Press Report : JLR eyes foreign factory after UK pay row fallout

Carole Nash Classic Insurance Specialists

Jon Griffin, Birmingham Post

Jaguar Land Rover's recently opened Engine Manufacturing Centre at i54 South Staffordshire Photo Credit: Birmingham Post
Jaguar Land Rover’s recently opened Engine Manufacturing Centre at i54 South Staffordshire Photo Credit: Birmingham Post

Jaguar Land Rover is targeting potential new factories in Austria and Turkey as the fallout from acrimonious UK pay talks continues. The Midlands’ most successful manufacturer, which has created thousands of jobs in Solihull and Castle Bromwich in recent years, is said to be favouring Europe over North America and the UK for further expansion.

Highly-placed sources said the luxury vehicle maker was now eyeing up lower cost factory developments in Turkey and Austria rather than North America, despite recent reports of plans for a US factory. JLR bosses are thought to be keen to continue expanding the manufacturing operation as part of the company’s determination to take on the likes of bigger rivals such as BMW and Volkswagen.

However, the expansion plans are thought to have now switched to continental Europe, partly as a result of lingering ill-feeling towards the unions over last autumn’s protracted pay negotiations. The source said: “Nothing has been decided at this stage and it may take weeks yet before they come to a decision or anything. But it is potentially now more likely that they will look at Europe first – Turkey and Austria are possibilities. Costs are very high in the UK and they could go to places where they are much lower and where there is not the same union influence.

“At this stage Europe seems more likely than America. The union pay dispute had a big effect. There is a feeling of alienation that has been left over from the way the pay talks were handled. There is still a bad feeling over pay and that could count against the UK getting more investment, which is why they are looking to go abroad. It has set back the case for UK investment. They have launched in China, they are launching in Brazil, it looks like there is an international plan. It is likely that Europe is currently ahead of America.”

In December, more than 77 per cent of JLR Unite members voted in favour of a two-year pay deal, finally lifting the threat of industrial action after weeks of shopfloor uncertainty. The ballot of the revised offer saw 9,759 workers vote in favour of the deal, with 2,766 against, a majority of 77.7 per cent, but the settlement was only achieved when JLR backed down over pensions after unions accused them of planning a £240 million hit on the pension fund to pay for the new deal.

In November, Coventry-based Unite national officer Roger Maddison told the Birmingham Post before the second ballot: “The company is making a fortune and to try and attack people’s pensions is not something they tried when they were losing cash. It is no secret that they want to make savings of £240 million on their pensions deficit. I think that they have tried it on and it fell flat.

“We do not want to take action but to protect our pensions and increase our standard of living, we are fully prepared to take action. There are people who have worked for 30 years in a car factory, have paid into the pension scheme and they should be able to rely on that pension to fund their retirements.”

Jaguar Land Rover has doubled its volumes under the Tata ownership since 2009, selling 462,678 globally in 2014, and executives are keen to continue the sales momentum with new models and job creation programmes.

American newspapers recently reported that Georgia Governor Nathan Deal met JLR executives to discuss a possible US factory while other reports have speculated over plans for a factory in South Carolina producing 200,000 vehicles a year. A spokesperson for JLR said the firm regularly reviewed opportunities in a range of markets.

She added: “No decision has been taken on future manufacturing locations. We will continue to evaluate opportunities to increase our manufacturing footprint in the future. Our new world-class manufacturing facilities will provide additional production capacity supplementing that of our three vehicle manufacturing operations in the UK. Manufacturing our vehicles internationally allows us to reach new markets and new customers, creating a stronger, more sustainable and increasingly agile business, safeguarding employment in the UK.”

Clive Goldthorp

Clive claims that his interest in the BMC>MG story dates back to his childhood in the 1960s when the family’s garage premises were leased to a tenant with an Austin agency. However, back in the 1920s and 1930s, his grandmother was one of the country’s first female Garage Proprietors so cars probably run in his genes! Admits to affairs with Alfa Romeos, but has more recently owned an 06/06 MG TF 135 and then a 15/64 MG3 Style… Clive, who was AROnline’s News Editor for nearly four years, stood down from that role in order to devote more time to various Motor Racing projects but still contributes articles on as regular basis as his other commitments permit.

34 Comments

  1. Let’s hope JLR isn’t heading back to the old days as industrial action was one of the causes of the downfall of British Leyland. Obviously nowadays with compulsory secret ballots, less unionisation in plants and the absence of Red Robbo-style shop stewards, it’s unlikely there could be a re-run of the endless strikes of the Seventies, but the workforce have to be aware that Tata is a huge corporation that could shift production anywhere in the world.

