APPENDIX 45
Memorandum submitted by the Society of
Motor Manufacturers and Traders (SMMT) Ltd
Following discussion with members of its Education
and Development Committee[91]
Introduction
1. In June 2006, SMMT made a comprehensive
submission to the Trade and Industry Select Committee's inquiry
into the reasons for success and failure in the UK automotive
industry, including sections on skills. We emphasised that the
UK automotive industry is very diverse—a point which is
equally relevant to this current inquiry. The media and other
observers tend to comment almost exclusively on the operations
of global brand vehicle manufacturers (and within this, chiefly
passenger cars). The emphasis is generally on perceived "bad
news" stories, which not only creates a false impression
of the true position of the sector's competitiveness, but also,
as a result, makes recruitment into the industry appear to be
a less attractive option. Indeed, the negative image of manufacturing
has been recognised as a serious threat to UK Plc in the DTI's
2002 Manufacturing Strategy.
2. However, recent economic data (figures
from the Office of National Statistics, ONS) highlights the sector's
positive performance—in the first half of 2006 automotive
sector exports were £11.7 billion, which is 17% up on the
first half of 2004, representing annual exports of some £120,000
for each person employed in the sector. The industry's manufacturing
turnover is around £45 billion and it supports approximately
800,000 jobs in the UK (including retail).
3. "Stockturnover", one of the
seven key measures of Quality, Cost and Delivery (QCD) and a key
indicator of lean manufacturing, has been climbing steadily across
the sector for over a decade, reflecting the industry's strong
commitment to manufacturing best practice. Similarly the strong
productivity performance of the industry is highlighted in the
latest regional value-added figures published in September 2006
by the ONS. These show that in several English regions, value-added
in the automotive sector exceeds labour costs by 100%, providing
a good return on investment and strong cash flow to encourage
new investment and R&D. It is true to say that this performance
is not seen to such an extent in all regions, but leaders in those
best-performing regions have an important role to play in showing
what can be achieved within the sector.
4. The UK is home to the most diverse range
of global brand vehicle manufacturers in Europe, but we also have
particular strengths in premium and luxury vehicles, sports vehicles,
motorsport, specialist vehicles, automotive components, vehicle
design, design engineering, and engine manufacture. It is therefore
important that more attention should be focused on these assets
and the attractive career options they offer.
5. The positive performance of the competitive
strength and achievement outlined above reflect the sector's sustained
engagement with each of the five factors of productivity—competition,
enterprise, innovation, investment and skills, as outlined in
Government's Manufacturing Strategy. This submission draws on
these key issues, particularly from the experience of the Automotive
Academy, a division of SMMT, and SMMT Industry Forum, the business
improvement arm of the organisation.
6. The Automotive Academy has consistently
promoted skills improvement at all levels, from shop floor right
through to the boardroom. Its core programmes have concentrated
on continuous improvement tools and techniques for manufacturing
in line with the priorities identified in the Sector Skills Agreement
(SSA) and the 2002 Automotive Innovation and Growth Team (AIGT)
report. Its emerging priorities, shaped by an on-going dialogue
with the industry, extend to technical skills, leadership, management
and more general business support programmes. Foremost amongst
its current concerns is the quality of provision in the UK vocational
education sector.
7. SMMT Industry Forum was established in
1996 with the aim of achieving sustainable world class operations
in the UK automotive manufacturing and supply chain industry.
The original focus was on manufacturing process improvement in
the automotive sector—based around its MasterClass product
delivered by specially trained engineers working with shop-floor
teams. Industry Forum has also trained engineers for other business
improvement organisations in sectors such as aerospace, agriculture,
metals and ceramics, and also for the regional initiative, the
North East Productivity Alliance. The current product and service
offering includes lean assessment, team leader training, supply
chain improvement, value stream mapping and raising purchasing
performance. Industry Forum has also designed and developed products
for the Automotive Academy and assisted the Academy in training
trainers to strengthen the national delivery capability.
To what extent are skills shortages hindering
the development of manufacturing industry?
