Select Committee on Trade and Industry Minutes of Evidence

Examination of Witnesses (Questions 280 - 299)



  280. Can I draw your attention to the specific wording of your company commitments. It says in paragraph 7, under sub-paragraph 3, "Appropriate investment will be included in Vauxhall's business plan and it is assumed that respective grant aid will be sought. In the event of exceptionally adverse changes to the economic environment which forces a reconsideration of the plan, then the ....", Joint Negotiating Committee, "... will commence talks on the actions to be taken in regard of this." It does not seem as though that actually happened.
  (Mr Reilly) As I say, we have been constantly talking to them, but specifically relating to that, that was why we called the Joint Negotiating Committee together on 12th December, which was the first time we could get them together given the decision was taken on a Friday night and we called them on the Monday to get the meeting on the Tuesday.

  281. But that was not a reconsideration, that was a complete reneging on the previous agreement.
  (Mr Reilly) It was to tell them what the situation was and what the resultant action ought to be.

  282. I think most people looking at the terms of that agreement would say that you have broken the agreement.
  (Mr Reilly) That is not our interpretation.

Mr Laxton

  283. Is this not a bit of a play on words? You have just responded to Mr Chope by saying that consultation and all those issues were taking place, it does seem to me, listening to you, there was an on-going dialogue about the difficulties concerned with profitability and changes in the market, et cetera, but it is not consultation to tell people in advance of the decisions being taken. If the decision is taken and you tell them after the event, that is a fait accompli. You can go through the business of talking, discussing, negotiating, all of these issues, but at the end of the day the decisions are taken in an absolutely arbitrary way, with no discussion or consultation whatsoever.
  (Mr Reilly) As I have said, we have been consulting and discussing the situation on-going, and at the first opportunity when these conditions became clear we called a meeting immediately.

  284. And told them the decision had been taken. "Hard luck, that is the end of it."
  (Mr Warman) It is fair to say that throughout the month of November we had been in intensive consultations talking about options to try to deal with the situation as it was developing at that time. Options like moving people towards IBC. We had been in those talks throughout November.

  285. Can I very quickly touch on the issue of one of the factors involved, over-capacity in Europe? General Motors in Europe have an arrangement or a collaborative partnership arrangement with Fiat which may very well lead perhaps to a buying-out of Fiat in its totality. My understanding is that there is a huge amount of over-capacity in some of Fiat's plants, surely you would only be exacerbating a problem which you say already exists if the moves for taking-over Fiat go ahead. Can you provide some explanation for that?
  (Mr Reilly) First of all, there has been no indication at all that General Motors intends to take any more of Fiat, and Fiat have said very clearly that is not what they would desire. The relationship with Fiat is driven by an attempt to take costs out of both organisations by dealing in particular in engines, power train activities and purchasing. To that end two joint ventures were formed because it was realised we were both spending a lot of money developing engine lines to do virtually the same job in the same type of car and therefore we might be able to share those components and reduce the costs, but then we would compete in the market place car by car. That is the intent of that relationship. There has been no statement we intend to increase the 20 per cent share of Fiat.

  286. But even through your collaborative arrangements with Fiat, are you not buying into an arrangement where there is—and perhaps you could tell me whether there is or there is not—over-capacity in terms of Fiat's existing plants?
  (Mr Reilly) As far as I know in power train there is not an over-capacity in either of our plants. I do not know the situation in Fiat's car assembly but that is not what we are working together on.

Helen Southworth

  287. Can I draw you out a little more about the reason for the decision for the UK site closure? We have had some evidence from you that there were not issues about productivity, there were not issues about an over-reduction in the local market as opposed to the rest of Europe, also it was not the short-term issue of the low value of the euro. We have had suggestions right the way across, from virtually every part of the UK community, the workforce, the management, the supply chain, the local community, that the reason the UK was chosen, that Luton was chosen, was because the legislation here allowed that to happen and the legislation would not have allowed it to happen in other parts of mainland Europe. Can you explain to us why Luton was chosen?
  (Mr Reilly) Because it was the only way General Motors Europe could take out a significant amount of capacity in the short-term. It is a question of which products we are talking about and the product cycle, ie when you change that, and the Vectra is due to be changed shortly. Therefore you cannot get the same thing by considering the Astra, for example, which is half way through its life. This particular segment, as I have said, has declined, so we have gone from needing two plants for production to only needing one and a half, or one and a flex-plant. The only way you can get into a flex-plant is to take the volume which Luton would have produced and put it into a different plant. There is no other combination which could have got that answer.

