Examination of Witnesses (Questions 300
THURSDAY 11 JANUARY 2001
300. Would it be possible by way of a note to
let us have details of the full proposals right the way across
Europe and the impact on the other countries which are going to
come from this process?
(Mr Reilly) Yes.
301. Could I also ask whether you are committed
to seeing Vauxhall employees who are made redundant as a result
of this, or those who will accept redundancy as a result of this,
getting the same kind of terms of redundancy that they would have
got had they had the benefit of the German or Belgium employment
(Mr Reilly) No, I do not suppose so because we do
not live there. I do not actually know them.
302. But you have said they are not a factor
in the decision-making process so presumably that is not a problem
(Mr Reilly) We are losing money. The terms of the
package that has been proposed so far is a considerable enhancement
on the normal package.
Chairman: You are not telling us that as a member
of the European board you do not know what the folk whom you make
redundant in Germany and elsewhere in Europe are getting in the
way of redundancy pay? Surely you have some inclination?
303. It would be your expectation they would
be applied equally if you are not making the decision based on
(Mr Warman) The situation in different European countries
varies considerably and I know in Germany in particular the payments
and pension arrangements are integrated with the state pension
scheme, so it is a totally different approach.
304. We are asking you what your position is
going to be.
(Mr Warman) Our position is to introduce an enhanced
programme in line with what we have done in the past and what
most other companies have done and what is generally applicable
in the UK. There are many differences between arrangements to
provide pensions for employees in different countries, and I am
sure you are aware that in other continental countries, with the
possible exception of the Netherlands, a much greater role is
played by the state in providing pensions.
305. But in terms of your company, will you
undertake to treat Luton employees as beneficially as you will
be treating the employees in Germany, for instance? In your company
terms. It is your decision, you can decide to do this or not,
are you prepared to do it?
(Mr Reilly) We will treat them just as well in relative
306. In relative terms. In company terms, will
you treat them as well? Will your company treat British workers
as well as it would treat German workers? A simple question, yes
(Mr Reilly) Relatively, yes.
Helen Southworth: Yes or no?
307. Maybe we can help you with this. We had
a similar exchange with people in your position in the Ford Motor
Company where exactly the same allegations were made by in fact
some of the full-time union officers, that it is easier to sack
people in Britain than it is in Germany and it is cheaper to do
it in Britain than in Germany. I have to say I do not agree in
every respect with the trade union representatives because the
figures which we got from Ford suggested that in fact the sums
involved were not wildly different between the two countries when
you took currency changes into account and things like that. The
point I am really making is that Ford were able to do that, and
perhaps if we provided you with this information you could let
us see the comparative figures you would be providing for your
people in the UK and in, let's say, the Federal Republic. It is
helpful for us to try and ascertain whether there is a common
pattern in decision-making across the automotive industry in Europe,
and whether the same kind of factors are taken into account within
a structure of decision-making. We are trying to produce a report
about the car industry and about manufacturing in Britain, and
one of the things we want to try and sort out is whether it is
not only more attractive for people to invest in Britain but we
would like to assume that it is just as difficult to sack people
here as it is in other parts of the European Union and the European
continent. We would be quite happy to provide you with the information,
which will be in the public domain before very long, and perhaps
you could try and provide us with comparable information in relation
to your own workforce. It does not seem to me to be rocket science
and you would probably admit that when you realise Ford have been
able to do it.
(Mr Reilly) We will provide you with that information
and I would be happy to receive the information from you. Could
I come back to the question, if that was what was driving the
decision then why have we actually reduced employment by more
on the continent than we have here?
308. But if it is not driving the decision,
I would have thought it would have been simple for you to have
thought of it.
(Mr Reilly) I do not know the comparisons. If you
give them to me, I will give you an answer.
309. I presume when you say you are reducing
it by more on the continent, are you including the Turkish, the
Polish and Hungarian workers in that figure? They are not really
directly comparable given the nature of their industrial relations
set-up and their basic rates of pay. We are more on a par with
the Federal Republic.
(Mr Reilly) I am talking about comparative reductions
in Germany versus here over a period of time.
310. Can I ask you a straightforward question,
has Luton been losing money or has Luton been making money for
(Mr Reilly) Luton is not a profit centre in itself.
Vauxhall is a profit centre, Luton is a cost centre, so you cannot
say whether Luton has been making or losing money.
311. How can you make a decision if you do not
(Mr Reilly) First, you can compare costs and, secondly,
I have already said this is a capacity decision we are talking
312. So it could well be that the most profitable
site within the EU is here in Luton, but because of capacity you
are willing to close a profitable site and move to an unprofitable
(Mr Reilly) We would not do that in order to improve
our financial well-being, no. That does not sound very sensible.
