§ 9.2 pm
§ Mr. George Park (Coventry, North-East)
I am grateful for the opportunity to discuss the motor industry and to draw attention to the fact that world-wide the industry is in recession, with one significant exception—Japan. In the first half of 1980 Japan put 3 million cars on the world's roads. Last month, in a drastically reduced home market, the Japanese sold more cars than British Leyland, but we still rely on a gentleman's agreement to contain these soaring imports. We play the trade game according to the 141 rules of croquet, whereas the Japanese practise judo world-wide.
Following Japanese exports of 1.7 million cars into America, 300,000 American car workers were sacked or laid off. That led the American Government not only to give direct financial help to Chrysler but to try to give its car manufacturers a breathing space to retool for smaller models by the introduction of a new industry policy. That seeks to force Britain and other European trading nations to absorb the excess of Japanese cars which is troubling the American market. Later, I have no doubt, we shall be expected to absorb the new smaller models from the American plants.
In France, Citroen shut down production for seven days. French Talbot declared longer than usual breaks at Christmas and the new year and closed its plants for six days in the first four months of 1980. Its workers are now on short time, as are the workers in the French Ford plants. The French Government have told the Japanese bluntly that the car industry is too important to the economy to allow the present position to continue.
Fiat in Italy has announced that 78,000 of 114,000 workers are to be laid off. Even in Germany 4,000 workers have been sacked by Opel. There is also short-time working at Ford's in Germany, as there is at Volvo in Holland and for the bulk of the 32,000 car workers in Spain.
In Britain 18,500 jobs have gone from British Leyland with more to come at Canley in Coventry and in the body shops at Swindon following the pending closure of MG and the slump of its potential rescuers, Aston Martin, which is sacking one-fifth of its work force. That seems to be the fate of more than one rescuer. Armstrong Equipment, which tried to rescue the Meriden motor-cycle business, is chopping 1,500 jobs from its labour force of 6,500. In West Bromwich the old Jensen plant is now the United Kingdom base for the Japanese Subaru. British Talbot has sacked 2,500 workers. Another plant in Coventry is almost completely dependent on a contract from Iran.
§ Mr. William Wilson (Coventry, South-East)
I am glad that my hon. Friend has mentioned the contract that Talbot has 142 with Iran. Can he tell the House that the existence of Talbot in Coventry, and probably Talbot in this country, depends upon the implementation of that contract with Iran, which is held primarily by the factories in Coventry?
§ Mr. Park
I am grateful for that intervention. There is no doubt that the livelihoods and jobs of those in the Stoke works in Coventry are perched on a knife-edge. It cannot be reassuring for them to know that their livelihood depends on events in Iran.
The previous Government had to give the factory temporary employment subsidy to help it over a difficulty and there are now doubts about the future of the other Talbot plant near Coventry because of the situation in France that I have outlined.
Every week there are announcements of sackings and layoffs, but none of that is news to the Government. In his capacity as president of the Committee of Common Market Automobile Constructors, Sir Michael Edwardes wrote to Commissioner Davignon on 27 June and to member Governments spelling out the degree of Japanese penetration and the fact that it was largely due to the depreciation of the yen by nearly 20 per cent. over the past 18 months. The letter also expressed doubt whether the present market situation came within the GATT. I hope that the Minister will touch on that aspect in his reply.
The pressure in Britain is greater than elsewhere, largely because of three abnormal factors in our economy that were referred to in the previous debate and in Question Time earlier today—the strong pound, the steep increase in the rate of inflation, and high interest rates.
The rate of exchange normally reflects the general state of a country's industrial wealth. If industry is not performing well, the currency weakens. The cost of imported goods rises—protecting the domestic industry—and the price of exports goes down, making it easier to sell abroad. If the currency strengthens, imports become cheaper and export prices rise.
North Seal oil has distorted that situation and our rate of exchange does not properly reflect the state of British industry. That has meant a savage reduction in profit margins on exports. Vehicles 143 are having to be sold at a loss, as in the case of MG, because if prices are raised the goods are no longer competitive.
In the Government's ideological haste to distance themselves from involvement with industry and their inability or unwillingness to manage the exchange rate for the pound, they are not putting the temporary bonus of North Sea oil to work to regenerate our industry.
Britain has become the most profitable market for any foreign manufacturer. In a period of one year, the profits for Italian imports into Britain have gone up by one-half, the profits for France and Germany have doubled, and those for Japan have quadrupled. Our trade in complete motor vehicles is out of balance.
When selective import controls are mentioned, as they were in the previous debate, the Government express fears about retaliation. They should consider the fact that in 1979 we imported 720,000 vehicles from the EEC and exported 140,000; we imported 199,000 from Japan and exported 2,500; we imported 39,000 from Eastern Europe and exported 400; and we imported 50,000 from Spain and exported 300. How much retaliation can be exerted on those figures?
In present circumstances, apparently it is profitable for Citroen to establish a marketing office in Leamington for its machine tools, transfer lines and specialised motor industry equipment. It has already sold equipment to the Ford tractor plant at Basildon and currently is quoting for BL equipment. This points to the increasing tendency of the British machine tool industry to act as agent, rather than as manufacturer. However, that may be the subject of a debate on another day.
Any Government must seek to keep inflation under control, but no Government should be actively promoting recession. No Government, especially one who deliberately increased inflation within weeks of taking office, should consider that any remedy is justified. No Government should use unemployment as an instrument of policy.
Inflation means that a manufacturer in Britain buying his raw materials here pays more for them than his counterpart 144 in other industrial countries. But the accusation often made by the Prime Minister that workers are creating unemployment by excessive wage demands cannot be levelled at the 160,000 employees of BL who settled for a basic 5 per cent. increase for 1980 and who achieved a record of 98 per cent. of available man hours free of strikes or disruptions in the first half of 1980.
In the debate on the West Midlands on 20 June, the Minister of State, Department of Industry, admitted that interest rates, inflation and the high level of the pound were the immediate causes of industry's current problems. But he went on to repeat the parrot cry that we hear from Minister after Minister "You are not sufficiently competitive". With the thousands of people shed in the past year, the reason can hardly be overmanning. I think that it is more a question of better facilities and more funds for research and development.
§ Mr. John Patten (Oxford)
The hon. Member speaks of facilities and increased investment. Does he not agree that some, though not all, of those who have been made redundant find themselves redundant because of the introduction of investment for robotics and machine-assisted ways of production? Unless BL and other companies modernise in this way, with the absolute concomitant that some labour will have to be shed, BL will not succeed.
§ Mr. Park
I do not disagree. But, that having been said, the hon. Member for Oxford (Mr. Patten) has to go a stage further. He has to accept that by introducing new methods of production, by introducing robots, as has been done on the Metro line, and by being able to achieve the same level or an even higher level of production with less labour, either we have to aim for a greater share of the market to maintain a greater labour force or we have to look at the other aspects to which the trade union movement has made reference many times—those of a shorter working week and trying to line up our holidays with those enjoyed on the Continent. At present, our wage levels are considerably lower than they are on the Continent. Therefore, although I accept what the hon. Gentleman said, I urge him to look at the other side of the coin as well.
145 When the hon. Member for Oxford intervened I had just referred to the speech by the Minister of State on 20 June. He did not tell us how industry was expected to invest in modern, cost-effective equipment with interest rates at their present penal levels. How are manufacturing stocks to be funded? How do car dealers fill their showrooms? The Minister did not give the answers to any of those questions.
On 10 December, with the hon. Member for Coventry, South-West (Mr. Butcher), I led a delegation to see Ministers at the Departments of Industry and Trade. Those Ministers were told by major manufacturers of components for the motor industry, employing about 440,000 people, that they had reached the limit of development using normal commercial solutions and for them to continue trading internationally and domestically they now had to look to the Government to create a fair trading environment. So far, they have looked in vain. They appeal for decisive action to combat the situation that the United Kingdom is currently open to all-corners without the restrictions that they find in world markets. They drew attention to the freeing of franchise arrangements as favoured by the Price Commission in a report now with the Office of Fair Trading. They ask that our copyright rules be brought into line with those in other countries to stop the counterfeiting that is going on with brand names. If nothing is done about type approvals, required by foreign Governments, especially for lorries, we should erect our own non-tariff barriers, acting with the same commercial concern for industry as most of our competitors, both in the EEC and internationally.
There should be searching inquiry into the American DISC system, Comecon dumping and local content rules. For example, Brazil requires an 84 per cent. local content and Spain 75 per cent. We have no such requirements. These are all areas for Government action, and time is not on our side. It is predicted by experts in the motor industry that by the end of the 1980s only six volume car manufacturers will exist in the world, each producing a minimum of 2 million units a year. If this is so, it is essential that one of them should be located in Britain, especially when one takes into 146 account the impact on other industries, such as steel, textiles and glass, that are already struggling.
Apart from components, there is at present only one volume producer of vehicles, which has its basic policy decisions taken in Britain. That is BL. So far I have not mentioned Government financial support, but I hope that it is clear from the situation that I have outlined that BL cannot be expected to generate, within a reasonable time scale, the cash flow necessary to continue with its policies of adopting the latest production techniques, as in the case of the Metro, the design techniques in the drawing office at Pressed Steel Fisher and new concepts like the economy car or the next new models.
The Metro, the Ital and the Bounty may enable BL to advance only slightly or even just tread water. If it is to obtain a greater market share, the next new models need funding now in order to retain a United Kingdom vehicle industry. From the present shambles, the Government see emerging a tougher leaner industry, ready for the challenges of the 1980s, but unless some action is taken on the points that I have raised, what is more probable is a leaner, scrawnier industry more ready for the chop.
§ Mr. John Butcher (Coventry, South-West)
The hon. Member for Coventry, North-East (Mr. Park) and I have had this debate—almost a private debate—on many occasions. As we are time-constrained and a number of my hon. Friends wish to speak, I have undertaken to say that I will not detain the House for more than five minutes. I am delighted to see my hon. Friend the Under-Secretary of State for Industry—the Member for Arundel (Mr. Marshall)—on the Front Bench. I am sure that he will deal adequately with any flak flying around the Chamber. I hope that he will appreciate that my remarks and many of those of the hon. Member for Coventry, North-East concern the Department of Trade as opposed to the Department of Industry.
I should like to concentrate on what amounts almost to an injustice—the practice of tied franchise dealer arrangements, whereby a car manufacturer, foreign or domestic, can stipulate that his dealers in 147 the after-market can sell only those parts of which he approves. Therefore, Fiat et Volkswagen, for example, can stipulate that its British dealers must buy their parts from the original German or Italian suppliers.
That is an unfair trading practice. Thankfully, it is now highlighted even more by this Government's recent legislation on competition, which has empowered the Director General of Fair Trading to consider the effect of such monopolies, which eliminate free competition and create unfair pricing, thus causing the consumer to suffer.