8. The industry has set out its skills agenda
at international, national and regional level on a number of occasions
recently. At European level the trade association for the automotive
supply chain, CLEPA, has produced a White Paper on education,
training and learning to increase competitiveness in the Automotive
Industry, which was presented to the European Commission in
September 2005. GKN, the leading UK automotive supply chain company
took a major role in the production of the White Paper, which
warns:
The issue of attracting and retaining employees
with the right level of skills in the automotive sector has long
been a prime concern for the industry. The European automotive
industry is losing competitiveness, partly due to the lack of
skilled labour to fill open positions. The imbalance between the
supply and demand in the educational system in many countries
across Europe is contributing to a mismatch in the labour market,
which is also felt in the automotive sector.
White Paper on education, training and learning
to increase competitiveness in the automotive industry
9. The UK automotive sector shares these
concerns expressed by CLEPA at a European level. Graduate recruitment
into automotive manufacturing remains difficult, especially into
smaller companies. Recent trends in the UK output of UK engineering
graduates are not encouraging—a CBI survey has shown that
since 1994 the absolute number of students obtaining a first degree
in engineering and technology has fallen by 11%. It is clear that
we face a challenge to ensure that young, bright employees are
attracted to the sector in sufficient numbers. And in terms of
school pupils, SMMT Industry Forum is working hard to change the
perception of the engineering sector through initiatives such
as the annual Youth Engineering Summit (YES). The aim of the YES
is to raise awareness of engineering and its associated career
options among school children aged 12-14 years old through improved
information and advice.
10. The issues of recruitment and retention
are by far and above the most important for the UK automotive
industry going forward. However, there are several additional
core priorities which need to be addressed:
— raising the standard of basic skills:
it is widely felt that government is not delivering the basic
literacy, numeracy and IT skills required by the automotive manufacturing
industry. UK businesses are being forced to remedy these failures
internally and, as a result, are being placed at a disadvantage
in comparison to other European and emerging markets, not least
because of the productivity implications of an under / un-skilled
workforce and the costs associated with having to educate and
train staff internally;
— improving the role of vocational
education: the Government is committed to achieving parity of
esteem within education, in particular through the introduction
of technical diplomas within the 14-19 education agenda. However,
the UK's investment in vocational education is weak when compared
with other European countries, such as Germany, where a co-ordinated
national effort is underway to accelerate the national progress
towards the needs of 21st century manufacturing;
— increasing the guidance available
to young people about careers in the automotive industry: SMMT
Industry Forum research shows that young people have a very negative
image of manufacturing even when they have enjoyed direct exposure
to automotive-based team activities. They do not understand the
full scale of interesting and rewarding careers which will be
available to them by developing technical knowledge and skills.
There seems to be little coordinated effort within the education
sector aimed at correcting this misconception;
— middle and senior management coaching
and mentoring: industry leaders are aware that leadership and
management gaps appear further down the supply chain in smaller
companies where the infrastructure becomes leaner. Compared with
larger global companies, long-term strategic planning is weak
in parts of the UK supply base with over 30% of businesses without
a business plan and 50% no documented and integrated business
training plan. Industry leaders appreciate that larger firms have
a role to play in improving this situation.
What skills are needed—for both management
and other workers?
11. The industry has undertaken detailed
work to identify the key skills required for competitive success
beyond the core priorities listed above. In 2006, the West Midlands'
hub of the Automotive Academy, Skills4Auto, identified 10 priorities
through a special exercise with major firms led by Ricardo Strategic
Consulting. The priorities identified are:
— leadership and management;
— production and process engineering;
— continuous improvement;
— supply performance and logistics
skills;
— new product innovation;
— multi-disciplined working;
— customer service skills; and
How effective is the dialogue between industry
and education/training providers?
12. The five factors of productivity identified
at point 6 above (competition, enterprise, innovation, investment
and skills) form the basis of an excellent structure for the dialogue
between industry and providers, placing skills and workforce development
in the context of overall global competitiveness and firm strategy.
However the diversity of the UK automotive industry means dialogue
must cover a broad range of needs, including for example:
— collaborative research projects between
five star universities and major global automotive firms spending
hundreds of millions of pounds on R&D in the UK;
— the basic skills ability of new recruits
to SMEs in the supply chain;
— persistent intermediate technical
skills gaps in the UK system where, for example, City and Guilds
are forecasting substantially increased skills shortages in the
next decade. (A link to the City and Guilds report can be found
at the end of submission). When major international companies
make leading-edge investment in world class manufacturing facilities
in the UK they expect to be able to discuss their advanced technical
skills requirements with well-resourced technical education institutions
in the locality. Several such investments by Ford, Honda, BMW
and Nissan have been announced recently.
