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Last Updated: Wednesday, 6 April, 2005, 09:37 GMT 10:37 UK
Hammering Midlands metal bashers
By Mary Hennock
BBC News business reporter

Worker on the zinc dipping line at K&S Plating, Birmingham
'Basic engineering' at K&S Plating, in Birmingham
"This is basic engineering. Don't expect anything fancy," says Linda Evans as she shows off the zinc plating vats at K&S Plating in Birmingham.

"Two years ago, you would not have seen a space. It would've been chock-a-block with work."

That is certainly not true now.

Two men are trundling racks of metal parts across the workshop for dipping in anti-corrosive zinc.

Next door, just one is needed.

Upstairs, the third dipping line has been shut.

K&S has halved its workforce from 41 to 20 in the last couple of years.

Britain's motown

Globalisation is biting hard in the West Midlands engineering industry. Car-making is moving eastwards, to Eastern Europe and Asia, and its support industries are going too.

"I've never seen an exodus in engineering like today," says Mrs Evans, who has spent 40 years in the plating business.

You either innovate faster than the Chinese or you copy their cost base
Nick Matthews, Warwick Manufacturing Group

Two big customers have recently moved to Eastern Europe. The Surface Engineering Industries Association which she chairs, reckons that in the last year 18 big plating plants have been built in China alone.

The West Midlands is the heartland of the UK's motor industry, with four volume car makers churning out one third of the UK's vehicle production - Peugeot, Jaguar, Land Rover and MG Rover. Another 1,500 mostly small firms make vehicle parts.

Overall, Birmingham's economy is thriving as new retailing, financial and service industries have sprung up, lessening the city's dependence on manufacturing.

One in six people in the region works in manufacturing, compared with a quarter of the workforce in 1998, according to the Office for National Statistics.

But the car industry is the core of the region's industrial base, and it faces seismic pressures.

Auto industry crisis

Globally, giants General Motors and Ford are struggling for sales against nimbler Asian brands like Toyota, the second largest car maker in the world, as well as Honda and Nissan.

MG Rover truck
MG Rover's crisis threatens sales at many Midlands firms

Car sales in Europe and the US are sluggish, squeezing profit margins and stepping up pressure for cost savings. Suppliers are routinely expected to deliver fresh savings in every new contract negotiation.

The official wisdom is that Britain's future lies in pursuing top-end engineering design and innovation to tackle globalisation, rather than trying to beat third world economies on price.

"They don't seem to want the dirty part of industry, only the nice clean bits," says Mrs Evans.

W MIDLANDS CAR INDUSTRY, 2004
1.65m cars built in UK, 2004
14,000 car workers in Birmingham
418,000 manufacturing workers in W Midlands
Sources: DTI; Advantage W Midlands

"If you want to stay in the game, you either innovate faster than the Chinese or you copy their cost base," says Nick Matthews, principal fellow of Warwick University's Warwick Manufacturing Group.

'Wake-up call'

Machined Component Systems (MCS) is trying to innovate. As the baby boomers reach for their Zimmer frames, it hopes to turn Britain's lack of dynamism into a commercial trump card.

The Redditch-based widget maker has gone into making medical equipment such as bone screws, and stair lifts for invalids.

In the past four years, father and son team Jim and Warren Gray have ploughed 400,000 a year - a whopping 17% of sales - back into buying top end computer-driven cutting machines.

Measuring bone screw at MCS in Redditch
Computerised measuring can check bone screws to within the width of a human hair

MCS got its "wake up call" from the crisis that hit MG Rover in 2000, says Jim Gray. MG Rover's Longbridge plant "was a nice comfort zone" for small engineering firms like his, but with its future uncertain it was time to look elsewhere.

Three years ago, car parts made up three quarters of sales at MCS. That has now fallen to about half, and MG Rover parts are at most 10%.

It employs 35 staff. That is 15 fewer than 3 years ago, but sales have held steady, and its busy workshops reek of hot metal and machine oil.

"We are a subcontract machine shop. We are selling time. We saw that a (medical) implant is a piece of metal machined," says Warren Gray.

Breaking into a highly regulated area like healthcare has been neither easy nor quick. But the rewards are potentially high as the market in medical equipment is growing at 5% a year, partly due to more NHS spending.

It is a strategy encouraged by Medilink UK, a quango with 307 member firms in the West Midlands. Another sector getting official promotion is aerospace.

Survival strategies

K&S has diversified too, dipping parts for washing machines and caravans, and is merging with another firm. Car parts now account for roughly 50% of sales, and parts for MG Rover have fallen from 28% to 3%.

Jim and Warren Gray - managing director and sales director of Machined Component Systems
Warren and Jim Gray are determined to go into more lucrative products

But plating is a volume driven business rather than technically complex, so scope for innovation may be narrower. Mrs Evans believes government subsidies are essential to upgrade and keep pace with environmental laws.

The British government argues that UK plc needs to beat the competition on innovation and design strength, rather than mimic low cost producers, which appears impossible anyway.

TRW Automotive is the embodiment of this theory in action - globalised, hi-tech, designing new products that become essential and create new markets.

It specialises in vehicle safety products such as driver airbags, braking systems and video warning sensors.

It has four Midlands factories, as well as six clustered around Shanghai. It sells $12bn a year in parts and customers include both MG Rover and its suitor Shanghai Automotive Industries Corporation (SAIC).

Sober warning

TRW Conekt is the group's research and development centre. Its general manager Mike Southwell has sober words for anyone who believes the hi-tech route is a magic solution to protect British jobs.

Linda Evans, MD of K&S Plating
Price pressure from Eastern Europe meant cutbacks at K&S Plating

"It's no longer a differentiator to manufacture in low cost countries," he explains. "It's the norm." Car makers are therefore hunting for "the next big chunk" out of costs, and they see it coming from R&D.

