Motor Car Industry

Part of the debate – in the House of Commons at 12:00 am on 22nd February 1957.

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Photo of Mr Donald Chapman Mr Donald Chapman , Birmingham, Northfield 12:00 am, 22nd February 1957

I am delighted to follow the hon. Member for Cheadle (Mr. Shepherd). As so often before, I am in such broad agreement with what he says that if it were not the kiss of death for him I would say that I wish that he were on the Treasury Bench, because then we should have in these debates a much more enlightened reply than we usually receive from the Government.

This is one of a number of debates that we have had during eighteen months about the situation in the motor car industry. I want to follow the hon. Member for Cheadle in dealing mainly with the problem of the smaller mass-produced car. What I have to say does not really concern the luxury or sport class, which is a matter quite on its own.

There is some agreement on both sides of the House about several things and I want to say what that agreement is first I think that we are very unhappy about the state of the industry. It gives me no pleasure at all to record that last year output in this country was down by 15 to 20 per cent., and exports were down by a similar figure. It dispirits me to record that in January of this year—a terrible start for the year—output was down 42 per cent., and commercial vehicle exports, which have been the only bright picture in the whole unhappy story of the last couple of years, were down no less than 46 per cent., which is a really terrible thing to happen.

When we look at what is happening to our Continental competitors, it is not pleasant to have to record that while our output has gone down 15, 20 and 40 per cent., German production in January was up 22 per cent. on December, that they took the lead from us last year, and that in Italy, which we never thought of as a world producer of cars, production last year went up by 17½ per cent. and exports went up by 16½ per cent.

These are not palatable facts to us in Britain. If the hon. Member for Cheadle is right in saying what a wonderful industry we have got, we want to know what the dickens is happening to it, if these sorts of figures are happening day after day, frightening the lives out of many people who look to this industry for their living.

I want to say something about Volkswagen production. I was so frightened about the situation that I spent sonic days at the Volkswagen factory, talking to some of the executives there. It is not palatable to me to have to record that although the Volkswagen sells for £750 in this country, still more of them could be sold here, while we have a British equivalent which we cannot sell at £400, £500 or £600.

These things have to be faced. It is no good the hon. Member for Cheadle waving his flag, and saying how wonderful the industry is, if the achievement of that industry does not match the grand words with which he describes it.

Another matter on which the House will not be happy is the human side of what has been happening in the last twelve months. A large number of men in my constituency have had to change their jobs, and suffer great hardship in the process. I have made it my job to follow up what has happened to some of them. I have been to visit some of them in their homes, to discuss their change in fortune.

Let me give one example of the kind of thing I found. A man earning £14 to £16 a week on the production line went to six factories looking for an engineering job. He was, I would say, a little more than semi-skilled. At one place he was offered a job at £7 5s. a week. At all the rest of them the general tale was, "Oh, are you from Austins? We are not interested then. Austins had enough trouble with the Austin blokes, so we do not want them here."

This man tramped round the streets, and finally, just before the lists closed, he dashed in and got a job on the Birmingham City transport. I say "just before the lists closed," because they had so many of these men after jobs that they could not take them all. This man, who is earning £14 to £16 a week, is now working 63£ hours a week to earn £11 18s. To get £15 9s. one week he worked 83 hours. The reason he had to do that was that he had brought his family and his whole way of life up to a certain standard of living. He had taken on commitments in hire purchase, and so forth, which he could not easily cast aside.

This is the toll of human tragedy that has come with this decline in fortunes in the motor car industry and the deliberate contraction of it by the Government. Before I go any further, I want to register that single point with the hon. Member for Cheadle. He slides over far too many of these facts. There is a terrible toll of human unhappiness which has accompanied what he calls the dip in its fortunes in the last twelve months.

The second point on which we are agreed, I think, is that possibly the industry has over-expanded. Whether it was due to the over-optimism of the era of the Lord Privy Seal—I am sure that had a large part to play in it during the period when we were told that all the problems facing Britain had been solved—or whether it was due, as the hon. Member for Cheadle said, to the fact that there was no consultation between motor car manufacturers about their development plans, I do not think it matters very much. I am sure that both have an element of truth in them. I think it is true that we probably over-expanded.