313. No, it does not, so the question is, does
Luton make money? Somebody must have looked at that rationale
in order to come up with the decision you have taken.
(Mr Reilly) As I have said earlier, we are currently
trading not profitably.
314. But you do not know about Luton?
(Mr Reilly) I cannot give the exact figures for Vauxhall.
315. Would you be willing to let us know at
some point, even though you have made the decision, whether Vauxhall
was profitable or not?
(Mr Reilly) We will be able to do that in two to three
316. Would that mean that if you do find out
it is profitable, you would actually reverse the decision?
(Mr Reilly) I do not follow.
317. If you do the figures and send them to
us and you find that Vauxhall is profitable, would you then reconsider
the decision which has already been taken, or is that decision
now in tablets of stone without knowing the details?
(Mr Reilly) The decision does not depend on the profitability
of Vauxhall Motors.
318. You both spoke earlier about moving people
to IBC, do you have any idea of the figures and numbers involved
who could actually do that move?
(Mr Reilly) We are talking about a thousand people,
in round numbers.
319. So the other 2,000 or so, 2,500, would
presumably just be made redundant?
(Mr Reilly) Not necessarily, no. What we are proposing
to do is, first of all, offer a separation programme and early
retirement programme. What we have said we would do when we have
an indication of how many people wish to take that programme versus
staying with the company and working for IBC, if we have an over-subscription
of people wishing to remain with us then we would extend the offer
of the separation programme to other parts of the company, so
that people in IBCand we are sure there would be somewho
would like to take the early separation programme or the early
retirement programme would leave and then we could back-fill with
the people who want to stay. We do not know yet what the situation
will be. Remember, we have 15 months because the vast majority
of the job losses we are talking about will be in 2002, and it
is our real intent and hope we can do it without any enforced
320. Can I move on to the components sector?
We remember the evidence in June, and let's hope our memories
are very similar. I think you stated that around half of the new
Vectra was to have UK content. I wonder what are the prospects
for the UK content of a car which will be mainly built in Russelsheim?
(Mr Reilly) The sourcing for the Vectra has obviously
largely been done, so it depends a little where the tools go which
were destined for Luton as to how the UK component manufacturers
will fare. If it goes to the continent, then some UK component
manufacturers will lose out more than if it stays in this country.
321. Would it be fair to say, as has been reported,
that you cancelled 700 contracts with around 70 suppliers before
Christmas? Is that correct and are you going to pay compensation?
(Mr Reilly) I do not know where those numbers come
from. We did obviously cancel contracts for contractual work in
plants because we were intending to move the Frontera to Ellesmere
Port and obviously we have cancelled the work which was going
to be done in the Luton plant. I do not know the number you have
talked about. If there is a financial penalty for those companies
that they cannot avoid, then we will talk to them about compensation.
322. Has any consideration been given to the
indirect jobs which will be lost, people who will be joining the
scrap heap, because of the decision to move to Russelsheim? Indirectly
you will make other people redundant in the UK because of the
decision you have taken.
(Mr Reilly) You say "the decision to move to
Russelsheim", that is not the decision.
323. I will make life easier: the decision which
has been taken not to build the new Vectra here.
(Mr Reilly) We have tried to make some estimates of
that and again it depends ultimately whether or not the car is
made in the UK. Across the UK, in terms of component suppliers
and suppliers directly to the Luton plant both for services and
so on, we have come up with a number of about 1,290 if the Vectra
is not built in the UK. If the Vectra remains in the UK, that
number drops to approximately 700. That includes the Frontera
going to a single shift. Of the 700, a little over 500 would be
local to this area.
324. Has any consideration been given to follow
the Toyota decision to actually put all of the Vectra build here
which would save this plant and it would also, by scale of management,
ensure you would become more profitable here in Luton?
(Mr Reilly) That was not possible to do.
325. Not even using Ellesmere Port as well?
(Mr Reilly) No.
326. You still would not be able to build it?
(Mr Reilly) Not to meet the timetable because the
tools which are going into Russelsheim are Russelsheim-specific.
327. So you are building in Russelsheim?
(Mr Reilly) Yes, we are building in Russelsheim.
328. You were not sure before.
(Mr Reilly) No, there are two plants, one in Russelsheim
and another, and the Russelsheim tools are specific for their
German Vectra and Omega production.
329. Have you decided, even in principle, to
build the new Vectra, the Epsilon, somewhere in the UK?
(Mr Reilly) No, we have not decided that yet.