Our car industry looks different from Japan
COMMENT: 'Of the 700,000 cars that Toyota and Nissan could conceivably be building here early in the next millennium, three-quarters will be shipped to the Continent'
Thursday 23 January 1997
The official Ford line is that it cannot justify building its new Escort in three places because there is already surplus capacity in the motor industry and this would only add to it.
The view from Toyota City on the outskirts of Nagoya is rather different. There, they will cheerfully tell you, the picture is one of chronic undercapacity in Europe. Their plan is to sell 600,000 cars in Europe by the turn of the century - a shade under 5 per cent of the market - and to achieve that while remaining good citizens means more than doubling local production in the next five years.
The message from Nissan, which has just taken the plunge and confirmed plans to build a third model at its Sunderland plant, is much the same. The second model that Toyota will introduce at its Burnaston plant next year and the third model Nissan intends to build in the North-east will compete head- on with the Escort. That rather gives the lie to the idea that this is a segment of the market consumers are backing away from in search of something more exotic.
The reality is that customers are backing away specifically from the latest Escort which has struggled to live up to its predecessors despite some monumental marketing back-up.
That is hardly Halewood's fault because Escorts built in Saarlouis and Valencia are no more popular. Where Merseyside can be faulted is in developing a reputation for poor quality in the 1970s and 1980s that dished any hopes it had of ever becoming a major export business.
Of the 700,000 cars that Toyota and Nissan could quite conceivably be building here early in the next millennium, three-quarters will be shipped to the Continent. The only thing likely to spoil that happy picture is a disastrous lurch in a Eurosceptic direction. But if that happens, it will not just be jobs in Burnaston and Sunderland that are in jeopardy.
Stock selection name of the game
The crisis at Millwall, the football club whose fans chant "No one likes us - we don't care" to opposing supporters, comes as no surprise to followers of these matters. Drifting along in a lower division with only average crowds and little television money to speak of is hardly the stuff of stock market excitement.
But while many of Millwall's problems are specific to the South London club, this week's developments may force a fresh appraisal by starry-eyed entrepreneurs (Joe Lewis, he of Christies fame, joined the bandwagon yesterday with a pounds 40m investment in Glasgow Rangers) and investors of the market's latest fashion sector. Up until now most have been playing a stock market version of fantasy football.
So just how good are these clubs - as businesses that is? The first thing to note is that the picture is mixed. Return on capital in some cases such as Manchester United and Tottenham can be very good - as high as 30 per cent. This is because money from television rights requires no real capital investment in the first place. Others such as Chelsea and Leeds have ratios of just 2 per cent.
Most City institutions are still very wary of investing directly in football clubs, tending to get involved only through tracker funds. They will be using the pounds 150-pounds 200m float of Newcastle United to reappraise their view. A small but committed minority, however, see them as classic "people businesses", such as advertising agencies and PR consultancies, and believe they should be valued on the same basis. Indeed, football seems rather better at dealing with the tantrums of its star players than a great many other people businesses, judging by the Nicola Horlick fiasco.
Football, then, does indeed have some investment merits. But stock selection is the name of the game. And don't count on pay per view being quite the goldmine for investors that some are expecting. More than likely the fruits of this new source of income will end up with the players rather than the investors. That's the problem with people businesses. The people have an awful tendency to demand a very large slice of whatever cake is going.
Pressure is on to blow the whistle
Client confidentiality and sheer timidity are among the reasons why in the past whistleblowing has been a no-no for actuaries and accountants. But for well over a decade, the pressure has mounted on them to do more than agonise and resign the account when they suspect something is wrong. Why don't they actually pick up a phone and tell somebody, is the recurring question.
The strongest pressure has come in the banking industry, where Johnson Mathey Bankers, BCCI and now Barings have embroiled auditors in lengthy lawsuits about who missed what in the accounts, and bitter recriminations about why they did not say anything at the time.
It was the 1987 Banking Act, written to correct deficiencies in the legislation shown up by JMB, that brought the concept of legalised whistleblowing to the auditing profession. And it was the wave of legal actions against auditors over the past 10 years that concentrated their minds on the problem of what to do if fraud is suspected. Not that there has been any marked increase among auditors of whistleblowing.
So far the profession's most decisive response to fraud has been the rapid development of plans to become limited companies or offshore limited partnerships, thus limiting their liability.
Now the actuarial profession is coming under renewed pressure to whistle blow too.
The Occupational Pensions Regulatory Authority is asking actuaries to report cases not just of serious abuse, but the entire range of minor problems that actuaries and auditors discover within pension funds. It wants to use this information as a database that will in future allow it to identify the characteristics of problem funds.
Well. This is progress of sorts but it is a poor substitute for legislation. The 1995 Pension Act drew back from making all pension funds register and report to the authority on grounds of cost and complexity. Detailed regulation and reporting requirements were deemed impossible. The Act even omitted to make whistleblowing obligatory. So now we have this self- administered stab at the problem.
The trouble is that it is not in the cautious nature of actuaries and auditors to pick up the phone for every minor problem and tip off the authorities. This scheme might just work, but only if pension fund trustees make it their business to prod actuaries and auditors into constant communication with Opra.
Presents unwrapped, turkey gobbled... it's time to relax
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