TRW Conekt already has a joint venture in India handling drawings overnight while its UK staff are asleep. Now it is exploring links with Chinese universities.

"If you could totally use those sort of resources you'd be down 25% on costs," he says.

The pressure to do so is growing, as car makers want components firms to shoulder the costs and risks of R&D when designing for them. For now, he believes UK engineers retain an edge at complex project planning.

But longer term, the UK is likely to lack skilled engineers. Often, those doing work experience at TRW from Midlands universities come from China.

"I've got two marketing people and I've got 120 engineers, but you don't get that balance in the universities," observes Mr Southwell.


What future for British industry. Please share your views.

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The following comments reflect the balance of opinion we have received so far:Most car makers in Europe are broke. Those that survive and do well do so with the aid, past and to a lesser extent present, by governmental support in the terms of preferential loans and local support, ie French People buying French Cars. This will never happen in Britain and that is why only small niche car makers can survive.
Ben Shepherd, Farnham, Surrey

With experience gained from the manufacture of goods comes experience and insight to design them. Why would a China, rich on dollars from abroad, then spend them elsewhere on services they are bound to be able to provide at home before long.

The Swiss have the right idea, supporting Swiss businesses regardless of cost to give growth and stability rather than hand your hard earned cash to outsiders who've no interest in your long term situation.
Mark Gayler, Bristol, UK

In a few years time, all that will be left of British industry are companies making huge profits that serve their shareholders well but employ very few people in this country.

All the manufacturing and even design will be done in countries where the cost base is much cheaper ie China and India.

People say that this doesn't matter as we now have more people employed in financial services and retail, but what has driven this growth? It is the all those people living on the never-never.

When interest rates go up, people will stop spending and all those new jobs will be unsustainable, leading to job losses in these service sectors too.
Nash Patel, Stanmore, Middlesex

For the tier one suppliers to the automotive industry, significant rationalisation over the last 10 years has concentrated R&D activities at French and German headquarter sites, leaving production only units in the UK, vulnerable to closure as the automakers insist on production in low cost countries.

The trend to push further design and support services onto the tier one suppliers will only exacerbate this trend. I have to take the pessimistic view that manufacturing in the UK will continue to decline and that the rate of decline will probably increase.

The logical conclusion of the devastation of the UK supply base is that the automakers themselves will relocate to reduce distribution costs
R. Fairclough, Telford

It's in quite enough trouble, near hysterical political correctness isn't going to help at all.
Steve, UK

This government's idea of raised corporate taxes has priced the British manufacturing industries out of a normally lucrative market. It's time for a change.
Mark, Midlands

I am a Engineer who used to work for the old Rover Group, and I went to BMW following the split.

I have since moved to the service sector as I saw no future in the UK auto industry since it cannot compete with Eastern Europe and the far east.

UK auto engineering is dead and has no future, and the government is flogging a dead horse in these negotiations.
Peter McLaughlin, Livingston

I am an engineer working in the motor industry, and still have another 20 years to work before I can retire.

I'd like to ask Mr Blair this question: in this current climate of "downsizing, outsourcing and cost cutting", what future do I have?

Your track record is not good, over 1 million jobs lost in manufacturing since 1997. Should I continue a career in engineering, or should I get used to saying the phrase "would you like fries with that?".

Come on Mr Blair, do something to help, if this country doesn't make anything we'll have to import everything, all our cash will go abroad, and we'll end up a Third World nation riddled with debt, famine and death.
Paul Dickinson, Nantwich, Cheshire, UK

We seem to be training people in all the wrong subjects. If you look at the university figures for the number of engineers against the number of sociology degrees there is a massive imbalance.

If we do not build or at least design anything in this country, where is our wealth going to come from? We cannot all be software engineers and accountants.
Gregory Hayes, London UK

Engineering in the UK is dying out, mainly due to lack of real investment, strong overseas competition and poor morale within the professional engineering community.
Alex McCristal, Derby, UK

Outsourcing is destroying jobs, the effects will be everywhere in 10 years time. Gordon Brown also wants to invest millions in IT skills, a huge waste in money as these skills are heading offshore.
Zak, UK

K&S's attitude is typical of British industry. Why should they expect subsidies and assistance from the government. Why on earth should UK plc help companies such as K&S who need to look forward and not back and also stand on their own two feet when they do nothing for the building industry at all.

Mrs Evans should realise that she runs a business and not a nursery and if she can't make her business profitable, shut it down and do something else. Times change and if you can't plate anymore because others are doing it cheaper, then think again.

Its not the Government's job to assist businesses which cannot be profitable or be run efficiently.
Matthew Clark, Chigwell, Essex

British industry will continue to decline whilst employers continue to move jobs abroad. Fortunately there is no global market in haircuts, so British industry will be reduced to doing special purpose equipment, one offs and short lead time orders.

Virtually all volume repetitive work will be transferred to third world countries where they have lower labour costs, virtually no health and safety legislation and no environmental controls.

Political desires will see some plants remain, although these will be mainly "screwdriver operations" assembling components manufactured elsewhere.

In my experience, companies with as few employees as 20 are now getting on board the rush to the Chinese with devastating effect.
Phil Cooper, Stevenage, Herts

It is fine saying that the economy in Birmingham is less dependent on the manufacturing sector due to new jobs being created in retailing and other service sector businesses, but where exactly do economists think the retailers get their customers from in the first place?

Retailing is at the top of the economic food chain that is supported by a strong manufacturing base and subsequent wholesale economy that provides these retailers with the customers to buy their goods and services in the first place.
Darren, Manchester




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