UK races to revive supplier industry
LONDON -- The revival of car production in the UK has prompted the government to take action to rebuild the country's supplier industry.
Led by Japanese automakers Nissan, Toyota and Honda, plus domestic brands Jaguar Land Rover and Mini, UK auto production has recovered so much that the country is catching France and Spain, Europe's No. 2 and No. 3 producers.
Automaker executives and industry watchers say there are gaps in the parts industry that may hamper future expansion of production. "It is seen as critically important to grow capacity in the automotive supply chain to meet increasing demand," said a report from the government-backed Automotive Council UK.
The organization sees 3 billion pounds (3.7 billion euros) worth of opportunity for suppliers, divided into 35 sectors headed by engine castings (370 million pounds), steering systems (220 million pounds) and interior trim (170 million pounds). It also points out that the UK has a low corporation tax rate, "the lowest labor costs in western Europe" and tax credits for r&d investments.
"There's definitely a will and desire to increase sourcing in UK," said Garel Rhys, president for the Centre of Automotive Industry Research at Cardiff University. "The issue is not demand; it's persuading the actors to come here."
Duncan Aldred, managing director of General Motors' Vauxhall brand, said: "Generally speaking, local content is pretty low. The government has a lot of work to start moving up levels of 30 to 50 percent." Vauxhall will increase local content to 30 percent from about 10 percent for the next generations of the Astra compact car and Vivaro van, he said.
The UK is actively persuading suppliers to relocate. At the Paris auto show in September, UK Business Minister Michael Fallon spoke at the board meeting of the European suppliers association, CLEPA. "I want to make it clear there is government support when suppliers make their choice," he told Automotive News Europe.
Britain's historically important car production used to be able to rely on the local component industry, described as the "jewel in the crown" by Rhys. He blamed its decline on carmakers themselves. "There was this headlong rush to go abroad for parts in the 1980s because it was seen as being better," he said.
A further decline occurred after the global economic crisis of 2007-2008, when the components industry was hit hard and suppliers shut local factories. Last year, Robert Bosch shut an alternator plant in south Wales, transferring production to Hungary. In addition Britain's last remaining global component supplier, GKN, shut two plants.
Rhys said the number of people directly employed in the UK automotive industry fell to 160,000 in 2011 from 210,000 in 2007, with over half the jobs lost in the supplier branch.
By contrast car manufacturing is growing. Nissan is expanding its Sunderland, England, factory. Production will increase to 650,000 by 2015-2016 from about 500,000 in 2012, the company has predicted, meaning the plant will account for a quarter of UK production.
Jaguar Land Rover will have invested 2 billion pounds in new products between 2012-2013, including a new engine plant. Vauxhall has confirmed it will build the new Vauxhall/Opel Astra in the UK, and BMW is investing 250 million pounds in its Mini production, as well announcing its new 1.5-liter three-cylinder engine for UK production. Chinese automaker SAIC is expected to ramp up its currently small-scale production of MG cars in the old Rover plant in Longbridge.
It's not all good news. Ford is closing a factory in Southampton, its last vehicle manufacturing site in the UK, as well as a stamping plant at Dagenham, east London.
UK car production was expected to be 1.52 million in 2012, according to forecasters LMC Automotive, behind Germany (5.59 million), France (1.97 million) and Spain (1.91 million).
Rhys said annual production could reach 2.2 million by around 2015-2016. LMC Automotive is less bullish, forecasting UK production at 1.61 million in 2017, with Germany still No. 1 at 5.93 million, followed by Spain at 2.42 million and France at 1.89 million.
Arthur Maher, LMC Automotive's director of research, said: "Capacity utilization in the UK is good at about 80 percent. In France and Spain it has fallen below 60 percent or less. However we don't think UK will overtake France or Spain. It will not gain additional capacity that would take it past 2 million."
You can reach Nick Gibbs at email@example.com.