Hope for specialist car manufacturers

The car industry is dead. Well, if it isn't quite dead then it is certainly in intensive care and now needs massive injections of taxpayers' money to keep it alive, or at least ticking over in the world's largest automotive marketplace, America.

Just last week General Motors (GM), the world's second-largest carmaker, asked for a further $16bn (£11.2bn) in government loans to prevent it collapsing, according to the "viability plan" handed to the US treasury.

Add that to the $13.4bn that GM has already received and the total cost of preventing the carmaker from expiring has reached $30bn. Meanwhile, the smaller and even more vulnerable Chrysler is asking for another $5bn in loans from the US government on top of the $4bn it already had as an emergency bailout in December.

Almost all British-owned car industry passed away in 2005 when mass manufacture ended with Rover. However, even in this harsh climate, there are traditional marques such as Morgan that do still make money, and even have a waiting list. In contrast, the very modern Honda plant in Swindon has been shut down until April. At Jaguar, 400 jobs went in November, and its Indian owner, Tata, is seeking government assistance for its Land Rover and Jaguar factories. Even the world's largest and best-run car company, Toyota, is predicting a loss for the first time. Company boss Katsuaki Watanabe said falling car sales had been "far faster, wider and deeper than expected". It seems that the problem stems mostly from America, where the car market has almost completely collapsed, eating into Toyota's export margins.

When GM boss Rick Wagoner was asked how his company had got into such a serious financial situation, he said that aside from the global collapse in car sales, GM had needed to spend $103bn on "post-retiree costs" over the past 15 years. Yet if anything demonstrated how out of touch car managers had become it was the "big three" bosses of GM, Chrysler and Ford flying from their headquarters in Detroit to Washington on separate company jets, to beg for state aid. The truth is that too many cars have been made for too few customers, for generations.

Put simply, car factories are geared up to produce a certain number of vehicles irrespective of actual sales. So once the production tap is turned on it can't be turned off. If there are no orders the cars are then parked in compounds until the manufacturer decides what to do with them. That could mean forcing their dealers to take extra stock, usually with an increased bonus.

And there was always the daily rental market, selling cars to rental firms at massive discounts. When those fleets were renewed every few months it took care of any unsold slack. When times were good, this seemed to work, especially as buyers could easily find cheap credit to finance these subsidised cars.

There is also the question of whether the cars being made were the right ones. In America, the cult of the pickup truck translated into massive sales despite the vehicles being overweight and unsophisticated. But they were cheap to build and highly profitable. It could be argued that 4x4 sales in the UK mirrored this trend, but the Land Rovers were far more practical, better built and safer. However, environmental legislation and the Government changing the road tax to penalise them has not helped sales of big-engined, high-CO2 producing vehicles.

Still, building luxury and off-road vehicles is something that we remain good at. Here is proof that when governments interfere in car manufacture they usually get it wrong. Just as when the Labour government in 1968 encouraged Leyland to create a huge, unwieldy conglomerate that became known as BL. Even now those two letters conjure up industrial strife, shoddy products and the Austin Allegro's unfathomably square steering wheel.

Currently, a subsidy or bailout would do little more than pay manufacturers to park unsold cars in a field, and what would be the point of that? And, why pay money to a private company? Tata is one of the world's largest industrial companies; and it already knew about the vagaries of the car business from its experience in India.

Well, obviously, it is all about jobs. Vehicle manufacture is still labour-intensive, and there are many hundreds of related suppliers and businesses. The fact that more than 800,000 work in the car industry has concentrated the Government's mind, so it has been suggested, by Lord Mandelson, the Business Secretary himself, that it could encourage car buyers with some easy credit. However, many car owners have realised that they don't actually need a new car every few years.

As far back as 1960, author Vance Packard in his book Waste Makers had a go at the Detroit carmakers and other consumer-goods makers for their devotion to built in obsolescence. One chapter was called "How to Outmode a $4000 Vehicle in Two Years", and the constant revamp of vehicles, often for cosmetic reasons, has never slackened in the past 50 years. Only Charles Ware at his Morris Minor Centre in Bristol listened, and was prepared to do anything about it.

In 1976, Ware chose the Morris Minor as the perfect embodiment of his "Durable Car Ownership" philosophy. He believed that the car could be modified and carefully maintained without the need for it ever to be replaced. Also, long before "Fair Trade" became a buzzphrase, Ware was getting high-quality replacement panels made in Sri Lanka by local craftsmen. Speaking to me last week at his Minor Centre he was sad, but not in the least surprised, about what has happened globally: "Changing models every few years is ridiculous. You would never pull down a solid Edwardian house, when perhaps some routine maintenance and a few tiles on the roof is all that's required."

So if billions of bailout cash is to be splashed around, perhaps it should be invested in some fresh ideas.

Gordon Murray, legendary Formula One and supercar designer, has turned his mind to the problem of building everyday cars. Right now, a prototype town car – the T25 – is being built in the utmost secrecy. Murray describes it as a multi-purpose vehicle with up to 14 potential body variants. It is different from all other small cars, he says: "You don't sit normally in it, you don't get in and out normally, and you don't load luggage in the normal way." And, it will create far less CO2 than conventional cars, in building and recycling phases.

But, of course, we do have a British car manufacturer, celebrating its centenary this year, which seems to have been getting it right for the past 100 years. Malvern-based Morgan builds its cars out of trees, could never be accused of over-production, always has a waiting list and each car is hand-crafted by highly skilled artisans. Oh yes, and it always makes a profit. Perhaps the car industry is actually alive and well and living in the Cotswolds.

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Now there is a prevailing view that the car industry is a notoriously difficult one in which to thrive – or even just survive.

That is true as the amount of money involved in remaining in business is phenomenal. Also the high-volume nature of vehicle production means there have often been more cars than customers. Even so, the basics of building cars are universal because, at the very least, they need to be reliable and practical. Once you've cracked that, you can go on to sexy and double your money with a car that people don't actually need, but really, really want. For instance, Volkswagen using their Audi brand to make the TT, which under the pretty bodywork was essentially a Golf.

That's all Britain needed to do – build a Golf – and the Austin/Morris 1100/1300 was probably the closest we ever came. It wasn't priced right, of course, but a hatchback model in the 1970s would have helped, instead of the Allegro. It's not as though Brits aren't clever when it comes to engineering and design.

Hi-tech wonders like the McLaren F1 could only have originated in Britain ... which has managed to create some of the finest motoring minds and excel in the richest, most ruthless and competitive car business of all, Formula One.