Car makers are waiting to see if they will be bailed out, reports Alistair Houghton
THIS is far from a festive season for the world’s motor industry, as the credit crunch keeps driving down sales.
Yesterday’s news from Jaguar Land Rover that it was scaling back production at its Halewood plant is the latest blow for the region’s car industry..
JLR has already announced non-production weeks and UK-wide redundancy programmes in its bid to cut costs to cope with the slowdown.
Elsewhere in the region, the 2,200 workers at Vauxhall’s Ellesmere Port plant have been sent home for an extended Christmas break. They are also waiting anxiously to see if outgoing President George W Bush decides to bail out the US auto industry and save parent company GM from collapse.
US analysts say the most likely option is that GM could be rescued through a so-called “pre-pack bankruptcy”, where the company goes into bankruptcy, but with finance already in place for a recovery. That could get the companies back on their feet within months, and spare GM and rival Chrysler a bankruptcy process lasting many years.
This week, Toyota revealed it was suspending work on a new £88m production line at its Deeside engine plant.
The company is carrying out a global review of all its operations, but the news leaves its 600 Deeside staff in limbo. Components firms are also facing hard times as their orders dry up. Yesterday JLR supplier Stadco said it was making 106 of 153 jobs at its Mid Wales panels and pressing plant redundant, while gearbox builder Getrag Ford, also in Halewood, has sent its 700 workers home for an extended Christmas break.
The reason for these freezes and cuts is simple. There is no point producing cars if they cannot be sold.
The statistics tell a simple story. Figures out yesterday from the European Automobile Manufacturers’ Association (AMEA) showed new car registrations in Europe fell by 25.8% in November compared to the same month last year – the seventh consecutive decline.
Jaguar Land Rover sales fell 43% over the same period.
In the UK, the most recent figures from the Society of Motor Manufacturers and Traders (SMMT) showed new car registrations in Britain fell 36.8% from November, 2007, to November, 2008, the steepest fall since June, 1980.
Luxury car sales have been particularly hard hit. Jaguar has outperformed many of its rivals thanks largely to the introduction of the new XF. The European Automobile Manufacturers’ Association figures show Jaguar sales were 1.2% higher last month than in November, 2007.
But Land Rover sales in Europe fell 54.9% over the same period. In the UK, according to the SMMT figures, Land Rover sales fell from 2,906 in November, 2007, to 1,034 last month, down 64%.
JLR, which was taken over earlier this year by Indian giant Tata Motors, has been trying to increase its exports to developing markets such as Russia and India, but has already warned that might not be enough to offset falling UK and US sales. JLR spokeswoman Lucy Reynolds said: “It would be unwise to make public predictions about sales, particularly in the current environment. We will continue to monitor the market and adjust our production accordingly.”
The UK Government is widely expected to be on the verge of announcing an aid package for the British motor industry.
Professor Peter Cooke, KPMG automotive professor at the University of Buckingham, said it was vital the companies kept their factories going, even with smaller workforces and less output.
He said if factories closed altogether then expertise would be lost, whereas if they retained their trained workforces they would be able to speed up production when necessary.
He said: “This move from JLR is a prudent action. It protects cash flow and the plant can be brought back on full stream fairly quickly. Most companies are doing this or something similar.
“My suspicion is that the Government is going to offer some sort of support to the industry, either directly or indirectly through local authorities or banks, to keep these companies going and solvent.
“These companies may lay off staff in the short term, but it’s absolutely critical that they can bounce back when demand comes back.”
The motor industry will now await news of proposed support packages from around the world.
That aid might well help companies to survive. GM in particular has publicly stated it needs billions of dollars in aid soon just to stay in business.
But analysts say it could take years for sales to recover and for production to return to the same level as last year.
So, even if car makers and component companies do survive, it seems workers in the motor industry may have to brace themselves for yet more cutbacks before the good times return.
alistairhoughton
