§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Mike Hall.]
§ 10.2 pm
§ Mr. Peter L. Pike (Burnley)I am pleased to have the opportunity to hold this Adjournment debate on the Government's policy on the motor components industry, and I am glad that my hon. Friend the Member for Pendle (Mr. Prentice) is able to attend. Although the normal conventions and the restricted time available mean that he will not speak in the debate, my hon. Friend is concerned about the principal issue—the redundancies earlier this month at TRW—that has caused me to raise the matter. I shall speak about TRW first, and then about the industry in general.
Although I am sorry to have dragged my hon. Friend the Under-Secretary here this evening, I am sure that on his desk there is a letter from Burnley borough council, asking him to meet a joint delegation to discuss the redundancies. The council is worried about the effect that those redundnacies will have, and about the loss of objective 2 status, in Burnley and in most of north-east Lancashire.
Most people in Burnley still know the firm now called TRW as Lucas. During the war, the Lucas firm was relocated to Burnley, which was a safe industrial area. In only a few years, it had become a major employer: it ran several different factories and employed several thousand people in the separate sections devoted to aerospace and to motor components. The name changed first to LucasVarity and then, in May last year, TRW Automotive Electronics, whose headquarters are in Farmington Hills, Michigan, acquired the factory.
I am sad to say that there is almost nothing left of what used to be a major local employer, as the last of the aerospace factories was sold last year. When I became the Member for Burnley, that company was the largest employer in the constituency, with several thousand employees working in the town.
Earlier this month I received a notification from TRW that it was making 450 redundancies. The notice was sent to my Burnley office by hand at the moment that the company was making the announcement on 2 March. It was faxed to my office at the House at the very moment when I was asking a question in the Chamber about the aerospace industry. Little did I know that I would rise a few minutes later during business questions to ask for an urgent debate on the issue. That intervention resulted in this debate.
TRW's press release on 2 March was accompanied by a letter to me saying that it had announced that it would reduce
the number of its employees by about 450 people as part of a major business change to make the plant at Burnley profitable.The letter continues:Our intent is to build a solid and profitable foundation for the Burnley facility," said Gerd Kleinert, vice president and general manager, Body Control Systems, TRW Automotive Electronics. "Like our competitors, we are facing manufacturing overcapacity and feeling pressure from increasing customer demand for lower prices. We shall be transferring some products and processes to other plants to better utilize our total manufacturing capacity and lower costs at Burnley.1086 It must be noted that work is available and that the company is transferring work from the order book elsewhere. The letter continues:We appreciate the efforts of our employees at Burnley," said Kleinert. "The reduction certainly is not a reflection on them. TRW will do what it can to help them with the transition.That sounds very nice but the work force does not think too kindly of that comment.I immediately arranged a meeting with TRW. Peter Bagshaw, the personnel manager, arranged it for the following morning, Friday 3 March. Brian Nadel, the director of operations, was present at the meeting, plus union and council representatives. We went through the situation and discussed several options.
The following day was the regional conference of the north-west regional Labour party. The GMB, my union, moved an emergency motion, which was carried unanimously. That was at Southport on Saturday 4 March. The conference condemned overseas firms buying United Kingdom plants and order books and transferring that work to other places. It urged similar protection for our manufacturing industrial base to that which is given in France and Germany.
It must be said that the unions on site, the GMB and the Amalgamated Engineering and Electrical Union, remain committed, understandably, to the principal objective, which I would also support, of trying to eliminate the need for the redundancies, or at worst reducing the number of redundancies and saving the maximum possible number of jobs.
A letter to me from Burnley council on 6 March reads:
As you know Burnley is heavily dependent on manufacturing and many of our largest employers are "branch plants" of multinational organisations. We have a number of employers manufacturing components for the motor industry. They are all reporting severe pressure due to the high value of sterling especially against other European currencies, high and growing levels of interest rates and intense price competition. Whilst we have worked hard to alleviate the consequences of previous job losses, by supporting the creation of new businesses and the expansion of others, redundancies on the scale announced by TRW have a major adverse effect on the entire town.A press release was issued after the meeting that was held on the Friday. It reads:Councillor Tony Harrison, Chair of the Council's Economic and Property Committee, said "It is clearly not the fault of a loyal and hard working work force, although some of them will have to pay the ultimate price.TRW supplies a number of car manufacturers and assemblers both in the UK and in Europe. We need to have a meeting because commercial confidentiality means that it would not be possible or appropriate to debate some of the points at issue in an Adjournment debate.The switch gear that TRW makes is highly sophisticated. Switch gears on cars now operate so many things. They are not simple systems; they are expensive and complex, and TRW, formerly Lucas, has considerable expertise in manufacturing them.
