Sunday 3 February 2019

Car Making

Car making is seen as a crown jewel of UK industry. I think because all consumers understand cars, and because they're reasonably expensive, it's easy to get footage of what they do, which people understand and they seem to employ lots of people.

So when a story appears about Jaguar Land Rover cutting 4500 jobs and moving them to Slovakia, there's a lot of people making a lot of noise about Brexit. Same with the story about Nissan not making the X-Trail.

I'm a leaver. But I'm not here to argue the effects of Brexit on UK car making. Because it's largely irrelevant. Assembly line car making (and I'm not including the likes of Aston Martin) is going to be gone from the UK in the fairly near future because assembly line car making will be gone from Western Europe in the fairly near future with production shifting eastwards.

Fiat and Toyota are of course making cars in these places because labour is cheaper. According to this, Czech Republic car workers make just over half the wages of UK car workers. And I'm going to guess Turkish car workers are making a little less than the Czechs. And is anyone doubting the quality of those cars? Are they any worse than any other Corolla?

What's keeping car production lines going in Britain is, I suspect that we already have the plants and not much else. In 1986, Nissan couldn't have put production in Eastern Europe because it was still communist. And even for some years after, they couldn't have done it because of things like transportation and infrastructure. But these countries now have everything in place and eventually, our manufacturers will follow.

At a larger level, I think people in the UK need to understand that production line manufacturing is either going or gone. UK manufacturing still matters, but it's manufacturing that's more specialised, small scale or customised like F1 cars or the company near me that hand-makes furniture. The part of manufacturing we will keep for some time is things like product design and engineering - Dysons get made in Malaysia but they get designed in Wiltshire.

31 comments:

Rich Tee said...

I don't deny that this is true, but how does a wealthy country stay wealthy if it doesn't manufacture anything substantial? The British balance of payments has been in the red for many years. According to some people, it is only confidence in the housing market that is keeping the British economy afloat. We may have to get used to a lower standard of living and being an also-ran in the world economy.

By the way, I just bought a pair of Dr Martens shoes, which have been manufactured abroad for about 15 years, and two of the lace eyelets have come loose straightaway. Never had this problem when they were manufactured in the UK.

Shiney said...

@RT

"but how does a wealthy country stay wealthy if it doesn't manufacture anything substantial" ..... Mercantilist fail at so many levels!!!

Repeat after me - "Imports make you richer".

And I speak as someone who owns a manufacturing company.... manufacturing is alive and well and thriving. It is just the large scale subsidy junkies (steel, cars, aircraft) who can't make things work in the face of larger subsidies (bribes?) from foreign government that are suffering.

We used to make lots of steel and ships in the 70s - are we not a richer country now all of that is made in the far east?

Re... Dr Martens - you can still buy the UK manufactured ones - they are just more expensive.

Mark Wadsworth said...

True but depressing.

Staffordshire man said...

Nissan did not blame Brexit, they merely said that it didn't help, secondly the new car is now to be built in Japan which sort of proves the not brexit related case. Nevertheless, Brexit was mentioned in the second sentence of the BBC report.

Shiney said...

@MW
"True but depressing" - what is depressing about being richer?

Mark Wadsworth said...

Sh, because short or long term, thousands of people will be out of work. For sure, long run and for the majority, we're better off.

Tim Almond said...

"I don't deny that this is true, but how does a wealthy country stay wealthy if it doesn't manufacture anything substantial?"

Can we stop talking about "manufacture" and use a broader term "produce"? Does it matter if a man is bashing a piece of metal in a factory that someone wants to buy, or if a man is creating game show formats that someone wants to buy? No, it actually doesn't. And the latter pays better.

And what do you mean by "substantial"? Are £400 brogues from Northampton "substantial"? Medicines from Swindon? Jars of preserves from Chippenham? £600 handbags from Somerset?

Most people don't really know what UK manufacturing looks like. A large factory closing or not getting to do something is huge news, but compared to the whole manufacturing or employment sector, it's just not that important. Our manufacturing isn't generally about huge factories any longer, hasn't been for a long time, and what's happening to car making is part of that transition. Our manufacturing sector isn't a few giants, it's lots and lots of companies with less than 500 employees. It's manufacturing that often includes a large service element or customisation. You can buy your Brompton bike with all sorts of options. An order for parking meters from the manufacturers in Poole or Swindon might include some special requests.

You can't go chasing things like car making because you're competing with people who can do it for a lot less and this is an eternal thing. We used to make clothes, toys and electronics in this country in the 1970s. Clothing went to cheap, low-skill places, then toys, then electronics. I'm competing with Indians over software, so I have to provide something higher value than they do.

Tim Almond said...

Staffordshire man,

"Nissan did not blame Brexit, they merely said that it didn't help"

True. My point is that the argument is basically pointless because it's going to be gone soon enough anyway. You maybe run an experiment making cars in a low cost place. If it works, you're just going to do all of it, aren't you?