Another matter on which I am sure we would all agree in all quarters of the House is that while we expected this growth in foreign competition, we did not expect that it would "knock us for six." I am tired of going to the motor car manufacturers and to the Government and hearing them say, "Oh well, we had it easy in the markets at the end of the war, and we expect our foreign competitors, once they get going, to catch us up." So they have, but we did not expect them to "knock us for six," which is what is happening the world over.

The hon. Member for Cheadle is optimistic about the state of the industry, but I think we shall agree in not being over-optimistic about the medium-term future of the industry. Reference has been made to the situation in South-East Asia, where Australia, New Zealand and the area generally have taken 40 per cent. of our exports, but are now producing their own cars. In some ways this is like the cotton industry. A newly-developing nation begins to industrialise, and then hits at what was once one of our staple exports and does the job for itself.

In Australia, the motor car industry is now the biggest employer of industrial labour. It is quite a frightening thought when we reflect upon how much we depend upon it. General Motors, which dominates the Holden firm, has expansion plans amounting to £l7½ million. The British Motor Corporation will soon be producing 50,000 cars a year from its own factory. Chrysler's are to be in production there next year. Volkswagen, which had nothing, increased to nearly 6 per cent. last year in its share of the Australian market, and this year it is to be higher.

What hope have we in these markets, based on this present trend in the figures, when we consider, further, that the Holden Corporation and others are to export to the whole of South-East Asia as well, taking away from us not only the home market of Australia but the South-East Asian market generally? We should not be over-optimistic about the medium-term future. I and the hon. Member for Cheadle are in agreement on this, I think—I say it with some hesitation to my friends in the motor car industry—that we must be quite firm about consumption levels at home. We really cannot envisage going back to the rip-roaring consumption of motor cars on the home market. My target is a surplus of £350 million in our balance of payments, and that we simply will not reach unless we are willing to tighten our belts and limit any increase of consumption at home quite considerably, saying to the motor car industry that if it has any hope of importing steel in order to sell cars on the home market it had better think again. I am sure that I carry a large number of hon. Members opposite with me in that. We must be tough about consumption levels on the home market and about the need to concentrate on exports.

I think we have agreement thus far between the two sides of the House on the state of the industry as it exists at this moment. Summarising the heads of our agreement, we are unhappy at the state of the industry, and we think it has been over-expanded. We are sorry about the human problems which have been thrown up by its contraction. We are not optimistic about the medium-term future in exports, and we certainly are not going to encourage the industry to be optimistic about future home sales: there is no prospect of increasing, them at the rate the industry wants.

Before I come to what I believe to be the real justification for the inquiry for which we ask, I will interpose a few words about the Volkswagen. As I said earlier, I was so alarmed by what was happening that I went to Germany to see the Volkswagen people for myself, and I had what were for me perhaps the four most instructive days of 1956. In my view, the phenomenal success of Volkswagen is due to something which has not been mentioned today. Even the hon. Member for Cheadle overlooked it.

The success of Volkswagen is based on producing one car and saying that it will not change and that there is no prospect in the immediate future of any major modification in body, engine or anything else. The result is that traders the world over are willing to carry spares because they will not be out-dated. Moreover, the public will always buy the Volkswagen car because people says to themselves that it has now been perfected to this level after a number of years and there is little likelihood of their discovering great flaws in it.

If I may say so, the contrast with the British industry lies in this: that by the time a British manufacturer has cured the faults in a current model, a new model is due, so that nobody knows where he is. Furthermore, by sticking to one model the manufacturer ensures that the resale price stays up. Every time a new model of a British car comes out, the value of an old model drops by 20 per cent.; but because the Volkswagen goes on for ever and ever the second-hand price stays up.

This is an enormous attraction to people who buy the Volkswagen as a family car, because they know that they will be able to sell it in a year or two for very little less than they gave for it, knowing that a new model will not have knocked down its price. I am sure that that is the primary reason for the Volkswagen company's success, and Dr. Nordhoff, the great man who runs Volkswagen, assured me that it was a most important factor in his sales.

