Midlands auto producers: productivity accelerates as pace of innovation revs up
With changing patterns of automotive production Professor David Bailey predicts that the Midlands is well positioned to take advantage of its worldclass strengths in innovation having, as it does, 'one of the best design bases in the world'.
"There's been a bounceback in automotive production in UK over the last few years - and with that we need to consider what this means to our region and how best to provide policy support," he said.
Sharing the platform at the recently held Birmingham MadeMe Automotive Seminar with eminent Midlands designers including Marek Reichman, Aston Martin; Jonathan Sandys, F-Type Principal Design Manager, Jaguar; Charles Morgan and Julian Turner from Morgan and Westfield and with Neil Cheeseman from Zytek, Professor Bailey was able to stress the importance of appropriate higher and further educational support for these teams and their supply chains, stressing the reputation, technical and skills excellence of Coventry University's automotive design and engineering facilities.
"Radical new technologies driven by environmental legislation coming out of the EU are being developed in Midlands businesses."
Professor Bailey highlighted that if companies didn't cut CO2 emissions for fleets by 2015 they would be fined.
"We might have thought that car companies would have been opposed to this, but they aren't," he added. "In fact they have helped shape the regulations seen now as 'smart' regulation. The EU is aiming to regulate to innovate. We are seeing the emergence of more lightweight materials, a move on powerful engines, turbo engines, stop-start technologies. We're seeing a slow shift from the petrol and diesel engine -although these will be around for a long time yet. Electric cars have so far failed to take off but we're likely to see hybrids and in the longer term hydrogen playing a part."
He highlighted recent UK success indicators. "Our last peak in automotive production in the UK was seen in 1999 when output reached 2m cars produced. Whilst in 2009 production fell by 31% on the previous year to under 1m cars, following the credit crunch, in 2012 1.5m were produced and in four years time output could be 2.2m according to the SMMT - ahead of the historical peak in UK output when 2m cars were made."
"It's clearly rubbish that we don't make things. We are now on course with investment to make more cars than ever made before.
"The UK is the 2nd largest premium automotive producer in world - we have seen a great shift to upmarket niche production with the UK's auto sector having the lowest labour costs of any Western European country. Exchange rate depreciation has helped the UK in terms of auto exports and 55% of what we produce is exported beyond EU. We need to increase our focus on exports to BRICs and key CIVITs - Cambodia, Indonesia, Vietnam, Turkey."
Professor Bailey remarked on the benefits of the investment in i54 plant in Wolverhampton stating that that in 2011 UK engine production was around 2.5m units.
With UK plant utilisation at around 70% UK producers were getting their production costs right down. "We have 2nd highest productivity in EU after Germany," he stated.
"How long will the UK market remain buoyant? There's a two speed production scenario with the discount end doing well and the premium end doing well. The mid bit is struggling with Peugeot, Citroen, Ford, GM all finding it tough going.
"Within the UK supply chain we are faced with a situation where not enough components are sourced here - only about a third of our components are being sourced from UK producers. The Automotive Council has identified that up to £3bn more could be sourced in UK. AMSCI is making £150m available to support gearing up our supply chain.
"With rising wage costs in the Far East and rising transport costs, there are opportunities to bring some production and sourcing back to the UK. Proximity has become to be seen as more important along with access to the specialist knowledge and consultancy services that are accessible in the UK.
"In terms of policy support the UK still needs to design and develop an intelligent Industrial Policy able to bring together different players, uncover tacit knowledge, support exporters. The Auto council is promoting a Sourcing Road Map and the industry, together with the Auto Council, are in the process of discovering sector core competencies.
"The government could provide more support through better Capital Allowances, providing loan fund because banks can't do this - they have effectively become licensed pawn brokers. And the government could provide part-time wage scheme subsidies - as in US. In Germany there is a lot more intervention than there is here."
Professor Bailey concluded stating that there was a grand re-structuring taking place with capacity being cut across Europe and with more still to come.
Beverley Nielsen is Director of Employer Engagement at Birmingham City University