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Last Updated: Friday, 8 April, 2005, 16:45 GMT 17:45 UK
Rover suppliers brace for pain
Analysis
By Mary Hennock
BBC News business reporter

The UK government has responded to MG Rover's collapse by putting up 40m in aid to stave off job losses by helping the car maker's suppliers to diversify.

A worker leaves Rover's Longbridge plant
Will there still be jobs outside the gate?

Those who do lose their jobs in Longbridge and its support industries are being promised retraining.

But there's no doubt many workers could soon be filling in forms at the Job Centre.

Hi-Finish Casting is one small engineer that expects to have to say goodbye to some of its 80-strong workforce.

"It will result in some employee losses within the business," says Brendan Delaney, HFC managing director, though he does not yet know how many.

Across the West Midlands, managers have spent the day in meetings trying to gauge the damage. Some car parts suppliers declined to comment on what Rover's troubles mean for them.

Rovers's shrinking share

Making cars is still at the core of the West Midlands engineering industry.

Depending on the level of business they have with Rover, they can be closing next week
Brendan Delaney, MD Hi-Finish Casting

But beneath the grim mood there is a quiet confidence that the engineering sector will not be mortally wounded by Rover's troubles, though the short term pain for many people who live there could be great.

Rover may be the last British-owned mass car maker, but it is far less important to the UK's car industry's overall health than it once was. Last year, it turned out 100,000 cars out of a national total of 1.6 million.

Furthermore, Rover's previous crisis in 2000 started a stampede among engineering firms to diversify away from Rover towards other customers and in many cases, away from making car parts.

"A number of our members decided to diversify so they are not so dependent on Rover as they were," says David Elliott, chief executive of the Surface Engineering Association which represents at least 270 firms locally.

He reckons that while many SEA members produce 10-15% of their output for Rover cars, few are reliant on Rover taking even 20% of their goods these days.

The feeling among local firms and motor industry analysts is that Rover's demise could be a big hit, but not a death blow for the car parts industry.

Impact

"Rover has traditionally sourced itself from the West Midlands," says Peter Cooke, Professor of Automotive Industries Management at Nottingham Trent University.

Twelve to 18 months down the line we'll start seeing these people reabsorbed
Prof Peter Cooke

Most parts put on Rover cars come from within fifty miles of Longbridge, according to SEA chair Linda Evans.

Opinions differ about who will be worst hit. Most car parts firms locally supply Rover and other car makers indirectly - so called tier two and tier three suppliers.

"The tier one players don't just operate in the West Midlands, they operate globally," says Prof Cooke. Sheer size may protect firms, if not all their workers.

The region has 17 tier one firms out of 1500 altogether, according to Advantage West Midlands, the regional development agency handling the aid effort.

Retraining - too late?

Smaller companies may be more vulnerable, though.

"Depending on the level of business they have with Rover, they can be closing next week," says Mr Delaney. He does not think HFC faces any such risk. It has diversified and sends only 12% of its goods to Rover, far less than a few years ago.

Trade & Industry Secretary Patricia Hewitt at Longbridge on Friday
Ms Hewitt is promising 40m in aid

But he is sceptical too about the value of the government's 40m for companies at risk.

"They can talk about training and retraining but that's not going to keep businesses going. They need a revenue stream," he says.

"For smaller businesses particularly, this is an immediate impact" whereas retraining "takes time".

Overall, most see the automotive and engineering industries as buoyant enough to withstand the shock.

"Twelve to 18 months down the line we'll start seeing these people reabsorbed," says Prof Cooke. He thinks the engineering industry may even emerge stronger from the shake-up, which will force firms modernise and move into more profitable sectors.

Certainly, there is no crisis without opportunity. It seems from a few Midlands firms are lining up to seize any chance to buy weaker rivals, if the phone calls Mr Elliott has received are anything to go by.

"One or two of them want to offer assistance to companies that might be affected such as financial rescue packages," he says.




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