  288. So it is short-term reasons, it is because of speed?
  (Mr Reilly) No, it is because of long-term reasons, it is because of the long-term market decline of that segment. Clearly the decision has to be taken in the relatively short-term.

  289. But the UK seems to be treated on a par with Turkey.
  (Mr Reilly) That is your interpretation. I have tried to explain that is not the case. You forget that what I have said already is that in the past, relatively speaking, the UK within General Motors Europe has done extremely well.

  290. We are talking about the present and the future.
  (Mr Reilly)I am talking about the present and the future. You may know that one of the plants which is being considered for the flex-plant is another UK plant. If it was just the UK which was being picked out, then—

  291. With all due respect, I am asking you about the choice of closure.
  (Mr Reilly) Yes.

  292. I am not asking you about where you might be allocating your additional half plant, I am asking you about the decision to close Luton.
  (Mr Reilly) You are asking me is that because General Motors Europe is picking on the UK because it is easier in the UK. I am telling you, no, that is not the case. I have explained the reasons why it has to happen and, to support that view, General Motors Europe is considering investing more in the UK.

  293. What about the position of Russelsheim? That is producing the alternative Vectra, the new Vectra, but it is also producing the Omega. Is this actually because Germany would not allow them, because of its legislation, to do what they are trying to do in the UK?
  (Mr Reilly) Russelsheim is down-sizing considerably and closing several of its plants. It is taking its capacity down from 470,000 to 270,000, which is approximately the same reduction we are having in Luton. So it is again not true to say that Russelsheim is being untouched by this. Both capacity and numbers of people in Russelsheim are going down by at least as much as we are.

  294. So in terms of the new Vectra, the Epsilon, what impact is that going to have there?
  (Mr Reilly) They are reducing the capacity they are putting in for the Epsilon, for the Vectra and the replacement Omega.

  295. By what capacity?
  (Mr Reilly) By 200,000.


  296. Would you say that the psychological impact of the reductions in the Russelsheim area would be comparable to those in Luton and the ending of car assembly here?
  (Mr Reilly) If you take a perspective of several years, I would think the impact is probably greater in Russelsheim. Certainly the numbers of job losses have been greater there.

  297. Just before we move on, I would like to explore one last aspect of the decision-making processes within GM International. We know globally there is over-capacity, decisions are therefore taken at Detroit about reducing the level of losses or the need to reduce the capacity in different parts of the world. Was the agenda provided by Detroit for Zurich, which is where I believe GM Europe meet, initially at the instance of Detroit that Europe was required to find savings through a reduction in capacity?
  (Mr Reilly) No.

  298. Did you voluntarily lay yourselves down on the altar and say, "Have whatever part of our anatomy you would like to remove"?
  (Mr Reilly) No, neither of those is correct. GM is organised in four regions of the world and is basically run in four regions of the world. GM Europe is in significant financial difficulties, as is the automotive industry generally in Europe, it is not just a GM problem. GM Europe has taken several decisions, one of which is to improve its cost structure, but it is proposing to reduce manpower by 5,000 people and is doing certain other things. The decision was not taken in Detroit, the decision was taken in GM Europe. Obviously it is ratified in Detroit.

  299. If we were to say—I do not like using it but it is not an inappropriate metaphor—the organ grinder and the monkey (and I am not classifying you as the European monkey), would it be more appropriate to go to the American organ grinder for the last word?
  (Mr Reilly) No, as I have said, the decision is not made in Detroit. Detroit is the holding company, if you like. Detroit runs North America. GM Europe runs Europe. Latin America is run in Latin America. The organisations are expected to take actions to ensure their long-term survival in those regions.

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