Employment: Car industry fears world recession

Two British motor manufacturers now involved in moves to stem losses

GLOOM MOUNTED in the motor industry yesterday with Rover continuing intensive talks over job losses and Ford announcing a fresh round cutbacks.

The pessimistic mood was compounded by Juergen Schrempp, chairman of Daimler-Benz, who said the automotive industry throughout the world was encountering serious difficulties and could be heading for recession.

The Government insisted yesterday that job losses at Rover could be kept to a minimum if unions were "realistic" about working to achieve pounds 150m a year savings.

Peter Mandelson, Secretary of State for Trade and Industry, told union leaders they should take seriously Rover's proposals to change working hours, reduce overtime or a impose a pay freeze.

A government source said: "It is hoped that these proposals will increase productivity. It would be wrong to say the only solution is to cut 2,400 jobs.

"That is a crude union estimate of the savings required divided by the average earnings of workers. Mr Mandelson will urge them to be realistic and accept that changes have to be made. The unions cannot expect the Government to bail BMW/Rover out."

Ken Jackson, general secretary of the Amalgamated Engineering and Electrical Union, said employees' representatives would be working hard with management to find a solution. "No one underestimates the difficulty of the task."

He said the crisis at Rover could be blamed squarely on the high pound and the workers were being asked to pay the price of that policy.

Mr Mandelson insisted that the company was asking for nothing more than the Government's goodwill and support, although Rover gave a different account and said he was warned that ministers should tackle the problem of the sterling exchange rate.

At an earlier meeting with Rover bosses, Mr Mandelson was told that more job losses lay ahead unless the Government acted on the strong pound.

Mr Mandelson said that he had "a thorough discussion" with Bernd Pischetsrieder, chairman of Rover's parent company BMW, at his offices in the DTI.

The company's spokesman said: "We told him that we are looking for them to bring the exchange rate down. We have been saying this for a long time now, but how loud can you shout `ouch'?"

After the meeting, Mr Mandelson repeated his assertion that it was for Rover to tackle its productivity and investment problems. "There are both immediate decisions to be taken about the costs at Longbridge and long- term investment decisions for the company as a whole," he said. "But without the immediate problems being solved it will be very difficult for the future to fall into place.

The shadow Trade and Industry Secretary, John Redwood, said the cutbacks at Ford proved the problem was much wider than simple productivity. "I'm pleased that Rover have told Mr Mandelson that the crucial point is they are being hit hard by the high value of sterling ..." he said. "The Rover job losses are part of a downturn made in Downing Street. Labour is bad for business."

The company has given union just six weeks to agree to wages and job cuts of 2,400, most of which will go at Longbridge.

Mr Pischetsrieder said he had not asked Mr Mandelson for any specific aid, though the DTI confirmed yesterday that Longbridge would be eligible for Regional Selective Assistance. The Government grants, which could be used to inject millions of pounds into the area, are triggered when ministers believe the cash would safeguard or create new jobs.

A DTI source said BMW were free to apply for funds but had not yet done so.

The Competition and Consumer Affairs minister, Kim Howells - visiting the Motor Show at Birmingham's National Exhibition Centre - said the Government was doing all it could to help."Clearly, it's going to be a difficult task, but I am confident that something will come out of it."