Business Profile: Automotive specialist Eric Wallbank
Stimulus packages such as the UK’s scrappage scheme have also helped put a firmer floor under many manufacturers, he believes. While US companies have been getting billions of dollars in federal grants, here in the EU competition rules limit state aid largely to loan guarantees. But that is not necessarily to Europe’s disadvantage.
“What we are seeing is that a lot of the innovation for future power train technologies is emerging from European manufacturers,” Eric said.
“German manufacturers are innovating some very fuel-efficient cars and the French are starting to produce full electric vehicles. If we look at where the real innovation is coming from, I think Europe is a very strong powerhouse.
“We have a number of really interesting innovators in hybrid and electric vehicles here in the UK, both in terms of the componentry and the technology that goes into vehicles.
“We have companies here putting electric vehicles on the road.”
The fact that the UK auto sector is predominantly foreign-owned does not worry Eric. They are here for the long term, he says. “When a car company puts a plant down it is with a view that it will run it for at least 20 or 30 years and engine plants potentially for even longer than that.”
So why are Mini and Aston Martin planning to build cars in Austria? “My understanding is that both of those decisions were made because the current plants in the UK are at capacity.
“I don’t believe there is a long-term significance in that and conversely the Dutch company Spyker is relocating to the UK because they want to be closer to their suppliers.”
Asked whether the recession, one of the most savage ever known, has helped by removing any of the car industry’s global over-capacity – estimated to be as high as 20 per cent – Eric’s answer is an emphatic “absolutely not”.
The only place to see plant closures, as well as entire brands such as Pontiac and Saturn, has been the US.
“There has not been a single plant closure in western Europe, or indeed the whole of Europe full stop. What has happened is that people have downscaled existing operations, put them on short-time working, taken shifts out rather than close a plant.
“It is a concern because it means the industry in Europe is carrying the extra cost of that capacity,” Eric said. “Some people think there has been a missed opportunity to take capacity out but it may come.
“We haven’t yet seen the plans that GM is now putting together for its European operations [Vauxhall and Opel] and that might well involve a plant closure.
“Certainly, some commentators think that once one manufacturer announces a plant closure it will be easy for others to step in behind that and announce other closures.”
One company known to be considering such a move is, of course, Tata Motors, the Indian owner of Jaguar Land Rover.
Will the axe fall on Jaguar’s Castle Bromwich plant or Land Rover’s Solihull site? “It is not an easy decision to make because the structure that exists is that Halewood [on Merseyside] produces the more volume end of the products, and very successfully so.
“Then there is the plant making the Jaguar premium products and the plant making the Land Rover premium products. It is not easy to see how that rationalisation will take place.
“At the logical level you can say that three plants producing the number of cars that JLR do sounds like too many plants. But getting there in a way that takes cost out is not going to be easy. If it was, it would have been done already.”
* On the Chinese MG at Longbridge ...
“The whole story of the Chinese carmakers and how they are going to become global is very interesting because it is not yet clear which will be successful and how quickly they will move into export markets.
“The industry there has moved forward at a very rapid pace and the plants in China that are run as joint ventures with western manufacturers are as good and as effective as plants anywhere.
“The piece that some of the Chinese manufacturers are missing is building a brand and the ability to design the product themselves.
“But some of them are absolutely on the track of being able to do that, which is why Shanghai Automotive was interested in some of the assets and intellectual property of MG Rover.
“They will undoubtedly develop their own brands and their own vehicles and the mid-sized SAIC vehicle that will come to Longbridge is one example of that.
“There are two types of Chinese manufacturers. There are the state-owned, state-controlled ones like Shanghai Automotive, Beijing Automotive and Nanjing, then there are the independent entrepreneurs like Geely and Chery.
“Undoubtedly the Chinese brands will be successful and will come to Europe.
“The jury is still out for Longbridge as to whether it will become a small scale niche production firm or whether, if the products get to the point where they are truly competitive, Chinese manufacturers like SAIC will look for locations to produce those cars in Europe.
“Whether they choose to do that at an existing site or whether they put down a new location is far too far in the future for us to think about.”
