We’re on the road to Car-mageddon: From JOHN NEILL, the boss of Britain’s biggest automotive firms, a devastating indictment of how hard Brexit will drive his industry to ruin
By John Neill, Unipart Chief Executive
Published: 01:26, 27 May 2018 | Updated: 02:25, 27 May 2018
Back in the bad old days of the 1970s, the British car industry was almost brought to its knees by a rabble of militant trade unions. I know, because I was there – and it was devastating to watch.
Thanks to my talented and hardworking colleagues, we were able to salvage success from the jaws of defeat. Together we created the automotive parts business Unipart out of the old British Leyland – a firm that had become a byword for all that was wrong with motor manufacturing in the UK.
Today, Unipart employs more than 6,000 people and has a turnover of £900 million, supplying major car manufacturers at home and abroad with components and spare parts.
As such, we are at the heart of an automotive sector that has become one of the greatest stories of industrial revival in history. UK car production rose like a phoenix from the ashes of the 1970s and today provides more than 800,000 jobs in Britain.
Why, then, am I filled with a sense of foreboding? Quite simply because I fear hardline Brexiteers are in danger of achieving what that rabble of militant trade unions failed to do: destroying the British car industry.
In fact, I am even more worried than I was back then, when at least I could help fix the part of the industry I ran myself. Today, our fate lies in the hands of politicians whose negotiations threaten not just our own business but the whole British economy.
That’s not just my view. I can assure you that the leaders of all the other big automotive firms agree that we are in real danger of damaging an industry we have spent decades rebuilding.
At the heart of this crisis lies the issue of the frictionless trade we enjoy as part of the EU customs union. This allows components to pass freely between the Continent and the UK. If we leave the union, the survival of our car industry is in peril.
Why? Allow me to explain. One of the biggest reasons the automotive industry failed in the 1970s is that supply chains were seriously disrupted and completely unpredictable, so costs soared and quality deteriorated.
Modern supply chains need to be super-efficient. The car industry has been described as the most complex organisation of human endeavour on the planet, which is not surprising when you consider that there are more than 20 million variations of, for example, a Range Rover. Precisely the correct part must be available at the right time when the car moves down the production line.
At the heart of this crisis lies the issue of the frictionless trade we enjoy as part of the EU customs union. This allows components to pass freely between the Continent and the UK. If we leave the union, the survival of our car industry is in peril (file image)
For example a red, right- hand, heated, electronic wing mirror must arrive for car number one and then, for car number two, a blue one with a different specification.
These components come from all over the world, with the vast majority being sourced outside Europe. Car supply chains are particularly at risk of delay because 60 per cent of parts are imported. That equates to more than a thousand delivery lorries from the Continent to the UK every day.
Take fuel tanks, for instance. People don’t stop to think about them, but of course you can’t get a car off a production line without one. Half of all the cars made in Britain rely on fuel tanks that come from Unipart’s factories in this country.
It takes a long, long time to design and develop each tank. They are sophisticated and complex products with multiple components coming from continental Europe. All that could be thrown into expensive disarray if just one component is not there when we need it.
The idea that we could start sourcing all the components for the fuel tanks in the UK just doesn’t work. We would love to, but it isn’t possible – if it were, we would already be doing it.
The issue here is not one of border tariffs. The hard Brexiteers say that since German manufacturers want to sell their cars to us in the UK, there is no incentive for them to try to impose heavy tariffs after Brexit. Perhaps so. But that’s not the real problem.
Tariffs hurt competitiveness and we don’t like that, but at least we can plan for them because they are quantifiable and predictable. Delays at border checkpoints, however, are disastrous precisely because they are so unpredictable.
If we don’t know where a part is because it is stuck on a lorry in Europe and can’t get across the border, or they haven’t trained enough customs officials yet, then we have no certainty when it will arrive. The industry operates efficient ‘just-in-time’ practices so stock is not left lying around. That means we would normally have only enough parts at customers’ factories to keep the production lines running for just eight hours.
But if the right part isn’t there when it is needed, you either have to send the car on and rework it afterwards, which is expensive and hurts quality, or you have to stop the production line. And that is very expensive, costing more than £1 million an hour – all for the sake of that single missing component.
If we barrel headlong towards a hard Brexit, I fear such border delays are not only possible but inevitable, with the result that I believe the British motor industry will find it very difficult to survive in the long term.
The hard Brexiteers prefer to avoid discussion of such practicalities, with talk of the UK forging new trade deals outside the EU. But again, it is more complex than that.
For instance, a free-trade agreement with South Korea currently requires that cars we manufacture in the UK for export to Korea have 55 per cent of ‘local content’.
Under the current rules, British-based car firms are allowed to count all EU components as being of local origin, even though only 25 per cent of them are typically sourced here. With a hard Brexit, I am not sure we can do that any longer, so the deal simply doesn’t work.
Now do you understand why automotive bosses like me are so worried?
But this is not just about the survival of firms such as mine, it is about the pounds in your pocket. The car industry benefits the UK economy to the tune of £200 billion a year and supports hundreds of thousands of jobs.
Many people don’t realise that if the car industry fails, the economy will go with it. No one voted in the referendum to lose their jobs or their income.
So what, then, can be done to avoid looming disaster. At the minimum, we must stay in the customs union. If the hard Brexiteers can find a credible and executable alternative, which deliver the same results, we need to see the evidence. There has been none so far.
To press ahead without such a frictionless trade deal in place would be an act of wanton self-destruction.
How tragic it would be if we had saved the British car industry from the grip of one damaging political ideology in the militant 1970s, only to lose it to another in 2018.