Motor Industry

Part of the debate – in the House of Commons at 4:21 pm on 12th December 1983.

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Photo of Mr Roger King Mr Roger King , Birmingham, Northfield 4:21 pm, 12th December 1983

I beg to move, That this House acknowledges the important contribution to the economy of the motor industry; congratulates the car industry on its improved performance; acknowledges Government support; and calls on the Government in the development of its policies to give continued encouragement to the industry. This is a welcome opportunity for the House to discuss the prospects and current position of the British motor industry, which is an important industry for this country. It is vast and employs a large number of people. Some would say that it is our biggest industry. This year has been an especially good year for the British car industry. So far sales look like touching an all-time high of about 1·79 million cars. We have seen the resuscitated organisation of BL Ltd.—which has taken in the Jaguar car company and is proving to be one of our most formidable exporters of cars, principally to the United States — and the Austin-Rover group into which so much taxpayers' money has been placed during the past four or five years. With its increased market share of just under 20 per cent., BL is beginning to deliver those much-promised goods.

The gross value of the industry to the British economy, including commercial vehicles, cars and components, amounts to about £8 billion in 1982 terms. However, in 1981 the total turnover for the entire motor trade, covering retailers, distributors, wholesalers, stockists and all those in allied industries, was nearly £28 billion. By any standards, the car industry is a very large one.

The car industry is a vital sector of our community in terms of the number employed. No exact figures will be available until the second quarter of 1984 because, surprisingly, no one has ever kept any. It is estimated that there are about 360,000 people in manufacturing with about 200,000 more involved in the allied industries on the retail and servicing side. That represents a significant decline, because the motor industry has borne much of the brunt of the recession. In 1973, car production was 1·7 million units. In 1982, it had declined to 880,000 units —a 49 per cent. decline. I am happy that that figure is beginning to climb back again. In 1973, 600,000 people were engaged in the manufacturing side of the industry. In essence, during the past 10 or so years, the industry has lost nearly a quarter of a million jobs. This year our balance of trade — which was in a positive state throughout those years—will show a record £2·3 billion deficit. Although matters are looking more encouraging at the moment, there is a great deal to be done.

What has happened to the British motor industry during the past 10 or so years? What lessons can we learn from that? In the good old 1950s, anyone could sell anything, and the motor industry was no exception. A person had to be put on a waiting list for six months before the car of his choice was available, and really there was no choice. The car came with black paint and red upholstery, and that was that.

The Government implemented stop-go policies. The booming car industry was used as a tax regulator when inflation rates started to increase. In every sector, when manufacturers were ready to install new plant and equipment, the screws were put on in the form of taxation, and management cut back on its investment. Although we may have had competitive products—the Mini was a classic example of what happened during the late 1950s; it was a world leader in its manufacturing ingenuity and virtually every car manufacturer in the world has since copied it—the quality of the product left much to be desired. This country is known for its designers, but in the 1950s and 1960s we could not put cars together with the quality that was demanded by the customer. Add to that poor productivity, soft management and demanding unions, and we had a recipe for price increases and growing inefficiency in the industry.

One of the most cataclysmically disastrous policies was then implemented by the Government — factory dispersal. That sprang from the desire to bring employment to the so-called development areas and necessitated the removal of many of the car factories from the west midlands to the north-west, Scotland and elsewhere. Satellite plants with conveyer belt lines 300 to 400 miles long were introduced. That is a handicap that was never inflicted on any overseas manufacturer.

Heavy motor taxation was imposed by successive Governments, so that today the motorist is paying about £10 billion in taxation to the Exchequer. The car industry has been used as a milch cow because, seemingly, it has not experienced any retardation in growth. Governments of all persuasions have repeatedly taxed the industry.

The problems faced by the industry when we were deciding whether Britain was entering or staying out of the Common Market led many of the multinational companies to decide for themselves that they were going into Europe. Investment in plant by the Ford Motor Company Ltd., General Motors and other manufacturers has gone to the mainland of Europe, to the detriment of indigenous British industry. The white hot technology of the late 1960s resulted in the forced arranged marriages of what was the independent British motor industry. The industry had to be big to be beautiful, and it had to be big to be competitive. However, the evidence shows that the most competitive manufacturers in the world are the small units, such as Honda, BMW and Mercedes. There was no money in the British market for new models and new plant so the multinationals invested elsewhere.

The problems of the industry culminated in the mid-1970s with the BL rescue plan, when the Government pledged large sums of money to enable the industry to pull itself around, to invest in new models, plant and equipment and to make one last desperate effort to be a successful industry once again.

Given the level of investment, we have seen how sensible it was for both Labour and Conservative Governments to maintain a strong, solid investment in what was left of the British motor industry.

In my constituency we make the Austin Metro, which had the benefit of Government investment of about £500 million in a brand new automated plant. That is a great deal of taxpayers' money but within three years, when we hope that the millionth Austin Metro will come off the assembly line, the Government will have received, assuming that many of the Metros are exported, about £262 million in sales tax from Austin Metro production. It will have saved about £260 million in unemployment benefit, bearing in mind the scale of unemployment that might have occurred if the old British Leyland company had gone bankrupt. When comparisons are made with the shipbuilding industry, the coal industry and the aviation industry, it can be seen that money invested in the motor industry will produce a return, unlike many other organisations.

