Ford Motor Manufacturing

Debate between Iain Wright and John Denham

Tuesday 6th November 2012 Westminster Hall

[Mr Iain Wright (Hartlepool) (Lab)]

It is a pleasure to serve under your chairmanship again, Sir Roger. I congratulate the hon. Member for Romsey and Southampton North (Caroline Nokes) on securing this important and timely debate, and I pay tribute to the Members who have supported her.

My immediate concern, as it has been throughout the course of today’s debate, is about the 1,100 Ford workers who will lose their jobs with the closure of both the Transit factory in Swaythling and the stamping operation in Dagenham, as well as the wider impact that will have on subcontractors, the supply chain, and workers in those areas. The workers at those plants, many of whom have worked either directly or indirectly at Ford for many years, have important skills for our manufacturing base, and naturally they will be anxious about their future and that of their families.

The message from today’s debate is obvious, and the Minister must clearly set out what reassurances he can provide. What precisely will his Government, working with the company, local council leaders, the Mayor’s office and others, do to secure to alternative employment? How will the workers at Southampton and Dagenham be helped? What specific initiatives, whether the formation of an enterprise zone or of a focused taskforce such as the one already set up in east London, are being put in place to help? What is the Minister doing to co-ordinate action across central and local government for the benefit of the workers employed both directly and indirectly and in the wider supply chain who are at risk of redundancy?

As you quite astutely said, Sir Roger, there is a wider and more fundamental issue. The repercussions extend beyond Southampton and Dagenham. Let us be in no doubt: this is a devastating blow to this country’s manufacturing base. Ford is an important global company and we want the company to stay and to prosper in the UK. In that regard, as my hon. Friend the Member for Dagenham and Rainham (Jon Cruddas) said, its £1.5 billion programme of investment in advanced manufacturing and the production of the new low-carbon Panther diesel engine, designed and engineered at Dunton and made in Dagenham, is very welcome. It reinforces the UK’s competitive advantage in Europe’s engine design and manufacturing market, and we need to continue that.

However, the point and the blow remain: this announcement is the end of an era. It brings to an end a century of Ford vehicle manufacturing in Britain. Ford started in Dagenham some 90 years ago—when we think of Ford, we often think of Dagenham, and vice versa. The iconic Ford Transit van, which for 40 years has been the symbol of Britain’s white van man and is the automotive industry’s modern-day equivalent of the workhorse, will no longer be made in this country, but will instead be produced in Turkey, as the hon. Member for Romsey and Southampton North said. At a time when Ministers from the Prime Minister down speak of the need to rebalance the economy towards manufacturing and of the march of the makers, this decision in a sector that is often lauded as a productive and efficient part of the economy shows the need for business and Government to work ever closer together to implement an active industrial strategy.

I have a number of questions to put to the Minister, supplementing much of what has already been discussed in today’s excellent debate. I will speak in very broad terms. I would like to hear the Minister’s assessment of what the volume car market in Europe will look like in the future, and how that assessment affects Government’s approach to the sector. As the hon. Lady pointed out, car and van sales have fallen dramatically on the continent in the past couple of years—by some 20%. There is, let us be honest, overcapacity in car and van production capabilities in Europe. Ford’s decision in the UK a couple of weeks ago must be seen in the wider context of what the company has done with the closure of an assembly plant in Belgium, as well as the closure of a factory near Paris for Peugeot Citroën and the shutting of facilities for Opel.

[Mr Denham]

My hon. Friend talks of overcapacity in Europe. Does he acknowledge the point made by a number of the Southampton Members present that what Southampton has been up against is not overcapacity in Europe, but overcapacity in Turkey? Ford has pursued a strategy of developing a 300,000-plus vehicle plant in Turkey, with the assistance from the European Investment Bank, and that is what many of us question. That is at the root of Southampton’s problems, so the question is really about the company’s strategy in seeking to locate such a massive proportion of its production for the European market outside the European Union.

[Mr Wright]

I shall respond to my right hon. Friend in two ways. First, he is absolutely right about overcapacity in Turkey and the extent to which British taxpayers helped to push production away from the UK to Turkey. That will be one of my themes.