The next important point in the sucess of Volkswagen lies in the high ratio of planning and technical staff to the total labour force. I am sorry to keep referring to the speech of the hon. Member for Cheadle, but I did agree with so much of what he said, and I should like to emphasise this particular aspect of the problem, to which he did make some reference. In our industry, we have what I might call the "tycoon atmosphere", based on earlier days of success, still continuing. As far as I can see, we tend to get too many of the favourites of the big tycoon running the immediate show.

In German industry, that is not so. In Volkswagen, a high degree of training is planned for all members of the technical staff; they have very high responsibilities, and there is a large number of them compared with the situation in British motor car companies. The result is that over every single stage of the Volkswagen production, sales, after-sales service, and all the rest, there is nothing whatever "hit-and-miss" about the organisation. The company has the technicians and the managerial staff to sec that that does not happen.

The third reason for the success at Volkswagen is inspection. One hon.

Member has already said that one of our troubles is flaws. One does not find flaws to any great degree of Volkswagen cars. I would say this to the Parliamentary Secretary, who, I think, does not really believe this, that in my own town, Brighton, not so very long ago a man had a British car on which the chromium plating peeled off the bumper bar. It took him several months of argument with the manufacturer to get satisfaction.

Another man had the same thing happen on a Volkswagen. He drove it to the Volkswagen distributor, who said, "We never argue about these things; we believe they are too important for the reputation of our production". He brought over a mechanic, the thing was changed, and the man drove out of the garage some minutes later with a new bumper bar, at no cost to him. This sort of thing matters greatly, and our manufacturers have not even caught up with the idea yet.

The fourth factor in the success of Volkswagen is after-sales service. I want to warn the Parliamentary Secretary that the Volkswagen company is being pressed to expand its sales into countries where it does not at present sell. I merely say, heaven help us when it starts. Dr. Nordhoff told me personally that he will not do it for this reason, that he does not start selling in any country until he has got the network of garages and traders with spares and after-sale service established. If Volkswagen starts to do that in some of the countries where our products are now supreme, then I am afraid that we shall take a harder knock than we have already suffered from Volkswagen elsewhere.

Other factors have been mentioned. Design is one of them. I will not go over that again, as other lion. Members have covered the matter already. The hon. Member for Cheadle referred to the air-cooled engine and independent suspension, and he was absolutely right about that. Another factor is the lack of complication in the engine itself.

Lastly, a factor which has not been mentioned at all is the spirit in the Volkswagen industry. When I was in Germany I found it exhilarating to hear people talk of "Our Volkswagen", "Our car", "Our Dr. Nordhoff". I was very impressed to feel that here I was visiting a joint enterprise of workers and managers, where there was a spirit of partnership such as I have never seen or even smelt in the British motor car industry. One of the tragedies of our industry has been the bitterness of human relations within it.

Herein lies the great difference at Volkswagen. I forget the exact figure, but about 80 per cent. of the workers there have been trained after coming as refugees from the East, and now they have become part of the community, feeling the spirit of partnership. These things make a great difference, when all is said and done. Workers like that do not let their products go out of the factory without the stamp of absolute quality being impressed upon them.

With so much agreement between both sides, as I have said, and with these startling lessons from Volkswagen before us, I am sure that we ought to be able to get agreement of what the Government should do next. I am afraid we part company here, but I will say what I believe they ought to do. First, my people in the industry have every right to know whether the Government think that the disinflation, the contraction, of the industry has gone far enough. It is most unfair that we should leave an industry, employing so many people, in complete ignorance of the Government's views about it. The man to whom I referred, and who is in so much trouble through being displaced, is now working 83 hours a week to get the same wage as he earned at the Austin works. Such people are bearing the brunt of the Government's decision, yet we still do not know and the Government will not tell us whether the disinflationary pressure on the industry has gone far enough.

Secondly, we do not think that disinflating by monetary measures is sufficiently effective in itself. Here we come to the need for an inquiry. I want to see a full-blooded inquiry, but if we cannot get such an inquiry I ask the Parliamentary Secretary to the Board of Trade to see that there is an inquiry inside his own Department. From what we have seen, there is an abysmal lack of knowledge about the industry in both the Treasury and the Board of Trade. I say that advisedly, because I have had much to do with the subject in the last few years. The answer from the Minister of Labour and from the President of the Board of Trade has been that they do not produce cars and that they have to leave it to the motor car manufacturers.

