No longer strike bound, car sector bounds back

David Bowen charts the re-emergence of the motor industry as a magnet for investment from abroad

ONCE, it was almost impossible to open a newspaper without reading about a strike in the British car industry. Now it is nearly as difficult to avoid an announcement of investment in the industry.

On Wednesday, Peugeot Talbot said it was pumping £150m into its Ryton factory near Coventry over the next five years. On Thursday, Vauxhall said it was investing £136m in its Luton plant. These followed announcements last month from Toyota, which said it was doubling its UK production; from Honda, which is spending an extra £200m to expand its range at Swindon; and from Ford, which is building a £200m diesel plant at Dagenham.

In addition, it has become clear that Ford is to allow its Jaguar subsidiary to build its new higher-volume car in Coventry rather than Michigan. Here the investment is coming from the British government, in the form of a £60m grant.

These increases come despite a European car market that is as flat as Saskatchewan. "They are part of a rebalancing process, driven by the fact that it is reasonably good value to produce a vehicle in the UK," says John Lawson, director of the motor consultancy DRI/McGraw-Hill.

The weakness of sterling against the Japanese, German and French currencies has probably accelerated some of the decisions. The Japanese are faced with a yen at around 85 to the dollar, a rate that would have seemed impossible to live with only a year ago when the strain was showing at 100 to the dollar. "The strength of the yen is very much an issue for the Japanese," Mr Lawson says.

But Garel Rhys, motor industry professor at Cardiff Business School, says the underlying decisions have nothing to do with currencies. "The motor industry will not invest long term on currency or wage-rate effects," he says. "That is why they won't invest in eastern Europe, despite the very low wage rates."

He says the announcements are all part of the long-term revival in the British motor industry and reflect its increasing ability to produce high- quality cars, as well as the availability of plenty of spare capacity. To put this success into context, though, it is worth noting that the UK makes - and will continue to make - fewer than half the cars that Germany does.

As the Independent on Sunday reported on 19 March, the most economically significant announcement came from Toyota. Although the immediate effect is to increase capacity at its Derby factory from 100,000 to 200,000 cars by building another line, Professor Rhys says the company will have an eventual capacity of double that figure. "Toyota will have two plants, each of which can produce 200,000 cars," he says. He predicts that one of these will build the Escort-sized Corolla, while the other could produce two different models. He believes this shows just how long a view Toyota is taking: its existing model, the Carina E, is finding the going tough in the fiercely contested Mondeo-sized sector.

Honda's decision to build new models in the UK was flagged a year ago, and followed BMW's purchase of Rover. The company decided it could no longer rely on supplies from its former partner, and is trying to make sure it is not marginalised in Europe. The Swindon-built Accord has been consistently outsold by the near-identical Rover 600. Last month, the factory started building the Civic hatchback.

Vauxhall's decision to upgrade Luton is also important, because it will bring the first increase in car output at the General Motors subsidiary for many years. A decade ago the plant was assembling parts made in a GM Opel factory in Germany - an activity usually reserved for screwdriver works in developing countries. GM had started running down its British activities in the early 1960s, though it managed to maintain the fiction that the Vauxhall was a British car.

The UK component content started to rise in the 1980s, although it was not until late in the decade that GM committed itself to direct UK investment, in an engine plant at Ellesmere Port. The Luton initiative will bring it almost on to an equal footing with its German cousins, although its cars will be still less British than Fords or even Nissans, as no small- car engines are made in the UK. The Luton upgrade is much needed, says Professor Rhys: "It is one of the least automated plants in Europe."

Ford's decision to increase engine production at Dagenham means the plant is now the company's diesel centre. Unlike GM, Ford has maintained a commitment to the UK, particularly in engine production, which is more capital-intensive and therefore less vulnerable to industrial action. The company considered building a new engine factory in Hungary, but decided this would just add complexity. However, there has been a revolution in attitudes in the assembly plant, which is why Ford has also announced that Dagenham will be producing cars for its partner, Mazda.

Like Luton, Peugeot's Ryton plant - the old Rootes factory - has suffered from under-investment. With the injection now planned, it will be automated and should be able to increase capacity from 120,000 to 200,000. French plants are as badly hit by the rise in the mark as the German ones, because the franc is still in the ERM.

Mr Lawson says Ford's decision to build the new Jaguar in Britain was not a foregone conclusion. "There is a perfectly possible alternative plant at Wixom in Michigan," he says. "It will be building cars using the same platform." The car, codenamed X200, will be aimed at the lower reaches of the BMW range and should start production in 1998. It will be the biggest-volume Jaguar ever built, and will double output at the Browns Lane factory in Coventry.