The components industry, quite apart from the motor manufacturers, employs over 400,000 people and is of strategic importance. My concern is for free and fair competition in the supplier parts market. I am delighted that, contrary to some feelings held outside the House in the industry, the Minister for Consumer Affairs has fully endorsed the famous yellow book entitled "Prices, costs and margins in manufacturing and distribution of car parts." My right hon. Friend has sent it to the Director General of Fair Trading to investigate this aspect of motor trading under the monopolies provisions of the Competition Act.
My right hon. Friend has, therefore, done everything that she is empowered or obliged to do, but there is one problem. The Director General, by virtue of his office and of the fact that he has to be seen to operate fairly, decides which products to investigate. It is not the Minister's role to point to a particular scandal or injustice. He must make the decision alone. Therefore, the best help that we can give our friends in the motor industry, particularly in the Midlands, is to generate a debate in which the strategic, economic and social importance of the components industry is recognised nationally. I hope that in that context, since the Government have discharged their duties, the Director General will be left in no doubt where his major duty lies at this moment.
§ Mr. Julius Silverman (Birmingham, Erdington)
The components industry is, of course, a part of the motor industry as a whole and is not likely to be separated from it, so it stands to reason that a depression 148 in the motor industry will affect the components industry—as the hon. Member for Coventry, South-West (Mr. Butcher) will readily agree.
I want to start from a constituency angle. In the motor car industry—not merely the motor car manufacturers but the producers of accessories and components—no fewer than 10,000 jobs have disappeared in my constituency in the last 18 months, or have been announced to disappear. A large part of the Pressed Steel Fisher plant of British Leyland has closed and redundancies have been declared at Dunlop. More recently, I and other Birmingham Members have heard of the proposed closure of another plant in my constituency—Forgings and Pressings of Witton—which is a part of GKN and which caters largely, or almost entirely, for the motor car industry. That will be a terrific blow to my constituency, quite apart from the small companies which are also involved. If the motor car industry collapses the social and economic consequences in the West Midlands will be a complete and utter disaster. The effect upon our economy as a whole will be equally disastrous.
I mention that as an example of what is going on, bearing in mind that the full impact of these events has not yet struck. Many redundancies have been announced which have not yet taken place. To a large extent the recession in the domestic car industry is a reflection of the recession in the car industry throughout the Western world, and it is true that the Government can do nothing about the problem unilaterally. However, I believe that certain things can be done.
Some aspects of Government policy have undoubtedly hit the car industry. The rate of exchange imposes an enormous competitive burden on the industry. It is no good the Prime Minister or the Secretary of State for Industry saying that the industry must be competitive when, at the same time, the Government are imposing burdens which make British industry uncompetitive to the extent of about 20 per cent. That is a large margin in relation to profits and costs.
Interest rates obviously affect the provision of capital, quite apart from Government policy on the free export of capital. That, undoubtedly, has resulted in British capital being invested in various 149 portfolios and projects in Europe and all over the world when it is required for investment in this country now.
Industrialists in my constituency have mentioned the costs imposed by the Government for energy, including gas and electricity. Those represent an additional burden no less in the car industry than in any other industry. Something can be done about that.
However, our major problem is import penetration. Current figures are calamitous when one considers the gradual and steady growth in motor car import penetration as well as import penetration of other goods. That penetration now amounts to well over 50 per cent. of the total market in this country. I have said before that that cannot be the result of our motor cars being entirely uncompetitive, because we succeed in selling a substantial number of cars throughout the world. British Leyland is having considerable success in selling its products. Our products cannot be entirely uncompetitive when we know that there is an opening for our exports throughout the world.
When one talks about free world competition one recalls that in the past we were a great industrial nation exporting manufactured goods in return for the raw materials that we needed. We could afford to be a free nation in those circumstances. Now, when the manufactured goods that we import are almost equivalent to those that we export, we are in an entirely different ball game. We shall certainly need to review our attitude to this problem in the near future.
It has already been said that various non-tariff barriers are being put up against our goods. We are not very clever at putting up such barriers. Some of them are technological barriers. There are hidden subsidies, tied franchises and all the other various methods which allow countries to exclude imports. This country will, therefore, certainly have to review its policy on import controls. I forecast that the case for selective import controls in order to protect the livelihoods of our people and our industry will find more and more support on both sides of the House, and that in the very near future the cry for such controls will certainly become irresistible to any Government.
§ Mr. Jocelyn Cadbury (Birmingham, Northfield)
I share the concern expressed by the hon. Member for Birmingham, Erdington (Mr. Silverman) about the level of redundancies in the motor industry. I share his concern also about the level of imports. I do not entirely agree with him about the reason for those imports. I believe that it is much more connected with our level of competitiveness than with other factors.
I shall deal first with import penetration and then refer to some recent comments by Mr. Bill Hayden, chairman of Ford of Europe, after his recent visit to Japan. Finally, I want to deal with areas of Government policy for the motor industry where a more positive strategy is needed.
Hon. Members will be aware that car imports for the first half of this year have captured 57½ per cent. of the market. A factor that has gone relatively unnoticed is the parallel and surreptitious invasion of commercial vehicle imports. In the first six months of this year imports of goods vehicles of less than three tonnes rose by 30 per cent. in value, and imports of those of over three tonnes by 21 per cent. It is disturbing to note the rate at which the Japanese have increased their share of the van and four-wheel drive markets. They now have 36 per cent. of a province where once Land Rover had a virtual monopoly. I find that extremely alarming.
While the Japanese may be adhering to the so-called prudent level of car imports, they are doing serious damage to the British commercial vehicle industry. Let us not forget, however, that by far the largest exporters of vehicles to this country are the Common Market countries. Renault, for example, has about 6½ per cent. of the United Kingdom market—more than half the total of Japanese imports. It is sobering to realise that we have failed to stem the tide of vehicles from Wolfsburg, Rouen and Turin, let alone the flood that is coming from Osaka.
It is important that we do not try to conceal from ourselves the reasons why Japanese car producers have been able to build up such an awesome lead, not only over our car industry but over the 151 European car industry as a whole. That is why I want to quote some of the points made by Mr. Hayden recently. As a result of his visit to Japan he discovered that the Japanese success was due 50 per cent. due to the level of automation and 50 per cent. to the level of dedication of Japanese managers and work people.
There are some specific aspects of Japanese factory organisation that he highlighted that will strike a chord with anyone who has worked, as I have, as a production manager in a British factory. I admit that I worked in a somewhat different industry, but it is surprising how similar are organisations such as maintenance on different kinds of industry in this country. For example, in Japan production line workers do all the simple maintenance jobs on their machines, which means that skilled men can concentrate on the more difficult maintenance work. Such a system goes entirely against the traditional division of labour in British factories, but management and unions will have to face the matter very soon. Similarly, a Japanese press operator will change a die himself, but in a typical Ford plant in this country a team of skilled men is required. In the Toyota body stamping plant a die change takes only 10 minutes, but in a United Kingdom Ford factory, it takes three or four hours. The difference in the way that maintenance is organised is one reason why the productivity of skilled labour in British factories is four to 10 times less than in Japanese factories.
A further important factor mentioned by Mr. Hayden is that Japanese car plants run with scarcely any stocks of components. That is possible because their computer-controlled supply system are so efficient, the quality of their components so good and their factories so strike-free that there is no need to stockpile parts. In a Japanese car factory one may find 12 engine blocks waiting at the head of the line, whereas in a Ford factory there will be two or three days' stock. That gives Japanese companies enormous advantages in keeping working capital to a minimum. Again, we shall have to take note of that.
Mr. Hayden made a further general point that is of great significance to us in the House. In Japan the link between Government, education and industry is so 152 absolute that they are virtually indistinguishable. The system ensures that nothing gets in the way of industry, especially exporting industry.
All these and many other factors explain why Nissan can make the Datsun Cherry in Japan for £1,225 and sell them for £1,661. The same car sells here for only £2,221. Far from dumping cars here, the Japanese are making more profit in Britain than in their own country.
§ Mr. Tom Benyon (Abingdon)
Does my hon. Friend agree that another reason for the imbalance in the motor car trade between ourselves and Japan is that the yen is at an all-time high and the pound is at an all-time high? A further reason is that the Japanese have tied up their internal dealer network in small lots in Japan, whereas we have not. They also have regulations that make it extremely difficult for us to export cars to Japan, but we do not have such regulations. Those are three matters on which the Government can take action.
§ Mr. Cadbury
I accept that the exchange rate has made life much easier for the Japanese and much more difficult for us. However, with the extraordinary differences in price and efficiency, I cannot accept that even a considerable devaluation of the pound would make any difference. The Japanese would still be far more competitive than we could ever be. They have the scope to cut their prices even further if a price war takes place, which is even more worrying.
Faced with that apparently desperate situation, what should we, and particularly the Government, do? We must learn from the Japanese the importance of industry and Government working together. As a nation we must adopt a wholly new philosophy. Everyone—management, unions, Government and our education system—must work in unison to improve productivity, push back imports and increase exports.
The Government need to act with a greater sense of urgency in specific areas. Here I am in agreement with previous speakers. I am an optimist, but, in the light of Bill Hayden's comments it is inconceivable that we can raise the efficiency of our car industry to Japanese levels in the short term. The Japanese car industry will not stand still and let us catch up. It is a moving target, and that makes it 153 even more difficult. Therefore, the Government must put maximum pressure on Japanese manufacturers to adhere to the existing informal understanding that imports into the United Kingdom should not exceed 10 per cent. They must make it clear to the Japanese that if they fail to keep to the 10 per cent. the voluntary controls will become formal and will be enforced.
§ Mr. John Townend (Bridlington)
Why does my hon. Friend think it should be 10 per cent.? I understand that the French have been able to restrict Japanese imports to 3 per cent. in recent years. However, import penetration in other EEC countries has been higher than that.
§ Mr. Cadbury
If Japanese car companies are not prepared to buy more British components, to trade freely and to make it easier for European and British car manufacturers to export their vehicles to Japan, we should demand that they reduce their imports to about 5 per cent. That would be reasonable. It is also important that the Japanese should be asked to cut down their sales of vans and four-wheel drive vehicles to 10 per cent. of the United Kingdom market and to hold them at that level.
The Ministry of Transport should move more rapidly to ensure that administrative controls on imports are at least equivalent to those imposed by our competitors.
Recently, I talked to a manager from the Leyland Truck Company who said that it is possible to have a new Renault truck on the roads in this country within a few weeks, whereas the equivalent British Leyland truck would probably take over a year to pass all the regulations and get on to the French roads. This is an injustice. I cannot accept that it needs to take until April 1982 to introduce type approval for imported trucks. We need a greater sense of urgency by Government Departments. After all, we are talking about the survival of an industry.
