Orders of the Day — Motor Industry

Part of the debate – in the House of Commons at 10:47 pm on 4th August 1980.

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Photo of Mr Terry Davis Mr Terry Davis , Birmingham Stechford 10:47 pm, 4th August 1980

Our debate this evening is especially appropriate. First, it is taking place a few days after the end of the car registration year and on the day when many people in the motor industry are returning to work after their annual holiday. It is also appropriate because it is exactly a year since a similar debate took place on the Consolidated Fund and a little more than a year since the general election. Therefore, it gives us the opportunity to consider what the Government have done during the past year as far as the motor industry is concerned. Above all, this debate is appropriate because the motor industry today faces a crisis that must be almost unprecedented.

During the past year we have seen a catastrophic fall in the car market in Britain. It is now being forecast that 200,000 fewer cars will be sold in the United Kingdom this year than in 1979, and during the first half of this year there was a fall of nearly 16 per cent. in the car market compared with the same period a year ago. Within this shrinking total the proportion of cars made in Britain is also falling. The proportion of imports is rising. It is up from 54 per cent. to 58 per cent. and it is still rising.

There is no compensation from exports for the lost sales at home. I understand that British Leyland's exports of cars are down by about a quarter.

It is a similar story for commercial vehicles. There have been smaller reductions in the sales of vans, but there has been a massive reduction of 20 per cent. in the market for lorries with an increase in imports from 21 per cent. last year to 23 per cent. this year.

The implications for the components industry can be described only as appalling. Every imported vehicle sold in Britain means not only less work for Britain's car manufacturers but less work for Lucas, GKN and Smiths Industries. There is not only the immediate lost sales of the original equipment, as it is called in the industry, but the future lost sales of the replacement parts.

Britain has always enjoyed a favourable balance of trade in components, mainly as a result of selling replacement parts for the vehicles that we have already exported. Now as we are selling fewer and fewer vehicles abroad and buying more and more imported vehicles, so the favourable balance of trade in components is disappearing. Last year our imports of components rose by 30 per cent. and our exports increased by only 10 per cent. At that rate we shall have a deficit in our trade in motor components in 1982 or 1983.

The reaction of the component manufacturers has been to campaign for an end to the exclusive nature of the franchise system. They want to be able to sell spare parts for imported vehicles. We have heard their call endorsed by the hon. Member for Coventry, South-West (Mr. Butcher). We know that their call was endorsed by the Price Commission and we gather that it has the support of the Department of Trade. I hope that the Under-Secretary of State will tell us what effect he calculates such a move would have on the British motor manufacturers. It is well known in the industry that the motor manufacturers make their profits from the sale of spare parts. If we are to attack the exclusive nature of the franchise system, let us know what the potential damage will be to the British manufacturers.

The position is already bad enough for both the motor manufacturers and the component suppliers. A year ago British Leyland employed 160,000 people. Since then we have had the announcement of at least 25,000 redundancies. I disagree with the hon. Member for Bromsgrove and Redditch (Mr. Miller). He said that it was a remarkable achievement of Sir Michael Edwardes that 24,000 people had been made redundant at British Leyland. For my part, I deplore the need for those redundancies. I might accept the description that they are a regrettable necessity, but I cannot accept that they are a remarkable achievement. That is the difference between the parties. I accept that the Government wish to increase productivity. However, they wish to do so by reducing the number of those employed in the motor industry. We would prefer to improve productivity by increasing the number of vehicles produced by the motor industry in general, and by British Leyland in particular.

It is not only those lost jobs. It is also lost job opportunities. I refer particularly to the lost jobs opportunities for young people. My hon. Friend the Member for Warley, East (Mr. Faulds) pointed to the effect of such lost opportunities on the employment prospects of school leavers.

We have had a wave of similar announcements from the component suppliers. Hundreds have been made redundant at Triplex and Wilmot Breeden, and thousands have been made redundant at GKN and Lucas.

During an intervention, the hon. Member for Oxford (Mr. Patten) questioned whether some job losses were due to investment and to new technology. It was not new investment that cost the jobs of the MG workers at Abingdon. It was not new investment or new technology that cost the jobs of those who used to work at Canley. It was not new investment or new technology that cost jobs of the thousands who used to work at Castle Bromwich.

In most cases, the redundancies have been voluntary, but now whole factories are beginning to close. Even when part of the factory can be kept open, and when only some redundancies are declared, one finds that there are no longer enough volunteers. At Lucas they have asked 3,000 people to volunteer for redundancy—that is one in six of the work force—but they are now beginning to talk about having to make those redundancies compulsory.

The reasons for the dramatic decline have been analysed by both sides of the House tonight. I am in greatest sympathy with the analysis made by my hon. Friends the Members for Coventry, North-East (Mr. Park) and for Birmingham, Erdington (Mr. Silverman). I was also struck by the reference to British Leyland made by my right hon. and learned Friend the Member for Warley, West (Mr. Archer). As he said, British Leyland is generally regarded as being small in comparison with our international competitors, and it is getting smaller, so it stands to reason that the company is heading into even greater trouble.

In the motor industry, success breeds success. The higher the sales and the higher the production, the better the productivity, the lower the unit cost and the more competitive the vehicles become. My hon. Friend the Member for Coventry, South-East (Mr. Wilson) described his visit to the Renault factory in France. He pointed out that the firm's advantage did not lie in new equipment. According to his observations, its advantage did not lie in better productivity. What is the secret of Renault's success? From my experience in the motor industry, I suggest that the difference is that the French motor industry has the advantage of a much closer relationship with the French Government than applies in this country. That relationship is expressed not only in terms of money but in other extremely important ways.

Several hon. Members have referred to the world-wide reduction in demand for motor vehicles. That is true, However, it is hardly an adequate explanation of what is happening to the sales and production of British vehicle manufacturers. After all, last year there was a booming market in the United Kingdom for both cars and commercial vehicles. There was a fall in the share of the market held by British manufacturers. Similarly, in the first four months of this year not only Japan but other countries increased both their production and their sales.

The fact is that we have some special problems in this country. They have been admirably summarised by my hon. Friend the Member for Warley, East. First, everyone in the motor industry agrees that the high value of the pound has priced our vehicles out of the export market and made it even more attractive for foreign manufacturers to sell their vehicles in Britain. As my hon. Friend the Member for Coventry, North-East said, during the last year, the profit on each French or German car sold in Britain has doubled. The profit on each Japanese car has quadrupled. That is not the result of anything that they have done to reduce costs but simply because of a change in the exchange rate.

Secondly, there is the inflation rate. We were told a year ago that the Government's monetary policy would reduce the level of inflation. Instead it has doubled. The costs of the British motor industry have risen with it. The hon. Member for Rugby (Mr. Pawsey) intervened to describe the small reduction in inflation as being the result of the Prime Minister's leadership. I must say that in relation to inflation the best description of the Prime Minister is that she is like the noble Duke of YorkHe had ten thousand men,He marched them up to the top of the hill,And he marched them down again. However, we are coming down very slowly.

Thirdly, there are high interest rates. Again they are the result of Government policy. They are fuelling inflation and increasing the costs of manufacturers and also acting as an old-fashioned deflationary factor by reducing the size of the total market.

It is not only these economic factors which are responsible for the crisis in the motor industry. As the hon. Member for Sowerby (Mr. Thompson) said, there is a deliberate decision by the multinational manufacturers to import more and more of the vehicles which they sell in Britain. The Ford company is now the biggest importer of cars into Britain.