Recent news that GM via Vauxhall is creating 550 new jobs in the UK at Luton and Ellesmere Port is of course excellent news. But it’s especially significant in the context of GM taking capacity out of its European operations. At the same time as creating jobs in the UK, GM – via Opel - is closing its Bochum plant in Germany.
That’s remarkable in that the latter is the first major automotive plant closure in Germany since the second world war; in stark contrast with the UK where I’ve lost count of the number of auto plants shut down here in the West Midlands alone in recent decades.
We should perhaps pause to reflect on two aspects of this.
Firstly, it shows what a great job Vauxhall management and workers are doing. Both Luton and Ellesmere Port have seen significant investment after management and workers pulled out all the stops to make the plants as efficient and flexible as possible (as JLR workers did at Castle Bromwich as well). For example, just a few years ago Luton workers agreed to a two-year pay freeze in return for significant new investment.
And when GM was looking at reducing it over-capacity in Europe and Ellesmere Port was in the firing line it was again another major effort by management and unions which along with some useful support from the government not only saved the plant but convinced GM that it was worth investing in to produce the next generation Astra. Hence the recent announcement of 550 new jobs across the two plants.
Vauxhall’s UK quality and work practices now compare with anywhere in Europe, and the adaptability and skill level of Vauxhall’s UK workforce is a major asset for the firm.
The firm has a line-up of well designed, styled and engineered cars, with decent quality levels. The Adam, Mokka, Astra and Insignia – soon to be joined by the Viva city car (which brings back childhood memories of pale blue and light green vivas) - are doing pretty well.
The next generation, British built Astra should finally take the fight to the best-selling Focus. The Insignia is still selling in decent numbers in a shrinking D segment, and the Mokka is selling like hot cakes in the booming B-SUV market. As a result, Vauxhall – like Peugeot - has done well at converting showroom visitors into buyers.
Secondly, the new jobs show just how well UK auto more generally is doing. On the back of a major upturn in auto assembly in the UK – up by over 50% from a low point of around a million cars in 2009, combined with a change in economic fundamentals which are encouraging firms to source more components locally, the sector is now experiencing investment on an unprecedented scale. Over £6bn has been invested by major auto assemblers over the last 3 years, with more to come in the supply chain.
I’ve talked before in my blogs about how 1 in 6 manufacturing firms – including automotive firms – are reshoring some of their activity, driven by rising costs overseas, increasing transportations costs, and by a desire to boost supply chain resilience, to improve quality, and to have a faster turnaround time for production.
And given the investment taking place, in part supported by a more intelligent industrial policy and a big effort by unions, assemblers and bodies such as the Manufacturing Advisory Service and the Society of Manufacturers and Traders, the proportion of parts sourced from UK suppliers is likely to rise – maybe to above 40 per cent by 2017. That in turn should help component suppliers here in the Midlands.
That’s especially welcome, as over the last few decades, the UK’s automotive supply chain has taken a big hit. One analyst, John Leach at KPMG, stated recently that the UK’s 2,300+ supply chain companies had been “ravaged”, with the proportion of parts sourced from British auto suppliers falling to as low as 35%. That’s now changing.
A big question for government and local LEPs is whether this surge of interest in investment in UK auto and localisation of more sourcing will feed through to more jobs. It should do, with the upswing likely to add “tens of thousands” jobs according to Leach.
Total UK car production rose to just over 1.5 million in 2013, but is expected to rise to more than 2 million by 2017, according to the SMMT. If that happens, the UK will be on track to be making more cars than ever before.
That’s quite a turnaround from just a few years ago.
Professor David Bailey works at the Aston Business School in Birmingham