Making awesome cars needs reliable finance: the fall and rise of the UK car industry

mini1 Making awesome cars needs reliable finance: the fall and rise of the UK car industry

The UK car industry seems to be doing well these days.

Why should I be interested, you may ask, driving as we do a Skoda Citigo, made in the Czech Republic by a company owned by Volkswagen?

As in many older car-producing countries, cars are a national obsession in the UK.  Truth be told, I am a bit of a petrol head and an engineering enthusiast to boot.  Not so much the practical type – more an armchair observer.

Of course I would love to have (or have had) a Ferrari or two – better an E-type Jaguar – but have never had the money, nor would my excessively frugal nature permit it.  I really don’t know how some people manage to have these super cars on an average salary.  One day, I hope…

For a long time now, we have been less than loyal to our indigenous manufacturers than, say, the French.  When we have made such iconic vehicles as the Mini, the Jaguar E-type, Range Rover, Rolls-Royce not to mention all the open topped sports cars, why do we as a nation tend to buy from overseas?

To be fair to our friends over the Channel, they too have had their share of innovative vehicles, as have the Germans and Italians but looking at British designed and made vehicles, the reason for the industry failure is not hard to see.

The quality of some British cars of the past was, shall we say, a little lacking.  It is easy to blame the workforce and labour disputes but ultimately quality is driven from the top.  A loyal workforce will engage in quality programmes as it is security – and pride – for them.

Things like the absence of dehumidifiers, let alone air conditioning, in the paint plant, tooling quality control and lack of a global vision are not due to poor workmanship or strikes but bad management.

Whatever business process like 6 sigma, Lean Sigma or Toyota Production System should have been adopted, rest assured that in the old days, it wasn’t.

It was ‘it will be alright on the night’ attitude and the customer will never notice; it clearly wasn’t alright at all.

I have long bemoaned the absence of any understanding of quality among Britain’s management.  Maybe there aren’t enough scientists or engineers at board level, or maybe the quick turnover of senior staff meant continuous change to justify their salaries before they left to make a mess of the next company.

I have spoken to many small and medium sized manufacturing businesses and the main aim seems to be to get the product out of the door and hope it doesn’t go wrong.

If any evaluation is done, it will be on sales figures and forecasts in a spreadsheet which are not worth the paper they are printed on – garbage in, garbage out.  Modelling processes is all about getting the widget into its hole as fast as possible, not whether the widget was made properly or the hole was the right size.

Compare that with the attitude, for example, of one European manufacturer of power drills that embeds a chip in every drill so, if it does go wrong, they can use the data stored to find the cause and rectify it, as well as replacing the unit.  Or SEMATECH in the US chip industry, which sets the production standards.  Is it any surprise that the US still leads the world in processor manufacturing?

So while the designs were often brilliant, the reason for people not buying British cars was that of reliability.  If you wanted a Mini, wiser folk bought an Innocenti – licenced car from Italy rather than one made in the UK.  Say no more.

Government after government toiled with this problem, there was nationalisation, privatisation, bail out and private equity as factories were handed from owner to owner to owner, at each stage losing staff or at least losing the respect of those staff that were retained.

What has turned the industry round has been international ownership and management with global ambition.  Perhaps the former managers have all retired by now, moved on to manage the health service or have become politicians.

Japanese, German and French manufacturers have set up in the UK so that, for example, Nissan’s best plant worldwide is in Sunderland in the North East of England.   And now Jaguar Land Rover is owned by Tata Motors of India, it can invest so that these vehicles can aspire to their original designer’s hopes.

Much of the growth these austere days has come from the luxury end of the market.

What else needs to be done?  Where are the bottlenecks now that the quality and vision issues have largely been solved?

The main problem these days is in the fractured supply chain finance.  It is all too easy to insist on ‘Just in Time’ manufacturing but this really means that a close and trusting relationship needs to be built up with producers down the line, whether they are making springs for small components or car seats.  Manufacturers need to be involved from the start and to do this, they need finance.

For some end-manufacturers, this is part of their DNA.  It is automatic to include suppliers, right from the beginning of the design.

There are still issues in the UK: unlike in Germany where people look after each other, the end-manufacturers pay for tooling and 30 day payments are the maximum.

Fortunately there are good signs.  The UK produced over 1.5 million cars last year and over 2.5 million engines.  This appears to be growing – 2 million cars are expected in 2017.

Funding is an issue despite the Enterprise Finance Guarantee scheme, the Advanced Manufacturing Supply Chain Initiative and the European Enterprise Network.  These need to be integrated so that a one-stop shop can be created for the supply chain otherwise suppliers don’t know where to turn.

There remain issues with different sets of rules and the main end-manufacturers doing things in different ways, all of which make it difficult for the supply chain, as well as payment terms.

These issues are being examined.  Information and help for the supply chain such as cash flow management and start-ups is readily available.

Hopefully in 5 years time, when I may return to the topic, all will be fine and British manufacturing will have become a more important part of the economy.  For while there is no doubt that services provide a more sustainable base for the economy, innovation and science require a symbiotic relationship with a healthy manufacturing sector or we will yet again see products invented here where all the profit is made elsewhere.

Science and engineering are as important part of culture as music and theatre.  We should not lose sight of this.

4 thoughts on “Making awesome cars needs reliable finance: the fall and rise of the UK car industry”

  1. It sad that foreign ownership is needed to restore reliability to any company. In the US, foreign competition from the Japanese changed our auto, electronics and many other industries. Maybe competition as well as foreign ownership is a good thing!

    1. It isn’t only competition from Japan (and Korea of course). Chrysler has had a chequered history recently with ownership moving from Mercedes to Fiat via a government bailout. GM similarly needed help during the crisis. The US manufacturer that stood out was Ford, largely I suggest because it had adopted more fuel-frugal concept along with massive improvement in quality control dating from the Focus.

      One hesitates to suggest from this side of the pond that large gas-guzzlers have had their day – after all as the US is an enormous country with large inter-town distances, it is not surprising that there is a lot of pressure to keep the price of gas/petrol down – but the success of European and Asian manufacturers has been a large wake-up call. In the UK, the main issue was just quality – we have always made quite economical cars.

  2. Like BMW in Germany, the UK could keep doing high end luxury cars and there will always be a market for those, however, with high costs and wages, not sure they can keep competing for middle market cars. France has taken a hit and sent most of its production to cheaper country but even though you keep buying a Peugeot, it is not the same quality it used to be.

    1. The most successful UK manufacturer these day is Jaguar Land Rover which cannot make enough (luxury) cars, not only to star in Hollywood movies either! Particularly the Range Rover is an incredibly impressive machine off road and the new Jag F-type is a long-overdue replacement for the most iconic of all cars, the E-type.

      For the rest of us, we try to get away with cars that are as cheap to run as possible although a Range Rover remains a dream of mine – my first ‘car’ was an 86″ Land Rover.

      But yes, the French motor industry has been taking quite a knock recently, notwithstanding quite good products and a loyal domestic market. The days of the iconic 2CV, ID19, DS21 are long gone I’m afraid!

      In any market there are only two stable positions – the cheapest or the best. It is difficult for any European manufacturer to be the cheapest and France has never embraced truly luxurious (and expensive) cars. Maybe it is in the national egalitarian psyche but you are better qualified to comment on that!

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