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17 Dec 2008 : Column 105WH—continued

Mr. Jim Cunningham (Coventry, South) (Lab): I congratulate the hon. Member for Romsey (Sandra Gidley) on securing the debate. It is a vital debate
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nationally, but it is equally important for the west midlands, because as everybody knows, or should know, the west midlands produces about 10 per cent. of the wealth of this country through its manufacturing base. It is vital that we retain that base.

If we consider Coventry in particular, we see that since the 1980s some household names in terms of car manufacture and suppliers have gone out of business. That gives us an idea of the seriousness of the situation. Companies such as Massey Ferguson have left Coventry, which has had a knock-on effect on the west midlands as a whole. Recently—I think it was last year—there was a closure involving Peugeot. In my view, that was badly handled. Two or three years ago, it was the turn of Jaguar’s Browns Lane site. Some hon. Members may remember the demonstrations that took place in Paris outside the showrooms. I am sure that the representatives of Jaguar—it was Ford then—remember that. The problem related to a reduction in Coventry, where we probably have only Whitley left, which is a research and development facility. That is vital for new models for the future. It is equally important because it retains certain levels of skills in the west midlands.

The problem with the auto industry has been around for a long time, but the current crisis has accentuated it in a number of ways. Going back about two years, hon. Members will remember that Ford in America paid off about 80,000 employees. Ford had a major problem at the time, and it closed many of its subsidiaries around the world. It is well known in the trade that there is probably one motor car manufacturer too many, but that may be debatable.

Recently, within the last 18 months, Jaguar was taken over by Tata. We read in today’s newspapers that Tata is selling some of its assets in India because sales are down by something like 20 per cent. That is an indication that somewhere along the line we need to support the motor car industry. For every direct employee, the industry probably employs two or three indirectly, including those employed by small suppliers in the various trades that help to make a motor car. The hon. Lady has initiated an important debate.

In the west midlands in about 2000, we saw the first stage of what I would call the Rover crisis. Some will remember that the Select Committee on Trade and Industry visited the west midlands and took evidence not only from the Secretary of State but from employees and potential buyers. A rescue package and a taskforce were set up to deal with that situation, but we all know that Rover collapsed about three years ago. The rest is history.

In my view, there has been a gradual erosion of the manufacturing base in the west midlands. In Coventry some 100 years ago, 129 companies were involved in the motor car trade. That shows how much the industry has shrunk. Only Whitley is left in the Coventry area, and it does not produce motor cars; it is, as I said, an R and D establishment. We have had the same situation with Rolls-Royce; 15 years ago, it closed its Parkside facility and moved some of its staff to Anstey, but there were also redundancies.

We must bear it in mind that in the west midlands, manufacturing is still vital both nationally and internationally. People may have different ideas about manufacturing, but we must remember that many of our universities, including Coventry university and to a
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certain extent the university of Warwick, rely on manufacturing—and particularly so for design, development and research. Manufacturing, as much as anything, is vital to our universities. Some think that universities are not really involved in technology and only involved in academic matters, but manufacturing trade sustains universities throughout the country. Indeed, we have some very good universities in the west midlands, but I do not want to list them today because time is precious.

We must remember also that the car trade in our country is worth about £50 billion in export values. We should remember that we sell cars abroad. That trade makes a major contribution to our economy.

Mr. Andrew Smith (Oxford, East) (Lab): Does my hon. Friend agree that there are enormous areas of strength in the UK car industry, of which the Mini plant in Oxford is a good example? The first way to help the industry through the crisis is to give help with short-term credit facilities, which is one aspect of the financial crisis. The second is to help motor manufacturers sustain the good progress that they are already making towards producing more environmentally friendly vehicles.

Mr. Cunningham: My right hon. Friend is right. We have to make a special case for manufacturing in general, but for motor cars in particular, because we are famous throughout the world for producing them.

The Government must reconsider credit facilities, and any assistance that they can give should be made available without us having to make it a party-political debate. The matter should be above party politics. It is a serious situation. If we can bail out the banks, we should start bailing out the motor car trade, at least in the short term. It is equally important to remember that dealers will feel the brunt of the crisis. At the end of the day, they have to sell the motor cars.

All in all, something has to be done by the Government. The situation is urgent. If nothing is done, we could lose more than 100,000 jobs—even as many as 200,000.

Mr. Robert Flello (Stoke-on-Trent, South) (Lab): Does my hon. Friend share my fear that what is happening to the motor industry mirrors what has happened to the pottery industry in north Staffordshire? As he said about the motor trade a moment ago, where there were hundreds of firms, we now have a small, almost non-existent, handful of companies producing pottery and ceramic ware in north Staffordshire. Indeed, Wedgwood has a big threat hanging over it at the moment. Firms in north Staffordshire moved on to supplying the car chains, and they are now under threat again. Does he share my concern that we may see the beginning of the end if we are not careful?

