Rover stalls at the lights

In Britain, the car industry failed because there is no consumer loyalty

The protests by the unions and the Government against the probable loss of thousands of jobs at Rover's Longbridge plant has brought a whiff of the 1970s to the new millennium. But those who believe that volume car production has a future in the West Midlands are not only out- of-date, say industry experts, but also missing the point.

The car business is belatedly catching up with changes other industries were forced to make long ago. Cars are increasingly a fashion item, and the model for manufacturers in the future may well be a consumer electronics company such as Sony, or even a mass clothing retailer such as Gap. The involvement of Swatch, the design-driven watchmaker which gave birth to the Smart car in collaboration with Mercedes-Benz (although the enterprise is now owned by DaimlerChrysler), is a portent of the future.

Jac Nasser, the head of Ford, recently said he could see the day when his company would no longer make cars: that could be done by other people. Such a structure is already familiar in the personal computer industry, where Dell or Compaq would not dream of attempting to manage processes that can be carried out much more cheaply in Taiwan or Malaysia. Ford, said Mr Nasser, could contract out production and concentrate on designing cars and marketing them.

"Car companies are in trouble," said Dale Harrow, acting course director of vehicle design at the Royal College of Art. "They are struggling with overcapacity and fighting for market share in a world where there is no consumer loyalty. When manufacturing and production is pretty standardised, what matters is differences in design."

It is here that lessons can be learnt from companies such as Gap which have leant on their suppliers to react swiftly to design changes. Some are already getting there, says Mr Harrow. "Look at VW Audi, which is making 13 models on the basic VW platform. Once you have invested in that, it is very easy to add more models at little extra cost. The new Jaguar S-type is based on a Ford chassis. Does this matter to the consumer? I doubt it."

The Rover bombshell simply seemed to reinforce Britain's place in the car-making world: great at turning out dream machines (we are the world capital of Formula One racing-car development), no good at volume production. "The problem for Rover," said Mr Harrow, who was born in Coventry and served an engineering apprenticeship at the company, "was that the volumes were not high enough, but the cars weren't special enough either. The business is about big players, and the irony is that even BMW may not be big enough to avoid being gobbled up."

With Ford already set to take over Land Rover from BMW, it seems likely that the Americans will look to swallow up more of the company, although the Germans have consistently denied that BMW is for sale. However, there is some suggestion that it would relinquish Rolls-Royce and the Mini to its rival Volkswagen, leaving the hard core to Ford, the world's second biggest car maker. BMW would sit comfortably with Ford's recently-formed Premier Automative Group which already includes Aston-Martin, Jaguar, Volvo and now Land Rover.

The implications for Britain of the ever-accelerating pace of change in the industry are shown by two announcements this year from Ford. In January, seeking to capture Britain's creative energy, it revealed plans to set up a £20m design centre in London; a month later it was telling the 8,000 workers at its Dagenham plant that 1,500 of them would be gone by the end of the year. Production of the Fiesta will be halved from the present 1,200 a day, and a total shutdown of Dagenham is not ruled out. Even if Ford took over more of BMW, manufacturing over-capacity in the European car industry is such that job losses in Essex would still be possible.

The biggest names are frantically acquiring brands, such as Volkswagen with Skoda and Ford with Jaguar and now Land Rover, and are not above forging alliances with each other where their interests coincide, such as in developing new engines. Although Mr Nasser's idea of a virtual car company is still some way off, much more of the work is being pushed down to component companies, which are having to invest heavily in higher technology to stay afloat.

The complex web of supplier relationships that has resulted makes it unthinkable that the West Midlands should react to the sale of Longbridge by boycotting German car makers, said Edward Roberts, managing director of a firm that makes springs. "German companies are very good customers in the West Midlands. We sell to them here as well as in Germany."

Ford has linked up with Oracle, the world's second biggest software business, to put all its $80bn (£52bn) annual purchasing transactions with more than 30,000 suppliers on the internet, which it expects to save billions of dollars.

"Car companies have to listen to their customers more," Mr Harrow said. "Take the rise of off-roaders in the 1980s - families discovered they were more convenient than conventional saloons for the school run. It caught the makers completely on the hop. Now you have to ask whether the family car is relevant any longer. The building industry is learning that more single dwellings are needed as families fragment, and car makers will have to draw the lesson as well."

As new niches appear, opportunities may open for smaller players, Mr Harrow added. "It may not be car companies that exploit them. Swatch is one example, but I could see Microsoft possibly applying its skills. It would probably have a very different approach, much more organic than the traditional divisions between design, production and marketing." Here there could be hope for Britain. Mr Harrow sees a future for "boutique manufacturers", as he calls them, where creativity is what counts. We may no longer be good at being big, but if flair and flexibility are called for, we are in with a chance.