Examination of Witnesses (Questions 307-319)
MR DAVE
OSBORNE AND
MR ROGER
MADDISON
10 JUNE 2009
Q307 Chairman: Gentlemen, thank you very
much indeed for coming in. We are going to take about half an
hour with you, if we may, to discuss three particular areas of
questions. We are very grateful to you for coming to give evidence
to the Committee in what is a very challenging time for the automotive
sector, to say the least. I am sorry we kept you waiting for 15
minutes due to a division in the House of Commons, but thank you
for your understanding. It means we will keep the Minister waiting
15 minutes too, and I apologise to him as well for that discourtesy.
Can I begin like I always do by asking you to introduce yourselves,
please?
Mr Osborne: Thank you, Chairman.
I am Dave Osborne. I am the National Officer for the Vehicle Building
and Automotive Group for Unite the Union, and I have responsibility
for predominantly the OEM businesses.
Mr Maddison: I am Roger Maddison
and I am the National Officer for the Car Components section of
Unite.
Chairman: Thank you very much indeed.
Q308 Miss Kirkbride: Gentlemen, the
automotive sector in the UK. Could give us a view on how important
the automotive sector is for the UK economy?
Mr Osborne: I think it is well
documented, the size of the industry, obviously. In terms of employment
the industry accounts for about 800,000 jobs in the UK, of which
approximately 190,000 are in manufacturing, 600,000 in retail,
with a turnover of £50 billion per annum, value added in
excess of £10 billion, and obviously it is a key sector as
far as we are concerned in terms of the UK's overall balance of
trade, of course. So in that context we see this industry as a
key driving force for a vibrant manufacturing sector in the UK
going forward. I think it is true to say that the industry has
gone through major restructuring in the last 10 or 15 years. The
industry as we once knew it has changed dramatically. Globalisation
has, of course, changed the way we operate. The markets are much
more fragmented with many more companies now vying for business
in each of the markets all around the world. The UK is not unique
in that, of course, but we are still, as I say, a major employer,
a major generator of wealth for the country by virtue of the fact
that we export around 75% of the production here in the UK, and
of course in the premium sector we are the second biggest manufacturer
across the globe.
Q309 Miss Kirkbride: I hope that
sets out the picture, but in your own report you point out the
fact that we are now a very mature economy and that these kinds
of jobs and manufacturing sectors are migrating towards lower
cost countries, so how much of what you have described do you
think we can really aspire to hanging on to?
Mr Maddison: I think we lead the
world really, in the innovation of new products as well. A lot
of the work which is being outsourced to low cost economies leaves
the UK basically to help develop new products, more green effective
vehicles and things like that. I do not think the Third World
and the low cost economies are yet ready to take up that sort
of challenge. They can make parts for cars and they can even put
cars together, but the UK is at the forefront really of new technology
and innovation in the industry.
Q310 Miss Kirkbride: Does it matter
that we do not now have our own high volume car manufacturing
sector?
Mr Osborne: Like I say, globalisation
has changed the face of the modern industrial world, certainly
in terms of the car industry. The days of two or three car producers
dominating the market have gone. We have around 35 different companies,
each taking a share of the market, and the importance is that
we do have still what I would call, and I think you would call,
volume producers. There is no bigger volume producer in the world
than Toyota, and Toyota is here making cars in the UK as are Honda
and Nissan. On your own doorstep, Jaguar Land Rover, for example,
just prior to the recession produced over 300,000 vehicles. I
do not know if that is what you mean by a volume producer, but
in today's world I would suggest that is exactly what a volume
producer does. On top of that, of course, we should not forget
that the UK as far as powertrain is concerned, is a volume producer
by any stretch of the imagination. We produce approximately 3
million engines a year here in the UK. I think it is not the size
of each individual company in terms of their capability, but I
think it is about whether this industry remains competitive as
it has gone through that process over the last 10 or 15 years,
and as long as we can continue to be competitive then I am quite
content that provided we get the appropriate support at the appropriate
time when the industry is facing difficulties, then I am convinced
that this industry can be part of the industrial landscape—and
an important part of the industrial landscape, I might add—for
many, many years to come.
Q311 Miss Kirkbride: Moving on to
my last question, which is about appropriate support, what do
you make of the present crisis at LDV? Could and should more have
been done to stop it going into administration?
Mr Osborne: I think LDV has a
chequered history. I was involved with LDV back in 1992 when it
was owned by DAF and of course DAF went into administration. As
a consequence of that, we saw the management buy-out of LDV. We
agreed at the time changes to terms and conditions of employment
to give the company an opportunity and it has been able, over
the last 17 years, to provide a standard of living for certainly
850 people up until last week, significantly more than that prior
to that, and of course not forgetting the people who were reliant
on LDV. My point about LDV is that I think it is an absolute tragedy
and an absolute waste that we see, at the point in the industrial
cycle where we are seeing the move towards greener vehicles, LDV,
which had a plan to do that, was not afforded the opportunity.
