Birmingham Post - Business Blog

European car sales rise at last, but don't get too excited by the news.

Wed, 15 Jul 2009 14:53:38 +0000

European car sales rose in June for the first time in 14 months, again underlining that the car sector seems to bottoming out after the worst downturn since records began.

New car sales rose by 2.4% year-on-year in June with some 1.46 million new cars registered in Europe, according to the European Automotive Manufacturers' Association ACEA.

Whilst this is good news, we shouldn't get too carried away. Two things seem to be going on here.

Firstly, sales this time last year nosedived, so we're now comparing this June's figures with truly awful figures a year ago. That's a statistical effect, so let's not get over-excited. What the figures really show is that things are bottoming out at a very low level.

Secondly, what growth we are seeing is being driven by government scrappage schemes. That's good news, of course, in that there is some stabilisation in the market thanks to policy intervention, but when the schemes are phased out one wonders how the car market will hold up.

Our Vanishing Van industry... Do we want to make vans in the UK? If so, the government needs to do something now, starting with LDV.

Fri, 05 Jun 2009 12:48:01 +0000

Whilst the UK has seen its production of heavy end commercial vehicles run down in recent years, light commercial vehicles are still made in the UK in significant numbers.

Yet that could well change over the next three years unless the UK government steps in, as the seismic changes that have unfolded in the world's auto markets threaten to wipe out mass van production in the UK, leaving only very small niche producers.

At the moment there are three main producers - Ford at Southampton, GM/Renault's joint venture at Luton, and LDV here in Birmingham. The latter has been in suspended animation since December when production was largely stopped as the double whammy of credit crunch and recession impacted.

If current trends continue, all three could effectively have gone by 2012, with all main van demand then having to be met by imports, and with jobs and capacity lost forever.

The key question for the UK government is: does it want a van industry in the UK? If so, it needs to step in with an industrial policy that can make that happen. LDV is a good place to start.

LDV: Back on the road by July?

Sun, 17 May 2009 20:52:07 +0000

LDV is back in court tomorrow hoping to withdraw its application for administration. After a last-gasp £5million intervention by the government (well done, Liam Byrne) to buy critical time for the Malaysian firm Weststar to look over LDV's books and hopefully buy the firm, hopes are rising that production will re-start this summer once the takeover is completed.

Readers won't need reminding that the van maker ceased production back in December after the double whammy of recession and credit crunch hit the commercial vehicle market, and LDV's Russian owner Gaz ran into its own financial troubles.

Critically, Weststar appears to want to maintain production at LDV's Washwood Heath plant, and also to expand manufacturing in Malaysia (where so far Weststar has imported Maxus van components and assembled them for Asian markets).

LDV employs around 850 workers at its plant, with another 1200 in dealerships. Several thousand more in the supply chain depend on the firm, although it isn't clear how many of these have already lost their jobs in the savage downturn affecting the industry and given that LDV hasn't made a van in months.

Manufacturing matters. Why I'm marching for jobs tomorrow in Birmingham... along with thousands of others.

Fri, 15 May 2009 23:49:20 +0000

Tomorrow thousands of workers are expected to join a march in Birmingham to send a clear message to the government that protecting jobs must be the top priority as the double whammy of recession and credit crunch continues to bite.

The "Unite for Jobs" march will bring together key figures from business, academia and politics to spell out the case for government action to protect jobs, especially in the manufacturing sector.

I didn't think I'd ever see the former CBI chief and trade minister Digby, Lord Jones of Birmingham marching alongside the joint general secretaries of Unite, Tony Woodley and Derek Simpson. Yet there they will be, at the head of the march, spelling out the need for government action.

I'll be going along as I think Digby, Tony, Derek and many others have a very strong case to make. In recent blogs I've been stressing the need to support not only JLR and the auto sector, but also manufacturing more generally.

There are very good reasons for doing so, as one day (we don't know when) this recession will be over, and we will need a strong manufacturing exports sector to drive growth. Financial services, consumers, property and construction will recover but they won't quite drive growth in the way that they did before. Manufacturing will matter.

LDV: Late-Delivery Victory? Almost, but the deal has yet to be delivered...

Tue, 05 May 2009 23:00:50 +0000

Some great news potentially - at last - for LDV. The government has finally supported a last-ditch takeover of LDV by Malaysian firm Westar with a £5m bridging loan that will buy an extra month to hammer out a deal.

That deal is not yet completed, but the news keeps LDV in the game and offers hope that it can indeed pull off yet another famous recovery.

The loan, from the Department for Business, Enterprise and Regulatory Reform (BERR), will - it's hoped - prevent the Brummie van maker from sinking into administration and keep the firm going whilst the deal is sorted out.

Whilst it isn't clear whether Westar, a Malaysian vehicle importer with whom LDV have long-term ties, has guaranteed that production will remain in Britain, it is doubtful whether the British government would be lending the money if UK production wasn't on offer.

Westar is probably the only hope to keep LDV going in Birmingham. If LDV had been forced into administration tomorrow, the most likely outcome would be another lift-and-shift of LDV assets and knowledge out to the Far East as we saw so painfully with MG Rover four years ago.

