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Last Updated: Thursday, 20 April 2006, 04:22 GMT 05:22 UK
Rolls-Royce chief praises UK car industry
By Jorn Madslien
BBC News business reporter

Rolls-Royce chief Ian Robertson
Mr Robertson believes the UK car industry has come a long way
Peugeot's decision to quit the UK should not be interpreted as a sign of the demise of the British car industry, according to the chief executive of Rolls-Royce Motor Cars, Ian Robertson.

"The motor industry in this country is probably stronger than it has been for decades," the seasoned industry executive said in an interview with the BBC News website.

Last year about 1.6 million cars were made here, not far short of record production levels reached during the industry's heyday in the 1970s, and pretty much all the remaining car factories in the UK are currently profitable.

Contrary to popular belief, Mr Robertson - who started out with Rover and has worked in the industry for 27 years - insists the UK has become a very good location for car makers.

Not only is there a large pool of skilled and flexible labour in the UK, but the infrastructure here is also very good with an efficient motorway network and good access to ports, he says.

It is inconceivable that Renault or Peugeot would shut up shop in France; that Volkswagen, BMW and Mercedes would close all their manufacturing plants in Germany
Kevin Morley
Automotive industry analyst

The UK government has also "initiated some change" to create a more favourable framework for car companies to operate in, and trade unions have done much to improve communication with car industry executives, he adds.

"Relations between trade unions and management has moved on over the last 25 years," Mr Robertson says.

"There is now a common purpose; to secure the future of the British motor industry."

As such, labour cost is just one of several factors determining where car makers set up their factories.

Attractive location

Almost half the cars made in the UK are produced by the Japanese groups Toyota, Nissan, and Honda.

In addition, the US giants General Motors and Ford have factories here, as does Volkswagen which owns the Bentley factory in Crewe.

Mini production
Investment in UK car factories boost economic growth

"They are all making big investments in the UK at the moment," Mr Robertson says.

The same is true for BMW Group, the German parent of Rolls-Royce and owner of the Mini factory in Cowley, Oxford.

"We [the BMW Group] are continuing to make very significant investments in this country," Mr Robertson says.

He points out that 100m is being invested in the Mini factory to lift production from 200,000 to 250,000 cars per year, and fresh investment is being pumped into new Rolls-Royce models.

The group is even producing all of its small BMW engines at its factory in Birmingham.

"The British framework has been very effective," Mr Robertson says.

"There are very many flames of success."

Committed investors

Investment by foreign carmakers has been of great benefit to the British economy, he points out.

Cost comparison between Germany and eastern Europe automotive component industry:
Western Germany: 25.8 euros per hour (2005)
Eastern Germany: 16.5
Poland: 5.4
Hungary: 4.7
Czech Republic: 4.2
Slovak Republic: 3.3
*Source: Centre for Automotive Research (Germany)

"Look back at the turn of the 1980s when Japanese firms first started investing in the UK," he says.

"Investment was being made in an industry that had not seen the right level of investment for many, many years."

The trend has continued, with much investment still coming in from Japanese, American and German car makers.

And those who are here today are generally committed to staying here for many years, Mr Robertson believes.

There are no plans to manufacture Rolls-Royce or Minis outside Britain, he says.

Successful sector

A BMW-commissioned report by Oxford Economic Forecasting backs Mr Robertson's belief that the car industry remains a powerful force in the UK economy.

"The direct contribution of BMW Group to UK gross domestic product was... 1bn in 2004," the report, which was published in February this year, says.

Add to that its "indirect contribution" to the economy - that BMW's purchasing of raw materials, components, capital equipment and business services from UK suppliers, as well as the consumption by its workers in the UK - and the overall contribution rises sharply, Oxford Economic Forecasting says.

"We estimate that in total BMW Group contributed around 2.5bn to UK GDP in 2004," the report adds.

On top of that there are the similarly massive contributions made by BMW Group's rivals, thus Oxford Economics' conclusion belies the myth that the UK car industry is in trouble.

"The automotive sector in the UK has been much more successful than manufacturing as a whole over the last 20 years," Oxford Economic Forecasting points out.

Selected nations' unit output (ordered by 2005 figs)
2003 2004 2005 Change 2004/ 05
Germany 5,506,629 5,569,954 5,757,710 3.40%
France 3,620,053 3,665,990 3,549,003 -3.20%
Spain 3,029,826 3,011,776 2,752,500 -8.60%
UK 1,846,429 1,851,589 1,803,049 -2.60%
Italy 1,321,631 1,142,105 1,038,352 -9.10%
Czech Rep. 441,717 448,106 604,930 35.00%
Poland n/a 522,900 540,200 3.30%
Slovak Rep. 281,165 223,542 218,173 -2.40%
Netherlands 192,634 247,503 180,568 -27.00%
Hungary 126,296 122,661 138,918 13.30%
Finland 19,658 10,510 21,644 105.90%
Source: European Automobile Manufacturers' Association

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