State needs a big stake in JLR
Dear Editor, 1948 was an important year for the British car industry.
In that year we had the second largest car industry in the world and in spite of a world war we had an industrial base to be proud of.
In 1948, for the first time under the new Jaguar brand name, the company launched two new models called the Mark V and later on the world famous XK 120 model. Two fabulous vehicles.
In that same year and just down the road a certain car company, which unfortunately no longer exists, called Rover launched a new vehicle inspired by the American Jeep and using readily available aircraft aluminium – it was called the Land Rover.
Thanks to Gordon Brown we are about to get a taste of 1948. Last month the IMF predicted that the UK economy would shrink by 2.8 per cent which will be the worse contraction in our economy since 1948.
Gordon Brown’s policy of reckless borrowing is projected to leave the economy saddled with more debt than we had in 1948, and that was after we had fought and won the Second World War.
Sixty years later we now have a relatively small car industry that is almost entirely foreign owned. This country produces about 1.5 million cars a year and that production is overwhelmingly dominated by the three Japanese manufacturers Nissan, Honda, Toyota and the German manufacturer BMW.
This almost exclusive foreign ownership of our car industry is yet another reason why this country is so ill prepared for Labour’s recession.
As the financial crisis gets worse, we will all be forced to watch as these foreign owned companies begin to shut down or reduce car production in the UK.
This government has had plenty of warning of this over the last 10 years about the dangers of foreign ownership but has done nothing to reverse this trend. They chose to let Rover go to the wall and they stood passively by while Jaguar and Land Rover were passed from pillar to post by foreign car companies. Owned by BMW when Labour came to power in 1997, then sold to Ford in 2000 and now sold to TATA last year.
At the same time over the last 10 years we have seen how other foreign car companies have retreated to protect their own home production.
This government has watched passively as Dagenham closed, as Browns Lane closed, as Ryton Closed and as Vauxhall at Luton closed.
That is why the Government has been floundering over the last two months in response to calls for help from Jaguar Land Rover.
They simply have no idea what they to do when confronted with the problems of trying to support foreign owned car companies.
For two months we have had mixed messages – Gordon Brown saying he will do what he can to help and Peter Mandelson saying he will not let Jaguar Land Rover fail.
These are all empty words and promises that will be shown to have little substance.
If Peter Mandelson says Jaguar Land Rover will not fail what will he do when TATA tries to move production of the Defender model to India which will be a likely option for them in the future? Will Peter Mandelson try to stop it? If TATA moves the Freelander model from Merseyside to Slovakia to reduce production costs, again a serious option for TATA will Peter Mandelson stop that? Of course he won’t, TATA will do what is best for TATA. We have allowed Jaguar Land Rover to fall into foreign hands and the loss of control is the price we will pay
Our European competitors do things differently, of course they don’t hand their industry over to foreign companies.
The French and the Germans have not dithered for months, they have acted immediately in the national interest and offered huge financial support packages to their national car makers.
The national German car industry employees about two million people and makes about five million cars. They have put massive loans and subsidies already into their car industry and have introduced a scheme to give new buyers a £2.5K subsidy to buy a German car.
The French car industry produces about three million cars per year, employs over two million people and has already announced a huge range of assistance including a £1,000 subsidiary to buy a French car.
The French Government has even hinted that they may take a stake in their own car industry.
What companies does this government chose to take a stake in – it pours billions into the banks.
They then put another £12 billion into a crazy wasted VAT reduction scheme.
If this Government had the slightest idea how to support manufacturing in general or the car industry in particular then they should have bought Jaguar Land Rover last Match from Ford instead of letting it go to TATA. The price tag then was £500 million – that’s about £33K for each of its employees. That would have been a bargain.
They could have then have put perhaps £3 billion into a development fund to built up the company and then floated it off ten years later ensuring that it remained British.
It’s not too late. Forget about European rules on state aid, the Germans and the French have.
This Government should seek to take a large stake in Jaguar Land Rover, perhaps even purchasing it and be prepared to make the necessary investment to build up the range of models.
Coun Nigel Dawkins,
Birmingham City councillor for Bournville,
Cotteridge and Stirchley.
Well, I must say I never though I'd see the day when Tory would want the state to buy a failed company. The reason that Jaguar-Land Rover keeps being put up for sale is because it is not a viable business. Dawkins is a member of the party that ran down the car industry in the first place. He is standing to represent the party that sold the remains of the British car industry to a German firm, I'm sorry but how dare he complain.
This Blogger is not a fan of neither the Thatcher or major governments but lets put this in perspective. It is an accepted part of mainstream economics that industries come and go. Both of Britian's leading party have form when it comes to nationalising failing industries. The labour Party started the trend when they went messing with coal in 1948. Labour compounded this in the 1960s by taking control of the steel industry and thus sealing the fate of British heavy industry (the contribution of Harold MacMillian who's Mussolinite corporatism saddled British industry with inefficient poorly sited plants and gave both workers and employers a raw deal in collective bargaining). The Conservatives soon got in on the action by nationalising large chunks of the aviation and ship building industries. Ship building like coal mining had been in decline since the 1890s, but aviation wasn't doing to badly.