The value of the pound is a problem, as is the fact that we have not joined the euro. Companies can go to other manufacturers to source the components elsewhere. It is a highly competitive industry and there is overcapacity. All of us who watched television at the weekend following the announcement about Rover last week—Rover is one of TRW's customers—will know about its massive overcapacity and the stocks of cars to be sold. 1087 We have to remember that problems selling cars have ramifications further along the line for the manufacturers of the components.
Enterprise, a company formerly known as Lancashire Enterprise, which does a good job in the area and outside in helping to secure jobs, wrote to me on 21 March, saying:
It is essential to recognise and accept that the automotive market is now, most definitely, global with competitiveness as the number one priority … The strong pound and the United Kingdom being outside the "Eurozone" have been promoted by BMW as some of the reasons for pulling out of Rover. Other manufacturers in the automotive sector … also reflect these views.This is not just about TRW, although that is the immediate problem. I have other car component manufacturers in my constituency. TRW has 949 employees, and 450 of them are under threat of redundancy. Michelin, which makes heavy vehicle tyres, has 545 workers. Tenneco Walker, which makes exhaust systems, has 210 employees and Viktor Achter has 600 workers. In a letter to me of 20 March, Burnley borough council said:Despite doing everything possible for themselves, these firms face a difficult future. This is in the context of local wage levels being 83 per cent. of national levels.That is an important, because a lot of people are employed in manufacturing in the area—the percentage is particularly high in Pendle, Burnley and Hyndburn. We are not a high wage area, however. Many of our people benefited from the introduction of the national minimum wage, and TRW certainly paid wages above the national minimum wage. It paid very reasonable and respectable wages but, overall, we are not a high wage area so we are not pricing ourselves out of the market. The letter from Burnley borough council continues:If employment is going abroad from this area, it is difficult to see the rest of the country competing successfully.The only way we can compete more successfully is if interest rates were lowered to European levels, the pound's strength tackled to help exporters or Britain joins the Euro. Additionally, more assistance could possibly be given to support firms' investment in higher levels of automation and leading edge technologies to counter the attraction of moving work to areas of low labour costs.I have to say that as things stand at present, it is very difficult to see a move away from the accelerating trend towards Britain exporting lower skilled employment to low wage areas.That letter is signed by Hugh Simpson, head of economic development. So this is not a problem just for TRW but for industry in general, and the motor components industry in particular.The East Lancashire chamber of commerce says in a letter of 21 March:
The news from Rover is plainly and simply bad for the area. We have companies entirely dependent now on supplying Rover cars and others whose major customers are Land Rover. After the split, some companies will presumably continue to supply those models being retained by BMW (until production moves overseas?), some being made on reduced scale by Alchemy and some in the Land Rover Ford compact. What supply chain assurances are there? Can the Government help obtain these?Will the temptation be for supply chain networks to be compressed into the South Midlands and South given the reduced overall demand, and the logistical disadvantage?The Minister will know that MPs representing north-west constituencies—indeed, people throughout the whole region—are extremely disappointed that investment in the synchrotron development went to Oxford instead of to Daresbury. That went down badly in the north-west.1088 Discussions between unions and management are now under way at TRW about which lines are to go and when; and about comparative costs and labour rates. The company is already considering where much of the work will go—comparing the wage rates of more than £60 a week in the Czech Republic with those in Slovakia where they are slightly more than £45 a week. Slovakia is likely to be biggest gainer. Rates in Russia are even less.
Those matters worry people who work in the industry. They ask where the line should be drawn and how we are to save jobs in our industry. The workers and the unions contacted me when they knew that I would be initiating this debate. They asked me a series of simple but important questions.
Will the Government do more to ensure that sourcing is from within the UK wherever possible, within EU rules? Do the Government accept that the high exchange rate and our non-membership of the euro are severe problems for the manufacturing sector?
At times, France and Germany must be laughing all the way to the bank, because their euro rate is fixed, while most of our exporting companies have to fix their euro prices at the beginning of the year and take a risk about what will happen. Europe is our biggest market. In many cases, we are Europe's biggest market. European countries can sell cheaply to us, but we have to sell dear to them because of the present balance in exchange rates. The workers and the unions ask what can be done to remedy those problems as soon as possible.
The regional development agencies introduced regional supply offices to encourage large companies to source locally. Both Enterprise and the East Lancashire chamber of commerce already encourage that. The TRW workers ask why the RDAs cannot do more in that regard.