    • Surely though workers can have some rights before we start talking of a return to the Seventies and ‘Red Robbo”? Surely workers can exercise some influence before company owners start to withdraw, transfer investment? I mean a pay rise funded from your pension fund isn’t really a pay rise is it. Surely the worker has a right to be concerned at such a proposal.

      Don’t think I’m being Dave Robinson am I?!

      • I agree completely Dave, but I’d go further. I know full-well the unions played their part in the downfall of the car industry in the 1960’s and 1970’s, but it’s now 2015 and income inequality is much higher than it was in the 1970’s, with many large companies making huge profits, paying little tax here, and workers having very limited power. The pendulum is swinging to the other extreme.

        This is part of the problem a foreign-owned industry presents – the ease with which production can be shifted elsewhere. It’s better than nothing for sure, but we shouldn’t delude ourselves into thinking all is well in British car manufacturing.

        • Whether it’s foreign-owned or not is irrelevant. The issue is globalisation, full stop. If JLR were still British-owned they would be thinking the same way. Every car maker has factories all over the planet. I’m not commenting about the rights and wrongs of this particular disagreement — I haven’t considered it sufficiently, but any car maker can only grow by distributing manufacturing around markets. The significant thing here is that JLR is considering plants elsewhere in Europe. That is a concern and if it is a direct result of this disagreement, then that is bad news.

          If you think about it, companies that were set up in the old days, when people had far higher expectations of pensions, are at a financial disadvantage over those which set up new, with new employment contracts. It requires very careful thought to take everybody (or at least enough people) with you when things change. People will only accept a certain amount of change for the worse, especially if they have alternatives, before they decide that cooperating isn’t their best course of action.

  2. This is the result of the union’s policy: it´s better to be unemployed than have a “precarious” (from their point of view) job.

    In highly concorrencial markets like the car market the companies can’t afford to lose time and money with this problems. Of course, the workers have rights and the companies must respect them, but the unions can’t continue with this approach, otherwise news like this will become common and, in the end, everybody will lose.

  3. No one is suggesting workers shouldn’t have rights and I am a trade union member myself and wouldn’t consider myself a right-winger, or a leftie for that matter, but unions have to tread carefully as the car industry is now a multinational business and factories exist all over the world.

    Ford and GM became tired of industrial action in British factories in the Seventies and gradually moved most production abroad, with the result Dagenham and Luton closed down, and TATA could shift production anywhere. However, a Turkish Jaguar would never seem right and probably this would count against producing such a British brand of car in a foreign country.

  4. The great mistake made by the car and motor cycle industry in Britain, both management and workforce, was that the buying punters would never go elsewhere. An impression of “Jobs for Life” meant that going out on strike did not threaten jobs and the lost production and hence sales was missed by many.

    As said above, GM and Ford got fed up of the constant strife and upped sticks. JLR need to tread carefully here, particularly with Jaguar as the marque is identified with Britain. Would a Jaguar made in, say, Turkey or Slovenia mean the same to a buyer or would it be become just another car?

    Companies like Ford and GM have always been multinational with factories all over the world. Jaguar are a British brand and have only ever been made here. Brand value is vital in the car industry and I think moving production to a lower-cost country could devalue the brand.

    • It depends if people notice or care, after all many Audi, BMW and Mercs come from places other than Germany.

      If we can’t build JLR products competitively in the UK, we won’t get the benefit of the expansion plans. I do recall how people at Radford and Browns lane said that they would have to keep Jaguar production in Coventry, we would be stupid now to think that JLR production should now stay forever in Birmingham and Liverpool.

      It could quickly become a situation where we are left with nothing but Gaydon and Whitley in the UK.

  5. Knee jerk reaction with lots of people going on about the 70s, which is frankly ancient history. Besides it wasn’t just the unions that sank BL. When Ford took over Jaguar they were shocked at how out of the date the factory was. BL suffered from under investment, poor management and bizarre product decisions, like not making the Allegro with a hatchback.

    A balance has to be struck, the danger for the UK economy does not come from unions, but other vested interests. Bankers, hedge funds, private equity. In fact, we could do with stronger unions, pay for most workers is stagnant. In many jobs, work simply doesn’t pay.

    That is something employers should care about, if workers don’t earn enough, they won’t be able to buy anything. We have solved this problem with credit cards, housing bubbles, and other forms of debt.

    Frankly, JLR’s attitude is disgraceful and a return to the bad old days. One of the reasons for the bad industrial relations in the past was mistrust between managment and workers.

    JLR’s employees merely want their pensions protected, and to have a share in the success of the company. A success which their hard work contributed to. This is not unreasonable, and I’m sure that JLR’s workers have no interest in creating a new BL.

    The company’s response has been to threaten the workforce that helped them increase their sales. It leaves a bad taste in the mouth.