I turn now to the subject of financing for British Leyland. I ask the Government to take note of what has been achieved by British Leyland under the leadership of Sir Michael Edwardes against enormous odds. The new Mini Metro will generate much of the cash for 154 future models, but additional capital will be needed if the LC 10 and the AM 2 are to be developed successfully. Therefore, I ask the Government to recognise that if BL is starved of investment capital it will die, with all the consequences for unemployment of which the Minister is aware. It is not possible to run a business the size of British Leyland on a trickle-feed basis. Now is the time to start funding the LC 10, which is due to be brought out at the end of 1982 and is a crucial addition to the new model range.
I turn briefly to the role of management and unions. The challenge facing management in the short term is to raise the efficiency of our car plants to the levels of our European competitors. That is possible if the motivation of the work force can be raised. Those who went on the all-party motor industry committee visit to Renault some weeks ago saw factories which were efficiently run and where the manning was tightly controlled, but Renault was not so far ahead of us in terms of automation. The new Metro facility at Longbridge has put British Leyland ahead of the Europeans in some respects. Therefore, this should not be an impossible target.
Productivity is not the only factor. There must be a relentless drive to improve the quality of British vehicles. If the British public can see that a British car is as well designed and finished as its foreign equivalent, they will return to buying British cars in large numbers. But doors must fit properly and bits must not fall off. Attention to detail is the order of the day.
I turn to the role of the trade unions. I certainly do not underestimate the difficulties facing union leaders in the car industry at present. They are being asked to agree to revolutionary changes in manning at a time of high unemployment. However, I am happy to report that considerable progress has been made at the Longbridge plant in terms of industrial relations. That is particularly true of the new Metro facility where, for example, on the Kuka welding machines, instead of the entrie range of crafts being represented, maintenance teams have been established with union agreement consisting only of electricians and fitters. That will mean a much faster response to 155 machine breakdowns, because fewer separate crafts and management hierarchies will be involved.
I believe that our motor industry needs some protection from the Japanese. Therefore, the Government must take a firm line on imports from that country. At the same time, the British motor industry must make strenuous efforts to raise its efficiency at least to European levels. It is the role of the Government to remove the obstacles to the revival of our motor industry. It is up to management, unions and the work force to bring that revival about.
§ Mr. Peter Archer (Warley, West)
I do not think that this is a controversial debate. There may be some differences in emphasis between us, but basically I accept the diagnosis of the hon. Member for Birmingham, Northfield (Mr. Cadbury). All the constituencies represented in this debate face a common problem. Over the last few months, all of us have repeatedly referred to the onset of unemployment among our electors, to the closure of plant after plant, to short-time working, to redundancies among people in the prime of their working lives—some with a lifetime of service behind them—to hopelessness among school leavers and to increasing numbers of unemployed chasing a diminishing number of vacancies.
I do not think that this is merely a syndrome of the depression, because some of it is not cyclical in nature. We are losing markets which are irrecoverable. We are draining away skills which are irreplaceable. Apprenticeships are being denied to young people, who for ever will lose the prospect of that training. We have just had a report from the Manpower Services Commission on training in this country, and there was a disturbing comment on it in The Observer on Sunday.
We have had explanations for all that during the debate, and I do not think that there is much division between the two sides of the House. It is to do partly with high interest rates, partly with the consequent exchange rate of the pound, partly with inflation and partly with competition from foreign producers whose 156 Governments shower them with advantages which are denied to producers in this country. In that situation it is not surprising that some of us have felt the need to look particularly at the vehicle building industry. That, more than any other factor in our lifetime, has dominated industry in the West Midlands.
I was pleased that at an early stage in the debate the hon. Member for Coventry, South-West (Mr. Butcher) introduced a discussion about the components industry. While many of my constituents work in car assembly plants, particularly at Longbridge, I specially want to say something this evening about the many firms—some big and some small workshops on street corners—which produce components for the car industry.
When car manufacturers went into business and expanded rapidly in the 1920s they needed to establish assembly plants near to a flourishing engineering industry. They found one in the West Midlands. They found an engineering industry which was highly diversified and which could produce virtually all their needs. They found companies making nuts and bolts, screws, brass products and pressed steel products as well as foundries, makers of springs, tubes, plating, leather goods and paint. All of them were there among the communities in the West Midlands. The car industry brought them a new prosperity, but in return it made very great demands on them. In place of the special orders in which they used to deal, it required vast quantities of standard products, and the engineering industry totally restructured itself for that purpose.
Within the 30 years from 1920 to 1950 the car industry changed the whole character of the West Midlands. Some of the earlier industries had contracted, in some cases almost to extinction—saddlery, nail making and wheel making—while special light steels, laminated springs, precision tubes and rivets all flourished.
Then, as the vast numbers of standard parts were required, the processes were broken down. The comprehensive skills of toolmakers such as my father were replaced by narrower and more specialised skills, some of them appropriate only to particular toolrooms. The industry was organised to depend more or less upon 157 an even flow of orders. The components—which in many cases were wanted in millions—required storage space, and storage space to cope with more than a few day's production was usually not available. The capital wrapped up in those components meant that if the process was interrupted for any length of time there was a serious cash flow problem. There were relatively high earnings for those who had not served apprenticeships if they were prepared to do tiring and repetitious physical work in unnattractive jobs.
Those with engineering skills found that they could earn more money by leaving their engineering jobs and going elsewhere. Those contemplating taking apprenticeships saw little point in acquiring the skills, and that in turn led to a further breaking down of the processes to dispense further with the need for the old skills. So industry in the West Midlands was left with a high proportion of its work force in boring work, sometimes with very little job satisfaction, and toolmakers were left with the kinds of frustrations which led to the toolroom strike of 1977.
The hon. Member for Northfield will not be surprised if anxiety among the maintenance staff has led to the kinds of problems which, as he pointed out, do not exist in Japan, because the history of the industry still lies heavily on the present in this country.
The car industry changed the whole character of the area, even for those who were not directly concerned in producing for the industry. If the car industry were to disappear today, the engineering industry in the West Midlands would never be the same again.
I am not complaining. This all brought great prosperity to the area. We can only be grateful. But the region became over-dependent on one industry. If that industry contracts, it entails not merely reductions in its own work force; it carries with it contractions in the whole of the engineering industry of the West Midlands, and drags behind it the basic industries, such as steel and coal. So the car industry carries on its shoulders the whole prosperity of Britain's industry, and particularly of industry in the West Midlands, the cradle of the Industrial Revolution.
158 The car industry has recently not been proving successful against foreign competitors, either at home or in its markets abroad. As my hon. Friend the Member for Coventry, North-East (Mr. Park) said, there are several reasons for that. Partly it is to do with the position world-wide: partly, as the hon. Member for Northfield said, the fault is to be found within the industry itself.
We have seen with alarm a number of statistics, many of which have been quoted tonight. There was a recent table, produced by the Society of Motor Manufacturers and Traders, showing that the production of cars for the home market fell from 728,000 in 1978 to 678,000 in 1979. It is estimated that it will fall to 500,000 by 1981. Production for exports fell from 495,000 in 1978 to 392,000 in 1979. It is estimated that it will fall to 350,000 by 1981.
I accept that those statistics could be misleading because cars are assembled in one country from components produced in another. However, we are left with the clear impression that the trade is contracting. If the problem is largely one of scale—we are told repeatedly that it is—even British Leyland is substantially smaller than most of its competitors in America, in Japan or even in Europe. If British Leyland is already too small in comparison with its competitors and it becomes smaller, it will be caught in a descending spiral, and that will be reflected throughout the economy.
In an earlier debate my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) commented—I think that the comment was repeated by my hon. Friend the Member for Birmingham, Erdington (Mr. Silverman)—that we were approaching the stage when our net imports of manufactured goods will exceed our net exports. Some of the fault undoubtedly lies at the door of the industry. Never-lies at the door of the industry. Nothing much will be served by apportioning the blame. It is easy to blame management for mistaken decisions. Perhaps in many instances they were not easy decisions.
Does the industry offer the customer a wide range of models or does it go for fewer models and economies of scale? Does it concentrate on the home market and ensure that there is a proper flow of replacements, or does it push sales in overseas markets? If it wants overseas 159 markets, does it engage in dubious local practices of the sort which would not be acceptable in Britain? Does it have a large number of dealers, some of whom have to make up their income from carrying other products, or does it guarantee a good living to a more limited number of dealers? Does it have wage rates and working conditions negotiated at plant level or does it seek to standardise the structure throughout the organisation?
We might question some management decisions with the benefit of hindsight, but we can consider them with some sympathy. I do not seek to put the blame on management. It is too easy to blame the trade unions, too. Those who know the feelings of frustration among those who feel that they have not been consulted about these problems, a work force which feels that its members have been treated as "hands" with no job satisfaction, no room for decision making and no real participation, will understand why there has been a measure of industrial discontent.
Happily there are signs that all sides of the industry appreciate its peril and the peril of all those whose livelihoods depend upon a flourishing assembly industry. We have seen examples recently in the new Metro line. But those concerned will need substantial help if they are to give effect to that new resolution. For it is partly, too, a world-wide problem.
I seize the opportunity to raise two essential issues. First, it is impossible for any Government, however Manchester school their basic philosophy may be, completely to abdicate responsibility for the industry and to renounce any concern for it. Surely no Government can claim that they have no concern for what would be on the scale of a national disaster.
It is not true that British Leyland receives a greater proportion of Government assistance than some of its competitors elsewhere. Renault receives substantial support from the French Government. Chrysler receives substantial support from both the Federal and state Governments in the United States. Volkswagen receives a large measure of regional aid in Germany. The Japanese industry has a national banking system 160 at its disposal. Most of Britain's competitors have a single integrated research structure throughout their industry with Government research laboratories at their disposal as well as university research centres and industrial research and development depots. No one can pretend that Britain pampers its motor industry. I wish to announce a personal recantation. I have always believed in freeing international trade. My constituents largely depend on exports. It has never been part of my political principles to export unemployment to workers elsewhere, even if that were to prove a practical proposition.
I have been compelled to revise that conclusion in two ways. First, all the countries with which the car industry competes encourage their populations to buy their own products. They sponsor campaigns encouraging individuals to buy their own cars. They encourage companies to equip themselves with fleets of their own cars and commercial vehicles. Of course, most hon. Members here drive British Leyland cars—perhaps Sir Michael Edwardes was a little less than fair to some politicians a few months ago. But the Government could give a lead. I hope that they will give support to Sir Michael Edwardes' remarks.