13. The automotive industry is looking to
the new National Manufacturing Skills Academy (NMSA)—a Labour
manifesto commitment in the 2005 election—to increase further
the effectiveness of the dialogue with the education sector. The
industry expects NMSA to build on the foundations laid by the
Automotive Academy, which it has supported since its recommendation
in the 2002 AIGT report. Major figures from the industry have
been heavily involved in the preparation of the NMSA business
plan which should be approved shortly.
The role of the Sector Skills Councils
14. The industry has supported its Sector
Skills Council, SEMTA, in a number of ways. For example in 2004,
SMMT Industry Forum organised an Automotive Summit at the NEC
in Birmingham where some 350 industry leaders came together to
consider skills priorities and identify skills gaps and needs.
At this event 83% of participants agreed that lack of employee
skills was affecting their profitability; about half reported
that they experienced greater difficulty recruiting people with
the right skills in the UK compared with other countries. Subsequently
SMMT Industry Forum has sought to establish closer links with
SEMTA, signing a Memorandum of Understanding and inviting the
SEMTA CEO onto the Industry Forum Board. SMMT has provided office
space for the launch team of NMSA and, along with other major
engineering organisations, seconded staff to the team. Furthermore,
the Automotive Academy holds regular update and dialogue events
with the industry and training providers.
15. However, within the industry, there
are concerns about the more general, overarching approach led
by central government and the fragmentation of the public sector
policy/research interface—for instance, DFES, DTI, Sector
Skills Councils (SSCs), Economic and Social Research Council (ESRC)
and Regional Development Agencies (RDAs) each commission overlapping
research. Whilst it is true that the formulation of the 2003 Skills
White Paper involved an effective dialogue with the research community,
since then there has been less evidence of a co-ordinated approach
to research and in the formulation of policy.
16. There are also concerns about the way
the Skills for Business network is developing, namely:
— the confusing relationship between
SSCs and professional institutes such as Chartered Institute
of Purchasing and Supply (CIPS), The Institute of Engineering
and Technology (IET), and The Institute of Mechanical Engineers
(IMECHE). Professional recognition can be a key driver for individuals
to undertake up-skilling, acquire qualifications and develop their
capabilities. The split of responsibilities between Skills for
Business and the professions can be confusing even for insiders
to understand and can only act as a deterrent to younger members
of the workforce;
— the apparent lack of priority
given to cross-cutting issues like supply chain management and
new product development and introduction which are critical
to the sector's competitive success. The industry sees supply-chain
management and development as the natural avenue for spreading
best practice from the major global companies to smaller firms
and, as such, it is a vital tool for driving the up-skilling of
the UK workforce, not just in automotive but in manufacturing
more widely. Supply chain work is an important means of addressing
some of the priority skills gaps identified earlier in this submission;
— the complex relationship between
the Qualifications and Curriculum Authority (QCA), Sector Skills
Development Agency (SSDA), SSCs and independent awarding bodies.
How do various links in the chain add value in terms of the creation
of a clearly focused portfolio of qualifications consistent with
industry standard curricula, supported by high quality course
materials, assessment and reliable delivery capability? The industry
is concerned about the ability of SSCs to influence awarding bodies
to ensure proper standards of assessment for qualifications are
in place within UK training provision. If substandard assessment
persists then value for money in public expenditure on training
is compromised and employers who are initially drawn to public
sector training provision fail to appreciate the real benefits
that can accrue from workforce development—any promotional
scheme like Train To Gain can rapidly become self-defeating on
this basis.
17. To help those designing curriculum and
qualifications structures, the industry has frequently drawn attention
to some central features of its best practice manufacturing i.e.
its adoption of seven key measures of manufacturing competitiveness
and its development and promulgation of a global quality standard
for the sector (TS16949) which covers most key aspects of firm
strategy including training and workforce development. The seven
key measures of QCD under pin the DTI's National Supply Chain
Group Programme. The TS16949 standard has been developed by the
global industry at its own expense.
18. Our concerns on this are based, in part,
on the experience of the Automotive Academy. In seeking to involve
public sector training provision in programmes to boost manufacturing
best practice, the Academy has found deficiencies in Further Education
Colleges. In particular, these concerns come from their underpinning
knowledge of the latest lean tools and techniques, and a lack
of recent industrial experience in modern manufacturing.