Secondly, my right hon. Friend makes an important strategic point about Ford’s direction of travel. Other car makers—Nissan, Honda, Toyota and others—have worked very successfully with the current Government and the previous Government in setting out a clear, long-term strategy to have assembly, design and manufacture here in the UK, but also to expand the markets further afield. Jaguar Land Rover is a very important case in point. As my hon. Friend the Member for Wrexham (Ian Lucas), who was an excellent Minister for the automotive sector, said, that close co-operation between business and Government when it comes to setting out a long-term strategy and expanding export markets has been for the benefit of the car industry. I would like something similar to what we have seen with Nissan, Honda, Toyota, Jaguar Land Rover and others to have been implemented with Ford. Sadly, that has not been the case.

I would like to hear what the Minister thinks the car industry, and particularly volume car makers with European manufacturing capability, will look like in the next few decades. Is the decline and overcapacity cyclical or structural? If it is structural—if the Minister thinks that we are seeing a general movement away from Europe towards new markets in the east and in south America—what impact will that have on other volume car and van manufacturers in the UK? We have talked about the UK automotive industry being a success story—something that, on a cross-party basis, we all want to see continue—so what does the Minister expect other manufacturers to do, given Ford’s decision? What are Government doing, in working closely with business, the Automotive Council and others, to ensure that we can mitigate the risks in this country? What co-ordination is taking place across Europe to ensure that general economic conditions on the continent, and specifically lack of demand, are being addressed? What discussions is the Minister having with his counterparts across Europe to ensure that the European car industry is not lost altogether?

My reference to discussions between Government and business brings me to my next question. Where does Ford’s decision leave the Government’s industrial strategy? The Secretary of State can talk a good game—he has had plenty of practice, having made 16 speeches on the matter since coming to office. In his speech of 11 September at Imperial college, he mentioned how Government

“must plan for the long term. Government must work with business.”

He went on to say:

“The second strand of our industrial strategy is to build a collaborative strategic partnership with key sectors. The examples I often give are aerospace, automotives, and life sciences... What is the starting point for this? We are dealing on a global scale with fierce competition—between companies and countries... Different industrial sectors require varying degrees of government support... At the other end are sectors that require a long-term, strategic partnership with government. We have the institutions to deal with them; the Automotive Council and Aerospace Leaders Group are models of what I have in mind.”

Indeed, the BIS paper entitled “Industrial Strategy: UK Sector Analysis”, which was published at the same time as the Secretary of State’s speech, stated:

“The UK has a strong comparative advantage in the aerospace and automotive industries which, because of their highly innovative nature, are a major source of knowledge and innovation spillovers... Both industries also have very important local economy and rebalancing effects.”

Certainly rebalancing is very important: we need a rebalancing towards manufacturing. On the other point, about local economies, the hon. Member for Romsey and Southampton North and other hon. Members have made very important and pertinent points about the impact that this decision will have on the Southampton economy. My hon. Friend the Member for Dagenham and Rainham mentioned the importance of the Ford plant to the east London economy.

We agree with much of the analysis by BIS. Much of current policy in terms of the setting up of the Automotive Council and the ensuing benefits in terms of increased investment in the likes of Jaguar Land Rover and Nissan began under the previous Labour Government. Continuity of policy, to allow global firms to plan investment in the UK for the long term, is something on which Opposition Members will support the Government. However, in relation to Ford’s announcement, the Secretary of State’s words about an active industrial strategy ring hollow. As I said, he often talks a mean game about assisting and working with productive sectors of the economy to allow them to improve and thrive, and we all want to support the UK automotive industry, but Ford’s decision showed him to be out of the loop, floundering and too weak within Whitehall to be able to offer a constructive solution.

There was no dialogue between Government and the company—indeed, following the announcement, the Secretary of State told The Southern Daily Echo that Ministers had felt “let down” and would have asked Ford

“what on earth was going on”.

So much for open, constructive and honest dialogue between Government and business. Answers to parliamentary questions from my hon. Friend the Member for Streatham (Mr Umunna) further revealed Ministers’ ignorance of the facts and failure to ask the right questions. As my right hon. Friend the Member for Southampton, Itchen (Mr Denham) said, since the coalition came to office in May 2010, Ministers have met Ford executives on—well, I make it 13 separate occasions, but I might not be able to count; my right hon. Friend said 12.

[Mr Denham]

I was not including the meeting the Minister had after the announcement.

[Mr Wright]

I welcome my right hon. Friend’s clarification.