My union, as you know, campaigned hard and long to try and bring
about a satisfactory resolution of that problem but unfortunately
the buyers were not able to secure the funding, which in itself
is a tragedy. Whilst the administrator is in there, I think we
should leave no stone unturned to try and bring about a future
for the production of electric vehicles, which is exactly what
the plan going forward was for LDV. I would make a plea to all
those concerned, including the Government I might add -
Q312 Miss Kirkbride: What do you
think the Government should do?
Mr Osborne: I think they should
provide the loan guarantees to enable the Malaysian company to
fund that business plan for the production of electric vehicles.
Q313 Miss Kirkbride: Is your union
calling on the Government to provide that?
Mr Osborne: That is exactly what
we did last week, yes.
Q314 Miss Kirkbride: We are always
told that the Government does have a loan guarantee scheme.
Mr Maddison: Somebody did the
forms but we cannot find them. We cannot seem to find the application
forms. We have been told there are loan guarantees there, but
for some reason we cannot find the forms.
Q315 Chairman: Do you mean the process
is opaque by which they have to apply? Is that what you are saying?
I cannot believe that the absence of forms inhibits them from
applying for the grant. I am sure it is a bit more complex than
that.
Mr Maddison: We cannot seem to
get the grants for it. There are supposed to be loan guarantees
there, but people seem to have a problem getting loan guarantees.
Mr Osborne: My point would be
simply that they were unsuccessful in raising the finance of the
Malaysian banks. My point is simply that the banks have been bailed
out to however many billions it is and I think the Government
should have "encouraged" (if I can use that word) the
banks, particularly those we currently own, to underwrite loan
guarantees to allow that business to survive. I think that would
have been more than a worthwhile investment which would have been
repaid over a period of time.
Q316 Miss Kirkbride: It is very shocking.
The Government has a scheme for loan guarantees. Do we assume
that LDV actually submitted an application for a loan guarantee
and that it either was rejected or never found its way onto the
relevant desk? What has stopped the loan guarantee scheme which
the Government has from helping LDV?
Mr Osborne: Are you talking about
the Automotive Assistance Programme?
Q317 Miss Kirkbride: Yes.
Mr Osborne: I am not aware that
LDV have submitted an application. That is a question you will
have to ask LDV.
Q318 Mr Binley: You must be very
busy at the moment. It must be a pretty difficult time for you
and I think we need to understand. We are grateful. I am particularly
interested in the motor sport industry, not from the perspective
of sport but from the perspective that it employs 50,000 people
in and around my constituency, Northampton South. I assume that
you operate in the motor sport industry. You talk about innovation
and they play a sizeable part in innovation. Can I ask how you
feel they are doing, whether you feel they are getting any attention,
whether they need it? Secondly, in terms of perception can I ask
whether the possibility of losing the Grand Prix might be harmful
to the British automotive industry?
Mr Osborne: I think it is fair
to say that we are not as involved in the motor sport side of
the business as we would like to be. We are extremely busy in
other parts of the industry, as you quite rightly pointed out.
That is not to say that we do not do motor sport. It is an extremely
important part, as you have referred to, 50,000 people being employed.
We have major multinational companies who themselves are involved
in motor sport and I think one of the problems of the current
financial pressures—and we saw it with Honda—is that
motor sport is taking a back seat, if I can say that, given that
these businesses see other priorities for their finances. I was
pleased to note, however, the other day, because we deal with
Aston Martin and David Richards, as you know, who is the Chairman
of Prodrive, is also the Chairman of Aston Martin, and he has
decided that Prodrive will go back into Formula One in 2010. That
is good news and obviously we hope that that will bring about
future employment. That is the most honest answer I can give you
in terms of where we are at this moment.
Q319 Mr Binley: Can I just press
you on the Grand Prix because there is a danger of it going and
I am trying to get as much pressure to keep it in Britain as I
possibly can. Would you support that pressure?
Mr Osborne: We would support any
pressure to support the British motor industry. I think Bernie
Ecclestone, however, will have a lot more influence over it than
I will.
Mr Maddison: I think another point
is that the Formula One industry is, again, at the forefront of
innovation and design. It leads the way in new technology that
actually goes back down the food chain and actually gets into
the bog standard family car eventually. A lot of that design,
a lot of that money and a lot of that expertise is there, so I
think if we are going to continue to be innovators in the UK on
new technology, green technology, then I think the sports car
part of that is very important.
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