Economy: Automotive Industry — Question for Short Debate

Part of the debate – in the House of Lords at 8:23 pm on 19th January 2009.

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Photo of Lord Bhattacharyya Lord Bhattacharyya Labour 8:23 pm, 19th January 2009

My Lords, I declare an interest as professor of manufacturing at Warwick University.

The House has heard a great deal about the current state of the car industry. The issues have been debated thoroughly in the press and here today. I concur with what other noble Lords have said and, in the brief time available, I shall not add to their analysis.

We have fantastic inward investment companies producing cars in Britain. Toyota, Honda and Nissan are efficient companies that produce superb cars, which are usually designed in their home country. We are lucky to have their manufacturing facilities here and should support them. For these companies, the problem is one of consumer credit. If they cannot access credit, they cannot offer loans to consumers. If the consumers cannot get loans, they will not buy cars. If consumers do not buy cars, factories close or go on short time. We can and should break this logjam, but we must go further.

For the last 20 years, we have heard about the importance of the service sector, the knowledge-based economy, sunrise industries et cetera. Less has been said about the need for a vibrant manufacturing industry. Much of this is the fault of manufacturing itself. The 1970s and 1980s were not a good advertisement for British manufacturing. Due to lack of investment, poor management and a weak skills base, the British car industry was virtually wiped out by competition from Japan. France and Germany faced the same foreign competition but were more successful in their response. They restructured their industries with state support and developed new products that appealed to consumers, using their local, indigenous companies. We find the same success at home. The aerospace industry received government support through launch aid and other channels. It used the opportunity to develop better products and became a very successful exporter.

The car industry is facing huge challenges over the next decade, from emissions to safety regulations, and a new generation of high-tech but low-carbon cars will be required. The companies that best meet these global needs will grow as the world emerges from recession. We have a unique tactical opportunity. As our products are high quality, we exported over a million cars in 2007, an increase of more than 7 per cent. In fact, we exported £170 billion-worth of manufactured goods, which was more than half of total British exports. With sterling at current levels, we have the chance to see our exports and European market share grow in the short term. However, for growth to continue beyond the narrow horizons of currency traders, short-term advantage must be supported by long-term investment. Investment for the future requires access to capital today. We need a level playing field with our competitors in Europe and the United States.

Jaguar Land Rover is the only major car company with an extensive R&D base in Britain. It plans to invest £800 million on a new product and a low-carbon technology programme. However, it may not be able to sustain this investment if its access to capital is choked off by the banking crisis. We must act so that progress in our car industry is not endangered by failed speculation in the financial sector. British-based manufacturers should be offered loan guarantees so that they can secure finance to fund innovation and research. They must then invest here to develop new products with British suppliers, so that we have a vibrant British manufacturing base.

The Government are saying the right things about easing the credit situation and they are using the right language about the need for a vibrant manufacturing sector. The Government say that help is coming. What I think we all want to know is, "How long?".