Examination of Witness (Questions 200-219)
MR CHRIS
GATELEY
21 MAY 2009
Q200 Chairman: They said: "The
hollowing out and loss of high value jobs in the automotive supply
chain has not been only to low cost countries such as China or
Eastern European, many have been lost to higher cost economies
such as Germany and France, therefore providing the opportunities
described earlier ... There is potential to stop this process
and rebuild in the UK" and they propose a UK supply chain
council of people involved in it to work out a policy framework
needed to sustain the UK supply chain. Do you think we have lost
jobs to mainland Europe and higher cost economies as well?
Mr Gateley: In my field I find
it very frustrating. We do a lot of benchmarking exercises where
we are up against Renault, Peugeot and the rest, BMW, et cetera,
and there is something quite unique every time. You go there and
their statistics are just as good as ours in terms of our first
full measure of availability but most of those have got one source
of supplier, which is Europe, where BMW build all the bits, put
them in a massive warehouse usually in Belgium somewhere and then
ship them across, whereas we are sourcing from 900 UK suppliers
and we do the job and that is it. Most organisations moving here,
and Isuzu are doing the same, are building a massive distribution
centre in Antwerp. That will be an issue for my company because
it is not six months' lead time now but literally overnight. There
seems to be a propensity for organisations to think they have
to be in Europe, probably because of the much wider market, and
we are right-hand drive, therefore a very small market, and they
serve from there substandard service, whereas Hyundai-KIA have
now made investment in the Midlands in a big distribution centre,
which is good. Organisations like ours vying for the lower level
quality vehicles like the LDVs and the TVRs will always have a
good marketplace in the UK. Take LDV, the danger is (a) mainland
suppliers will fall away and (b) will be obsessed by the LDV situation
and that means there will be consequences for us.
Q201 Mr Binley: I want to pick up
on that. You are an SME yourself.
Mr Gateley: Yes.
Q202 Mr Binley: Many of your suppliers
will be in that bracket too.
Mr Gateley: Yes.
Q203 Mr Binley: Not all of them,
but many of them. My concern is that when we are looking at aid,
and we are coming on to it later, and it is the structure of supply
chains that I am concerned about, the money is going to the big
UK plcs, as it were, but the supply chains are very vulnerable.
Mr Gateley: Yes.
Q204 Mr Binley: Is that your feeling?
Mr Gateley: I think so. I spoke
to somebody recently who said more investment and time and effort
was put into manufacturing than into supply chain support in this
country.
Q205 Chairman: We took evidence from
some big car companies yesterday in Birmingham and they were telling
us quite convincingly about the work they are doing to sustain
and nurture their supply chain because they recognise the importance
of it. Do you think enough is being done to sustain and nurture
the supply chain by the business itself? We will come to Government
policy in a second.
Mr Gateley: Yes, I do. Organisations
like those and us understand even though it is tough to get cash
at the minute the first people we pay are our supplies because
we have to keep all of those organisations on their toes at good
prices and equally have a sustainable supply. That is absolutely
critical.
Q206 Chairman: That aspect of the
supply chain is working reasonably well in the circumstances.
What are the strengths and weaknesses of the supply chain? What
are the issues that need to be addressed in the supply chain to
make sure it is sustained?
Mr Gateley: I would have to give
that some thought, to be honest.
Chairman: Nothing immediately comes to
mind. That is quite interesting in itself. It is not, "The
problem is X"?
Q207 Mr Binley: Could you write to
us on that? This is a serious area and if you could write we would
be very grateful.
Mr Gateley: Yes.
Q208 Chairman: The fact you could
not immediately identify an overarching problem inherent in the
chain itself is interesting. Let us move to the policy framework.
Mr Gateley: The reason it is difficult
is because it is a very fragmented supply chain. I have only got
five automotive CD clients yet I have got 900 vendors doing the
jobs and those vendors have survived somehow because of the lack
of scale of those clients, perversely enough. Whilst they are
not Ford, and Ford are screwing the suppliers into a smaller number,
the supply base I work with is far more niche, have got the only
access to tooling to provide the services I need, to provide parts,
et cetera, so we have to treat them well. Off the top of
my head, I cannot think what a genuine solution would be from
Government policy that would help those 900 suppliers.
Q209 Mr Wright: On that particular
point, obviously the Government recognises there is a huge problem
with the worldwide recession but specifically with the automotive
industry they have brought together packages which have been welcomed,
although guardedly. What do you consider the Government should
actually do to change its policy?
Mr Gateley: I only really hear
through the press where monies and guarantees are coming from
and when I was thinking about this yesterday I feel you are not
doing enough to help those innovative organisations which fall
under your wire, maybe less than £25 million, and that is
where the innovation starts.