Mr. Cunningham: I share my hon. Friend’s concern, and I take his point about the pottery trade. Britain was renowned for its pottery. We tend to forget it, but people should take a good look at what has happened to Stoke-on-Trent. The real danger is that we get into the same situation as the mining industry. The pits were devastated—we could debate that subject till the cows come home—but we need to learn lessons from that in order to help motor car manufacturers. Equally, we
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should remember that Coventry experienced all that when 10,000 jobs a week were being lost there. Can anyone imagine the effect that such losses could have regionally and nationally—and even internationally, because it has international ramifications?

I strongly urge the Government to do something. I have been speaking to my hon. Friend the Member for Birmingham, Northfield (Richard Burden), and we would like the Minister—or, more importantly, the Chancellor—to meet a small delegation to discuss the situation.

2.56 pm

Richard Burden (Birmingham, Northfield) (Lab): I congratulate the hon. Member for Romsey (Sandra Gidley) on securing the debate. The number of right hon. and hon. Members here today shows the strategic significance of the motor industry to the United Kingdom.

Some statistics have already been alluded to. We are talking about an industry with a turnover of £51 billion and 840,000 jobs, with 180,000 at the manufacturing end and a retail sector supporting thousands more. In the west midlands, turnover is about £13 billion. That includes not only the major manufacturers in the west midlands—Jaguar and Land Rover—but the Fords, the Vauxhalls, the Toyotas, the Nissans, the Hondas, and the BMWs.

Behind those big manufacturers are a range of performance engineering and motor sport industries. There are also niche manufacturers; Aston Martin springs to mind, as do Lotus and Morgan. Britain is home to most Formula 1 teams; it is world-class in motor sport. Behind those is an entire performance engineering industry, with specialist firms such as Prodrive, Mira and Ricardo. We then have the components industry—the supply chain. The big names in the first tier include GKN, Delphi and TRW, and behind them there are second, third and fourth-tier suppliers.

When people talk about the crisis facing the United States motor industry, it is often said that the industry did not keep up with the times—that it did not invest in new products and did not look to the future. That accusation cannot be levelled at the UK automotive industry. If the lead times, technology requirements and the research and development requirements of the UK’s automotive industry are akin to other high-tech industries such as aerospace, its vulnerability to sudden downturns in the market and consumer demand will be that much more acute.

We heard that new car registrations were down by 36.8 per cent. in November. We are in real danger of spiralling problems. If major manufacturers go on downtime for a week or two, or even two months—understandably, given the crisis that they face—it will be a rational business response, but what will it mean for component suppliers that have been told for more than a decade that they must be involved in lean production? They are being told to keep their stocks down and work with just-in-time delivery. Their survival could be at stake.

However, it can also work the other way around. If a component manufacturer goes into administration—we recently saw this in the west midlands with Wagon—it can in turn, by not producing, create major problems for big manufacturers. I have the same fear as my hon. Friend the Member for Coventry, South (Mr. Cunningham), that if we start to lose the critical mass of our automotive
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industry in the UK, it will not come back; it will not be there to come back when the upturn arrives. I have seen in my own constituency—I am thinking of MG Rover—what it can mean for a local community when a firm goes down. However, through the taskforces, the recovery plan and so on, we responded to that crisis and ensured that it was not as bad as it otherwise could have been—although God knows it was bad enough! When the problem is industry-wide, however, and extends further than just one firm, it is all the more acute.

What responses do we need to consider? I agreed with a lot in the hon. Lady’s speech, but she was a little uncharitable in her references to the Government. She described how President Sarkozy met manufacturers and said that nothing equivalent had happened in Britain, but Lord Mandelson met the majority of major manufacturers—[Interruption.] He is not a President, as far as we know, but that dialogue did go on. My hon. Friend the Minister, who admittedly is not a President either, has also been in regular meetings with major manufacturers, and when those meetings are not taking place, his mobile is usually going off.

As far as the components industry is concerned, in the past week or so, a letter went out to major manufacturers and suppliers about the range of support either available now or in the process of negotiation.

David Taylor: My hon. Friend is an acknowledged parliamentary expert on this subject. He was in the Chamber last week for Business, Enterprise and Regulatory Reform questions. The Minister, who is a man of great intellect, energy and commitment in relation to parts suppliers, said:

Sadly, four days later, in an e-mail to me, a significant parts supplier in my constituency said:

I turn that question to the Minister, and hope that he can respond today or at a later time.

Richard Burden: If communication has broken down, it is regrettable. However, if hon. Members will forgive me, I shall not get on to Royal Mail. [Hon. Members: “Or TNT.”] Indeed.

Good things are happening, but more needs to be done, and quickly. Hon. Members have mentioned the need to inject liquidity into the system and to get credit moving. The SMMT and the Finance and Leasing Association have given some pointers on how that could happen, and extending the Bank of England’s special liquidities scheme and the credit guarantee scheme is part of that. We should seriously consider those suggestions as well as scrappage schemes, as is happening in France. Issues around those schemes remain to be addressed, but we must ensure that they are not structured in such a way as simply to suck in imports. There are ways and means of ensuring that that is the case.