Since coming to office, the new Minister has met Ford on two occasions. We welcome such early engagement; that is exactly how it should be for an iconic global manufacturing company in a key industrial sector for the country. In his response today, will he outline what was discussed when he met Ford? Were the company’s future strategic direction and capacity issues within Europe not discussed? Did he not inquire what the company’s response might be to overcapacity on the continent and how that might affect Ford’s manufacturing in the UK relative to the company’s operations in Belgium, Valencia or even Turkey? Has Ford, as has been suggested today, reneged on previously agreed commitments?

Does the Minister agree that joined up, co-ordinated government is part of an effective active industrial strategy? Did he make Ford executives an offer to discuss matters relating to Ford and future investment with other Ministers? Did he speak to Ministers in the Department for Transport about how the competitiveness of Swaythling and Dagenham could be enhanced through infrastructure improvements in logistics or connectivity, improvements to the road network and the M27, or improvements to rail networks in the east end of London? That is what the Secretary of State should have been thinking about when he referred in his speech to the fact that:

“We are dealing on a global scale with fierce competition—between companies and countries.”

Instead, I have to say, with some degree of sadness, Government Ministers have been asleep at the wheel.

Assistance from Government inevitably comes down to finance. I have two questions, both of which were raised in the debate. The European Investment Bank approved the £80 million loan to Ford Otosan, which runs the Turkish plant, as part of a £452 million structuring deal for the production facility to

“support the future manufacturing of the new Ford Transit”.

The 27 EU countries own the EIB, and its board of governors includes the Chancellor of the Exchequer. The role of the governors, as it says on its website, includes deciding

“on the Bank’s participation in financing operations outside the European Union as well as on capital increases”.

Given that, what role did the Chancellor have in fulfilling his duties as a governor of the EIB in signing off the investment? What role did he and officials play in ensuring that the investment went to Turkey? It simply defies belief that British taxpayers, as well as other European taxpayers, have provided funds to a facility in a country outside the EU that undermines the competitiveness of manufacturing in the UK. Will the Minister specifically address that point?

The second aspect of Government funding concerns the award of regional growth fund money to Ford a matter of days before the closure announcements. In answer to a written parliamentary question from my right hon. Friend the Member for Southampton, Itchen, the Minister stated:

“As part of its relationship with Ford UK, the Department’s Automotive Unit has regular and ongoing discussions with the company. Those discussions included understanding the context to Ford’s bid for…(RGF) support… The RGF Secretariat did not have any other discussions with Ford UK about their strategic plans.”—[Official Report, 2 November 2012; Vol. 552, c. 430W.]

As my right hon. Friend said, is that not a huge failing in the RGF process? What did Ministers and their officials know about the wider context of Ford’s strategy in the UK? Did they not inquire about the longer-term view of the company in this country? If not, why not? Does not that show that Ministers are incapable of producing a proper co-ordinated and long-term active industrial strategy?

As my hon. Friend the Member for Wrexham said, we cannot have a productive and honest relationship between business and Government, or rebalance the economy towards manufacturing, by tossing a few grants here and there. As Lord Heseltine said in his growth review published last week, we need a strategic approach to each sector and to ensure that each pound of taxpayers’ money offered to companies gives the best possible long-term, sustainable, competitive deal. Is the Minister suggesting that no such strategic discussion or consideration took place as part of the RGF bid?

[Mr Denham]

First, does my hon. Friend agree that it would be good to hear the Minister accede to the request from the right hon. Member for Eastleigh (Chris Huhne) to make available any notes on discussions with the company in 2008 and 2009? I believe that they would show that Ministers discussed topics such as the future of Swaythling in discussions about EIB loans and so on. Secondly, it would be helpful, and I mean this in a non-partisan way, if the Minister undertook to review his Department’s and the Treasury’s engagement in the RGF and the EIB to see what lessons can be learned from these two extraordinary events.

[Mr Wright]

My right hon. Friend makes two important points that I hope the Minister will address. I will sit down now, because right hon. and hon. Members have raised many significant concerns during this important debate. There are huge implications not only for Southampton and Dagenham—I say that with the greatest respect—but for the wider manufacturing base in a key sector that should be productive for the UK economy. Manufacturing must be at the heart of what we do and the automotive industry must be at the heart of manufacturing. Ford’s announcement is a blow. I hope the Minister will address the concerns raised today.