UK car production's smallest monthly fall this year

Jun 22 2009 by John Cranage, Birmingham Post

The car industry can take some heart from the May vehicle production figures which showed the smallest fall so far this year.

UK car plants turned out a total of 67,754 units last month, a fall of 43 per cent over the same month last year.

That, however, compares with year-on-year declines in order of 50 per cent in the previous months as manufacturers slashed production and even closed plants temporarily in the teeth of the recession.

The Society of Motor Manufacturers and Traders said the May figures showed the outlook for the industry “remains difficult” but added that positive signs were emerging as manufacturers restart production and the Government’s scrappage scheme begins to translate itself into orders for new cars. The figures showed that, measured over the first five months of 2009, UK factories produced less than half the number of vehicles they did in the same period last year.

Total production was 54 per cent down at 319,022 units, the SMMT statistics showed.

Cars built for export last month totalled 53,980, nearly 80 per cent of the total and virtually the same proportion as last year.

Commercial vehicle (CV) manufacturers, though, are having an even tougher time. Output of trucks, vans, coaches, buses and specialist vehicles plummeted in May to just 4,692 units, a fall of 73.5 per cent year on year, a serious deterioration over previous months.

Output for the year so far was 65.4 per cent down at 34,642 units. Such figures will hardly give comfort to bidders for in-administration LDV, the Birmingham vanmaker that stopped all production in December last year.

They will also put further question marks over the future of Vauxhall’s van plant at Luton and Ford’s Transit plant at Southampton.

Paul Everitt, chief executive of the SMMT, said: “Commercial vehicle production is severely affected by low business confidence and economic uncertainty.

“Businesses across the economy are still holding back on new expenditure and will need to see better access to finance and stronger domestic demand.”

Commenting on car production volumes, Mr Everitt said: “Prompt action by manufacturers to realign supply with demand has been painful, but was necessary. There is now a direct link between demand in the marketplace and production volumes.

“The scrappage schemes in place across Europe are now beginning to have a positive impact, although the full benefits will take a little longer to flow down to companies at all levels in the supply chain.”

The Government said last week that more than 60,000 orders had been placed under the UK scrappage scheme since it was announced in the Budget in April. The scheme, which pays owners of cars ten years old or more a £2,000 discount if they trade them in for new models, has been criticised for being less generous than those put in place earlier in some European countries.

And with the cost divided evenly between the Government and manufacturers, it has been claimed that some car companies are clawing back their £1,000 contribution by imposing higher interest charges on finance deals.

The scheme also favours high-volume vehicles, most of which of those sold in the UK are produced abroad. Industry figures, however, say many imported cars contain UK components and that rising showroom sales will ultimately benefit all sectors of the industry.

UK production was bound to fall sharply this year as companies cut back on the production to match output with rapidly falling sales levels.

The most dramatic action was taken by Honda, which laid off its UK plant at Swindon for four months. Production there resumed at the start of this month amid signs that stocks of completed cars are beginning to run out.

Aston Martin, based at Gaydon in Warwickshire, has, however, denied speculation that it was reverting to a five-day working week after being on three-day working so far this year. The company said, though, that it was constantly monitoring its production needs.