The workers at TRW have every sympathy with the Rover workers. The effect on individual workers at TRW is just the same—redundancy is redundancy whether it affects thousands or hundreds. The proportionate impact of 450 redundancies in Burnley and the ripple effect over a small area is not so different from the impact on the west midlands of the BMW-Rover decision. Will Burnley receive a proportionate response from the Government to repel that blow?
I hope that we receive some positive answers from my hon. Friend the Minister and that we shall do everything possible to assure those people that the Government are concerned about their position and about the motor components industry.
§ The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Alan Johnson)I congratulate my hon. Friend the Member for Burnley (Mr. Pike) on initiating the debate and thank my hon. Friend the Member for Pendle (Mr. Prentice) for being in the Chamber. I know that the issue is extremely important to their constituents—as it is to the Government.
I express my regret at the announcement of the job losses in the constituency of my hon. Friend the Member for Burnley and our concern for the men and women who face the prospect of redundancy. It is extremely difficult for the Government to intervene when a company has come to a final commercial decision.
Officials from the Government office of the north-west and the East Lancashire training and enterprise council are keen to discuss with TRW whether we can help in any 1089 way to enhance the future security of employment on the site, and what packages of assistance might be available to those who are made redundant. The Employment Service is liaising with the company to provide advice and to help employees who may be leaving. Burnley borough council has also been in close contact to offer whatever help it can. I shall say something more about that at the end of my speech.
Recent events have helped to remind us—if we needed reminding—just how important to the United Kingdom's economy the car and components manufacturing sectors of industry are. They employ more than 200,000 people and, in 1998, they accounted for more than 11 per cent. of total UK exports. Altogether, UK vehicle and component manufacturing has an estimated turnover of £40 billion—nearly 5.5 per cent. of gross domestic product.
As in all areas of manufacturing, the pace of innovation and technological change is quickening. Concerns over the environment and congestion require cleaner and more fuel-efficient vehicles and greater recyclability. New car models are being introduced more frequently and more quickly than ever before, and the industry is also at the forefront of much technological research. Lightweight materials, safety systems, telematics and fuel cells are but a few examples and the industry leads the manufacturing sector in developing and adopting lean manufacturing techniques, such as continuous improvement and just-in-sequence supply.
Clearly, in such a sector, companies have to be world class to survive. For the vehicle manufacturers, that has meant consolidation to take advantage of the economies of scale that can be achieved through having a global reach. It means having sufficient resources to develop and apply the new technologies of tomorrow and to introduce new models that will have a shorter lifespan in the marketplace than ever before. Last but not least, it means having a healthy and competitive supply chain.
The performance of any vehicle manufacturer is critically dependent on its suppliers. Some 70 per cent. of vehicle manufacturers' costs are accounted for by bought-in materials and parts. The efficiency of their assembly lines is dependent on having the parts delivered on time and to the right quality. That means that the same competitive pressures will be passed down to suppliers, too. Vehicle manufacturers are increasingly looking for suppliers that have global reach and are able to deliver whole sub-assemblies or systems with state-of-the-art technology, excellent production quality and competitive prices. In effect, they are looking for suppliers to take on some of the risks of developing new models.
As a result, vehicle manufacturers have been taking steps to reduce the number of suppliers that they deal with and to secure the economies of scale and technological innovation that can be offered by global suppliers. In turn, that presents the remainder of the supply base with greater challenges and burdens. I know that that process is resulting in difficult decisions. However, it also offers immense opportunities. Smaller suppliers may decide that their future lies in supplying larger global suppliers rather than continuing to supply direct themselves to vehicle manufacturers. Others may decide that their future lies as part of a larger global supplier. Many have chosen those routes already.
Any supplier—large or small, first or third tier—will have to be globally competitive if it is to have any chance in the future. Companies in the UK automotive chain have 1090 to be able to compete with the best. A lot has already been done, and much has been achieved. International comparisons on stock levels—a key measure of lean manufacturing—shows that the UK's automotive component industry compares well with the United States and very favourably with Europe. It is testimony to the increasing competitiveness of the UK supply base.
However, both we and the industry recognise that there is more to do, and we are helping to do it. We are actively supporting the industry's efforts to improve its competitiveness through the Society of Motor Manufacturers and Traders industry forum. It is a unique initiative that aims to develop and sustain world-leading competitiveness in the UK-based vehicle and components industry, through the development and adoption of world-class manufacturing improvement activity and training. Indeed, the initiative is being replicated in other manufacturing industries.
The Department of Trade and Industry has been closely involved with the project from the start and is providing more than £6.5 million of support. The results of that initiative are astonishing and have won praise from within the sector and outside. Right-first-time quality is up by two thirds, productivity has doubled and stock turns have more than trebled. However, that is just a beginning. The challenge is now to sustain and spread such improvements more widely.