    • The leader of Unite Len McCluskey does not think the 70’s is ancient history, he is open about his determination to reverse the changes both in society and the Union reforms of the 80’s / 90’s and take us back to the 70’s which he clearly thinks was a better time.

      • “The leader of Unite Len McCluskey does not think the 70’s is ancient history, he is open about his determination to reverse the changes both in society and the Union reforms of the 80’s / 90’s and take us back to the 70’s which he clearly thinks was a better time.

        And if the workers at JLR plants were getting mates to clock on for them, sleeping durring night shifts, doing their jobs badly or any of the horror stories from the BL days were happening, you may have a point.

        In reality the workforce is productive, flexible, and doesn’t have a history of strike action. This isn’t the 70’s and at some point people have to get over that decade. I wasn’t even born back then, which will also be true of many JLR workers. The 70’s is ancient history.

        • You are naive if you think then that Len McCluskey has your best interests at heart.

          He will happily sacrifice you and the rest of the JLR workforce to achieve his political ambitions.

          Any Unite member working in JLR should ask themselves why they are paying to be a member of a Union who’s leadership are committed to creating a socialist society which would amongst many (stupid) things forbid the manufacture and purchase of your employers products.

          • “You are naive if you think then that Len McCluskey has your best interests at heart.

            He will happily sacrifice you and the rest of the JLR workforce to achieve his political ambitions.

            Any Unite member working in JLR should ask themselves why they are paying to be a member of a Union who’s leadership are committed to creating a socialist society which would amongst many (stupid) things forbid the manufacture and purchase of your employers products.

            Ok, so lets ask another question. When in your opinion is a threat of a strike legitimate? When a company cuts employees pay? Changes terms and conditions? Raids the pension fund? Are employees never allowed to take collective action?

            I know you have a thing about the 70’s, but the reforms brought in, in the 80’s haven’t lead to a golden age. Britain consistantly comes bottom for R&D and investment, out of developed countries. Britain has a massive trade deficit. Strip out industries like motoring racing and pharma, and the figures are even more dire.

            Part of the problem is a cheap, flexible, weak labour force which is too easy to exploit; is a disincentive to invest. Why invest in new plant and equipment, if it is easier to just sweat the workforce a bit more?

            I know you have been and others of your generation have been scared by the 70’s, but the 80’s and 90’s were not the success you make them out to be.

            If they were, how come 2008 happened? Did overpowerful unions cause the crash in the City, and the bailout of the banks?

          • Strikes don’t work in modern global manufacturing, what you have to do as a collective workforce in the UK is ensure that your high wages, pensions and high social costs are covered by your productivity.

            If you think Tata can’t get anybody else to do your job, then certainly you can go on strike, but you should know and I certainly know that JLR UK workforce productivity is marginal and that Tata profitability is also marginal so it’s hardly surprising that Unite at best perceived inflexibility is making them look at other countries to invest in. It’s important to note that in 68, Leyland and BMC productivity and profitability was also only marginal, but it did not stop the Union leaders like Unite’s with much wider political ambitions rendering their employer uncompetitive in the global market.

            You are right, Britain still under performs by global standards, but that is because as a nation we still pay ourselves more than we earn in the world and have consistently done so since the mid 60’s, we can as you do blame the bankers for so much, but what made the recession so much worse for the UK (and in most of Western Europe) was that due to the poor productivity in our over expanded state sectors we were whilst in an economic boom still borrowing money to fund Government spending, we went into the banking crisis effectively with the nations credit cards “maxed out”.

            The simple fact is that we need to face the reality that if we want the luxuries that we have come to take for granted in the Western Europe, we have to work for them and you like me who are the generation that arrived in the workforce after the devastation of the 60’s and 70’s, need to compete in a global market for our jobs in manufacturing.

  6. The rot has started. They already have a Chinese plant, the process will accelerate.

    The likes of Hyundai and Kia already produce cars in the Czech Republic and Slovakia, low labour rates are the way to keep costs down, and the fact the plants are nearer to expanding markets are a side bonus, too.

  7. But let’s not forget while all these “acrimonious” pay talks where going JLR was opening its new Engine Manufacturing Centre and doubling the size of Solihull, so they have hardly been that concerned about investment in the UK. I have seen nothing about this in the national press. Strikes me this is just some journalist on a regional newspaper trying to make a name for themselves. JLR will invest overseas, that’s inevitable. Every manufacturer expands production to put it closer to their products markets and avoid local import tarrifs. To suggest JLR is going to do this and then pack up in the UK because of the Unions is utter rubbish.

