from the Society of Motor Manufacturers and Traders (SMMT) shows that the volume of vehicles exported from Britain rose almost 20 percent from October 2010 to October 2011. The automotive sector accounts for more than one tenth of Britain’s total exports.

During the 2000s Britain built more than 15 million cars, topping production levels in the 1970s and 1980s. The decade was on course to be the country’s most productive yet until the recession struck, the SMMT said.

But even as Britain teeters on the brink of recession again, multinational car companies like Jaguar Land Rover, Tata Motors, Aston Martin, MG, Toyota, Nissan, BMW and GM’s Opel/Vauxhall are pumping money into the country’s automotive sector at an unprecedented rate.

Carmakers like these have, combined, announced investments worth more than 3.9 billion pounds in Britain’s automotive industry and its supply chain so far this year, creating 7,400 new jobs, according to SMMT data.

Analysts say logistics which enable just-in-time manufacturing, good infrastructure, world-class research capability, a flexible, high-quality workforce and a strong manufacturing heritage give Britain its pulling power.

“There’s no doubt that the global motor industry sees the UK as a very important part of their businesses and they have consequently invested here, and more so over the last two years than we’ve probably seen for the last two decades, so it’s a good time,” said Paul Everitt, Chief Executive of the SMMT.

While car production ceased at Ford’s flagship British plant in Dagenham and at a Vauxhall plant in Luton after the recession in the early 2000s, Britain has not seen any facilities close over the last three years despite the worst global financial crisis since the 1930s Great Depression.

“We’ve been through that point where there have been lots of job losses and we’ve been through that rationalisation process — a lot of plants in other countries still have to go through that,” Fletcher said, adding that he saw continental European plants as being at greater risk of closure than British plants.

In September Wolverhampton fought off competition from India with the British government’s backing to win 355 million pounds’ worth of investment from Jaguar Land Rover to manufacture low emission engines, creating 750 new jobs and thousands more across the wider economy.

The Indian-owned luxury carmaker said last month it would also create 1,000 new jobs at its facility in Solihull near Birmingham — more than a 25 percent increase in the plant’s workforce — as it seeks to launch 40 new products over the next five years.


Britain is home to seven volume carmakers, six commercial vehicle manufacturers, 11 bus and coach producers, more than 10 niche and specialist vehicle manufacturers and eight of the world’s 12 Formula One teams. More than one million vehicles and two million engines are produced in Britain every year.

“If you look at the British car industry, it’s not only successful but it’s also very varied and that makes it quite resilient,” said Paul Nieuwenhuis, Director of the Centre for Automotive Industry Research.

No new plant closures are on the horizon because foreign companies with operations in Britain are increasingly embedded in the country’s economy and uprooting them would cost too much, Autoanalysis Director Ian Henry said.

He said companies like Bentley, Rolls Royce, Aston Martin, Jaguar Land Rover and Lotus had no choice but to keep production in Britain anyway: “In the case of those iconic British brands, I think the fact that they’re made in the UK matters a great deal to a large number of the consumers.”

Concerns persist over domestic demand and the effect of the euro zone crisis and global economic downturn on international markets, but the analysts were largely sanguine.

Sales of new cars in Britain fell by 4.2 percent on the year in November to 134,027 units, SMMT data shows.

“As long as export markets hold up, whether they be the U.S. or Asia, I think the UK car industry will fare well,” Barclays Capital analyst Michael Tyndall said.

Britain typically exports more than 75 percent of the vehicles it manufactures; more than one in ten cars produced in Britain are exported to America and around 12 percent are shipped to Asia.

The specialist nature of many of the vehicles that are produced in Britain should shield the country’s car industry to some extent, Fletcher said.

Slideshow (4 Images)

And the high value-added cars like Jaguars, Land Rovers, Rolls Royces and Minis produced in Britain are not threatened by competition from lower wage cost economies as much as carmakers at the lower end of the market like Renault or Fiat, said Nieuwenhuis.

With the shift towards the kind of greener, more fuel-efficient cars in which Britain specialises about to take off, experts said the country’s total vehicle exports, which are worth around 25 billion pounds every year, could rise further.

“What you are seeing globally, apart from in the U.S., is a slow but sure move towards smaller engine cars which actually favours where we are and what we’re doing, so in terms of UK manufacturers, I feel very positive,” Raistrick said.

Editing by Sonya Hepinstall

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