Secondly, we have seen how the Governments of some other countries ensure that imports from Britain and other countries face every possible discouragement. The hon. Member for Northfield has already referred to some of those discouragements. Two obvious examples are Japan and Spain. Those countries should not be surprised if the United Kingdom does not welcome their exports. I have argued that point before, and I shall not labour it now. International competition can exist only when the competitors start from the same line. Of course, some types of restriction would infringe on our international obligations, and I do not urge them on the Government. But, many examples of non-tariff barriers operate elsewhere. There is no reason why they should not apply here.
Even in this area, some of the problems are of the industry's making. In a debate on 16 May, my hon. Friend the Member for Birmingham. Stechford (Mr. Davis) mentioned the decisions made by Ford, Vauxhall and Talbot to import vehicles 161 which will then be sold in Britain. The Government are entitled to tell the vehicle industry that its future is inextricably connected with Britain's future. They should tell the industry that, as the Government are willing to recognise their 162 responsibility, the industry should recognise its responsibility to its work force, its suppliers and to its consumers. If the industry succeeds, we shall all be winners. If it fails, it will drag us all into the pit.
§ 10.3 pm
§ Mr. Hal Miller (Bromsgrove and Redditch)
I am happy to speak after the right hon. and learned Member for Warley, West (Mr. Archer). I accept the importance that he attaches to the motor industry, not only in the West Midlands, but in the country as a whole. However, it would be difficult to deduce that from the attendance in the Chamber, which consists largely of hon. Members who represent constituencies in the West Midlands.
I sympathise with the Minister, as he is receiving a fair amount of shot and shell on subjects for which he is not directly responsible. However, with his considerable industrial experience he will appreciate the points that have been made. We feel that we are speaking to an open mind and an open heart. However, he is unable to be as forthcoming as he and we would wish, given the importance of the industry to the country's structure.
I must warn my hon. Friend the Minister that people all over the country—and on both sides of the Chamber—will regard the motor industry as the litmus test of the Government's policy towards industry. The Government's policy is not yet fully apparent. I was surprised that the hon. Member for Birmingham, Erdington (Mr. Silverman) did not allude to the grant to Dunlop which has recently been announced. It was a considerable surprise to me. I do not know whether it is a first swallow making a summer or whether it is a special case. We should like to examine the matter further.
We believe that there is a need for the Government to demonstrate an urgency, a sense of realism and a sense of appreciation of the national interest, such as my right hon. Friend the Prime Minister displayed so clearly in her dealings with the EEC on Britain's budget contribution. The echo that that aroused throughout the country encourages me to urge on the Minister a similar robust attitude towards the motor industry. An equal if not greater response is still to come.
I say that the Government should demonstrate a sense of urgency and realism in the national interest because the motor industry faces the twin threat 164 of a decline in demand matched, if not overtaken, by an increase in imports. That threatens not only the mechanical restructuring of the industry but the change in attitude which the Government were elected to bring about and which Sir Terence Beckett of Ford said in his evidence to the Select Committee was a precondition to bringing up our industry fully to international standards of competitiveness.
I accept the Government's priority of an attack on inflation. Inflation largely brought about the downfall of British Leyland in addition to other contributory factors which I have mentioned in previous discussions. I fully accept the need to be competitive by increasing productivity and quality. I welcome the Prime Minister's repetition of these themes. In BL giant strides have been taken towards the realisation of such aims.
My hon. Friend the Member for Birmingham, Northfield (Mr. Cadbury) referred to our recent visit to Renault. We were encouraged when we saw that equipment there was not up to the standard of that at Longbridge and that its engine plant was even more outdated than some in our factories. The Renault plant is also over-manned and inefficient. But it has advantages. The aims can be achieved and are being achieved. The Metro line is equivalent to any Japanese wonder production line in the fully automated parts.
Productivity gains are being made. The hon. Member for Coventry, North-East (Mr. Park) referred to unemployment and demanning. Sir Michael Edwardes made a remarkable achievement in the last two years in that 24,000 out of 130,000 of the work force—about 20 per cent.—have been made redundant. There has been a striking drop in employment in the firm. It is not sufficiently appreciated that the last six months have been 98 per cent. dispute-free at BL. That represents a fantastic change in attitude. I must admit that I was surprised to find out recently that there has been no strike at Bathgate in Scotland for the past two years, contrary to the impression that some people may have.
Considerable progress is being made, and it is appropriate to offer a tribute to the work force, who have accepted the need for greater productivity and 165 greater flexibility in manning, as was demonstrated recently by the stop and switch of production by BL between various models of which there were surplus stocks or for which there was excess demand. The changes of attitude, the flexibility and the competitiveness are to hand.
I was glad to read this morning an authoritative statement that the present inflationary effects are not the result of wage claims. There have not been excessive wage increases in the motor industry. In BL, wage increases have been 5 per cent. for the past two years. Hon. Members who feel hard done by should pause to reflect on the lot of those who have had 5 per cent. wage increases for two years running. One can understand their resentment and bitterness about those in the public service who have taken much greater increases without any apparent increase in effort, flexibility or adaptability.
A sense of realism is a keynote of my right hon. Friend the Prime Minister's Administration. What could be more realistic than the open admission by the deputy chairman of BL before a Select Corn-tee that if the Metro fails the company will be prepared to abandon volume car production? That must be matched by equal realism on the part of the Government. If the car is a success—and that will be known fairly quickly; the Government cannot expect to be able to wait until next year before reaching a conclusion on the matter—long-term financing will be required for the entire model range. It may not be funded immediately. It may have to take the form of guarantees initially, but orders have to be placed now for the necessary machine tools to give effect to the production of those models.
We are sometimes rather shy about discussing dealers, but employment in garages and dealers downstream of production equals that in the car assemblers. The BL dealers need to be assured of a continuity of new models to enable them to hang on through the present difficult times. It is important to understand that. The BL dealers have been faced with a disastrous decline in market share and a high increase in costs, because of high interest rates. They have held on, demonstrating their loyalty, despite all the diffi-166 culties, but they need to see some light at the end of the tunnel, because otherwise they will have no option but to go over to other franchises and thus to increase penetration.
All component manufacturers have been faced with a double jeopardy. Not only has there been a fall in demand from domestic assemblers but, because of our high exchange rate, many assemblers have had to import components in order to remain competitive on their finished product. That is particularly true in the tractor and agricultural machinery sector, which has had a disastrous result on foundries and forgings.
However, the same phenomenon is also present in motor car assembly. The component makers have faced a double threat, while being frustrated by the franchise agreements to which reference has been made. As the hon. Member for Birmingham, Stechford (Mr. Davis) will be aware from his previous incarnation, some motor manufacturers have found their spare parts operation fairly profitable and would not necessarily welcome a relaxation of the franchise, for which a call has been made in the debate.
The exports of the component sector have been frustrated by the higher pound. The sector is also suffering, as I mentioned in a debate on West Midlands industry, from the disparity in fuel prices, notably gas and coking coal about which I had occasion to take a delegation to the Department of Energy last week. What is the rationale of the grant of £ 6 million to Dunlop? I hope that the Minister's thunder was not stolen by the Prime Minister, but the House is owed some explanation of the rationale behind the grant and how other firms may qualify or may be disqualified from similar treatment. This is a matter of public concern.
I have referred to the threat from imports. In that context, attention is obviously concentrated on Japan. We should well understand the position of Japan, an island country bereft of many natural resources, depending on manufacturing and exporting to support its population. We find ourselves in a similar position. The position achieved by Japan not only in this country but in America and in other European countries means 167 that a halt has to be called unless some irreparable damage is to be done.
§ Mr. Donald Thompson (Sowerby)
Does my hon. Friend agree that the motor manufacturers anticipated, when Britain joined the EEC, imports of 25 to 30 per cent, including Japanese imports? We now have 57 per cent. imports, nearly half of them—at least 27 per cent.—from tied imports and nothing to do with Japan. Those tied imports mean that workers in my constituency making textiles for carpets are losing jobs. This affects textiles, safety belts and the whole paraphernalia of components. The effects are not as immediate in the constituency of my hon. Friend, but my constituency is affected by massive tied imports that make Japanese penetration look almost paltry.
§ Mr. Miller
I am grateful to my hon. Friend, although I find it hard to swallow his description of Japanese imports as being paltry beside tied imports. He must be referring particularly to those of Ford. It was in evidence before the Select Committee of which he is a member that the chairman of Ford made it plain that those imports had been largely occasioned by failures of production in this country for one reason or another, and, in part, by reason of its model policy and the fact that it is European based for reasons of economy of scale to which the right hon. and learned Member for Warley, West referred. I wish to deal with the question of scale of British Leyland in a moment.
Japanese penetration has now reached 22 per cent. in America, higher than that of the Ford Motor Corporation in its own back yard. This must be politically unacceptable. The penetration in Germany has increased. Contrary to popular belief, I think that the Japanese are making a dead set at Ford rather than BL on a world basis.
The immediate concern is the future of the current voluntary industry agreement under which the Japanese industry undertook to exercise prudence in exporting to this country. Prudence was generally understood to mean 10 or 11 per cent. of the market. Ten or 11 per cent. of the market last year is a very different thing from 10 or 11 per cent. of the market this year. If the Japanese were to continue to export at last year's 168 rate, they would end up with 18 to 20 per cent. of the market this year. The cause for concern is that their shipments are still increasing. Over the first six months of the year, they show an appreciable rise over last year.
That calls into question what prudence is in these circumstances.
§ Mr. Tom Benyon
Does not my hon. Friend agree that it would be absurd to ask a Japanese sales manager to exercise prudence voluntarily? Why should he? Not only is it alarming to see the flood of Japanese imports into Europe, with some 606,000 motor cars imported during the last year as opposed to their taking some 3,000 of ours. Ought not my hon. Friend to touch on the absurd anomalies of imports from Spain and Eastern Europe? In Spain, a tariff operates against us of 38 per cent., whereas operating against the Spanish is a tariff of 4 per cent. Eastern Europe exports 50,000 motor cars to us and accepts back 400. Does not my hon. Friend agree that the Government should take rapid steps to stop these totally inequitable balances against us?
§ Mr. Miller
I appreciate that my remarks have been lengthy, but I had intended to deal briefly with Spain and Eastern Europe. I was not trying to cover the whole gamut in my remarks, especially as the way had been paved for me by my hon. Friend the Member for Northfield.
As regards Japan, there is real concern about how this voluntary agreement is to run for the rest of the year. There is further concern that the Japanese are installing an additional 2 million vehicle capacity over the next two years and, therefore, there is great uncertainty about where those vehicles will be directed. It appears unlikely that they will be allowed into the United States of America. The conclusion is that they will come here.
I am not persuaded that Government action is necessarily the best way. We have to reckon with the difficulties of Japan and the peculiarities of the Japanese characteristics. I believe that the voluntary undertaking between the two industries has worked very well. All that I am trying to emphasise, perhaps in a rather Japanese manner, is that there is concern about the rest of this year and, 169 in view of the additional capacity being installed, in my view the industry-to-industry agreement will probably have to be expressed in terms of longer than a year to guard against what will result from the additional capacity.
