IMI Magazine

News: Analysis

Thankful for small mercies
There was never a chance that the motor industry would remain unscathed by the contents of George Osborne's emergency budget. Indeed, the sector should be thankful that its products and customers were not specifically singled out as a source of additional revenue as has happened so often in the past.

The rise in VAT to 20% from the beginning of next January will require a rethink over projected sales volumes. Logic suggests a ramp-up of demand towards the end of the year as private buyers seek to beat the rise. But that will be more than offset by a subsequent fall-off as consumers feel the full effects of cuts in disposable incomes.

On a brighter note, the coalition government's recognition of the need to rebalance the economy in terms of private/public sector activity will place a growing priority on manufacturing. For the motor industry, already there have been positive signals, including the confirmation of aid to Nissan for the production of the Leaf electric car in Sunderland, together with £360m of loan guarantees to Ford for the development of environmentally friendly technologies.

Relax, it's not dire news for Land Rover UK
It's tempting to believe that Tata's acquisition of Land Rover is already acting against British interests. The Indian company's decision to close one of Land Rover's UK factories has been followed by news of an intention to set up an assembly plant in China within the next couple of years. But these moves are not as disconcerting as they first appear.

For a start, the Chinese assembly venture will be based, initially at least, on kits sourced from Land Rover's domestic base and hence will provide it with an important new export opportunity. With China now the world's largest car market and possessing a rapidly expanding band of consumers with the income to purchase 'big ticket' Western products, the potential for developing further sales is considerable.

The same applies to India, where to date the presence of Land Rover (and Jaguar) has been derisory. It's just a year since Tata opened its first dealership there for the two British brands with the expectation of a rapid roll-out in representation throughout the country. Again, the potential for Land Rover to establish a major sales presence is enormous and it is surely only a matter of time before an announcement is made concerning the establishment of Indian assembly facilities.

Meanwhile, Tata has provided no evidence to support the contention that Land Rover's UK operations will be wound down. The proposed plant closure represents the need to streamline manufacturing processes and achieve a cost structure commensurate with maintaining international competitiveness. Having spent £1.15bn a couple of years ago on Jaguar Land Rover, the last thing on Tata's mind is to prejudice its investment, which suggests a great future based on the development of Asian markets. The hope must be that the UK workforce recognises this fact and does not do anything daft like industrial action to thwart Tata's plans.

Charmed by a warranty extension
Now that the dust is beginning to settle from the fallout of Toyota's worldwide recall debacle, the company is embarking on a step-by-step rehabilitation programme aimed at restoring trust and confidence among consumers.

In the UK, a key constituent of this 'charm offensive' is taking the form of a wide ranging press and TV advertising campaign. The strategy is to emphasise the personal commitment of Toyota's employees to producing vehicles with passion by means of the "your Toyota is my Toyota" strapline. The hope is that this will reverse the serious setback in the company's current UK market performance which has seen more or less a static level of unit sales to the end of May during a period when the overall market has leapt by 22%, resulting in an erosion of market share from 5.4% to 4.5%.

More importantly, Toyota has introduced a 5-year warranty throughout the model range to demonstrate confidence in its products and relay the message that recent problems are merely a blip on an otherwise unblemished reputation for engineering integrity and quality. This has noteworthy implications for other manufacturers, for with Hyundai already offering 5-year warranties and Kia showing sufficient faith in its cars to provide 7-year guarantees, it's only a matter of time before all other volume producers will feel the need to follow suit.

One-way Trafic
The erosion of the UK commercial vehicle manufacturing sector looks set to continue. This follows speculation in the French press that Renault plans to relocate assembly of the next generation Trafic model, scheduled for introduction in 2013, from Luton to Sandouville. If so, the likelihood of GM continuing to produce its Vivaro version at Luton seems slim with the result that assembly of this model also would move to France. It requires little imagination to work out the implications of this for the future of the Luton facility.

None of this, though, should come as a surprise to those versed in the French proclivity for blatant economic nationalism. The same forces within the French government which caused the fuss over future arrangements for Clio output - with Renault proposing to shift the bulk of French assembly to low cost Turkish operations - appear to be just as virulent and are almost certainly behind this latest manoeuvring.

With almost all of its domestic vehicle manufacturing controlled by companies located overseas, the UK is impotent to resist these regrettable developments. Past experience indicates that, at times of stress, foreign-based vehicle producers have tended to preserve domestic operations and trim their British subsidiaries. All the more reason to enhance the country's manufacturing culture and pull out all stops to encourage the Americans, Germans and Japanese to remain and develop their British-based motor industry investments.        

Jackson heights
Little more than two years after Belinda Poole took over as head of Lexus UK comes Linda Jackson's promotion to head of Citroen UK. The presence of two women in the boss's chair doesn't exactly shatter the so-called glass ceiling, but it does help weaken it.

If Citroen consolidates and builds upon recent market gains, rival manufacturers should examine the extent to which this has been aided by a woman's touch. And, as the industry grapples with the need to address an ever widening range of environmental and social issues, there can be no excuse for failing to exploit and promote a hugely significant proportion of the workforce.                

 Arthur Way