Voices
The Sumatran tiger, endemic to the Indonesian island of Sumatra, is an endangered species
voicesJonathon Porritt: The wild tiger population is thought to have dropped by 97 per cent since 1900
Arts and Entertainment
Beast would strip to his underpants and take to the stage with a slogan scrawled on his bare chest whilst fans shouted “you fat bastard” at him
musicIndie music promoter was was a feature at Carter gigs
News
news
Arts and Entertainment
Story line: Susanoo slays the Yamata no Orochi serpent in the Japanese version of a myth dating back 40,000 years
arts + entsApplying the theory of evolution to the world's many mythologies
PROMOTED VIDEO
News
Performers dressed as Tunnocks chocolate teacakes, a renowned Scottish confectionary, perform during the opening ceremony of the 2014 Commonwealth Games at Celtic Park in Glasgow on July 23, 2014.
news
Life and Style
Popular plonk: Lambrusco is selling strong
Food + drinkNaff Seventies corner-shop staple is this year's Aperol Spritz
News
Gardai wait for the naked man, who had gone for a skinny dip in Belfast Lough
newsTwo skinny dippers threatened with inclusion on sex offenders’ register as naturists criminalised
News
Shake down: Michelle and Barack Obama bump knuckles before an election night rally in Minnesota in 2008, the 'Washington Post' called it 'the fist bump heard round the world'
newsThe pound, a.k.a. the dap, greatly improves hygiene
Arts and Entertainment
La Roux
music
Arts and Entertainment
Graham Fellows as John Shuttleworth
comedySean O'Grady joins Graham Fellows down his local Spar
News
people
News
ebookA unique anthology of reporting and analysis of a crucial period of history
News
Ross Burden pictured in 2002
people
News
Elisabeth Murdoch: The 44-year-old said she felt a responsibility to 'stand up and be counted’'
media... says Rupert Murdoch
Arts and Entertainment
tv
Extras
indybest
Sport
Arsenal signing Calum Chambers
sportGunners complete £16m transfer of Southampton youngster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Data Governance Manager (Solvency II) – Contract – Up to £450 daily rate, 6 month (may go Permanent)

£350 - £450 Per Day: Clearwater People Solutions Ltd: We are currently looking...

Java Developer - Banking - London - Up to £560/day

£500 - £560 per day: Orgtel: Java Developer FX - Banking - London - Up to £560...

HR Business Analyst, Bristol, £350-400pd

£350 - £400 per day + competitive: Orgtel: My client, a leading bank, is curre...

Account Manager - (Product & Account Management, Marketing)

£26000 - £30000 per annum + Benefits: Ashdown Group: Account Manager - (Produc...

Day In a Page

The children were playing in the street with toy guns. The air strikes were tragically real

The air strikes were tragically real

The children were playing in the street with toy guns
Boozy, ignorant, intolerant, but very polite – The British, as others see us

Britain as others see us

Boozy, ignorant, intolerant, but very polite
Countries that don’t survey their tigers risk losing them altogether

Countries that don’t survey their tigers risk losing them

Jonathon Porritt sounds the alarm
How did our legends really begin?

How did our legends really begin?

Applying the theory of evolution to the world's many mythologies
Watch out: Lambrusco is back on the menu

Lambrusco is back on the menu

Naff Seventies corner-shop staple is this year's Aperol Spritz
A new Russian revolution: Cracks start to appear in Putin’s Kremlin power bloc

A new Russian revolution

Cracks start to appear in Putin’s Kremlin power bloc
Eugene de Kock: Apartheid’s sadistic killer that his country cannot forgive

Apartheid’s sadistic killer that his country cannot forgive

The debate rages in South Africa over whether Eugene de Kock should ever be released from jail
Standing my ground: If sitting is bad for your health, what happens when you stay on your feet for a whole month?

Standing my ground

If sitting is bad for your health, what happens when you stay on your feet for a whole month?
Commonwealth Games 2014: Dai Greene prays for chance to rebuild after injury agony

Greene prays for chance to rebuild after injury agony

Welsh hurdler was World, European and Commonwealth champion, but then the injuries crept in
Israel-Gaza conflict: Secret report helps Israelis to hide facts

Patrick Cockburn: Secret report helps Israel to hide facts

The slickness of Israel's spokesmen is rooted in directions set down by pollster Frank Luntz
The man who dared to go on holiday

The man who dared to go on holiday

New York's mayor has taken a vacation - in a nation that has still to enforce paid leave, it caused quite a stir, reports Rupert Cornwell
Best comedians: How the professionals go about their funny business, from Sarah Millican to Marcus Brigstocke

Best comedians: How the professionals go about their funny business

For all those wanting to know how stand-ups keep standing, here are some of the best moments
The Guest List 2014: Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks

The Guest List 2014

Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks
Jokes on Hollywood: 'With comedy film audiences shrinking, it’s time to move on'

Jokes on Hollywood

With comedy film audiences shrinking, it’s time to move on