That is not good enough. It is not good enough for the simplest of reasons, and I hope that the Parliamentary Secretary will agree with me to this extent. What the Government decide about credit restrictions and financial policy and anything else has such an effect on an industry of this size that it is quite wrong for the Government to make ad hoc decisions from time to time. Those decisions should be purposive, they should be intelligible, and they should be understood by the industry.

They ought to be—and this is the crucial point—ahead of events and not always behind events. Our great grumble has been that the Government have said one minute that they do not produce motor cars and yet, the next, have altered the whole complexion of the situation in which someone has to produce motor cars. Decisions should be more purposive, intelligent and intelligible when they have so much to do with the fortunes of the industry.

We may be asked what such an inquiry could do. It is not correct to say that such an inquiry could not do much. There is a notable firm, Joseph Sebag and Co., big merchant bankers and a big Stock Exchange firm, which produced its own inquiry into the motor car industry and which has answered all the questions which the Government tell us they cannot answer. The inquiry tried to assess the likely size of the future home market. It was found that it costs at least £110 a year to run a car, so that it is very unlikely that people earning less than £750 a year will be able to run a car.

That is some indication about who will buy cars in the future. It does not give us the numbers, but it does show that the estimates of motor car manufacturers, as shown by their development plans, are totally unrealistic. The industry plans to produce half a million more cars a year from about 1958 or 1959 in addition to the million a year now produced. Nobody pretends that if we are to have a real battle to get a balance of payments surplus, home consumption will increase by that amount, that we will have half a million more people coming into that real income bracket every year over the next few years.

That is the crucial issue facing the industry. If we are to take off our coats and fight this battle of the balance of payments crisis, the car manufacturers must say "Goodbye" to the hopes of selling half a million extra cars on the home market every year. At least, a Government inquiry could start working out whether I am right, or whether these rough figures which we have been giving to the industry are wrong.

Thirdly, we could make similar calculations about overseas markets. I have already mentioned what is happening in Australia and South-East Asia. It is not difficult to foresee what is likely to happen in those export markets. An inquiry could pinpoint what these huge sales on the home front will mean in terms of imported sheet steel. We should frankly tell the industry that it cannot hope for that amount of steel, and that it must plan its size accordingly.

Fourthly, we want an attempt made to find out what is likely to happen when we have the European Free Trade Area. I am not all that optimistic about the prospects of the motor car industry when the 30 per cent. duty on cars coming into this country is removed. The Volkswagen already sells at £750 when its British equivalent is £500. I do not know what will happen when the duty on Volkswagen cars is removed.

Lastly, we have to have this inquiry into the sort of things about which I have been talking—after-sales service, the ratio of planning and technical staff to workers in the industry, the industrial spirit of the industry, the problem of sales of commercial vehicles, and possible East-West trade. There is a case for something, as I have said on previous occasions, which would be half-way between what the Government believe and what we believe, that is to say, not wholesale planning and steel allocation, but an independent statement of facts as a guide to the industry about what its future is likely to be.

I am sure that that is a half-way house which the Government can happily accept. It would stop this wandering about in darkness for motor car manufacturers and workers in constituencies like mine, and would bring out many facts which need to be known by people outside as well as inside the industry.

I hope that the Parliamentary Secretary will not say that the Government expect the things will pick up this autumn. Frankly, I expect that they will pick up this autumn. The reason is that by the autumn about two years' pent-up demand for motor cars will begin to express itself. From credit restrictions and hire-purchase restrictions there will be about one and a half years' pent-up demand; and another half a year's demand from those people who have stopped buying cars because of the petrol shortage.

I fully expect that the factories in the motor car industry will be working at almost full-time again in the autumn. Nevertheless, if the Parliamentary Secretary rests his case on that, he will be a little dishonest. Even if that happens, it is the longer and medium-term problems of the industry to which we are desperate to have an answer. Those problems will remain. They will reappear once the autumn has passed and the pent-up demand has been satisfied. They will certainly reappear so long as the Government have the courage to seek a real surplus in our balance of payments.

It would be more honest to say that the Government agree that the medium-term outlook for the industry is not rosy and that we should have an inquiry, an intra-Government inquiry, or perhaps even an independent inquiry, about the sort of things which I and my colleagues have been saying about the industry.