Car industry left in limbo

February 20, 2010

Few sectors have escaped the effects of the global downturn, but last week’s £2.3 billion government aid package to the car industry was a reflection that it had “fallen further and faster ” than most, said Lord Mandelson, the business secretary.

A dramatic drop in sales, and subsequent cutback in production, has left car workers with tough choices: work shorter hours for less pay, go on a part-funded “sabbatical”, or take redundancy.

“There are long faces on the shop floor,” said Paul, who is now in his late twenties and has worked for Jaguar Land Rover since leaving school. Though some Jaguar employees are taking sabbaticals on 80% of salary, he will not be one of them. “I’d rather be at work doing nothing than sitting at home spending money.”

Vauxhall workers appeared similarly unimpressed by the concept of a sabbatical, with only 15 out of 2,200 taking up the opportunity at the Elles-mere plant on Merseyside.

Vauxhall responded that the company would be forced to consider more drastic options. Sales figures released for 2008 appear to support that. According to one expert, the global car market has “evaporated overnight”, leaving manufacturers based in Britain with little choice but to scale back the workforce.

More than 200,000 UK workers are employed in manufacturing cars or components, with a further 600,000 linked to sales and servicing, but economist Garel Rhys from the University of Cardiff said the two areas faced separate problems: “Three-quarters of cars made in the UK are exported, so manufacturers are looking at figures for the European market – not the home market. In 2008 the Spanish market was down by 50%. This is the first time we have seen a downturn in America, Europe and Asia at the same time. The next two years are going to be gruesome.”

Carmakers returned from the Christmas shutdown with a raft of proposals to save money and cut production, ranging from layoffs to a shorter working week.

Nissan announced 1,200 jobs would go as part of a redundancy scheme at its Tyne and Wear plant, and Midlands-based Jaguar Land Rover said its plans included a variety of measures, including sabbaticals and voluntary redundancies. Honda confirmed that, despite introducing a new model in the summer, its Swindon plant would be closed for four months with staff receiving only 60% pay for half of that period.

Honda’s Paul Ormond said the decision reflected the fact that the company “remained hopeful that we can come back on June 1 with a high volume of production and keep the workforce fully employed. This is about keeping people on board with their skills and training – if we lose those skills we’d have to start all over again”.

However, Honda workers seemed less optimistic: “Swin-don used to be a good place to work, but it’s bleak now,” said Norman Baldwin, who held a two-year temporary contract. “I’ve been told I’m no longer needed, and now I’m working nights for a lot less money.”

In addition to the enforced shutdown, more than 1,000 of Honda’s 4,800 workers at Swindon had already taken redundancy, while 800 temporary workers were let go last month.

Though the method of cutting production is common throughout the car industry, a spokesman for the trade union Unite criticised Honda’s strategy: “They didn’t discuss it with the union, they didn’t discuss it properly with the workforce, and I’m not even sure which country the decision was made in. Will the plant reopen in four months? I just don’t know.”

In contrast, Unite praised Jaguar Land Rover for holding weekly union meetings and daily briefings with shop stewards. “Demand dropped off at the beginning of the year, but it fell dramatically after Lehman Brothers’ collapse. It started in America, and then spread east’” said Jaguar Land Rover’s Simon Warr.

He said the company needed to cut back in all areas, offering voluntary redundancies, a sabbatical programme on 80% pay, extended weekend shutdowns and even community work, “although that is logistically difficult – we can’t just release hundreds of employees out onto the streets to help people”.

Jaguar Land Rover further announced that no executive bonuses would be paid, and a new redundancy scheme would lead to a 15% reduction in white-collar staff. “Since we were bought by Tata motors last year – and are no longer a part of Ford – we are a smaller operation and don’t need that kind of large back-office operation,” Warr said.

Assembly-line workers are less optimistic about Jaguar Land Rover’s plans, said Paul. “The feeling on the floor is that we’re always the ones who get it in the neck. This used to be a caring company, but the idea of it being a family has gone out of the window – you’re just a number. If they want us to stay off work they don’t tell us until the last minute and we’ve hardly got anything to do.”

He added that if he lost his job there was little hope of finding a similar position elsewhere, “I’d have to go back to college. Or stack shelves.”

Analysts claim that while companies struggle to implement innovative ways of hanging on to their workforce, cheaper labour markets overseas put the long-term future of carmaking in the UK in doubt.

Warr said Tata Motors was committed to Jaguar Land Rover remaining in the UK, partly because of the prestige of a “British” brand. He added that it was supporting calls for the government to consider a staff subsidy scheme, already in operation in Germany and the Neth-erlands, where workers on reduced hours and pay receivea top-up in government benefits.

Rhys believes such a scheme here could be crucial: “Plants in Europe can keep their workforce intact, and are ready to hit the ground running when demand picks up. If the UK loses its workforce, it will also lose contracts when the car market comes back. In the long run it is cheaper for the government to pay workers 20% of their salary than pay full unemployment benefits for ever.”

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