Chris Huhne: The key point about credit needs to be stressed. If purchasers do not have any money, everything else will fail. It is important that the Government take
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on board that point more than any other. Everything else is just a sticking plaster. Does the hon. Gentleman agree?

Richard Burden: I do not think that everything else is just a sticking plaster, but I agree that credit is essential to any plan, both to stimulate demand and to ensure that liquidity and credit is available to manufacturers and the components sector. That is also vital. A number of significant manufacturers are saying precisely that, although I shall not name them, because it would not be appropriate.

The Government should consider what can be done on public sector procurement. Part of the economic fiscal stimulus should involve bringing forward major capital projects. In addition, if a public authority is considering changing or updating its vehicle fleet over the next year or so, it should do so now and get those orders going through. The hon. Member for Romsey mentioned skills training for the future, but now is the time to be thinking about that. Downtime is precisely the moment to upskill. Again, a number of manufacturers are seeking assistance and co-operation on that.

In some cases, we need to have a dialogue with certain manufacturers. For example, Honda has announced its intention to pull out of Formula 1 next season. It has a massive hi-tech facility in Brackley, and it would be a tragedy if that was lost to the UK industrial base. Discussions are ongoing to keep it in existence, but that will take time to come to fruition.

Mr. Brian Binley (Northampton, South) (Con): Some 50,000 people are reputed to have worked within a radius of 14 miles of Silverstone. We are very frightened by the situation with regard to the withdrawal of Formula 1 racing at Silverstone and by the work of a certain Mr. Ecclestone. Will the hon. Gentleman get the Government to put some pressure on him, because he is having the most damaging impact?

Richard Burden: As with Royal Mail, I shall not venture into a discussion on Bernie Ecclestone, other than to say that the motor sport industry is vital to the UK economy. One of the things holding that industry in place has been the presence of major events such as the British grand prix, whether held at Silverstone or Donington.

Finally, in considering our response to the economic downturn, we must avoid putting up too many boundaries around the motor industry. Motor and vehicle companies exist within communities. In my own area, for example, a number of universities—Birmingham university business school, Warwick manufacturing group, Birmingham City university and Coventry university—are talking about how to ensure that those companies contribute to the regeneration of the local area. The Longbridge site is the biggest redevelopment site in the west midlands, one of the biggest in the country and pretty large on a European scale. China’s first major direct subsidiary is there, in the form of the Shanghai Automotive Industrial Corp and Nanjing production facility. Why not link the regeneration of that site—not just the motor manufacturing side, but regeneration in its entirety—much more to that production facility? Furthermore, Honda could be encouraged to play a much bigger role in the future of Swindon, which has an economy that will no doubt be re-profiling in the coming years.

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Those are just a few of the many things that we can do. However, the main message from everyone in today’s debate is that the UK automotive industry is too important for us to allow it to become fatally damaged in this downturn. Action is needed now to address the situation.

Frank Cook (in the Chair): Twenty-three minutes are available, and three Members are bidding for it.

3.7 pm

Andrew Miller (Ellesmere Port and Neston) (Lab): I shall be as brief as I can, Mr. Cook. Colleagues will understand if I focus most of my remarks on Vauxhall Motors, which provides vital employment in my constituency. It produces high-quality vehicles, its management has a fantastic relationship with the trade unions, and it has a very real future based on the new Astra coming into production in 2009 as a result of direct intervention by this Government. The hon. Member for Romsey (Sandra Gidley) should understand that the Prime Minister, when he was Chancellor, played a vital role in securing that investment from General Motors Europe.

I follow my hon. Friend the Member for Birmingham, Northfield (Richard Burden), who speaks with great authority on the industry, and my right hon. Friend the Member for Oxford, East (Mr. Smith). In those two speeches, we heard real solutions for the industry. The SMMT has put together an extremely informative briefing for colleagues speaking in this debate, and it has played a pivotal role in some of the discussions over the past few weeks.

Short-term finance is clearly an issue. We cannot get away from that. Inevitably, with a product in the £10,000 to £20,000 bracket, financial arrangements will come into play. The consumer, at any level—be he a fleet buyer at the top or a customer at the bottom—will be looking at liquidity and finance issues. The Government cannot avoid engaging in that dialogue. Some of the issues raised by the SMMT, to which my right hon. Friend referred, are mission critical.

Equally, we need to consider the next generation of vehicles. We will be making a huge mistake if we do not engage with the industry now and ensure that investment comes to the UK for more environmentally friendly vehicles. Such vehicles will not run on internal combustion engines but on other sources, such as bioelectricity or biofuel cells. I thank my hon. Friend the Minister for his response to the letters that I have sent to both him and the Prime Minister. I started to engage with the Government on such issues in September. If we do not bring the matter together in a co-ordinated fashion, we will be doing huge damage to the industry as a whole.

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