Press Report : New JLR plant will bring huge benefits for smaller firms
Enda Mullen, Birmingham Post, 9 June 2011
News that Jaguar Land Rover is set to build its new UK engine factory in Wolverhampton represents one of the biggest boosts to regional manufacturing in many years. Though some industry insiders tipped it as the favoured destination, given its proximity to the Birmingham and Solihull plants and easy access to Halewood, the choice of a Midlands site was far from a given.
Proposals to create a new factory on the i54 site in Wolverhampton provide a resurgent Midlands manufacturing sector with a much-needed shot in the arm and has been welcomed by business leaders and automotive industry experts alike. Plans for the £750 million plant are still at an early stage but it is expected to create 700 jobs with the possibility of hundreds more in the supply chain.
Hopes for UK component manufacturers will be high after Jaguar Land Rover Chief Executive Dr. Ralf Speth gave a pledge to Business Secretary Dr. Vince Cable in March to support British suppliers for the next five years. The new facility is part of a huge expansion, dubbed the Jaguar Land Rover Revolution, as the company seeks to expand its range by as many as 40 models. Although JLR remains tight-lipped about the plans it is believed the proposal is already at an advanced stage.
John Lamb, spokesman for Birmingham and Solihull Chamber of Commerce said: ‘If this is correct it is clearly tremendous news for the whole of the region and continuation of the whole success story that is Jaguar Land Rover. It is already deservedly making increased profits. This will not only ensure that continues to happen but will also be a real boost for the local economy. This is where the skills are and clearly they recognise that.’
Mr Lamb added that, as well as being a boost to the region as a whole, it would also benefit manufacturers in the automotive supply chain. ‘The well-being for the region cannot be under-estimated and clearly the skills it needs can be produced by this creative area that is the West Midlands,’ he said. ‘I’m sure a lot of the labour it will attract will come from all over.’
Mr Lamb also said that it was more good news as far as manufacturing in the Midlands was concerned. He commented: ”The last quarterly Birmingham and Solihull Chamber of Commerce quarterly survey, which will soon be published shows manufacturing is on the up and fighting back very well and a lot of that is down to JLR . The recovery is quite remarkable and represents a fantastic turn-around.
‘JLR is producing sought-after products, particularly in emerging nations like India and China and have obviously picked the right markets to sell these vehicles in. This is extremely positive and very good news for the future of West Midlands manufacturing and the region as a whole.’
If this is correct it is clearly tremendous news for the whole of the region and continuation of the whole success story that is Jaguar Land Rover. It is already deservedly making increased profits. This will not only ensure that continues to happen but will also be a real boost for the local economy. This is where the skills are and clearly they recognise that.” John Lamb, spokesman for Birmingham and Solihull Chamber of Commerce
Professor David Bailey of Coventry University Business School said: ‘This is brilliant news and from JLR’s point of view it is the ideal location to get its engines to plants in the Midlands and Merseyside. I would actually go so far as to say it is the perfect location – you couldn’t get a better site.
‘Engines are bulky components and manufacturers really need to be within a day’s drive of their factories, just off a motorway and with a ready supply of skilled labour. We have a lot of engineering skills in the Midlands and this sums up the current strength of the automotive industry in the West Midlands.
‘It may well be in an enterprise zone too, so there may be some tax breaks as well. South Wales offered attractions as well in terms of being near to a port, close to steel producers and having a skilled workforce and I did worry that Wales might be able to out-trump us but it is really great news it is coming to the Midlands.’
Prof. Bailey said the Indian engine plant that will also be announced was also essential if the company is to continue to succeed in emerging markets like India and China adding that, in so far as the supply chain is concerned, he hoped companies in the region would benefit too.
Pointing to the success of the BMW engine plant at Hams Hall, he said: ‘There will be companies that will benefit from this in terms of components that go into engines but it will be interesting to see how many components are sourced locally. We would all like to see as much local sourcing as possible to maximise the benefits to the regional economy.’
However, the new plant will not answer all of JLR’s engine needs. The company is expected to continue sourcing engines built by Ford in Bridgend and Dagenham, the likelihood being that larger engines – V6 and greater – will still be supplied by the American car giant. It is thought likely that only smaller four cylinder engines may be produced at the new factory.
‘Having this facility will give JLR greater flexibility,” said Prof. Bailey. ‘The problem was that it was struggling to get enough engines from Ford. As well as catering for its own needs Ford also supplies companies like Volvo and Aston Martin. JLR would struggle to get enough engines if it ramped up production.’
In terms of knowledge and expertise, Prof. Bailey believes JLR is well placed to cash in on the pool of talent the region can offer. ‘The West Midlands is a rich region when it comes to engine technology – BMW has won award after award for the Hams Hall plant, which shows the quality of local skills.
‘As far as technology and skills go JLR has got a lot internally but it can also draw on the wider labour market. In terms of designing engines it can do it, in terms of building engines it can do it and when it comes to having skilled labour it can do it,’ Prof. Bailey added.
As far as engine production is concerned JLR will also need to deliver on pledges to produce more frugal and environmentally friendly engines in the years ahead. ‘Going forward the big challenge for the company is to produce more fuel-efficient engines that produce less greenhouse gases,” said Prof. Bailey, who added that despite the downturn the company has been making steady progress.
This is brilliant news and from JLR’s point of view it is the ideal location to get its engines to plants in the Midlands and Merseyside. I would actually go so far as to say it is the perfect location – you couldn’t get a better site… We have a lot of engineering skills in the Midlands and this sums up the current strength of the automotive industry in the West Midlands.” Professor David Bailey, Coventry University Business School
‘It is doing extremely well. Even in the downturn when the premium sector was being hammered there was the view the company was going in the right direction and there are a lot of new models coming through too.’
The other big challenge for the company, according to Prof. Bailey, is the need to increase vehicle production. Although JLR is doing well and recently posted profits of £1 billion for the first time ever, its volumes are still small globally. It is producing around 250,000 vehicles a year while a company like BMW produces around 1.2 million.
‘Even a direct competitor and a niche premium player like BMW is significantly bigger,’ said Prof. Bailey. ‘JLR needs to be bigger to generate the cash needed for new model development and that is one of the significant challenges.’
Prof. Bailey said the company might also need to develop a partnership with another manufacturer to develop new platforms too. The new facility will also be seen as a welcome addition to both engine research and development and manufacturing in the UK.
There are currently seven factories producing engines for the car market in the UK. The closest is at Hams Hall, which produces four-cylinder engines for BMW vehicles produced worldwide. Other engine factories include Toyota’s plants at Burnaston and Deeside, Ford plants at Bridgend and Dagenham, the Bentley factory in Crewe, Nissan’s Sunderland factory and Cummins in Darlington.
More than two million engines were made in the UK in 2009 and it is estimated a new JLR engine factory could produce between 250,000 and 500,000 engines a year. In the West Midlands alone there are around 150 engine component suppliers who will be looking to cash in on JLR’s new venture.
An automotive industry insider, who did not with to be named, said: ‘This demonstrates JLR’s long-term commitment to the West Midlands and can only be good news for the existing plants. As well as the jobs created directly at the new factory there will potentially be lots more in the supply chain and there is an excellent base of component suppliers to support it. It will also provide a significant boost to engine production in the UK and builds on the desire to maximise research and development and innovation in engine production here.’
[Source: Birmingham Post]