Bangers and Cash, but where's the Credit Gravy?

Thu, 23 Apr 2009 00:18:16 +0000

So, Darling did finally unveil a (better late than never) scrappage scheme in yesterday's budget whereby motorists will get £2,000 if they trade in their 'old' (over ten years old that is) car and buy a new one. Interestingly, it seems this will also apply to vans up to 3.5 tonnes, so could - potentially - help LDV if it can restart production.

The scrappage scheme will run until March 2010 or until the money runs out. The UK is the last major EU government to set up such a scheme.

However, the auto industry will itself have to provide matched funding, with £1000 from government and £1,000 from dealers for each car traded in for a new model.
The cost to the exchequer is £300 million, with another £300 million from the auto industry. Unlike it France, the scheme won't be restricted to smaller, greener cars.

The UK scrappage scheme will be much smaller than Germany's, which is costing the government there some €5bn (around £4.5bn) and which has - it is estimated - lifted sales by 40% in March year-on-year.

The Budget: Some initial thoughts

Wed, 22 Apr 2009 15:24:03 +0000

So, Darling expects a quick bounce back for the British economy in 2011 and beyond. That can happen but when there's a credit crunch dimension, recessions tend to take longer to recover from, so I think the 3.5% growth forecast for 2011 is a bit optimistic. That impacts in turn on his ability to balance the books, or get anywhere near to doing so...

Is this a 'Soak the Rich' or rather 'throw a slightly damp cloth at the rich' budget as John Clancy wondered aloud in the live Birmingham Post Budget blog coverage today? Well, with a new top rate of tax of 50% for those earning over 150K, Darling aims to tax the rich to some extent to get borrowing down.

However, whilst last November Darling highlighted the future tax rises on the rich, the bulk of the fiscal tightening will - it seems - come mainly through slower growth in public expenditure after 2011. The key question here is whether this will impact on front line public services.

The new top rate of tax of 50% for those earning over £150K also leaves Cameron in a potentially tricky position. Will the Tories back this (to get the budget deficit under control) or will they pledge to reverse it?

The EIB Loan to JLR: a welcome starter - but we're still waiting for the main course...

Tue, 07 Apr 2009 22:03:08 +0000

Today's news that the European Investment Bank will lend Jaguar Land Rover some £300 million - backed by UK government guarantees - is a vote of confidence in the technological prowess of one of Britain's biggest investors in R&D (of course that's if all the due diligence is completed - the actual cash is still weeks away for JLR). The EIB also announced its intention to provide financial support to Nissan's operations in the UK and Spain.

It is hugely important for the firm in terms of it being able to keep up its impressive rate of investment, especially in environmental technologies. The firm has an £800 million investment programme in green technologies - something that much of the London 'quality' press seem to have overlooked completely.

It is also great news that the UK government has finally done something to help the UK auto industry, by guaranteeing the loan. So, this is good news for JLR's long term R&D investment, but equally does nothing to help the firm's cash position in what is the worst downturn in the UK car industry since records began.

Thinking Outside of the Box-Van. City Council throws LDV a lifeline, and backs a greener future. It's a shame the government has yet to act.

Sat, 28 Mar 2009 21:47:15 +0000

Blogged by David Bailey and John Clancy

News that Mike Whitby and Birmingham City Council have stepped in to help LDV has raised hopes that the firm can yet be saved, and in so doing safeguard thousands of jobs.

As Steve Dyson said this week in his excellent blog at the Birmingham Mail, 'what a great story it would be for Birmingham if the company is saved after his intervention. Brummies looking after Brummies, and challenging the government to step in as well'.

It should be stressed that LDV is not saved yet, but as I've pointed out in earlier blogs (see here), the firm can still pull this off if the government steps in with a bridging loan of around £4 or 5 million. This is a piffling amount compared to the billions thrown at the banks.

But why should the government act?

LDV: The last dregs of supping up time at the last chance saloon? Yet the firm can still pull this off if Gordon puts his money where his mouth is.

Mon, 23 Mar 2009 22:15:49 +0000

Blogged by David Bailey and John Clancy

It may not have made a van since December 12th, and may be hours away from falling into administration, but news that the giant Indian engineering group Mahindra & Mahindra could be a buyer of LDV raises hopes that maybe - just maybe - the ever optimistic LDV management can still pull this particular rabbit out of the hat, and in so doing save thousands of Birmingham jobs.

Mahindra, in case you haven't heard of it, has an annual turnover of some $5 billion, and was in the running to buy Jaguar Land Rover last year. It has just been named by The Times as one of three possible suitors (along with an Asian firm and a US bid) for the Washwood Heath business which Russian oligarch Oleg Deripaska is seeking to offload.

And as John Cranage in today's Post notes, Mahindra would like to make a van in India and if they could get LDV for next to nothing they would take it.

Mandy has a point.

Fri, 13 Mar 2009 03:59:59 +0000

"We are not going to get into a battle of words with the Bank of England," stated Lord Mandelson's spokesperson... "but the recession is really hurting the economy, and it is perfectly reasonable for the Business Secretary to speak up for the needs of business during these tough times."

