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Last Updated: Thursday, 2 September, 2004, 14:50 GMT 15:50 UK
Ford mulls Land Rover plant's fate
by Ben Richardson
BBC News Online business reporter

Land Rover off-roading
You are more likely to see one on the King's Road than off-road
The threat of job losses is hanging over the UK car industry once again.

Automotive giant Ford is looking at how to revamp working practices at its Land Rover plant in Solihull.

Despite working closely with trade unions, there are concerns that the production line will be closed down at a cost of more than 8,000 jobs.

Ford has been careful with what it says on the subject, but the language of Mark Fields, executive vice president of Ford Europe, shows what is at stake.

"There can be no half measures... we are talking about the future of the plant," he said earlier this week.

Production line

Ford has come a long way since its founder told consumers that they could have a Model T in any colour they wanted as long as it was black.

Today the firm spans the globe with brands that include Land Rover, Jaguar, Aston Martin, Lincoln, Mercury and Volvo.

Closing down or mothballing car production capacity, has always been a very sensitive issue for the auto industry
Deutsche Bank

But car companies are facing difficult times and Ford, like many of its rivals, is looking at how to boost efficiency.

"The autos industry is a mature industry, thus the long-term growth potential of the sector is below average," said Deutsche Bank in a report.

"The industry is characterised by overcapacity and commoditised product offerings, which means that price competition is very tough."

Consumers are becoming increasingly cost sensitive and companies are having to offer incentives, such as interest-free loans, to get them to buy new vehicles.

Research and development costs are climbing, while there is a limit to the amount of cars any one person can own.

Hard bargain

Ford's premier automotive group, which consists of Land Rover, Jaguar, Volvo and Aston Martin, made a loss of $362m (201m) during the second-quarter of this year.

Ford GT
Ford has increased its colour palette and product range

Only Volvo managed to make it into the black.

While each company's situation is slightly different, Land Rover's main problem is that it has developed a reputation as a poorer quality product when compared to rivals, said company spokesman Don Hume.

"If you don't have a quality reputation then you are behind the game already," Mr Hume told BBC News Online. "Your product has to be right."

According to Mr Hume, the company faces the stark reality that it either improves or gets left further behind as rivals step up their own efficiency and cost-cutting programmes.

Negotiating table

DaimlerChrysler has just reached an agreement with trade unions about new working practices that prompted a wave of protests and was only resolved when management agreed to a pay freeze.

BMW has had to go through a similar process, while Volkswagen, Europe's biggest maker of cars, looks set to clash with workers when they meet later this month.

Land Rover has given its employees until 8 September to come up with a "road map" of how it will boost the quality of its production to world class within 5 years.

Should they fail to convince management that the plan is viable, then the threat of job cuts will loom even larger.

Fall out

"Closing down or mothballing car production capacity, has always been a very sensitive issue for the auto industry," Deutsche Bank explained.

Land Rovers off-roading
Is there time to play catch-up?

"Politically and socially the removal of capacity can cause huge regional job losses, often in areas which are totally reliant upon the car industry for employment.

"What is often forgotten in this debate is the fact that it is not just the potential loss of a few thousand jobs from the closure of the car plant.

"It is also the tens of thousands of workers at local suppliers whose jobs would be at risk from any removal of capacity."

Mr Hume said that a turnaround is possible, giving the example of Jaguar's Halewood plant which has become one of the world's best in terms of quality, despite facing problems of its own.

With the stakes so high, many people will be hoping that Solihull also manages to find the road to success.

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