Rich Tee said...

Shiney and Stigler's cheery optimism doesn't convince me but there isn't enough space here to explain why. Perhaps the academic question is: does a persistent Balance of Payments deficit make a country poorer in the long run?

I recently became aware that Kurt Vonnegut's first novel Player Piano is set in a world where the wealthy upper class are engineers and managers whilst the majority of manual workers are now redundant and unwanted. I haven't read it but I wonder if I should now. Both Shiney and Stigler's occupations would fall into the former category which would explain the "I'm alright Jack" attitude

https://en.wikipedia.org/wiki/Player_Piano_(novel)

Staffordshire man said...

@RT David Ricardo became an MP on 20 February 1819.

Yes, 200 years ago this month; have a look into comparative advantage.

Jonathan Bagley said...

RichTee, A few years ago it was claimed in a TV documentary, that for every iphone, Apple made a profit of 50$ and the Chinese manufacturers got paid 1$. The same will apply to Dysons vacs.Those working at Dyson HQ in UK will be very highly paid - upward of 50K, many times more than those who will be assembling the vacs in the far East.

Sobers said...

"By the way, I just bought a pair of Dr Martens shoes, which have been manufactured abroad for about 15 years, and two of the lace eyelets have come loose straightaway. Never had this problem when they were manufactured in the UK."

The same thing happened to Hunter wellies. Used to be a premium UK make, they shifted production to the Far East and now they last no longer than the cheapo wellies that us farmers buy for £10-15/pair. Yet they are still sold to the trendy idiots who want polka dot wellies for Glastonbury for £100/pair.

Striebs said...

Sobers ,

That is my experience too with DM shoes manufactured outside the UK .

The heal turned in too much at the top and rubbed the skin over my achiles raw .

Essentially the shoe was mishapen and not rectifiable by one of those wooden things I have put in other shoes to stretch them .

So much of the Chinese E-Marked , Kite-Marked stuff is a danger to it's operator and clearly has not been checked for conformance - but HM Govt wouldn't dare annoy the Chinese by refusing equipment on safety grounds ; proof Hinkeley Point .

I'm convinced they use high quality stuff domestically and only supply the tat to stupid "Wai Guo Wren" westerners with an insatiable appetite for cheap rubbish .

Striebs said...

Another issue is energy .

Biomass was incapable of sustaining the energy needs of England by 1600 and by 1650 England became the first country in the world to get over half it's primary energy from coal .

UK coal production peaked in 1918 .

UK Oil and Gas production peaked in 1999 .

The only domestic renewable source which has been a success is offshore wind and it needs scaling by over an order of magnitude just to cover existing electricity demand then to be tripled to substitute for liquid transportation fuels and domestic and industrial process heat .

De-industrialisation hasn't been an accident or just economics driven by price if labour - it is establishment and Westminster/Whitehall policy .

There is no room for energy intensive industry in the UK and without widespread roll out of nuclear the UK will increasingly become an importer - in an energy deficient world .

Shiney said...

@RT
"Shiney and Stigler's cheery optimism" - wut? Its not cheery optimism its grounded in fact - I told you I own a manufacturing company, as well as being a member of two local manufacturing groups so I DO know what I'm talking about.

@TheStig explains it rather well, actually.

Shiney said...

@RT

" Both Shiney and Stigler's occupations would fall into the former category which would explain the "I'm alright Jack" attitude" - and that is just fucking offensive actually.

I invest in, train and employ many 'manual' workers (whatever they are). What industry do you work in?

Bayard said...

"Most people don't really know what UK manufacturing looks like. "

The problem is that most people, and that includes most politicians, think they do know. They think it looks like the silk-hatted, cigar-smoking boss sitting in his office that overlooks the factory where his thousands of workers toil for a pittance. One of the perennial character flaws of the British is a tendency to live in the past (as evidenced, inter alia, by the Faux Bucolic Rural Idyll, and our idea of manufacturing is stuck in a 1950s time warp.

Lola said...

Well, Brexit, if done properly (and it won't be - too many vested interests, mostly in government, government bureaucrats and crony fake businesses) would see us turn into a 'super Singapore'. And if we implemented Georgism (even Georgism lite) as well, we'd be quids in. The UK can compete with 'low cost' off-shoring as we have a relatively well educated work force, relatively excellent infrastructure, rule of law and property rights, and so on.

(In re Nissan and the X-Trail - that has little to do with Brexit now. OTH if may & Co. had come out on day 1 and said we are planning for no deal and we will do x, y and z to make us competitive Nissan may have had a deeper think. Plus why if the EU is a such a great place t make stuff isn't the European only X-Trail production being sent to on of Nissan / Renault plants in the EU?)

Tim Almond said...

Rich Tee,

"I recently became aware that Kurt Vonnegut's first novel Player Piano is set in a world where the wealthy upper class are engineers and managers whilst the majority of manual workers are now redundant and unwanted. I haven't read it but I wonder if I should now. Both Shiney and Stigler's occupations would fall into the former category which would explain the "I'm alright Jack" attitude"

And how's that going? 67 years later where has this happened?