§ Mr. J. F. Pawsey (Rugby)
In the light of what my hon. Friend has said and the case he has been arguing against voluntary agreement, does he not consider that in the background at least there should be the threat of some form of statutory agreement? If the Japanese persist in exporting an enormous quantity of vehicles to the United Kingdom and thereby threatening our own industry, should we not be prepared to take action against them, if necessary by statute?
§ Mr. Miller
I thought that I had made it plain in response to my hon. Friend the Member for Abingdon (Mr. Benyon) that I did not favour statutory action. My first reason is that which I tried to outline about the difficulties in which the Japanese find themselves. We must have some understanding of that valuable ally with a very large population on an island with no resources. Obviously they are concerned to ensure a continuance of free trade. However, I am saying to them that the continuance of free trade will be endangered if they do not exercise prudence. The second reason is that from our point of view we must hesitate for a long time before we bring in statutory import restrictions. The point has been made that we are uniquely dependent as a trading nation on freedom of trade and have the highest proportion of GNP already accounted for by trade. I am afraid that I could not agree to my hon. Friend's suggestion at this stage.
Mention has been made of Spain. Spain is about to become a member of the EEC, and I hope that these problems will be resolved as part of that necessary negotiation. But I take comfort from the fact that in the meantime Ford has given a clear commitment to reduce its imports from Spain in the remainder of this year by half the amount that it imported from there last year. That will make a considerable difference. There is no doubt that there is discrimination against us and that it will have to be resolved on an EEC basis.
I asked at the outset for Government action which was urgent, realistic and 170 in the national interest. Apart from the more general questions of interest rates and exchange rates, that action should concentrate on type approval both for cars and for lorries. In fact, to correct my hon. Friend the Member for Northfield, I would point out that it took 18 months to get type approval for the British Leyland commercial vehicle in France. We have no national type approval for cars—we rely on EEC directives—but other EEC countries have their own national approval systems as back-up, whereas we do not, and for commercial vehicles we have nothing at all.
We must face up to the need to increase the payload of commercial vehicles and to spread the load better among the axles. I can imagine the reaction to that statement from the environmental lobby, but our commercial vehicle industry is fighting with its hands tied behind its back against European imports. Not enough mention has been made of the fact that the import problem is developing just as seriously for commercial vehicles as for passenger cars.
The Government need to discuss with our European partners the elaboration of a trade strategy to deal with Japan, Spain's access and trade with the Comecon countries. I argue unashamedly that our Olympic boycott should have been coupled with some commercial sanction. The Olympics have now ended. How will our protest now be expressed against the continued Soviet occupation of Afghanistan?
I was disappointed to receive a reply from the Department of Trade when I last raised the subject reminding me gently that it was in our commercial interests to continue trade with the Eastern bloc, where we showed a visible trade balance. Such a reply is not my idea of how one protests at the action of a foreign Power.
The Government will also have to fund BL once the results of the Metro have been seen. It is impossible to continue running a company of that size on an annual financial dripfeed, as one of my hon. Friends described it.
My next point may seem a small matter, but the Minister, with his experience of industry, will be well aware of its importance. Much more of our R 171 and D effort should be placed in firms and directed by firms rather than by Government research establishments. I know that there have been reports on that.
The Government have made a good start on bringing about the necessary changes of attitude, but further resolute action is needed to demonstrate the Government's commitment to those working in the motor industry. I am sure that that will meet with a more than corresponding response.
§ Mr. William Wilson (Coventry, South-East)
Like the hon. Members for Birmingham, Northfield (Mr. Cadbury) and Bromsgrove (Mr. Miller), I have visited the Renault car factory. I confess that I went like a country cousin, thinking that I would see how a vast car industry should be run. As the other hon. Members have said, we discovered that the mechanisation and technology did not put the British industry to shame at all.
In Chrysler at Ryton, Coventry, we were able to stand up to what Renault could show. But even to my inexperienced eyes men could be seen standing around. Overmanning was there to be seen by anyone who bothered to look.
The problems of the British car industry in relation to manning, machinery and mechanisation were not answered by our visit to Renault. I confess as I look around the House that, vicariously and otherwise, I probably have greater experience of the car industry than any hon. Member present.
Growing up in Coventry with a father who worked all his working life in the car industry, I could not help but learn of the difficulties of that industry. In our family, it sometimes seemed that we talked only about two things. One was the hopes and fears of the Labour Party, and the other was what would happen to Coventry City football club at the weekend. But within those conversations ran the theme of the day-to-day work and problems of the car factories.
We need look no further than Coventry to see the warning—it is there for anybody who bothers to look—about what could happen to the British car industry. When I was a boy we talked 172 about motor cycles. There was the Rudge, the Humber, and the Triumph. It seemed like a stable industry in Coventry but the motor cycle industry has gone. There is no longer a motor cycle industry except for Meriden which is struggling to keep its head above water. Anybody can understand just by looking at Coventry what has happened to the motor cycle industry and what could, just as easily, happen to the car industry.
We have, of course, seen great changes in Coventry. When I was a lad there were Alvis, Singer, Morris, and Standard Triumph cars. They have disappeared altogether as names. Other names have taken their places, but it is apparent to all of us that the British car industry faces a serious situation. There is no need to look further than the boundaries of Coventry to see that. To the Minister who will reply for the Government I say that it is a time to be vigilant and to realise that what happened to the motor cycle industry can, just as easily, happen to the car industry.
Rudge motor cycles have become a name for the museum. We should be careful to ensure that Jaguar and Daimler do not likewise simply become museum names.
§ Mr. John G. Blackburn (Dudley, West)
This debate is everything that is good about the House of Commons. It is the model of a debate where hon. Members, self-evidently for the same reason and sharing a common problem, have come together to debate the needs and problems of their constituents in relation to the motor industry.
I was particularly impressed by the speech of the hon. Member for Coventry, North-East (Mr. Park), who opened the debate. It was factual, it was real and it was a credit in setting the scene for this debate. There is no river Jordan flowing through the Chamber with opponents on either side. We come here with a common purpose, and I believe that that purpose is the British motor industry. I believe, from the tenor of the debate, that we are all dedicated disciples to that aim.
I do not believe that there are any more enthusiastic advocates of British Leyland than the right hon. and hon. Members now in the Chamber. The Government, like their predecessors, have 173 taken a realistic view of the problems of BL and have given financial aid. The aid to BL amounts to about £300 million in the current year, and I am informed that £275 million has already been paid.
I am able to reflect, for personal reasons, on the identical debate that we had on this subject last year. It was most interesting that in that debate all those who spoke gave a solemn pledge that they would support the British motor industry. I am assured and confident that again tonight the Members of this House will support British Leyland.
Provisos and conditions may be attached to that support. I suggest that we should support British Leyland at a realistic and an economic price, but not at any price. The economic realities of life are being grasped by the board, the management and the employees of BL, I am sure. It is a tribute to them that we have heard repeatedly in this debate that the work force at BL has accepted a 5 per cent. increase in pay in order to create what we all want—a viable British motor industry.
What are the economic realities? What is the future? How secure are the jobs in the work force corporate? BL took £150 million of aid in April, another £75 million in May and a further £50 million in July. I share the simple view that the financial reality is that the Metro model, to be launched later this year, is the key to the future of the company. Several times during my speech I shall direct my remarks to my Front Bench to say that BL needs funding for that model. If the Metro should fail in terms of performance, reliability, availability or price, the position would pass, I believe, from being serious to critical. I am led to understand that that is the view of the board of BL.
I spent most of Saturday morning viewing the Morris Ital. To suggest that it is a Marina Mark II is most unfair. Again, this model is to play a crucial part in the survival plan of British Leyland. I am not ashamed to say that my soul wept, particularly since I was in the Principality of Wales, when I realised that the design features came from Italy. Here we have a British model that is alleged to have been remodelled in Italy.
I do not normally use such expressions as "survival plan". It is an indictment 174 of successive Governments, management and the company generally that we have to talk of a survival plan for one of our great, traditional industries. The new series A engine and LCIO model will require Government assistance to finance stocks from the initial launch. It is sad to discover the inability of this great British industry to supply models in prime demand, such as the Range Rover, Jaguar, Daimler and Rover. There is growing need for financial aid to introduce a replacement for or complement to the Princess range. The work force in the group has amply demonstrated a new sense of realism and is facing the cold, stark realities of survival.
Since 1977, British Leyland has lost 7 per cent. of the United Kingdom market. Ford has increased its share by the same percentage, and imports have increased by about 13 per cent., made up of 3 per cent. from Germany, 4 per cent. from France, 3 per cent. from Belgium and 3 per cent. from Spain. It is vital that the industry grasps the message that to be viable it must have a secure home-based market. I suggest that it is only on the platform of a secure home market of about 25 per cent. that it can launch into the export market, which is what we all want. In simple economics, orders equal production equal jobs equal profit equal further investment equal further jobs, as was brought out earlier by the hon. Member for Coventry, North-East. Everyone on the payroll of British Leyland should be a salesman. The first ingredient of production is an order.
In my constituency and the adjoining constituency of the right hon. and learned Member for Warley, West (Mr. Archer), we do not make motor cars. We have never done so and are unlikely to do so. However, we have a host of small businesses that supply components to that vital industry. Naturally I am concerned about the welfare of those companies. I was surprised to learn that 400,000 people are employed in industries related to the motor industry. My constituents make components in steel, brass, plastics and rubber. The bond between all these industries was amply illustrated by the hon. Member for Birmingham, Erdington (Mr. Silverman). Many of the companies suffering vast redundancies are in my constituency. I have received correspondence, for example, about the problems in Fisher. 175 So there is a common bond bindine us together.
Another important feature that was brought out was a greater share of the market. I shall not dwell on that feature because it has been covered amply on the order situation. But I take the gravest exception to motor companies based in this country and receiving aid which import foreign vehicles. They are importing not vehicles, but unemployment, and to do that at the taxpayer's expense is outrageous.
A buoyant, healthy motor industry based in its home in the West Midlands—I am not ashamed to be selfish we all share the same view—would mean a healthy constituency with full employment, which is what we are all here to achieve in the context of the West Midlands.
The message that I give to the British motor industry is that, like other right hon. and hon. Members, I shall support its further claims. I give it a vote of confidence which I am sure is not misplaced. I still have the faith to believe that the West Midlands will accept the challenge to produce a viable, British motor industry. To that end I give my pledge this night, which I am sure will be echoed from this Chamber to the country.
§ Mr. Andrew Faulds (Warley, East)
Thank you, Mr. Speaker, for noticing me at this somewhat late hour. I ought to apologise to some of my colleagues for not having been here earlier, but I have had a fairly full day on what I think one could term other commitments.
