14 January 2019

UK PLC needs to take a more global view

With the news last week that Jaguar Land Rover (JLR) has confirmed it is cutting 4,500 jobs, with the substantial majority coming from its 40,000 strong UK workforce, I was invited to talk on the carmaker’s local radio station about the impact on the local and UK-wide supply chain. In case you missed this; it was on Radio Coventry and Warwickshire which may not be among the saved stations on your radio set, I made a few points which I think are worth repeating here.

In the UK we are rightly very proud of our automotive industry; great names such as Jaguar, Land Rover, Nissan, Honda, Toyota, Ford, Lotus and Morgan have world-class facilities in the UK. Some of these are world-leading plants, such as Nissan’s Sunderland factory, but we must not forget that all these companies are foreign-owned and thus prey to the constantly shifting global balance of demand versus supply, differing local labour costs, supplier localisation and the changing geopolitical landscape.

As much as we might think of Jaguar Land Rover as being quintessentially British brands, the company has not been British-owned for a long time. First BMW then Ford took over the companies; BMW harvested Land Rover’s four-wheel-drive expertise to help create its X-series SUVs and then Ford brought the brands together to join its Premier Automotive Group.

JLR is now a subsidiary of Indian automotive company Tata Motors, whose businesses extend to include Tetley Tea, another quintessentially British brand. With Tata’s patronage and husbandry comes the Indian company’s global outlook and so we really should not be surprised that it is choosing to manufacture vehicles wherever it makes the best business sense, be that in Brazil, Slovakia, India, China or the US.

Globalisation cuts both ways - the British car industry was very happy to export 80% of its output to a profitable US market in the 1960s and North America and China are now the company's biggest markets. With the global market must come recognition that the UK may not always be the best or cheapest place to manufacture and the region has to compete with the rest of the world with this in mind.

Most of the job cuts at JLR will be in white collar roles as the company says it wants to simplify its management structure and ramp up its EV programme, particularly vital in the light of the perfect storm of its 90% diesel-powered model range fighting against a Europe-wide backlash against diesel power and sales in China falling by almost 50% in the last year.

What does this mean for suppliers? Well, it could be good news; vendors could well have a larger stake in every vehicle. At present 70% of a JLR vehicle comes from suppliers, this could move to some 90% in EV models; there will be little point in any OEM making battery cells or even battery packs if the supplier community can offer them at better prices. Similarly, EV motor and control electronics makers could be very well placed to win more business.

It is time for all actors in the automotive business in the UK to think bigger and more globally; the business is out there to be won and if it means designing and developing in the UK and manufacturing wherever costs are lowest then that is the mindset that UK PLC must adopt.

Simon Duval Smith

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