Blog : Jaguar and state aid
I suppose that this blog might make me unpopular but, with Tata/Jaguar/Land Rover asking for a handout from HM Government, perhaps now is time to question whether state aid for motor manufacturers is cost effective and, indeed, whether motor industry finances make any sense at all.
The amounts being talked about are enormous, considering the number of employees affected. If the object of state aid is to prevent unemployment, could it be used more creatively?
The cost of developing a new car seems to escalate every year and the factories producing them employ fewer and fewer people as time goes by.
By the time MG Rover collapsed in 2005 the Longbridge factory was employing 6000 workers, a far cry from the 21,000 who worked there in 1955. The amounts invested by BLMC (which creamed off the profits of Jaguar, Rover and Leyland Trucks to do so), the Government between 1975 and 1988 and BMW were mind blowing and yet, in hindsight, it might have been a more cost effective way of employing people by turning Longbridge into a shopping centre or a business park, which it now is. The old Morris Motors factory at Cowley became a business park in the 1990s. How many hospitals could have been built with the money that was pumped into Longbridge and Cowley?
The amounts invested by BLMC (which creamed off the profits of Jaguar, Rover and Leyland Trucks to do so), the Government between 1975 and 1988 and BMW were mind blowing and yet, in hindsight, it might have been a more cost effective way of employing people by turning Longbridge into a shopping centre or a business park
For a car to be successful it has to be profitable enough to recoup the capital invested in it and how many cars in this image conscious, ultra competitive world achieve this goal? How many car companies are propped up by numerous grants, subsidies and loans by states that fear de-industrialisation? Is there any real money to be made from motor manufacturing these days?
Back in 1968 critics made much of the fact that BMC had something like 26 different model platforms when Ford UK had only four. The amazing thing is that BMC were able to develop 26 different models, produce them and remain profitable. Nowadays it could not be done. Instead of 26 different models from one manufacturer, we now have even more choice from even more manufacturers, from Europe, Japan and South East Asia.
With the market so saturated and sales of individual models diffused, how can any one manufacturer generate the profit for a sustainable model programme?
As I see it, any Government handout to a motor manufacturer, even if it is described as a loan, has no hope of being repaid. The current talk is of billions of pounds being invested here and there. Here is some food for thought as we approach Christmas.
There have not been a million days since the birth of Christ.