Mark Wadsworth said...

I suppose I shouldnsh be such a hypocrite. I buy whatever seems best value, regardless where it was made. In a tie break situation, I would Buy British, as long as it's only slightly more expensive.

Shiney said...

@MW

It should be your choice - i.e. you can buy what you like from whom you like without any restrictions/tariffs/subsidies/friction etc AKA Free Trade.

Want to buy stuff from me (well one of my customers)? Cool.
Want to pay a bit less from one of the 'German' stores? - OK by me as well.

By the same token - if I want to employ a German/Spanish/Malaysian/AI robot accountant to do my tax return why shouldn't I be able to?

jim said...

As said, the car industry will move to lower wage areas. So for one plant that loses say 5000 jobs @ £35K which we replace with 1000 design/creative jobs @ £60K. That means we swap £175M for £60M. Of course we might look around for something to usefully occupy the unused 4000 who are now costing say £16M until they start work. Let us say half move house and get jobs making luxury goods on say £30K. So far we have swapped £175M for £60M + £60M less £8M for the remaining unemployed, so we at some £47M down.

The difficulty is that people are not totally fungible and even the clever jobs are only temporary, it won't take long before they get offshored too. The snag is that car plants are a very efficient use of ordinary people, so every nation wants some as an employment base load. Once you start losing them you are on an economic slippery slope and unless our government pulls its finger out pdq the slide will be pretty quick. SMEs are good but not so efficient at soaking up average people and they are a bit like wind power, rather variable.

The market for good quality games producers or top marketing strategists is still very good but never large. These folk need education and more importantly a conducive environment. Not for nothing did Apple and Amazon and Facebook get started in wealthy comfortable societies, that is where the creativity and the opportunities come from. Not from sink estates and one room flats and endless cuts to the public purse.

We have been eating the seedcorn and not sowing sufficient new crop. Hunger awaits.

DBCREED said...

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Tim Almond said...

jim,

"The snag is that car plants are a very efficient use of ordinary people, so every nation wants some as an employment base load"

What?!?

Do you know what the total number of people working in car making is? It's less than 80,000 people out of a total workforce of 30m+. Around 13000 at Ford, 7000 at Nissan, 4000 at Honda, 4000 at Toyota, 4500 at Mini, and I think something like 45000 at JLR.

And a lot of what's at JLR isn't production. They do the design and engineering work there, which is higher skilled. Even if you go to plants like Honda and Nissan, less and less of it is manual work because there's constant innovation to automate car making. The engines are made by robots, nearly all the welding is done by robots, painting is done by robots, windscreens are fitted by a robot. A lot of jobs are in things like supply chain management, quality checking, testing, monitoring, planning upgrades.

Shiney said...

@jim

"car plants are a very efficient use of ordinary people..... SMEs are good but not so efficient at soaking up average people and they are a bit like wind power, rather variable." - ummmm..... no they aren't its the other way around.

I refer you to @TheStig's post earlier "Most people don't really know what UK manufacturing looks like".... are you one of them 'cos it sure sounds like you haven't been in any manufacturing plants recently? Car plants, aerospace, pharma etc have lots of automation (either full automation or 'cobotics') and require high skilled workforces - therefore per £ of VA use less people.

SME manufacturing/small engineering/food etc uses more people per £ VA which is why there is a big 'productivity drive' to get SMEs to invest in automation. I know, because the MAG locally did some numbers (I'll try to dig them out) on this.

Its just that the 'big guys' make all the noise, get all the headlines and hoover up the government largesse - out in the real world we just get on with stuff.

And as all of us know around here we'd be much better off if we reduced taxes on output and employment and taxed 'rents' which would help all 'producers' at the expense of 'rentiers'.

Shiney said...

@The Stig

I think we are on the same page!! ;-D

Mark Wadsworth said...

Sh, the stigler is one of the best YPP members... Except he never signed up.

Tim Almond said...

Bayard,

"The problem is that most people, and that includes most politicians, think they do know. They think it looks like the silk-hatted, cigar-smoking boss sitting in his office that overlooks the factory where his thousands of workers toil for a pittance. One of the perennial character flaws of the British is a tendency to live in the past (as evidenced, inter alia, by the Faux Bucolic Rural Idyll, and our idea of manufacturing is stuck in a 1950s time warp."

Indeed. My first ever job was writing a program for a factory that made shoe heels in the mid-80s and some of that was true (although the management weren't that rich) but today? I've worked in manufacturing companies that have more programmers than shop floor staff.

Actually quite interesting places to work in software now as they're growing use of internet of things technology.

Lola said...

I'm with The Stigler and Shiney

Lola said...

DBCReed. Are you OK?

George Carty said...

It does sometimes seem like Remainers have come to fetishise car manufacturing just as Brexiteers have fetishised fishing.