I am delighted to speak after the hon. Member for Dudley, West (Mr. Blackburn), because he and I represent constituencies whose economic well-being reflects the health of the motor car industry. There is a developing situation of industrial degeneration in the West Midlands caused partly by the decline of the motor car industry. In Smethwick and Oldbury particularly the effects will be truly tragic in terms of the standard of living of the work people around there, of the employment prospects of young and old alike and of the blighted hopes—this is perhaps the most depressing aspect of the whole picture—of thousands 176 of youngsters who will enter their adult lives with their expectations of work and social fulfilment completely blighted.
The companies affected by what I can only term as industrial collapse in the Smethwick picture are a litany of some of the best known names in industry. I do not want to weary the House with the numbers of redundancies in each of those companies, but they are now reaching quite staggering proportions. Each of the names that I mention now—well-known names in British industry—are laying off in some cases hundreds, in other cases dozens, of workers who in many instances are not likely to see those activities restored again: Midland Motor Cylinders, Mansell Booth, Avery, Wilkinson Riddell & Larkin, Smethwick Drop Forgings, GKN Fasteners, Chance Brothers.
Then there is the sad saga of Dartmouth Autocastings. I believe that the programme that Birmid Qualcast has implemented of closing Dartmouth Auto-castings and Birmetals, which was discussed earlier in the House, and Midland Motor Cylinders is quite deliberate.
I have had an innuendo, if I may term it such, from a reliable source that it will not be very long before Birmid Qualcast moves its headquarters altogether from Smethwick to Derby, with an appalling effect on the life, and prospects of work, of people in my constituency. Derby—and I do not wish to attack any of my colleagues here—seems to be the heavy part of the BQ involvement in terms of foundry business, because BQ management appears to be Derby influenced in that the majority of people in the Smethwick management—I am sorry to say that this seems to be one of the factors—are ex-Derby Qualcast people.
Of course, we shall have from the Government all the usual excuses. The heartless monetarists on the Conservative Benches have conjured up a number of excuses which they reiterate on every occasion. There is a world recession, as if we did not know that. The Arab oil producers will exact a price for Western support of the State of Israel. Some of us warned of that many years ago. There is a lack of Western leadership—my God, do not we realise that?—not only in America, the great Western country, but also in this country, and, sadly, in some of the European countries.
177 We suffer from all of those, but the fact remains that this Government are directly responsible for three factors which are making the existing pressures much worse and the situation in the motor car industry infinitely more depressing. The first is the over-valued pound which works against exports. I am sure that some of our colleagues on the other side of the House would agree about that. Secondly, there are high interest rates, which prevent any hope of investment in improved productivity. I see nods of agreement. Great; we are making progress. This is an unusual and happy situation in the House of Commons. Thirdly, there is roaring inflation, which Government policies have stoked up. Perhaps I can have some agreement on that as well.
§ Mr. Pawsey
Does not the hon. Gentleman agree that the rate of inflation is showing a significant fall? Will he, therefore, give credit to the Prime Minister, who so ably leads this country, for her brave policies which are now working?
§ Mr. Faulds
This is the time of the year for young and expectant Tories to make these happy statements of support, because there may be Government reshuffles. I am sure that that bright beaver on the Conservative Benches would like to be considered in that happy band.
Of course, there has not been a marked drop in inflation. There has not been great leadership by the lady to whom the hon. Gentleman referred. If the hon. Gentleman questions my raising the issue of inflation, I remind him that he is a young Member who may not have been here at the time of the Budget. Perhaps he was rehearsing a speech elsewhere. Perhaps he was not present at that Budget. In case he has forgotten, let me remind him that it was that 15 per cent. VAT increase which largely stoked up the inflation from which the country is now suffering. Though I do not have a nod of agreement, I certainly do not have a denial.
The analysis that I have just given is one that is agreed by West Midlands businessmen across the board. I am sure that we have agreement on that as well. They are angered that the Government listen too avidly to the theoreticians, the 178 economists and the financial experts who conjure with figures rather than to the practical men of business, such as the industrialists and the small business men themselves who have their finger on the industrial pulse of Britain and know what is happening. They should be listened to rather more carefully than they have been listened to by this Government. They know the damage that is being inflicted on local industry, and they say quite openly that some of the damage will be permanent in the West Midlands. There will be no recovery. There will not be a sudden phoenix rising out of the ashes. There will simply be ashes in the West Midlands in a lot of those industrial setups.
The most devastating effects are on the young people as they leave the school gates for the last time. For many, more than half of them, there is no prospect of work of any sort at all. This problem is causing tremendous concern, not only among Members of Parliament who sit here for the area, but among local councillors and education staff in particular.
Following a meeting between the director of education, the Members of Parliament, some of the local councillors and trade union representatives, our local director of education, an excellent man called Mr. Brindson, wrote a letter to the Prime Minister, and I should briefly like to give one or two quotations from it. He goes through the numbers of jobs available for young people just coming on to the labour market. There are thousands of such young people and there are jobs numbered in dozens. That is the reality of the situation. In the letter, which is addressed to the Prime Minister, he says:There are signs that companies and other organisations are withdrawing the places on Work Experience because they are having to make redundancies and/or introduce short-time working in order to keep their businesses afloat. One hundred and fifty places on WEEP—that is, work experience on employers' premises—have been suspended and eight cancelled in the last three months.Towards the end of the letter he says that employers locally—and this is true—are doing their damnedest to provide opportunities. I am sorry, Mr. Speaker, I should pay more regard to your and my common background, and I withdraw 179 that remark. They are doing their very best to provide job opportunities for a lot of these young people.
Brindson says:Employers locally are very sympathetic to the situation but are unable to help in any way and so the Careers Officers face a new challenge of maintaining morale and strengthening the motivation of young people who are becoming increasingly"—and he has underlined the word—despondent. Many of the young people have made determined attempts to obtain employment; have completed shoals of application forms; written several dozen letters each; been subjected to test after test without, in many cases, even a letter of non-acceptance from employers. New approaches to the total training needs of young people need to be carefully examined, bearing in mind the future changing requirements in the pattern of trade and industry. The cost of neglecting such training now will be measured in the future in retrospect when the true size of the problem becomes apparent.The new approach that Mr. Brindson suggests must really be pursued. The last Labour Government—I do not know whether this point has been made this evening—had set themselves a 10-year period for building a programme under which every school leaver was to be given some form of training. Some of our colleagues here were not in the previous Parliament and will not remember these happy facts of our life then.
Ten years, of course, is now quite clearly too long. It is an unacceptable period to subject these young people to. But what do the Conservative Government intend to do? They have not yet pronounced on whether they support Labour's earlier target. I hope that at the end of the debate some hint will be given as to the special attack on this aspect of the problem.
The Government must really review their economic policy, which has made a bad situation in the West Midlands much, much worse, with the strict monetarist straitjacket into which they have tied themselves. They cannot allow this permanently damaging industrial decline to go on. They cannot sit back and unconcernedly watch hundreds of thousands of young people launch out on life with no job and no prospects of a job.
There are—I know a lot of them—reasonable men on the Government Benches; men who are worried about 180 what is happening in our industrial life in Britain. They really must make their arguments heard much more clearly and much more frequently until they get a change of view, until they have battered some better understanding of these and associated problems into the minds of the Secretary of State for Industry, the Chancellor of the Exchequer and, not least, the Prime Minister.
These will be my last phrases, Mr. Speaker, because I can see you looking anxiously at the clock. My colleagues would like me to go on longer, but I have some regard for your wishes. Would it really not help if the reasonable and concerned Tories convinced their Cabinet that one approach to engendering a move out of this encompassing recession would be to follow the path pointed out by Brandt and his colleagues, including the right hon. Member for Sidcup (Mr. Heath)—not the closest colleague of the Prime Minister but an ex-colleague, and a man with a tremendous and impressive reputation? Those gentlemen of the Brandt Commission represent a much greater body of informed, intelligent and concerned opinion than the limited bunch of toadies who now hang around the tartar they have temporarily elevated to the Prime Ministership.
The Government really must examine the possibilities in our present industrial situation of an approach along the Brandt lines, which will not only help our industrial revival but, perhaps even more important, help industrial generation in the Third world which needs this sort of activity even more than we need it.
§ 11 pm
§ Mr. Terry Davis (Birmingham, Stechford)
Our debate this evening is especially appropriate. First, it is taking place a few days after the end of the car registration year and on the day when many people in the motor industry are returning to work after their annual holiday. It is also appropriate because it is exactly a year since a similar debate took place on the Consolidated Fund and a little more than a year since the general election. Therefore, it gives us the opportunity to consider what the Government have done during the past year as far as the motor industry is concerned. Above all, this debate is appropriate because the motor industry 181 today faces a crisis that must be almost unprecedented.
During the past year we have seen a catastrophic fall in the car market in Britain. It is now being forecast that 200,000 fewer cars will be sold in the United Kingdom this year than in 1979, and during the first half of this year there was a fall of nearly 16 per cent. in the car market compared with the same period a year ago. Within this shrinking total the proportion of cars made in Britain is also falling. The proportion of imports is rising. It is up from 54 per cent. to 58 per cent. and it is still rising.
There is no compensation from exports for the lost sales at home. I understand that British Leyland's exports of cars are down by about a quarter.
It is a similar story for commercial vehicles. There have been smaller reductions in the sales of vans, but there has been a massive reduction of 20 per cent. in the market for lorries with an increase in imports from 21 per cent. last year to 23 per cent. this year.
The implications for the components industry can be described only as appalling. Every imported vehicle sold in Britain means not only less work for Britain's car manufacturers but less work for Lucas, GKN and Smiths Industries. There is not only the immediate lost sales of the original equipment, as it is called in the industry, but the future lost sales of the replacement parts.
Britain has always enjoyed a favourable balance of trade in components, mainly as a result of selling replacement parts for the vehicles that we have already exported. Now as we are selling fewer and fewer vehicles abroad and buying more and more imported vehicles, so the favourable balance of trade in components is disappearing. Last year our imports of components rose by 30 per cent. and our exports increased by only 10 per cent. At that rate we shall have a deficit in our trade in motor components in 1982 or 1983.
The reaction of the component manufacturers has been to campaign for an end to the exclusive nature of the franchise system. They want to be able to sell spare parts for imported vehicles. We have heard their call endorsed by the hon. Member for Coventry, South-West (Mr. Butcher). We know that their 182 call was endorsed by the Price Commission and we gather that it has the support of the Department of Trade. I hope that the Under-Secretary of State will tell us what effect he calculates such a move would have on the British motor manufacturers. It is well known in the industry that the motor manufacturers make their profits from the sale of spare parts. If we are to attack the exclusive nature of the franchise system, let us know what the potential damage will be to the British manufacturers.