19. Employers are most likely to engage
with skills issues most thoroughly when training is linked directly
to a practical project within a business. This directly linked
approach means that the business pay-off comes as the new competencies
are more readily identified and remaining gaps more easily highlighted.
This approach also helps root the new capabilities more deeply
within the business. In essence this means that to make progress
on the skills agenda, better links are needed between the skills
dimension and other factors of productivity. During the run-up
to the 2003 White Paper this message appeared to have been appreciated
by policy makers, but it is not clear since then that this important
point has been taken forward in the design of programmes.
20. With a proliferation of qualifications
available to them, employers do not readily know which of those
available will improve the capability of the business in a way
which is relevant to their competitive needs. In the face of this
complexity the business case for training is very hard to make.
Simply promoting qualifications for their own sake presents firms
with an unsolvable dilemma—which qualification out of the
vast number available best contributes to strategy? If qualifications
are linked to and flow from improvement projects, the selection
process makes more sense and employer engagement in skills arises
more naturally. Without this, management will not appreciate the
substantial returns that can be achieved from changing their process
and product management approach at all levels.
Co-ordination of provision within Government
21. The initial role of the Cabinet Office
Performance and Innovation Unit in the period leading up to the
2003 White Paper has been much less evident to the industry since
2003. The complexity of the skills and competitiveness agenda
requires programme management and risk management in government
especially when so much change is happening concurrently.
22. There is plenty of evidence that the
key qualification Levels for increasing competitiveness globally
in many manufacturing sectors are Levels 3 and 4 (middle management).
However the rate at which this message has diffused through the
public sector has been painfully slow—not an encouraging
sign when the essence of global competition in coming decades
will be a competition between the effectiveness of different nations'
vocational training systems.
23. Government has been slow to realise
that its productivity and competitiveness agenda can be accelerated
by making available targeted funding for key level 4 vocational
qualifications outside the Higher Education sector. Unfortunately
the ad hoc institutional boundary in the UK—between Higher
Education and Further Education—falls exactly at a level
which in terms of global competitiveness and capability is critical
to national success. This contingent factor seems to be developing
into a major institutional hurdle for the country in its pursuit
of global competitiveness, particularly in manufacturing.
Conclusions
24. Improved skill levels are an important
element in ensuring the continued competitive success of the automotive
sector—along with the other four factors of productivity.
There is widespread concern at many levels—including at
the European level—that the dialogue between industry and
providers needs to be improved in order to meet the challenges
of global competition. The UK must urgently make progress with
getting better linkages between its skills programmes and programmes
concerned with the other factors of productivity. Messages of
skills for skills' sake or simply qualifications are
good for you will not engage employers. Ultimately, there
has to be a business case to train—improved competitiveness,
productivity and added value come through improved skills.
25. The National Manufacturing Skills Academy,
building on the Automotive Academy, is a major opportunity to
improve dialogue and secure better value for money through more
focused provision. The automotive sector has supported and will
continue to support these initiatives in a number of ways. The
industry appreciates it must continue to develop its own strong
record of supplier development using its commercial and procurement
relationships to leverage workforce development and management
upgrading amongst smaller firms.
26. The challenges facing all stakeholders
in making better progress with the skills agenda are severe and
should not be under-estimated. It is vital that technical and
vocational upgrading is treated as an even higher priority right
across the public sector and that additional funding is properly
focused so that better quality provision and capability is reinforced,
developed and expanded rather than routinely distributing funds
through the usual channels.
27. The industry is keen to work with Government
and the public sector to raise the profile and attractiveness
of manufacturing, technical careers, and qualifications for young
people as well as to help shape the programmes that are currently
being developed in this area. Improved technical and vocational
education that attracts the best candidates to rewarding careers
in the automotive sector is clearly an overriding and widely shared
goal that needs to be supported by much more effective action
on all sides. The UK automotive industry will continue to play
a full and active role in this effort.
91 The SMMT's Education & Development Committee
provides a forum for the discussion and formulation of broad automotive
industry positions on learning and skill development. Its membership
includes representatives from vehicle manufacturers, Automotive
Academy, SMMT Industry Forum and SEMTA. Back
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