Q210 Mr Wright: You think they should
be more flexible?
Mr Gateley: Yes, I do.
Q211 Mr Wright: We heard that yesterday
from the industry.
Mr Gateley: Or even more targeted
rather than flexible.
Q212 Mr Wright: We heard from the
industry yesterday that the message coming from Government is
they are going to be more flexible on the £25 million and
the £5 million in terms of the project funds.
Mr Gateley: Yes. Those are big
amounts. Innovation comes from small companies. I feel you are
putting massive amounts into organisations that can afford it
and there is a contradiction. If you think of a major manufacturer,
what interest has he got to go into green vehicles when in this
country we are not that bothered, to be frank? If I want to buy
a BMW or a Mercedes or a Ford I have a choice here but it is not
quite like that in France or anywhere else. I want a cheap car
and I just want it to run. You are 20 years too early in some
respects. If you are going to do something real you have got to
push it hard by looking at those small organisations that will
be innovative and drive change and then I think the major manufacturers
will follow after.
Q213 Mr Wright: Really what you are
saying is be more flexible on the £25 million and also the
£5 million project fund?
Mr Gateley: Flexible is one word,
but I think you need to be more targeted. It is easy to sound
flexible, but you should be out there looking for the organisations
that need the help and probably do not shout for it.
Q214 Mr Binley: I just want to go
back to supply chains and understand a little about how you relate
to your suppliers with regard to quality, which is a vital issue
for you.
Mr Gateley: Yes.
Q215 Mr Binley: Because of cash pressures,
have you seen that quality diminish?
Mr Gateley: No. There has been
no evidence in our organisation of quality diminishing. Quality
is clearly important for us and our clients. We would not change
suppliers without the clients saying, "That part is now genuine
OE and serves the test of time". We have not had to resource
much. The issue we have got whilst things are difficult is our
suppliers coming back with significant price increases on parts.
The quality is not an issue but the volumes are dropping and the
way they can recover is by saying, "The price has gone up
by X per cent".
Q216 Mr Binley: Can you give me an
idea of how you monitor and maintain your supply chain quality?
Mr Gateley: In the auto commercial
vehicle sector we effectively have QA underwritings by the supplier
in our contracts of procurement. We have got our own internal
audit team, QA team, to audit that. When parts come in they are
visually checked on site. We have got an inspection part of the
business where if there are any issues we quarantine those and
follow that up with suppliers. It is quite a blue chip organisation
making sure we have got processes in place to capture parts before
they go into the bins to be sold that might not meet the quality
criteria. We have got a contract supplier and we have probably
got a contract for 5-10 years, so at the start the processes are
quite cumbersome for our suppliers, they tell us that, but we
want contracts with organisations that will be there for 5-10
years and we check QA at the start and intermittently through
the supply.
Q217 Mr Binley: When on site do you
do regular spot-checks in terms of quality?
Mr Gateley: No, it is mainly when
parts come in. We do not actually have the resources to do that.
Q218 Mr Binley: That is helpful.
Can I come on to Government policy now because you made some statements
on that. I want to include the supply chains too because companies
like your own without that supply chain, if that structure was
not in place, would be in serious trouble. Can you be absolutely
specific about Government schemes and how you and the word you
have got from your supply chain find them? Can you tell me if
there is a concern there how we might improve it? Finally, can
you tell us any comment you might have about the systems being
operated by the banks and where we can improve there? Those are
big questions, I recognise, but we need to get to the detail of
this.
Mr Gateley: I think as a body
you are seen to be slow—even when money has been agreed
it does not seem to turn up for an awful long time—bureaucratic
and difficult. There are all the right intentions but when it
comes to getting money out of your wallet it seems to be a laborious
process to physically do that. That is real experience. Not from
me personally but from one of my major clients. Having read the
paper over the last few days on the AAP I do not think it is that
complicated and I have heard the comment that it seems to be.
My issue is it is so well finely tuned that anybody who qualifies
for it probably does not deserve to qualify, quite frankly. The
organisations that need it will be excluded from the £5 million
and £25 million for the, what was the fancy word that you
used?
Q219 Chairman: We are scrutinising
Government policy, we are not the Government. I must disassociate
myself from that. Those are not our words.
Mr Gateley: That sounds a very
defensive comment. You have to work hard to get it and when you
think you have got it, it takes a long time to get it. I am not
so sure the right horses get to the final end of the race. That
would be my take on what I have read so far.
Chairman: That is very consistent with
what we heard yesterday in Birmingham.
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