Select Committee on Trade and Industry Minutes of Evidence

Examination of Witnesses (Questions 300 - 319)



Helen Southworth

  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 laws?
  (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 for you.
  (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?

Helen Southworth

  303. It would be your expectation they would be applied equally if you are not making the decision based on that.
  (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 UK terms.

  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 or no.
  (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?

Helen Southworth

  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.

  Chairman: Fine.

Mr Hoyle

  310. Can I ask you a straightforward question, has Luton been losing money or has Luton been making money for GM?
  (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 know?
  (Mr Reilly) First, you can compare costs and, secondly, I have already said this is a capacity decision we are talking about.

  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 site?
  (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 weeks.

  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.

Ms Perham

  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 IBC—and we are sure there would be some—who 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 redundancies.

Mr Hoyle

  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.

Mr Butterfill

  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.

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2001
Prepared 8 February 2001