Fall in car sales crippling industry

Oct 8 2008 by Alistair Houghton, Liverpool Daily Post

How can the car industry survive the global spending crunch? Alistair Houghton investigates

BANKS have spent recent weeks crying out for Government aid – now their chorus of despair is being joined by the UK’s motor industry.

The housing and finance markets may have been the most high-profile victims of the credit crunch, but the motor industry is also being crippled as consumer spending slumps. The latest UK car sales figures, from the Society of Motor Manufacturers and Traders, released this week, make grim reading. Last month just 330,295 new cars were registered, down 21.2% on the number registered in September, 2007.

Luxury brands were among the worst hit. Land Rover saw 4,907 new registrations in September – down 49.7% from the figure of 9.756 in September, 2007.

Vauxhall saw sales fall 16.51% over the same period, though the Ellesmere Port-built Astra remained the UK’s third best-selling car last month.

Jaguar saw a 3% sales rise, but that was thanks largely to the introduction of the new XF model late last year, rather than growth in its existing models such as the Halewood built X-type.

But the industry is not taking the decline lying down, and is calling for Government help to get it back on its feet.

The motor industry remains a huge employer – SMMT figures show it employs over 850,000 people in the UK and has a turnover of £51bn.

In our region, Jaguar Land Rover (JLR) employs more than 2,000 people at Halewood while Vauxhall employs more than 2,000 in Ellesmere Port and thousands more are employed in the supply chain.

The downturn has hit JLR hard, though it is trying to make up for falling sales in its core US and UK markets by increasing exports to developing markets such as Russia and China.

The company, bought by Indian giant Tata Motors earlier this year, has already laid off agency staff, had several non-production days and will later this month stop production at Halewood for a week as it bids to cope with the effects of falling sales. Tata last month issued a prospectus for a new share issue it hopes will raise £487m towards some of the costs of its JLR purchase. The prospectus showed JLR reported an overall loss of £207m after tax, despite growing its operating profits to £372m, and warned conditions would stay tough for luxury car-makers.

The SMMT wants to see Government action to restore consumer confidence, get people buying new cars and protect jobs.

And, last week, JLR managing director David Smith called on the Government to offer a support package to the UK motor industry, similar to the £14bn-plus package US lawmakers have offered that country’s motor sector.

The US package is designed to help vehicle manufacturers develop new green technology to make their cars more fuel-efficient.

Car-makers are facing increasing pressure from governments to cut CO² emissions, while buyers are becoming more interested in fuel efficiency as petrol and diesel prices keep rising.

JLR is ahead of the game when it comes to making its vehicles more fuel-efficient. Its LRX concept vehicle – likely to be built at Halewood – is designed to be smaller and more fuel-efficient than existing models, while the company is committed to exceeding Government targets for reducing CO² emissions.

But those measures cost money – Land Rover alone is investing £700m across its UK business in developing green technologies – and the industry is now looking for Government support to help it prepare for the future.

Mr Smith says that, if the US needs to take a bold move, we do, too, and the quicker the better. Otherwise the impact on manufacturing, and jobs in the sector, will be severe.