  8. @ Paul, JLR will never leave Britain, the brands are too closely associated with Britain that making them in Eastern Europe would devalue them. However, both unions and management have to tread carefully as TATA can move production anywhere they want in the same way Ford moved production of its cars from Britain at short notice. I think the way TATA has acted is a bit of blackmail, “you do know we have workers in Eastern Europe who can make these cars for £60 a week?” and no doubt this would make the unions back down.

    • Yes, I think this is TATA and JLR politely reminding the unions that production can be moved abroad. Didn’t Ford use the threat of producing the then new XK8 abroad (in Portugal of all countries) to get some government grants?

  9. Hope we don’t end up with Turkish-built Jaguars (like Transit vans) Perhaps Austrian ones though?. But, having said that, I hope Jaguar concentrate investment and production mainly in the UK.

    As has been posted here, one always thinks of Jaguar being a British icon. It took time for me to get used to MG being Chinese now.

    • The difference being that MG IS a Chinese company now, managed out of China, largely made in China, but with some design and engineering in the UK, and a small bit of UK final assembly.

      JLR is an Indian owned British company.

      Lots of BMWs and Mercs are made in the US, all the very successful BMW X SUVs are made in the US, and exported to Europe, and it doesn’t stop them feeling totally ‘Germanic’.

  10. @ Hilton D, Jaguar is to Britain what Cadillac is to America, a distinctly British upmarket car in the same way Cadillac is iconic of America. I would imagine if a Jaguar was produced abroad and cost cutting took place it wouldn’t be the same and buyers would lose interest. As it stands, Jaguar in Britain is doing very well and JD Power suggests their cars have come on massively in recent years.

    • Did I miss the bit where GM sold off Cadillac to an Indian conglomerate? People buy new Jags for the styling and for the nice interiors but I don’t think many people are buying them for the Britishness.

  11. There is a fundamental reality that Unite Union seems to fail to grasp which is that their members compete in a global economy and whether they like it or not, if they price them out of the market they will lose their jobs to workers in other countries.

    All this about sharing in the success and keeping their pension rights is just shouting in the wind, because they can only justify the higher cost of employment in the UK if it is matched with higher productivity.

    Also those commenters talking about massive JLR profits need to take a reality check, the profits relative to the massive investment in JLR are very marginal. There are simply much less risky ways to get a better return than putting money into JLR and the controlling company is heavily indebted to the banks.

    Of course when you look at the leadership of the Unite union, with its hard left politics and role in the anti-globalisation campaigns, you understand why they are refusing to grasp the reality.

    Then again why as a JLR employee would you want to be a member of a Union who’s leadership want to stop anybody being in a position to buy your company’s products?

  12. As I see it, it’s all about being reasonable and fair. If that is kept at the forefront during negotiations over the location of any future new manufacturing plant, both JLR and its British workforce, whose hard work has contributed so much to the company’s success, would emerge winners.

    Jaguar Land Rover is a British icon and manufacturing elsewhere would turn simply turn it into just another car manufacturer. In official press releases, Dr Speth, JLR CEO has been quoted as saying that being made in Britain is at the heart of its cars’ appeal. I wholeheartedly agree with that.

    Regardless of the compelling reasons to open a plant in China, a Range Rover Evoque made in Jiangsu will never be quite the same as one made in Halewood. Britain should always remain the location of first choice for any new JLR plant.

    • But those German Icons Audi, BMW, Mercedes still manage to keep their Germanity even though many of their products are made in the US and Eastern Europe.

      I also remember when Jaguar was a Coventry Icon, and would have been consider impossible for a Jaguar to be made in Birmingham let alone Liverpool and still be a Jaguar.

  13. @ Graham A, Unite is run by a seventies throwback who would dearly love to take us back 40 years, same as another relic, John Prescott, has now been given an adviser’s job to Ed Miliband. While not knocking people like Len Mc Cluskey for choosing to keep the old style left wing views that became unfashionable under New Labour, sadly people like him don’t realise the world has changed since 1979 and even most of his members would baulk at politically motivated strikes. No doubt should Unite members lose their jobs, Mc Cluskey would still get his huge salary and chauffeur driven car( some socialists are more equal than others).

  14. With regard to moving production abroad, I do remember British Leyland seriously considering moving Allegro saloon production to Belgium in 1978. However, even though the company stated the cars were assembled from British built kits with no foreign parts, the project became largely stillborn due to union and local Labour MP resistance. This was like the reverse of what would happen now, British Leyland was considered a national asset and everything it produced had to be British. A few thousand Allegros made it over from Belgium in 1979, but this was done quietly and the closure of the Belgian assembly plant in 1981, ironically costing 236 jobs in Cowley for kit packers who sent over Allegros in CKD form to be assembled for the Belgian market, meant this option was never mentioned again.

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