Ford's UK chief calls for curb on capacity

<i><b>The Geneva Motor Show: </b></i>Warning that car industry is heading for a crunch, as Peugeot heads to the east
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The Independent Online

The most senior Ford executive in the UK warned yesterday that the car industry was heading for a crunch unless more manufacturers grasped the nettle and shut down excess production capacity.

The most senior Ford executive in the UK warned yesterday that the car industry was heading for a crunch unless more manufacturers grasped the nettle and shut down excess production capacity.

Paul Thomas, the managing director of Ford of Britain, said that a combination of ever more onerous and costly legislative requirements coupled with price discounting by some car makers in order to fill their factories was threatening the stability of the industry.

"Something has to give in terms of the marketplace going forward," he said. "Manufacturers cannot sustain the onslaught of having to comply with more and more environmental and safety requirements at the same time as rising marketing costs are putting massive pressure on prices. It is just not sustainable in the long term."

He declined to name the worst offenders in terms of those car makers with the greatest surplus capacity and the most aggressive approach to pricing, but indicated that the Italian car maker Fiat was high on the list.

Despite the acknowledged level of surplus capacity - Europe has enough automotive plants to produce five cars for every four sold - Mr Thomas said it was important for MG Rover's Longbridge plant in Birmingham to survive. "The UK motor industry needs a healthy MG Rover to support the component supply base in this country if nothing else," Mr Thomas said.

He added that Ford would not be happy if the Government chose to provide financial support for MG Rover's planned tie-up with Shanghai Automotive Industry Corporation (SAIC) of China. But he said the need to keep the ailing car maker in existence took precedence.

The UK government is considering support measures, including deferral of VAT payments, to sweeten the SAIC deal. Daniel Ward, MG Rover's spokesman, denied this would require approval from Brussels. "It is open to anyone to apply to Customs & Excise for a deferral of VAT payments."

He declined to put any timing on when the alliance with SAIC would finally be signed. The Chinese are looking to make an initial investment of about £200m in model development - much less than the £1bn injection MG Rover initially spoke of.

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