Fears UK car industry may never recover as production lines close

Plants responsible for two-thirds of UK’s output and employing 17,000 workers have ceased operating

Britain’s automotive industry may never recover from the coronavirus crisis, experts have warned, after responsible for more than two-thirds of the UK’s annual vehicle production paused assembly lines.

Honda, BMW and Toyota joined a rapidly lengthening list of carmakers halting European operations on Wednesday, Jaguar Land Rover, the UK’s largest auto firm, as the only one still operating UK plants.

The latest closures mean the coronavirus outbreak has temporarily stopped the production lines at plants that employ about 20,000 workers and make more than 1m of the UK car industry’s annual output of 1.5m vehicles.

As the pandemic brought the automotive industry grinding to a virtual halt, the Society of Motor Manufacturers and Traders’ (SMMT) chief executive, Mike Hawes, warned that the industry “stands on the precipice”.

Automotive experts voiced concerns that the UK car industry, already struggling to avert decline, may not regain lost ground once the outbreak is over.

“Last year, with the uncertainty over Brexit, the shift away from China [amid falling sales] and diesel, it was the perfect storm. This is perfect storm part two,” said Prof David Bailey of Birmingham Business School.

“As assemblers [manufacturers] shut down, it has a cascade effect on the supply chain and some of those firms will have to start shutting down too.

“The fear is a scarring effect. If capacity is lost because of shutdowns, the longer that they go on, the more there is likely to be a permanent impact on an industry that has already been struggling.”

He urged the government to consider a wage subsidy scheme to prevent workers being laid off and losing capacity in the sector permanently.

Prof Karel Williams at Manchester Business School said it was likely the UK car industry would emerge from the coronavirus crisis smaller than it otherwise would have been.

“It’s clear from what Volkswagen has been saying that lost sales will not be found again and there will be a massive hit in terms of loss-making in the major carmakers,” he said.

“The markets will recover but the companies will be weakened just when they’re requiring large-scale investments in electrification. That will force them to rethink their portfolios of factories, models and markets.”

He said existing weakness in the UK auto sector meant firms may sacrifice their British operations to aid their long-term recovery.

“The review of factories, models and markets is not going to be good for the British car industry,” Williams said. “The last thing the industry needs is a major disruption to both demand and supply. The more marginal the operations, the model and the market, the more likely things are to be cut.”

About 20,000 UK car workers have been sent home temporarily across the UK industry, while Mercedes-Benz parent, Daimler, Volkswagen, Ford, Fiat and Peugeot have announced broader suspensions of European output. Jaguar Land Rover kept its UK sites operating but has frozen output at its Slovak factory.

The suspensions announced on Wednesday will affect Honda’s Swindon plant, already earmarked for closure in 2022, BMW’s Mini plant at Cowley in Oxfordshire and Toyota’s plant at Burnaston in Derbyshire. The three sites employ more than 11,000 people and produce more than 500,000 cars between them annually.

BMW’s chief executive, Oliver Zipse, said the interruption was expected to last until 19 April, while Honda’s will run until at least 6 April.

BMW said profits this year would be significantly lower due to the interruptions at plants that accounted for half of the 2.6m cars it built in 2019.

Toyota stopped output at more of its plants in Europe and Asia, including factories in Poland, the Czech Republic and Turkey.

Jaguar Land Rover, which has plants at Castle Bromwich, Solihull and Halewood,is responsible for almost all of the UK’s remaining production capacity. The firm said it was following government advice but had not yet decided to stop work at UK factories, although work at Nitra in Slovakia will be suspended.

The fresh suspensions come a day after Nissan closed its Sunderland factory, Britain’s biggest car plant – joining the aerospace giant Airbus in ceasing production.

Font: The Guardian

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