Industry at all levels is in need of

quick help

Britain cannot rely on the European Union alone to protect its “strategically vital” automotive industry in a time of global crisis.

That was the message from Graham Smith in a speech to the Society of Motor Manufacturers and Traders’ annual dinner as UK carmakers were enlisting government help in coping with haemorrhaging sales and slumping production levels in the face of the economic crisis.

Mr Smith, the SMMT’s outgoing president and a senior vice-president of Toyota Motor Europe, said the industry was confronted with some of the worst economic conditions in a generation.

“Consumers have been battered by high fuel costs, credit crisis and now by the onset of a global downturn,” Mr Smith said.

“There is a level of concern...that we have not experienced in many years. Sales are falling, anxiety is rising and things look certain to get worse before they get better.

“But one thing has become clear. A modern economy cannot live on financial services alone. The motor industry is strategically vital to the economy and is now attracting the attention it deserves.”

Mr Smith was speaking after the pre-Budget report from chancellor Alistair Darling, in which VAT was cut by 250 basis points and proposed swingeing increases in some levels of vehicle excise duty (VED) were watered down, but ahead of an SMMT-led industry delegation to business minister Lord (Peter) Mandelson last Thursday.

The industry welcomed the cut in VAT, Mr Smith said. But the Government’s failure to scrap the first year rate of VED and review its vehicle taxation policy in line with EU CO2 legislation was disappointing.

“The global credit crisis is at the core of the issues we face and the fundamental challenge is the accessibility and affordability of credit.”

Mr Smith said European finance ministers will this week decide on a proposed €40billion (£33billion) loan package by the European Investment Bank.

“The proposed package would support UK automotive companies wherever they are in the supply chain, ensuring they can continue to invest during the economic downturn.”

But he went on to say: “In a global crisis we cannot rely on Europe along to support British industry.

“We need a national scheme with an immediate impact – broad in its aims and availability.”

A key element of any package would be to allow vehicle finance companies access to the special liquidity arrangements set up for banks.

It was vital that the industry continues to upgrade the skills of its 850,000 employees and maintain current levels of spending on research and development.

“In times of trouble, research and development is often one of the first budgets to be cut. But, I tell you, we cut these budgets at our peril. If anything, we should create a ring of steel around them,” Mr Smith said.

He added: “Over 800,000 jobs depend on the automotive industry and we generate £9.5billion value added. But our industry is about more than numbers. Ours is a totemic industry.

“The products made in the UK excite imaginations around the world. We have embraced globalisation and helped to make the UK feel like home for companies with a diverse range of cultures and nationalities.”

Mr Smith will be succeeded as SMMT president on January 1 by Joe Greenwell, a former chairman and chief executive of Jaguar Land Rover.