Outlook: Ford subsidy
Saturday 29 May 1999
The latest supplicant is the Ford Motor Company, which is muttering darkly about removing a pounds 250m investment from its Brigend engine plant unless the Government is more understanding about the need for subsidies.
Now Ford is not exacly short of a dollar or two, being the world's most profitable car maker at present. It splashed out $6.5bn for Volvo and another pounds 1bn for Kwikfit without blinking and at one time had its beady eye on the Automobile Association.
Alan Michael, the first leader of the Welsh assembly, apparently did Bridgend no favours by going over to Detroit in March and telling Ford that there was no more money on the table beyond the pounds 30m offered.
Ford, however, is not the kind of company to take no for an answer. The big cheese, Jac Nasser, was due to have flown in to conduct the negotiations yesterday with Mr Blair. In the event, it was left to Ford's European president and its local UK chairman, Ian McAllister, to go along cap in hand.
There is a huge element of brinkmanship in subsidy negotiations of this type. Would Ford really close down Bridgend, which is reputedly one of its most efficient engine plants, and switch the investment to Cologne or Valencia, with all the extra expense that would entail, for the sake of perhaps pounds 10m-pounds 20m?
The fact is that the German and Spanish governments are not slow on the draw when it comes to devising aid packages and Ford knows it can play the three countries off against one another.
Mr Blair's case for refusing any extra aid is not helped by the Government's track record. He caved in when BMW threatened to close down Longbridge and promptly bunged the Germans another pounds 30m to keep the replacement for the Rover 200 in Britain. BMW said it had been studying a rival manufacturing location in Hungary but this seems to have been news to the Hungarians.
As for Ford, it has been down this road before. The previous administration was persuaded to cough up more state aid than it had been prepared to spend to ensure the baby Jaguar was built at Halewood.
In its favour, Ford has just agreed to invest pounds 300m of its own money to secure the future of Dagenham and make sure the next Fiesta comes out of the UK.
But then again, it is a very wealthy company. This time Mr Blair must be sorely tempted to say no but the likelihood of that is remote.
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