We have also supported work by Cranfield university to improve the product development and introduction process among automotive suppliers and to help them design and manufacture new products more quickly and more cheaply.
The work is being reinforced by excellent initiatives at regional level. In the west midlands, the accelerate programme offers an integrated programme of training and support to small and medium-sized enterprises and direct suppliers in the automotive component sector to deliver measurable improvements in their manufacturing performance. The Longbridge taskforce will, as part of its work, consider what further assistance might be given to the automotive suppliers in that region to improve their competitiveness.
Competitiveness is also increasingly dependent on suppliers' ability to offer vehicle manufacturers leading-edge technology and innovation. That is why the Government are supporting the highly successful DTI-led foresight vehicle LINK programme, which has provided more than £12 million of public funds for strategic collaborative research between industry and the science base. That is helping UK-based companies to develop the materials and technologies for tomorrow's vehicles—vehicles that are clean, efficient and lightweight and that integrate information and communication systems fully into the road transport system.
The DTI has also been developing a programme to help suppliers locate new customers in the UK and abroad, taking a strategic approach to markets and responding to customer needs. In addition, the Department of Trade and Industry helps UK companies to participate in trade fairs and missions overseas. Most recently, we supported a large and highly successful contingent of UK companies at the US Society of Automotive Engineers show in Detroit and we will be supporting a group of UK companies at the Automechanika exhibition in Frankfurt in September.
1091 We are also supporting major export campaigns in Mexico and central Europe and have on-going initiatives in India and China. All this represents a significant investment by the Government in spreading best practice and in helping UK-based companies develop and exploit new technologies. One of the most significant ways in which we have been able to support the motor components industry is to ensure the continued development of the vehicle industry in the UK, which provides the customer base for much of the UK's production of components.
I shall set some of the understandable and eloquent remarks of my hon. Friend the Member for Burnley in context. There are seven major car manufacturers in the UK—more than any other country in Europe. The majority of suppliers to the UK-based car manufacturers are based here. Ford's European operations source £2 billion a year from the UK, while Vauxhall adds a further £900 million. The Japanese vehicle manufacturers are estimated to be worth more than £2 billion to the UK components industry.
Since 1997—since the general election—more than £2.4 billion of new, additional investment has been won by the vehicle manufacturers in the UK. That investment has created more than 8,750 new jobs. To take some examples, Honda announced a £500 million investment to add a third model at Swindon. Peugeot and Vauxhall both added third shifts at their plants in Ryton and Ellesmere Port. There were two developments last year at Nissan in relation to production of the Almera and the Primera. Car exports last year of 1.1 million are the highest ever. UK car sales in 1999 are the highest on record and UK car production is the highest since 1972.
This investment and job creation is not simply in vehicle production but in research, testing and development. In a globalising industry, as my hon. Friend rightly said, this sort of high-quality investment helps to underpin the presence of the manufacturing operations in Britain and provides opportunities for component suppliers to work with vehicle assemblers on new products involving new technology.
1092 Last year General Motors announced the establishment of its new light vehicle R and D centre at Millbrook with 100 new jobs. Ford has continued to invest in its R and D operations at Dunton and opened £80 million worth of new facilities in September 1999, on top of the £303 million invested in 1998.
Inward investment by automotive component companies has continued as well. Since April last year, 28 automotive component companies have decided to invest in the UK, with £128 million of capital expenditure bringing 1,700 new jobs and safeguarding a further 4,700.
My hon. Friend mentioned the euro. As we have made clear, we believe that that was not the primary cause of the events at BMW. What matters to businesses in this country is stability, and we believe that we are delivering that. Companies want sound public finances and low inflation. We understand the concerns of businesses, especially manufacturers trading with Europe, about the strength of the pound, but we are determined to take a long-term view. It would be wrong to let short-term pressures lead us back to the policies that have produced instability in the past.
I emphasise the importance that the Government attach to maintaining a strong automotive industry in the United Kingdom. We do not underestimate the challenges: global competition has never been stronger; vehicle manufacturers insist on the highest standards of performance from their suppliers; and the industry as a whole faces a challenging environmental and safety agenda.
My office is searching for a date early next week when I can meet my hon. Friend and his colleagues—I believe Tuesday is the preferred day, but we are checking that with my hon. Friend. At that meeting, we shall discuss all the ways we can help in Burnley, just as we are trying to help in the west midlands. We can also discuss fully the issues and concerns that he has eloquently raised on behalf of his constituents, especially those directly affected by the recent announcements at TRW.
§ Question put and agreed to.
§ Adjourned accordingly at twenty-nine minutes to Eleven o'clock.