Lets look at the car industry in more detail. I am inclined to agree with Counsellor Dawkins that in 1948 the British car industry was in a state of some strength. The ravages of war and the level of industrial development in the UK circa 1948 relative to the rest of the world meant that in 1948 the British car industry was second only to the American.
In 1948 Italy and France were recovering from war and their national car industries were a shadow of what they are today, the mighty German car industry is almost entirely a post-war construct. Volkswagon didn't produce cars in any volume until 1949, the year of the foundation of the Federal Republic. the rest of the world offered no competition, the Soviet Union and Eastern Europe (with the notable exception of Czecholslovakia) were light years behind the West. In the Far East China was experiencing civil war, Japan was a semi-industrialised American colony, South Korea was almost entirely rural. The current success stories of motor production Mexico, Turkey, Iran, Egypt barely had paved roads.
In such an economic climate is it really surprising that the UK's car industry was in such good shape? I don't wish to knock the British car industry unfairly but I think that in the 1950s a heavily protected market led to a degree of complacency that bled commercial flops. Even the iconic Mini could only be produced by the BMC at a lose!
The death knell came in the 1960s with state interference. the Planning Board bankrupted the successful Hillman company by forcing them to move production from the West Midlands to an undeveloped part of Scotland. Likewise; Tony Benn's 1969 merger of the two main players the British Motor Corporation and the Austin Motor Company into British Leyland proved a disaster. The two companies proved impossible to integrate, unionists made restructuring impossible thus destroying the entire industry, duplication and design problems lead to financial meltdown and a dwindling customer base. Leyland just could not compete with the cheaper, better engineered and styled cars from Europe and Japan. We have seen the same thing in the USA with GM, Ford and Chrysler. Then as now nationalisation beckoned...
The Thatcher Government starved the car industry of funds-however, they did try to salvage what remained in the former of Rover Group. Unfortunately Rover Group failed because a company of its size just couldn't stay afloat in the world of modern mass manufacturing. The reason that Rover passed out of British hands was simple. There simply was no longer, the skill capital, or desire to keep a substantial car industry.
The Reckoning
The job of government is to protect the people. With the peoples consent government acts as an arbitrator in disputes through the courts and Police, thus enabling the peace to be kept. The rule of law enables people to govern themselves. The state gets it's power from the people. The only legitimate base for state power is that the people have devolved their powers to the government. The Government has a defensive role-this defence can be extended to health and social security in the form of mandatory insurance.
The Government has no place in industry. Industry is the providence of the private citizen. The Conservative Party has historically had a greater measure of respect for the private citizen than the Labour Party. It would appear that Nigel Dawkins wishes to cash this inheritance in at the pawnshop of broken policy.
It is now recognised that the UK was never a great manufacturing nation. Britian has never had a trade surplus. Today manufacturing nations like Germany have trade surpluses of 150 Billion Euros a year. In 1900 the UK had a trade deficit equal to over £16 billion in today's money, the national income was about £400 billion a year (2008 £). The country have a massive trade deficit that was plugged by the financial service industry and shipping. The same is true today. Manufacturing contrary to popular opinion has not declined, it has merely grown more slowly than the rest of the economy. In 2006 the UK exported nearly £450 billion worth or manufactured goods, that's more than ever before.
The UK's industrial economy has been changing for a long time. Government intervention merely makes the pains of adjustment worse. If the coal industry had been allowed to decline gracefully instead of being left to slump, maybe the coal mining communities would have been able to us their own ingenuity to adapt and improve their own lives immeasurably. Likewise government intervention in the steel and car making industries succeeded; not in helping the poor by giving them jobs but adding to their ranks by running down the industry so it couldn't compete with Europe, East Asia and Brazil.
Governments can't run companies. Governments are kept in power by voters. They can't make hard decisions that affect their workers when their workers are their bosses and pay their wages! They are in power for just over a decade at most and thus can't think about the long term. This short sightedness is great for running a county. We want leaders on their toes. We want business' on their toes, however that is business' problem not Gordon Brown's!
A Proposal
If a successful firm like TATA can't make a go of Jaguar Land Rover I don't think anyone can. Dawkins concern for his constituents and the countries manufacturing base is admirable but miss placed. If the UK is to survive in the new economy it must move up the value chain. The engineers at Jaguar Land Rover have valuable skills that can be put to use in new firms which are viable for the next century. There is no point propping up outdated sunset industries in an overcrowded market. If the Government gives Jaguar have a billion this year it will have to give it another half a billion next year and every year. Is it really worth it? Why not give that half billion to a new West Midlands County Council (like the one that existed before Thatcher destroyed our local government)? The council could set up a new bank to support local industry. A bank that charges low interest and gives generous loans. It could underwrite new industries. New industries that will see the West Midlands made a manufacturing powerhouse once more.
I'm talking about new technologies like wind turbines and fuel cells. Highly skilled precision industries, a thousand new metal bashing shops, independent and creating real communities around those who work their.
Why throw good money after bad? If Jaguar falls give the workers a hand up not a hand out.
Don't vote Tory 2010 if you support free markets and hard work!