The position is already bad enough for both the motor manufacturers and the component suppliers. A year ago British Leyland employed 160,000 people. Since then we have had the announcement of at least 25,000 redundancies. I disagree with the hon. Member for Bromsgrove and Redditch (Mr. Miller). He said that it was a remarkable achievement of Sir Michael Edwardes that 24,000 people had been made redundant at British Leyland. For my part, I deplore the need for those redundancies. I might accept the description that they are a regrettable necessity, but I cannot accept that they are a remarkable achievement. That is the difference between the parties. I accept that the Government wish to increase productivity. However, they wish to do so by reducing the number of those employed in the motor industry. We would prefer to improve productivity by increasing the number of vehicles produced by the motor industry in general, and by British Leyland in particular.
It is not only those lost jobs. It is also lost job opportunities. I refer particularly to the lost jobs opportunities for young people. My hon. Friend the Member for Warley, East (Mr. Faulds) pointed to the effect of such lost opportunities on the employment prospects of school leavers.
We have had a wave of similar announcements from the component suppliers. Hundreds have been made redundant at Triplex and Wilmot Breeden, and thousands have been made redundant at GKN and Lucas.
During an intervention, the hon. Member for Oxford (Mr. Patten) questioned whether some job losses were due to investment and to new technology. It was not new investment that cost the jobs of the MG workers at Abingdon. It was 183 not new investment or new technology that cost the jobs of those who used to work at Canley. It was not new investment or new technology that cost jobs of the thousands who used to work at Castle Bromwich.
In most cases, the redundancies have been voluntary, but now whole factories are beginning to close. Even when part of the factory can be kept open, and when only some redundancies are declared, one finds that there are no longer enough volunteers. At Lucas they have asked 3,000 people to volunteer for redundancy—that is one in six of the work force—but they are now beginning to talk about having to make those redundancies compulsory.
The reasons for the dramatic decline have been analysed by both sides of the House tonight. I am in greatest sympathy with the analysis made by my hon. Friends the Members for Coventry, North-East (Mr. Park) and for Birmingham, Erdington (Mr. Silverman). I was also struck by the reference to British Leyland made by my right hon. and learned Friend the Member for Warley, West (Mr. Archer). As he said, British Leyland is generally regarded as being small in comparison with our international competitors, and it is getting smaller, so it stands to reason that the company is heading into even greater trouble.
In the motor industry, success breeds success. The higher the sales and the higher the production, the better the productivity, the lower the unit cost and the more competitive the vehicles become. My hon. Friend the Member for Coventry, South-East (Mr. Wilson) described his visit to the Renault factory in France. He pointed out that the firm's advantage did not lie in new equipment. According to his observations, its advantage did not lie in better productivity. What is the secret of Renault's success? From my experience in the motor industry, I suggest that the difference is that the French motor industry has the advantage of a much closer relationship with the French Government than applies in this country. That relationship is expressed not only in terms of money but in other extremely important ways.
Several hon. Members have referred to the world-wide reduction in demand for motor vehicles. That is true, However, 184 it is hardly an adequate explanation of what is happening to the sales and production of British vehicle manufacturers. After all, last year there was a booming market in the United Kingdom for both cars and commercial vehicles. There was a fall in the share of the market held by British manufacturers. Similarly, in the first four months of this year not only Japan but other countries increased both their production and their sales.
The fact is that we have some special problems in this country. They have been admirably summarised by my hon. Friend the Member for Warley, East. First, everyone in the motor industry agrees that the high value of the pound has priced our vehicles out of the export market and made it even more attractive for foreign manufacturers to sell their vehicles in Britain. As my hon. Friend the Member for Coventry, North-East said, during the last year, the profit on each French or German car sold in Britain has doubled. The profit on each Japanese car has quadrupled. That is not the result of anything that they have done to reduce costs but simply because of a change in the exchange rate.
Secondly, there is the inflation rate. We were told a year ago that the Government's monetary policy would reduce the level of inflation. Instead it has doubled. The costs of the British motor industry have risen with it. The hon. Member for Rugby (Mr. Pawsey) intervened to describe the small reduction in inflation as being the result of the Prime Minister's leadership. I must say that in relation to inflation the best description of the Prime Minister is that she is like the noble Duke of York—He had ten thousand men,He marched them up to the top of the hill,And he marched them down again.However, we are coming down very slowly.
Thirdly, there are high interest rates. Again they are the result of Government policy. They are fuelling inflation and increasing the costs of manufacturers and also acting as an old-fashioned deflationary factor by reducing the size of the total market.
It is not only these economic factors which are responsible for the crisis in the motor industry. As the hon. Member for Sowerby (Mr. Thompson) said, there is a deliberate decision by the 185 multinational manufacturers to import more and more of the vehicles which they sell in Britain. The Ford company is now the biggest importer of cars into Britain.
§ Mr. Cadbury
One of the main reasons for Ford being one of the biggest importers of cars into this country is the failure of the Ford company in Britain to produce the vehicles which it has the capacity to make.
§ Mr. Davis
I said, not that Ford was one of the biggest importers but the biggest importer. It is responsible for more than one-quarter of imported cars in Britain. Ford alone imports more cars into Britain than all the Japanese companies put together. I do not agree with the hon. Member for Birmingham, Northfield (Mr. Cadbury) that that is simply the result of disruption. Reputable newspapers report that Ford recently had 100,000 cars in stock. We do not know whether the figures are accurate, because they are confidential to Ford. However, we do know that last year Ford imported 58,000 Fiestas into Britain. During the first six months of this year the company imported 52,000 Fiestas. It did not do that because of disruption in Britain. Nor do I believe that it is importing Cortinas as a result of disruptions to production.
Ford is importing into Britain for two reasons. First, it has an agreement with the Spanish Government which means that it must export a proportion of its production. Secondly, it has the advantage of the higher exchange rate when importing into Britain. The rise in the exchange rate means that the labour of German car workers is lower in unit cost than that of British car workers. It has nothing to do with wage increases negotiated by the British car workers but everything to do with the exchange rate. Under the Government's policies the exchange rate has risen by 13 per cent. since the general election. The Ford motor company can take advantage of internal pricing and make its profits in that way.
We are in great danger of simply accepting what Ford says about disruption of production. If it is correct, we must examine the reasons. That raises many questions, not all of them about industrial relations.
186 There are also hidden trade barriers. We have heard about the difficulties encountered by British manufacturers trying to sell vehicles in Japan.
What have often been forgotten in the past are the difficulties experienced in trying to sell British cars and commercial vehicles in the rest of the Common Market. Every other member of the Common Market that has a motor industry also has some unique national type approval. Before a British model can be sold in any of those countries, there is a legal requirement for the British manufacturer to go through a long procedure to obtain approval and to satisfy the authorities in those countries that the British car or commercial vehicle meets their special technical regulations. In some cases, that depends on an entirely subjective test.
Quite apart from the difficulty presented by such regulations, it can take months to obtain approval, simply as a result of bureaucratic delay. The hon. Member for Bromsgrove and Redditch was right to tell the story of delays encountered by British Leyland when it wanted to sell its new truck, the Terrier, in France and the comparative ease with which the French motor industry can launch a new commercial vehicle into this country.
Each country in the Common Market is different and in each country the British manufacturer has to go through a separate procedure. I sometimes wonder that the British motor industry manages to sell as many vehicle as it does in the rest of the Common Market.
The irony is that we do not have anything like a system of national type approval. This country is wide open. It is an importer's dream.
Against the background, what are the Government doing? I am sure that the Minister will remind us, as the hon. Member for Dudley, West (Mr. Blackburn) reminded us, that the Government have agreed to provide £300 million for British Leyland, partly for capital investment and partly to meet the cost of redundancies. That money will benefit not only British Leyland, to the extent that it is used for investment, but the manufacturers of components and all the suppliers of the motor industry.
187 But what else have the Government done in the past year? As far as I can see, the answer is "Nothing". The hon. Member for Northfield suggested that we should learn from the Japanese and that the British Government should work closely with the British motor industry. I agree with him, but that is exactly what the Government are not doing.
What have the Government done to bring down the exchange rate, to reduce competition from imports and to help our manufacturers to compete abroad? What representations has the Department of Industry made to the Treasury about that problem? Has the Minister even passed to the Treasury the representations that he has received from the industry?
Turning to the multinationals, what has the Department of Industry done to persuade Ford to change its policy and to export instead of importing? Has the Minister asked for a meeting with the managing director of Ford in order to discuss the problem?
What representations have the Government made to the Japanese Government about the increase in the shipments of Japanese vehicles during the past few months? What have the Government done to follow up the representations made by European manufacturers to the European Commission about the problem of the rise in Japanese imports?
What about the hidden barriers in Europe? What discussions are taking place about type approval? I realise that it is primarily the responsibility of the Ministry of Transport, but what discussions have taken place between the Ministry of Transport and the Department of Industry? Does the Under-Secretary of State for Industry know what civil servants in the Ministry of Transport are doing in Brussels while he is in Westminster expressing concern about the level of imports? In short, what is the Government's policy on type approval? Does the Minister want the system of type approval in other countries to be swept away, or would Britain benefit more by following their example and introducing a unique national type approval system in this country? Where is the balance of economic advantage for Britain?
We see no sign of the Government even thinking about these questions, let 188 alone answering them. The Government's policy is one of non-intervention. It is a policy of providing £300 million for British Leyland and sitting back and doing nothing—forgetting that, even though British Leyland is important, it is not the whole of the motor industry and failing to understand that it is precisely because taxpayers' money has been invested in British Leyland that the Government have a responsibility to try to create the market conditions in which both British Leyland and the rest of the British motor industry can succeed and a responsibility to do something to stem the tide of imports, not only in the interests of the motor industry, but in the interests of the country as a whole.
It is as if the Government had provided money for new fire engines and then taken the attitude that it was up to the firemen to fight the fires. What about a little fire prevention? When the fire already has a hold, is it sensible to stand aside and do nothing to stop people from putting fuel on the flames?
For the motor industry of this country, the Government's policy of "do nothing" is a disaster. For thousands of people who depend on the motor industry, the Government's attitude means unemployment.
§ The Under-Secretary of State for Industry (Mr. Michael Marshall)
This has been an interesting debate. Until the last two speeches, hon. Members had adopted a constructive approach that extended to both sides of the House on a number of issues.
