Ford Motor Manufacturing

Debate between Michael Fallon and John Denham

Tuesday 6th November 2012 Westminster Hall

[The Minister of State, Department for Business, Innovation and Skills (Michael Fallon)]

I congratulate my hon. Friend the Member for Romsey and Southampton North (Caroline Nokes) on securing this important debate. I thank all of those who have contributed for doing so in a relatively non-partisan way. Hon. Members have spoken frankly and asked some tough questions, but, until the previous contribution, we have approached the issue in a non-party political way.

I will focus on some of the broad areas that I have been asked about, but I am happy to address specific questions, be interrupted or to reply by letter if I have missed anything out. I shall address: what we were told in the Department; the circumstances surrounding the European Investment Bank loan; the support that we are able to offer Southampton and Dagenham now; and Ford’s future in the UK. I hope to wrap up in that most of the points made in the debate.

First, what were we told when? As recently as 7 September, when my officials specifically asked Ford about Southampton, Ford assured us that it would continue to produce the new chassis cab variant in 2013. Ford has invested regularly in Southampton, including significant sums this year. We therefore had no reason to question what we were told. Amid a sharp deterioration in the mainland European vehicle market, Ford’s board decided on Friday 19 October to close the site. Ford contacted my Department the next working day, Monday 22 October, to arrange a discussion between the Secretary of State and the Chairman/CEO of Ford Europe. That phone call took place on the evening of Wednesday 24 October. We did not know of Ford’s plans in advance of that conversation.

We are obviously disappointed that, on this occasion, Ford chose not to engage with us until the day before the announcement. It gave us no opportunity to discuss the decision, which we would have expected and preferred. It made the decision based on a thorough analysis of its commercial operations in Europe.

Last Tuesday, 30 October, Ford published its latest financial results, which revealed a $1.02 billion pre-tax loss for the first nine months of 2012 for its operations in Europe, reinforcing why it has had to take difficult commercial decisions to restructure its European business and place it on a more sustainable footing.

Demand for light commercial vehicles has fallen dramatically in Europe over recent years, with the Transit seeing a sharp fall in sales. The company is clear that it can no longer support two van production facilities in Europe and must seek to consolidate production at one. Unfortunately, the Southampton plant is unable to compete with Ford’s newer factory in Turkey where labour and production costs are significantly cheaper than those in the United Kingdom. The Secretary of State and our officials probed that differential with the company, but we are clear that those differences are too high to bridge.

Let me turn now to the circumstances surrounding the European Investment Bank loan. The loan to Ford for its Turkish Transit van operation was approved as part of the EIB’s support for Turkey’s integration into the European Union economy. The Turkish operation has been in existence since 2001, and since 2009, it has made all versions of the Transit apart from the chassis cab variant, which is made at Southampton. The EIB loan for the Turkish operation was for retooling the Turkish plant for the production of the next model in 2013 and was not based on the cessation of production at Southampton. It is therefore incorrect to imply that the EIB loan is itself responsible for exporting jobs from the UK. Indeed, Ford tells us that it will not be increasing capacity at the Turkish site.

The EIB makes investments in key markets outside and inside the European Union. For instance, Ford UK benefited from up to £400 million of EIB funding back in 2010.

[Mr Denham]

For the record, I do not think that any Member has suggested that the loan to Turkey was responsible for the closure of the Southampton plant, but rather that it undoubtedly helped Ford to develop Turkey, which therefore helped it to close the plant. The key question is, would British officials involved in that decision have given the go-ahead to that loan—it was a loan rather than a grant—had they been aware of Ford’s plans for Southampton and Dagenham?

[Michael Fallon]

I do not wholly accept that. Ford was already planning to develop the new model at its Turkish plant. That plant has the capacity to produce more than 100,000 units per year of all types of van. Southampton, as we know, only made 28,000 units of one van variant each year. Even if the Turkish factory had not got the loan from the EIB, it is unrealistic to suggest that the entire new model production would have moved to the smaller Southampton factory, and that is the issue.

On the assistance that we need to make available to those affected by the move, I fully appreciate the concerns that have been expressed for the workers at Southampton and those at the associated stamping plant at Dagenham, along with their families and the wider communities in each area. I accept that it should be the Government’s priority and responsibility to do their very best to help those affected.

In Southampton, both the Secretary of State for Business and I have been in discussion with the chairman of the Solent local enterprise partnership, Doug Morrison, to ask directly what we can do to help. As Members here will know, the local enterprise partnership held an emergency board meeting on Thursday. I discussed the matter with the chairman on Friday, and he told me that a multi-agency taskforce is now being established, including representatives from the local enterprise partnership, Southampton city council, Eastleigh borough council as well as officials from my Department and other agencies, including Jobcentre Plus and the Skills Funding Agency. The taskforce will work in partnership with Ford until the plant closes next summer to ensure support is in place for affected employees and small and medium-sized enterprises in the supply chain.

--- Later in debate ---

[Mr Denham]

I am grateful to the Minister for giving way, but perhaps I can just put it on the record that this is where we disagree and that, in the view of many of us, the regional growth fund should engage with a company’s wider strategy and not simply assess the merits of an individual decision.

[Michael Fallon]

I note that point and I heard the right hon. Gentleman make it in his earlier contribution. I am not sure whether, under the old system, the four regional development agencies that would have been involved—I think that is the number—would have been part of that process, but I will certainly reflect on what he has said.

What is important is that we are capturing this new work in the UK and we are playing to our world-class strengths of design, engineering and advanced manufacturing. That is the direction that we should be moving in, as we seek to rebalance our economy, drive forward growth and secure greater export revenues. That is the front and centre of our industrial strategy. Without our support, the Ford projects that I have mentioned would have gone elsewhere, which would have undermined the UK’s position as the centre of choice for Ford’s engine programme and our ability to bid for and win new work.

In conclusion, a number of points have been made today. Let me re-emphasise that I share the disappointment of every Member who has spoken in the debate at Ford’s decision to close the Swaythling plant. I regret the circumstances in which that decision was made and communicated to the Department and, indeed, to colleagues here in Parliament. Nevertheless, we will commit to work with local partners; we will do all that we can to help those affected by the closures; and we will continue to work with Ford to build on its major and ongoing commitment to the automotive sector in the UK.