Automotive sector leaders are visiting Whitehall today to plead for action to help prevent their £51billion industry from melting down.
Executives representing vehicle manufacturers, supply chain companies and retailers, who support a total of 850,000 jobs, are due to meet business secretary Lord (Peter) Mandelson in a move thought to be unprecedented in the 100 year-plus history of the industry.
The move comes a day after Land Rover added to the gloom by announcing that it was extending the Christmas shutdown of its Lode Lane plant at Solihull by a third week.
Toyota, the world’s richest car company, saw its bonds downgraded from a virtual gilt-edged AAA to AA. Top of the executives’ “wish list” will be action to boost the cashflow of vehicle manufacturers facing big falls in new vehicle registrations.
While industry leaders are concerned not to sound alarmist, there is an underlying worry that manufacturers, who despite increasingly lengthy factory shutdowns have avoided large-scale lay-offs, could soon start running out of money.
That would have a potentially disastrous impact on thousands of companies in the supply chain and on future vehicle development and technological projects.
“The motor industry faces a set of unprecedented market conditions,” the Society of Motor Manufacturers and Traders (SMMT) said ahead of today’s meeting. “The dramatic fall in demand for new vehicles around the world, combined with the limited availability of funding and liquidity now puts at risk valuable industrial capability.
“The global credit crisis is at the core of the issues we face and the fundamental challenge is the accessibility and affordability of credit.
“Urgent action is required to boost demand for new vehicles and ease the short-term cashflow pressures on UK automotive manufacturers and suppliers.”
The delegation will ask Lord Mandelson, among other things, to ensure the industry has “fast access” to credit and loans while setting up special liquidity arrangements for vehicle finance companies.
Speaking to the Birmingham Post, SMMT chief executive Paul Everitt, said: “It is a very complex picture and we will be trying to improve the Government’s understanding of the challenges we face.
“The priority, though, is access to finance. There are people out there who would like to be buying vehicles but who are finding it either difficult or very costly to access finance.
“Unless we address this short-term problem of finance companies are going to have enormous problems.”
The squeeze on cashflow means that vehicle builders are less able to put a floor under any key component suppliers who run into trouble. They will also soon be in the “invidious position” of having to decide whether to maintain employment, invest in new technology and develop new products, Mr Everitt said.
“We don’t care what the mechanism is for improving liquidity, whether it is Government guarantees, Government money or giving the banks a good kicking,” he said.
“I am trying to stay away from any hint of alarmism but the Government needs to show that it is committed to maintaining capability if we are to have a successful industry with a bright future.”
The £3 billion-a-year motorcycle industry, employing 15,000-plus, has also called for Government action.