So it seems that the Bank of England is now 'puzzled' as to Lord Mandelson's comments. True, it is most unusual for a cabinet minister to criticise another department (HM Treasury) and even more so the Bank of the England.

The Bank's response that it isn't responsible for sector-specific support is clever but doesn't actually get them off the hook. Just about every other car manufacturing nation has done something to stimulate demand, including in many cases helping out the car firms' finance arms.

And that's where the Bank comes in. If you buy a car today you actually buy a mix of a complex physical asset plus a package of services, including usually a financing deal. With financial markets in disarray, credit has effectively dried up. No credit, no sales - or very few of them, as we are seeing now. Indeed, some 300,000 people have been turned down for a car loan in the last six months. No wonder sales have collapsed.

Mandelson admits support for auto sector has been too slow, and points finger at the Bank of England

Thu, 12 Mar 2009 02:55:57 +0000

Lord Mandelson's comments that he wished the government had acted quicker to support the auto sector are welcome. They are the sign of someone who is genuinely listening and who is trying to get things done, in the face of a slow and cumbersome machinery of government that is cranking its way through the process far too slowly.

Yesterday he commented to the BBC that (my italics) "I wish our discussions with the Treasury and the Bank of England - and it is the Bank of England that is in pole position on this - had gone quicker than they have. I readily acknowledge that". Whilst he stopped short of openly saying that the Bank was holding things up, his comments place the responsibility for the lack of action firmly at the door of the Bank of England.

He stepped up the pressure by noting that "...discussions are nonetheless making progress and I hope that it will be possible to help those car financing arms because that goes hand in hand with our other efforts to boost this market and give a shot in the arm for the demand for cars."

It is unusual - to say the least - for a cabinet member to criticise the Bank in this way, and can be seen as a deliberate way of increasing pressure on the Bank to get on with helping car financing arms.

Memo from the Banks - "Thanks for saving us, but we will fight for the right to be unfair, and use your money to do it!"

Mon, 09 Feb 2009 13:29:21 +0000

Blogged by David Bailey and John Clancy

You may have missed it, but while you and I stump up the cash for a taxpayers' bail out of the banks (and whilst their greedy execs still have their snouts in the trough for yet more fat-cat bonuses), the issue that first undermined public trust in the banks has continued to rumble on - namely unlawful, unfair Bank Charges.

Did you know, however, that even as the government places the first priority in getting the nation through the recession as being the test of 'fairness', the banks are using your money and mine (as taxpayers) to try to prove that, actually, they have a right to be unfair? Hmmm, yes it came as surprise to me as well.

The Bankers were rather hoping that the government and the rest of us had forgotten about that one, thank you, what with all the other awful stuff they've had to deal with in the last 6 months in particular (must be tough at the top for a banker, eh?)

As we write, the Banks we have bailed out are collectively spending millions of pounds on a court case fighting the Office of Fair Trading (the OFT) on the other side (also, of course, funded by you and me) to get the courts (also funded by you and me) to say that the bank charges they have been levying for the last 7 years are not subject to the test of 'fairness'.

More specifically they are spending our money to get the courts to rule that they can continue to charge what they like and that fairness need not enter, and need never to have entered, into it. "I'm alright Jack" seems the line as they collectively stick two fingers up at the taxpayer and the government.

Toyota's Surprise Losses Highlight the Dire State of the Global Auto industry: An Unprecedented Situation, needing Urgent Action

Sun, 08 Feb 2009 21:24:42 +0000

Toyota, which overtook GM to become the biggest auto manufacturer in the world last year, shocked the auto world on Friday by announcing that its expected loss for this financial year (to end of March) will be more than double the estimate it gave out just under 2 months ago.

It now says that it expects its first full-year operating loss in its 71 year history to be around ¥350 billion yen (£2.6 billion or nearly $4 US billion), with the operating loss on its auto business adding up to some ¥450 billion yen, (£ billion or $5 billion).

By way of comparison, in the previous financial year the firm raked in huge profits (around ¥1.72 trillion).

It blames the loss on the collapse in sales in key markets (the US, Europe, Japan and China) and the rapid appreciation of the Yen (which rose 23% against the Dollar and 29% against the Euro last year). The latter has the effect of reducing the Yen value of overseas earnings. The firm has been especially hit in the US market (usually its most profitable) where sales fell over 30% in the last quarter of 2008 compared with the same period in 2007.

The credit-crunch induced downturn is hammering the auto industry, but until a few months ago Toyota seemed in good shape and able to ride things out. Not any more...

Is it wrong to do well in a downturn?

Sat, 07 Feb 2009 13:36:51 +0000

I've noticed a growing trend recently: an increasing number of business people who feel that they have to apologise for doing well during the downturn.

This is probably due to the fact that the people in question are decent, caring types. They are understandably sensitive to the difficult situation that many companies and individuals are facing as the country slides deeper into recession.

It's likely that most of us will know friends and family who have lost their jobs, and for the time being at least, the situation doesn't show any signs of improving. But should this stop the companies that are bucking the trend from celebrating their success?