NICK GIBBS

Jaguar Land Rover strike vote highlights risks of non-staff workers

Nick Gibbs is UK correspondent at <i>Automotive News Europe</i>.
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News that DHL workers have voted to strike at Jaguar Land Rover's three UK plants throws the spotlight on just how embedded into the factory operation logistics suppliers have become.

I saw this first hand last week on a visit to JLR's Halewood plant near Liverpool, northwest England, which builds the Land Rover Freelander and Range Rover Evoque. DHL staff were driving forklifts to deliver parts to production line workers. If the DHL staff stop work, then the just-in-time operation means the whole plant stops.

Automakers have increasingly invited logistics companies onto the factory floor over the last 15 years, according to IHS Automotive analyst Matteo Fini. "The big advantage for the OEMs is the fact that they reduce their cost basis and asset base as they lower their headcount and auxiliary machinery that would show on their balance sheet," he told me.

Another benefit to employers is that they "can avoid dealing with demanding unions," Fini said.

The problem comes when logistics staff demand similar wages to the better paid auto workers they share a factory floor with, as is happening with DHL's staff at the JLR factories. But the burden is on DHL to resolve the dispute, not JLR. If there is a production stoppage, then the automaker likely will be able to claim compensation from the supplier.

Labor relations in the UK auto industry were once very poor, but that is now largely under control and the country may overtake France as Europe's second-largest automotive producer within the next five years, according to industry watchers, helped by exports from JLR, BMW's Mini brand, Nissan, Toyota and Honda, all of which have factories in England.

Halewood factory boss Richard Else, told journalists last week that JLR union representatives know that that the plant's survival depends on good relations with management. "The reason the Freelander and Evoque came to Halewood is that the trade union committed to deliver a lot of things," he said. "It's about flexible working. For example, if I have a breakdown I can move a lunch break; 10 years ago I wouldn't have been be able to do that."

Automakers are unlikely change course on 3PL (third party logistics) suppliers and they prefer dealing with large companies such as DHL. "OEMs are looking to consolidate this part of their supply base," Fini says. "It can give the OEM more of a safety net against financial issues. No one likes to deal with a small fragile 3PL provider."

You can reach Nick Gibbs at nick.gibbs@btinternet.com.

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