According to the Investors Chronicle, about 4,000 companies in the west midlands depend upon a successful and viable British Leyland. Despite all the hoo-ha about the so-called microchip factories with the brand new jobs for tomorrow—it must be accepted that they are vital—it has been estimated that in the past 10 years, in a world of computers, water supply, petroleum, natural gas, radio, radar and electronic goods, many elements of which have been in growth sectors, they have created no more than 84,000 new jobs. The message must surely be that we pursue our policy of encouraging the British motor industry to develop its factories, model range and employment prospects.

I have already said that BL is one of Britain's great success stories. It will make a positive contribution of about £700 million to our balance of payments this year. That is vital when we bear in mind that the industry as a whole is still about £2·3 billion in deficit. It has the right cars, or soon will have when it achieves a complete model range, at the right price and of the right quality. The work force is as productive as any other in the world, thanks to the investment that has been put into plant and machinery. The result has been increased demand within the United Kingdom and in many overseas markets. Jaguar is a classic example of how a company, which failed to modernise and failed to put its products together properly, has grasped the nettle. It now produces cars for which there is a never-ending waiting list throughout the world.

Good though our achievements have been to date, we must recognise that many of our competitors on the continent are in considerable difficulties. Volkswagen, Renault and Peugeot-Talbot-PSA are all making losses. In Europe there is 30 per cent. over-capacity in car production. The European industry can produce about 13 million vehicles a year, and this year it will have produced about 10 million. It is nowhere near its ultimate capacity. All the companies within the European industry receive varying degrees of company support. That support does not happen just once in a while. For Renault, for example, it is continuing support.

Germany and France are blessed with the opportunity to sell about 2 million or more cars a year. Germany has a population that is roughly the same as ours but it has a market of about 2·2 million car units a year. German manufacturing companies will produce 3 million cars, which means that nearly 1 million vehicles will be exported from Germany. The United Kingdom's ultimate market is about 1·79 million units, which we hope will be achieved by the end of the year. However, our own factories will produce no more than 600,000 units. We shall produce more units but they will take the form of branded imports. These are the so-called tied imports, the cars that come in from Ford and General Motors overseas. In many people's eyes, they are United Kingdom products and are sold as such. Some of them contain some United Kingdom components but the majority do not.

We must increase our United Kingdom sales market beyond the 2 million mark if we are to achieve the economies of scale that are necessary for our United Kingdom car manufacturers and component suppliers. The suppliers are having to make the same components as are produced by the German, French, Italian and Japanese industries but at a higher unit cost because they do not receive the necessary orders from the United Kingdom car industry.

The recent relaxation of hire purchase terms has proved singularly beneficial to the motor industry. It pushed sales up this year by about 400,000 units. At the same time, it enabled our manufacturers to improve their market share. In the period ending May 1983, the total United Kingdom market was 17 per cent. higher than it was for the first five months of 1982. The British share of the market was more than 1 per cent. higher at 43·4 per cent. as a direct result of the relaxation of hire purchase controls.

The motor industry believes that the effect of substantial direct car taxation should be examined. If we were to eliminate the 10 per cent. special car tax, the benefits would be substantial. As late as May 1983, my right hon. Friend the Secretary of State for the Environment, who was then the Secretary of State for Industry, was quoted as saying: The car tax will be kept under review; we do not regard it as part of the permanent furniture of Government; we will gauge its impact and we will listen to any evidence that the industry places before us. The evidence is pretty substantial. By abolishing the special car tax, the Government would lose about £600 million in revenue each year. However, within three years sales could be expected to rise to 2 million and the £600 million would be returned to the Government. It has been estimated that if there were about 2 million registrations of new cars each year for the next few years, the Chancellor of the Exchequer would be better off by about £1 billion by 1990 at 1982 prices. This appears to be a first-rate bargain, and if the Government choose to reduce their yield from taxation by about £600 million a year they will be paid several times over.

The knock-on effect for component suppliers would similarly be substantial. If the United Kingdom market can be increased to 2 million units and if United Kingdom manufacturers obtain a greater share of the increased market than overseas competitors, it has been estimated that many new jobs will be created in the steel industry and in the components sector. I am not in the business of estimating how many new jobs will be created. Opinions differ, but the estimates range from about 50,000 to about 100,000. However, it is certain that new jobs would result, and that, too, is a factor that must be taken into account as it means that the Government would not have to pay out the same amount of unemployment benefit.

We need to encourage the tied importers of cars to produce more of the components in the United Kingdom. It is no good implementing investment plans by building semi-automatic engine plants and gearbox factories. I acknowledge that that sort of investment will keep some people in employment but the real opportunities for work are in the supplying sector. I have in mind the companies that produce sheet panels and all the infrastructure that is put inside a car—such as dashboard and seats.

Ford is a net importer of cars into Britain. More and more of the products that are sold in the United Kingdom market come from its overseas factories but I admit that sometimes they have Bridgend engines. Recently we have heard about the company's large investment in Dagenham in respect of the diesel engine development for passenger cars. That investment is to be applauded but we must not lose our capacity to manufacture cars in Britain and to export them.

I believe that an expanded United Kingdom market will stimulate many multinational companies to think again about sourcing their components in this country. General Motors—Vauxhall—is thinking about that.