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10.18 pm
The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Alan Johnson): I congratulate my hon. Friend the Member for Burnley (Mr. Pike) on initiating the debate and thank my hon. Friend the Member for Pendle (Mr. Prentice) for being in the Chamber. I know that the issue is extremely important to their constituents--as it is to the Government.
I express my regret at the announcement of the job losses in the constituency of my hon. Friend the Member for Burnley and our concern for the men and women who face the prospect of redundancy. It is extremely difficult for the Government to intervene when a company has come to a final commercial decision.
Officials from the Government office of the north-west and the East Lancashire training and enterprise council are keen to discuss with TRW whether we can help in any
way to enhance the future security of employment on the site, and what packages of assistance might be available to those who are made redundant. The Employment Service is liaising with the company to provide advice and to help employees who may be leaving. Burnley borough council has also been in close contact to offer whatever help it can. I shall say something more about that at the end of my speech.
Recent events have helped to remind us--if we needed reminding--just how important to the United Kingdom's economy the car and components manufacturing sectors of industry are. They employ more than 200,000 people and, in 1998, they accounted for more than 11 per cent. of total UK exports. Altogether, UK vehicle and component manufacturing has an estimated turnover of £40 billion--nearly 5.5 per cent. of gross domestic product.
As in all areas of manufacturing, the pace of innovation and technological change is quickening. Concerns over the environment and congestion require cleaner and more fuel-efficient vehicles and greater recyclability. New car models are being introduced more frequently and more quickly than ever before, and the industry is also at the forefront of much technological research. Lightweight materials, safety systems, telematics and fuel cells are but a few examples and the industry leads the manufacturing sector in developing and adopting lean manufacturing techniques, such as continuous improvement and just-in-sequence supply.
Clearly, in such a sector, companies have to be world class to survive. For the vehicle manufacturers, that has meant consolidation to take advantage of the economies of scale that can be achieved through having a global reach. It means having sufficient resources to develop and apply the new technologies of tomorrow and to introduce new models that will have a shorter lifespan in the marketplace than ever before. Last but not least, it means having a healthy and competitive supply chain.
The performance of any vehicle manufacturer is critically dependent on its suppliers. Some 70 per cent. of vehicle manufacturers' costs are accounted for by bought-in materials and parts. The efficiency of their assembly lines is dependent on having the parts delivered on time and to the right quality. That means that the same competitive pressures will be passed down to suppliers, too. Vehicle manufacturers are increasingly looking for suppliers that have global reach and are able to deliver whole sub-assemblies or systems with state-of-the-art technology, excellent production quality and competitive prices. In effect, they are looking for suppliers to take on some of the risks of developing new models.
As a result, vehicle manufacturers have been taking steps to reduce the number of suppliers that they deal with and to secure the economies of scale and technological innovation that can be offered by global suppliers. In turn, that presents the remainder of the supply base with greater challenges and burdens. I know that that process is resulting in difficult decisions. However, it also offers immense opportunities. Smaller suppliers may decide that their future lies in supplying larger global suppliers rather than continuing to supply direct themselves to vehicle manufacturers. Others may decide that their future lies as part of a larger global supplier. Many have chosen those routes already.
Any supplier--large or small, first or third tier--will have to be globally competitive if it is to have any chance in the future. Companies in the UK automotive chain have
to be able to compete with the best. A lot has already been done, and much has been achieved. International comparisons on stock levels--a key measure of lean manufacturing--shows that the UK's automotive component industry compares well with the United States and very favourably with Europe. It is testimony to the increasing competitiveness of the UK supply base.
However, both we and the industry recognise that there is more to do, and we are helping to do it. We are actively supporting the industry's efforts to improve its competitiveness through the Society of Motor Manufacturers and Traders industry forum. It is a unique initiative that aims to develop and sustain world-leading competitiveness in the UK-based vehicle and components industry, through the development and adoption of world-class manufacturing improvement activity and training. Indeed, the initiative is being replicated in other manufacturing industries.
The Department of Trade and Industry has been closely involved with the project from the start and is providing more than £6.5 million of support. The results of that initiative are astonishing and have won praise from within the sector and outside. Right-first-time quality is up by two thirds, productivity has doubled and stock turns have more than trebled. However, that is just a beginning. The challenge is now to sustain and spread such improvements more widely.
We have also supported work by Cranfield university to improve the product development and introduction process among automotive suppliers and to help them design and manufacture new products more quickly and more cheaply.