The hon. Member for Birmingham, Stechford (Mr. Davis) is always listened to with respect, but I could not help feeling, as he developed his argument, that there is always the danger, when the Whips are let loose to speak in the House, that they are looking for red meat into which to get their teeth. Some of his arguments tended to move in that direction. In a sense, he showed a little bias in terms of the companies that he selected to discuss. I shall come back to some of the questions that he raised, but I do not wish to equate his views to his past except to say that a lot of the arguments that he proposed are valid. I should like to examine them in more detail in a moment,
With the exceptions I have mentioned, the arguments have been well balanced. 189 It would not, perhaps, be unfair to say to the hon. Member for Warley, East (Mr. Faulds), who, as he explained, has not been able to be with us, that some of his comments were part of his general purpose speech and did not quite fit in with the theme that has been developed in the debate.
The hon. Member for Coventry, North-East (Mr. Park), in his usual statesmanlike way, looked at the matter in the widest international perspective. That theme was picked up by my hon. Friend the Member for Coventry, South-West (Mr. Butcher), and also by my hon. Friend the Member for Birmingham, Northfield (Mr. Cadbury), who demonstrated that his industrial experience is relevant to our proceedings.
The Government are well aware of the industry's difficulties. The fact that tonight's speeches have been made by hon. Members representing the West Midlands does not reflect a parochial view of the matter. A whole spectrum of views has been heard, covering all the major car manufacturing countries and much of the trading policies of the Government and previous Governments. Hon. Members have demonstrated that they are adopting a wide and international approach.
This country is not alone in facing motor industry problems. The only country that does not have similar problems is Japan. In terms of the world recession and its impact, one recognises the degree of difficulty facing a number of Western economies. The energy cost element and the degree of the usage of cars will perhaps be traced through future years by economists. Many of these key difficulties are reflected in this vital, internationally competitive manufacturing industry.
We have been speaking of an industry which is international and competitive and one in which there is a limit to the amount of subsidy that can be poured in compared with other countries. Such a route is not only self-defeating but postpones the evil day for many of the basic decisions that must be taken within such industries.
Many hon. Members, including the hon. Member for Coventry, North-East and the hon. Member for Birmingham, Erdington (Mr. Silverman), were anxious to raise the question of the sterling rate of exchange, interest rates and inflation 190 itself. I shall not reiterate all the arguments. It is only right, however, to make the point that to try to rig the exchange rate—that kind of artificial activity—would be inflationary in the extreme and would fuel the problem we have been discussing.
The Government are anxious to see interest rates continue in a downward direction, but, again, premature movement would fuel inflation. The fact that inflation has begun to reach a peak and that in the next few months, partly for technical reasons, we shall see a move in that direction means that we are moving towards the winter wage negotiations with a possibility—I put it no higher than that—of an inflation rate which is continuing to move downwards.
In that situation, I hope that all hon. Members will use their influence to ensure that this argument is carried through in the wage round. I recognise and pay tribute, however, to the fact that restraint has generally been a feature of the industry and has been part of the way in which some opportunities for reversing past trends have become apparent.
Many hon. Members dealt with Imports. The Government attach the greatest importance to the continuation of voluntary restraint agreement. A number of hon. Members who have been to Japan know that this problem is well understood there. We have still to work on the problems, but, on the statistical pattern, the market share for Japanese car imports this year remains below 11 per cent.—in line with recent years.
As has been said, in the last few months, there has been a relatively high rate. The question is whether that rate, or the 11 per cent. rate itself, will be maintained. I shall pass on the thrust of the argument tonight to my right hon. Friend the Secretary of State for Trade, who carries much of the heat and burden of the day in this matter. But I would ask hon. Members to consider a little more widely than perhaps some were prepared to do tonight the future relationship with the Japanese car industry.
In the BL-Honda tie-up, to which the Government have given their blessing, one sees the attractions of inward Japanese investment. The suggestion that up to 50 per cent. of that car will be made from British components is part of the answer to some of the component 191 problems raised tonight. One should beware of taking too narrow a view in this debate. This may be a way in which the balance can be reversed. While in no way selling short the argument about our difficulties in reciprocal trade and our determination to facilitate it, those wider aspects should also be borne in mind.
I am fully aware of the trading imbalance with Spain, which cannot be defended on any grounds. However, as my hon. Friend the Member for Bromsgrove (Mr. Miller), who plays such a notable part in all our debates on the motor industry, pointed out, this is one of the key issues on which we would expect further satisfaction in the context of Spanish accession to the Community.
On the question of Eastern Europe too, the Government are anxious to act wherever there is evidence of dumping, but, beside the problems that we are discussing, this is a smaller one. Import penetration of less than 2 per cent. is difficult to represent as substantial damage.
Hon. Members have asked for the reasons for the assistance given to Dunlop and how the deciison related to the Government's policy. The reason that £6.1 million has been agreed under the Industry Act is to help Dunlop rationalise and modernise some parts of its car operations. I am confident that this will play its part in improving the company's efficiency in Birmingham, and in the North-East. That fits squarely with the Prime Minister's view, expressed in the House only last week, that we are always prepared to help in the transition to higher productivity and more jobs.
§ Mr. Silverman
Is it not a fact that this proposition for the financing of new plant in Erdington was put forward to the previous Government and that they suggested as a condition that if they advanced this quantity of money perhaps they should have some equity in the company in compensation?
§ Mr. Marshall
I cannot speak for the previous Government, so I cannot confirm the basis on which the hon. Gentleman puts the argument. He will want to develop that argument on another occasion, because I dare say that he was privy to any such discussions that may have taken place at that time. All I 192 say is that, so far as the present Government are concerned, our interest here is in schemes which improve efficiency and which are geared effectively to higher productivity and more jobs.
One of the interesting aspects to this particular agreement—and this picks up the hon. Gentleman's point—is that the scheme was given the backing and support of the independent Industrial Development Advisory Board, to which the Government look in these matters. So, in that situation, if schemes of this kind can be found, the Government have shown their willingness to help.
§ Mr. Hal Miller
Do I understand from my hon. Friend's remarks that this scheme is still open to other applications meeting those criteria, and that it has not been cut off?
§ Mr. Marshall
As I was explaining, under sections 7 and 8 of the Industry Act, which are applicable to this agreement, there is no reason why applications cannot be considered. Of course, it would depend on the take-up of funds at that time; but I would not want to rule out other opportunities if they can be met within existing resources.
My hon. Friend the Member for Northfield and others raised a very important point on the question of vans and four-wheel-drive vehicles from Japan. This is an important question to which perhaps less attention has been paid than to the normal question of car imports. I share concern about the volume of such imports. My right hon. Friend the Secretary of State for Trade is keeping a very close watch on this matter. But import penetration overall in commercial vehicles is much lower, at about 20 to 25 per cent. Nevertheless, this is an area which requires careful attention. Again, though, we must look at it in perspective, because Land-Rover sales in the United Kingdom continue to rise as well. I am glad to welcome that. Also. BL is investing over £200 million to double Land-Rover production. I take the point that my hon. Friend put to me. I shall take an early opportunity of passing it on.
The hon. Member for Stechford raised another general question on the subject of commercial vehicle type approval. This problem is well understood. Although it is outside my Department's area of responsibility, we have naturally been in 193 close consultation. My right hon. Friend the Minister of Transport is giving urgent thought to this matter. He is fully aware of representations from the industry, as we are. Because this matter is being looked at urgently, I shall take an opportunity to reinforce the arguments that have been made and pass on to my right hon. Friend the views that have been expressed here tonight.
The hon. Member for Stechford also raised the question of the franchise system for car parts, which again falls within the responsibility of my right hon. Friend the Minister for Consumer Affairs in the Department of Trade. She is well aware of the problem and has asked the Director General of Fair Trading to make a full examination. As the hon. Gentleman is well aware, there is here a need to balance the interests of car manufacturers and the components industry in trying to break into replacement parts markets.
As I have said, a number of the issues raised tonight have been of a consistent kind and of a genuine nature in the problems they have brought out. Inevitably, much of the present Government's effort has been directed towards BL, the company with which, in a departmental sense, I have to concern myself. I add my tribute to those which have been expressed earlier about the progress which has been made in terms of improved industrial relations and the way in which the company has sought to move back into the market place. But, as I listened to hon. Gentlemen tonight, I could not help thinking that perhaps over many years all of us have been a bit too ready to look at some of the problems, to think of solutions and to look to the Government for help without recognising the years that the locusts have eaten.
Many Members will recall the postwar years when demand was high, when the problems then apparent were not tackled on all sides of the industry. It is easy to say that with hindsight. The right hon. and learned Member for War-ley, West (Mr. Archer) said that it was no good apportioning blame, and I agree. I raise the matter only to say that consideration of the problems of the past may guide us for the future.
One aspect of the import problem that was not brought out in the debate was that many of our own consumers—indeed, 194 many of our own workers in these very industries—demonstrate their preference by choosing a design from another country. That design aspect is very important.
In servicing, we must recognise that over the years, for a number of reasons, our industry has suffered in comparison with our competitors.
There is much to be done within the industry. All hon. Members know in their hearts that that is true, but in the usual late-night attempt to see what they can do to twist the Government's tail they tend to play that down.
However, I suspect that in the spirit in which the debate has been conducted these are matters on which we can make common cause. We all have at heart the future of this great industry. In my view, it must be maintained and must thrive. We have a great and pioneering tradition, and we still have a number of great successes. If in concluding I relate a few of those, it is because, despite all the problems, we should remind ourselves that there are matters that give us encouragement for the future.
For example, there is the investment of £285 million in the new Metro at Longbridge. That is a key matter, and we wish the project successes. There is also the investment in the new Road-train truck and the new assembly hall at Leyland, the plans at Solihull to double Land-Rover production, and the BL-Honda development, to which the Government have given their agreement in principle. That brings forward a new model; it does not simply introduce a stopgap.
The hon. Member for Stechford was a little unfair in singling out Ford for his criticism. It is true that as part of its European policy Ford has gone in for importing from one European country to another, but, as the hon. Gentleman well knows, with the Bridgend engine plant, which is now on stream, there will be an opportunity for all Escort engines for the whole of Europe to be supplied from this country. If one followed the logic of the hon. Gentleman's argument, Ford would be forced back into a fortress-type activity, with each country insisting that the company did every little piece within its own frontiers. It is a different strategy. I have given a good example of where it works to our advantage. After all, in a four-year investment 195 programme, now almost complete, Ford has spent almost £1 billion.
The components industry is still producing an excellent export record—an £800 million surplus on the balance of payments last year. For example, Lucas is providing all General Motors' requirements for diesel fuel injectors.
Those are some of the success stories. It is right that they should be mentioned to balance some of the problems that hon. Members have inevitably concentrated on tonight.
I certainly am not complacent about the future of the industry or the challenge that it poses for management and work force. Questions of demarcation disputes were raised. This is a Nita] matter. Hon. Members recognise that at a time of changing technology we must do all we can to encourage and facilitate the process of change. We in the Government are determined to do our part. The task has been made a little easier and a little more rational by the debate.