80. Vehicle manufacturers are increasingly concentrating
on the core business of assembly. Parts of their existing manufacturing
business are either sold to more specialist component manufacturers,
floated off as independent concerns or placed into joint ventures.
This applies to most components, including transmission and powertrain,
as well as spare parts manufacture and supply. They are also co-operating
more in development of those parts of the business they retain.
- Ford have formed a joint venture with Getrag
to make transmissions, affecting three of their European plants,
including Halewood. They floated off their Visteon parts operations;
and have separated from their other operations a number of UK
plants engaged in parts manufacture.
- GM floated off their Delphi parts division some
years ago. They have recently formed a joint venture with Fiat
for powertrain manufacture.
Mr Reilly told us "we 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".
81. The principal manufacturers have thus
far retained engine design and manufacture as a core competence.
MG Rover are seeking to buy the Longbridge South Works engine
and powertrain plant retained by BMW when they disposed of Rover.
The Managing Director of Peugeot UK told us that the Group was
not enthusiastic for outsourcing, preferring ventures with other
Nissan has recently been reported as hesitating to dispose of
their transmission operations. We noted that Ford has retained
their wheel manufacturing and press plant at Dagenham, used for
a number of their vehicles made in Europe, and are indeed investing
in modernising both. Outsourcing is therefore by no means the
82. The broad trend towards concentration on core
competences is nonetheless unmistakeable. The enterprises which
are thereby created have the chance to expand by selling their
product to other vehicle assemblers. They also run the risk of
losing to other independent suppliers their existing tied market
to their original parent company. The trend towards
concentration on core competences challenges the future of all
non-assembly operations carried out by the manufacturers, and
is likely to lead to difficulties for some of the UK plants thus
cast adrift. It is important that the Department is not taken
by surprise by such developments.
83. The perception of overcapacity and current low
profitability have added to the pressure on management to make
existing plants as profitable as possible. We were told by many
manufacturers that flexibility was the key to this: the
capacity of one plant to make a range of different models, to
switch rapidly from one to another in response to market changes,
and to assemble cars on more than one standard platform.
Companies do not want to have a plant tied up making cars that
they cannot sell and unable to meet demand for cars which are
"If a plant can build more than one model, the
exposure of any single plant to the effects of large demand swings
84. The mobility of manufacture is striking.
The BMW plant at Cowley and the MG Rover plant at Longbridge effectively
exchanged the new Mini and the Rover 75 lines in a matter of months.
Honda has recently been able to decide to use their new capacity
at Swindon to build a smaller number of larger recreational vehicles
rather than a large volume of new small cars. Toyota are able
to switch a model from Japan to Burnaston without apparent difficulty.
The line being prepared for the successor to the Vectra at Luton
although not a similar line in Germany can apparently
be moved elsewhere without difficulty.
85. The implications are grave for older plants,
those with geographical constraints or limitations, and those
whose internal configuration cannot readily be adapted to the
need for flexible plants able to produce several models and switch
quickly from one model to another. No matter how flexible and
skilled a workforce, the inherited characteristics of a plant
prove fatal to its long-term future. The implications can also
be grave for a plant which fails to win a new or replacement model.
It will face difficulties in demonstrating that it remains cost-effective
in producing a reduced range of models, since fixed costs have
to be spread over a lower volume of fewer models. Dagenham
and Luton were single-model plants. It is a matter of some concern
that a number of the remaining UK car assembly plants are also
single-model plants, notably Ryton, Cowley and Ellesmere Port.
93 Ev, p 76 Back
pp 74-5 for detailed calculations Back
2, 26 (Ford) Back
Q 4 Back
3, 24, 27 Back
82, 137; also Q 248 Back
p 73 Back
pp 112-5 Back
p 71 Back
p 17 Back
p101: Q 196 Back
p 109 Back
p 79, paras 19-21; p 98 (DTI) Back
p 99, para 5 Back
eg Qq 2, 21 (Visteon), 52 and 63: Q 112; Qq 191, 217, 232 Back
383, para 45 Back
Qq 24, 155 Back