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No bangers in the UK


Themes: Management science and operations

It’s often said that Britain’s car industry is in decline, but research from Dr Matthias Holweg suggests the real story is very different.

“Britain hasn’t lost its motor industry. It has just lost its national car company,” says Dr Matthias Holweg, Reader in Operations Management and Deputy Director of the Centre for Process Excellence & Innovation at Cambridge Judge Business School. “The idea that we need to resuscitate the industry is a misconception.”

The failure of MG Rover in 2005 cost 6,000 people their jobs and left the UK without a national car manufacturing champion. “Rover has gone, but its children are prospering under different parents,” says Holweg. “Firms like Mini, Jaguar and Land Rover are making up for the production that Rover once had – we are actually producing more cars under foreign leadership than before.”

Globally, the automotive industry is in a state of relative growth. Potential for a viable UK industry still exists, although its shape and dynamics have changed – with no British carmarker, it is reliant on foreign investment.

Poor government relations have been a thorn in the industry’s side, as Holweg discovered while researching the failure of British Leyland, which had encompassed Britain’s motor industry since the late 1960s. His investigation revealed an almost unremittingly poor relationship with government, dating back to the failed nationalisation of the industry in 1975.

Every previous assessment mentioned the perception that government didn’t care and industry had no say in key decisions,” he says. Competitor nations like Germany and France have leapfrogged Britain since the 1970s, which Holweg attributes to their relationship with policy-makers. “The industry has to be able to talk to politicians, nationally and at the EU, to ensure it can be effective in the long term.”

Following his investigation, Holweg became directly involved in the development of a new model for relations between the British Government and the automotive sector. As a member of the steering group of the New Automotive Innovation and Growth Team (NAIGT) – formed in 2008 to develop a collective, strategic vision for the industry over the next 20 years – his role was to determine whether British car manufacturing was still competitive and whether it could be made so.

NAIGT’s report, The Competitive Status Of The UK Automotive Industry, which Holweg co-authored, examined the industry’s continuing potential and illuminated key problem areas such as a perceived shortage of local suppliers and difficulties recruiting skilled labour.

As Holweg’s research showed, these impediments are policy-related as well as industrial. The NAIGT report built on these insights, reasoning that industry and government needed to be put back on the same wavelength – resulting in the creation of a joint Automotive Council in December 2009. It withstood the change of government in 2010 and is now co-chaired by Vince Cable and Richard Parry-Jones, former chief technical officer at Ford and chair of the NAIGT.

The creation of the Automotive Council reflects a shift in attitudes. “Business experts and politicians are giving their time to the industry in a serious-minded way for the first time,” says Holweg. Partnerships between the industry and policy-makers, national agencies, and the education sector are actively being built for the first time in 40 years, while internal working groups have focused on problem areas.

Holweg undertook further research as part of the Council’s supply chain working group. The ensuing report, Growing The Automotive Supply Chain: The Way Forward, pointed to the potential “hollowing out” of the supply chain – when the relationship between supply and demand breaks down, more parts are sourced from other countries.

The report identified areas of opportunity for building and retaining the UK supply chain’s capabilities. It revealed that the UK can support a greater proportion of vehicle assembly than at present, and dispelled widespread belief that this type of business is being lost to low labour cost countries – while this is true, just as much is actually being lost to Western European competitors, most notably Germany and France.

Countries closer to home are benefiting from the risk in running supply chains that span the globe,” says Holweg. “Once you factor in the logistics of getting components from a distant country, you realise air freight is the only sector that benefits consistently from offshoring.”

At a strategic level, the best way to match the needs of vehicle manufacturers to supplier growth areas is to get them talking. Holweg has been involved in instigating a series of “Meet The Buyer” events, which have taken place over the last three years, and which have led to hundreds of individual meetings between OEM purchasing staff and potential suppliers. “There is a willingness to supply and a wish to source more locally,” he says. “To make that happen, we need an environment where car manufacturers and suppliers can interact. All too often there is a tendency to source from established suppliers, even if they are abroad. This misses opportunities for sourcing from local suppliers in the UK.”

For the first time in a century, manufacturers, suppliers are interacting with the government through a regular, open forum” Holweg reflects. “This is a vital step towards retaining the industrial base in the UK.”