The work is being reinforced by excellent initiatives at regional level. In the west midlands, the accelerate programme offers an integrated programme of training and support to small and medium-sized enterprises and direct suppliers in the automotive component sector to deliver measurable improvements in their manufacturing performance. The Longbridge taskforce will, as part of its work, consider what further assistance might be given to the automotive suppliers in that region to improve their competitiveness.
Competitiveness is also increasingly dependent on suppliers' ability to offer vehicle manufacturers leading- edge technology and innovation. That is why the Government are supporting the highly successful DTI-led foresight vehicle LINK programme, which has provided more than £12 million of public funds for strategic collaborative research between industry and the science base. That is helping UK-based companies to develop the materials and technologies for tomorrow's vehicles--vehicles that are clean, efficient and lightweight and that integrate information and communication systems fully into the road transport system.
The DTI has also been developing a programme to help suppliers locate new customers in the UK and abroad, taking a strategic approach to markets and responding to customer needs. In addition, the Department of Trade and Industry helps UK companies to participate in trade fairs and missions overseas. Most recently, we supported a large and highly successful contingent of UK companies at the US Society of Automotive Engineers show in Detroit and we will be supporting a group of UK companies at the Automechanika exhibition in Frankfurt in September.
We are also supporting major export campaigns in Mexico and central Europe and have on-going initiatives in India and China. All this represents a significant investment by the Government in spreading best practice and in helping UK-based companies develop and exploit new technologies. One of the most significant ways in which we have been able to support the motor components industry is to ensure the continued development of the vehicle industry in the UK, which provides the customer base for much of the UK's production of components.
I shall set some of the understandable and eloquent remarks of my hon. Friend the Member for Burnley in context. There are seven major car manufacturers in the UK--more than any other country in Europe. The majority of suppliers to the UK-based car manufacturers are based here. Ford's European operations source £2 billion a year from the UK, while Vauxhall adds a further £900 million. The Japanese vehicle manufacturers are estimated to be worth more than £2 billion to the UK components industry.
Since 1997--since the general election--more than £2.4 billion of new, additional investment has been won by the vehicle manufacturers in the UK. That investment has created more than 8,750 new jobs. To take some examples, Honda announced a £500 million investment to add a third model at Swindon. Peugeot and Vauxhall both added third shifts at their plants in Ryton and Ellesmere Port. There were two developments last year at Nissan in relation to production of the Almera and the Primera. Car exports last year of 1.1 million are the highest ever. UK car sales in 1999 are the highest on record and UK car production is the highest since 1972.
This investment and job creation is not simply in vehicle production but in research, testing and development. In a globalising industry, as my hon. Friend rightly said, this sort of high-quality investment helps to underpin the presence of the manufacturing operations in Britain and provides opportunities for component suppliers to work with vehicle assemblers on new products involving new technology.
Last year General Motors announced the establishment of its new light vehicle R and D centre at Millbrook with 100 new jobs. Ford has continued to invest in its R and D operations at Dunton and opened £80 million worth of new facilities in September 1999, on top of the £303 million invested in 1998.
Inward investment by automotive component companies has continued as well. Since April last year, 28 automotive component companies have decided to invest in the UK, with £128 million of capital expenditure bringing 1,700 new jobs and safeguarding a further 4,700.
My hon. Friend mentioned the euro. As we have made clear, we believe that that was not the primary cause of the events at BMW. What matters to businesses in this country is stability, and we believe that we are delivering that. Companies want sound public finances and low inflation. We understand the concerns of businesses, especially manufacturers trading with Europe, about the strength of the pound, but we are determined to take a long-term view. It would be wrong to let short-term pressures lead us back to the policies that have produced instability in the past.
I emphasise the importance that the Government attach to maintaining a strong automotive industry in the United Kingdom. We do not underestimate the challenges: global competition has never been stronger; vehicle manufacturers insist on the highest standards of performance from their suppliers; and the industry as a whole faces a challenging environmental and safety agenda.
My office is searching for a date early next week when I can meet my hon. Friend and his colleagues--I believe Tuesday is the preferred day, but we are checking that with my hon. Friend. At that meeting, we shall discuss all the ways we can help in Burnley, just as we are trying to help in the west midlands. We can also discuss fully the issues and concerns that he has eloquently raised on behalf of his constituents, especially those directly affected by the recent announcements at TRW.
Question put and agreed to.
Adjourned accordingly at twenty-nine minutes to Eleven o'clock.
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