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UK Automotive Supply Chains

EASN Conference

Professor Jon KingDirector, Corus Automotive Engineering

29 January 2010

NAIGT

• New Automotive Innovation and Growth Team (NAIGT)

– NAIGT formed April 2008, chaired by Richard Parry-Jones

– Industry-led project facilitated by DBIS Automotive Unit to take an holistic, long term view

– Tasked with looking at:• Opportunities for automotive sector in the UK

• Barriers and obstacles for realising these opportunities

• Strategy and mechanisms for accelerating progress

– Reported to Government 06 May 2009

• NAIGT vision

“A competitive, growing and dynamic industry making a large and increasing contribution to employment and prosperity in the UK, and playing a decisive global role in developing exciting, low carbon vehicle transportation solutions”

UK Automotive Council

• Agreement to set up an Automotive Council to

– Create a transformed business environment in the UK to provide a more compelling investment proposition for the related industries

– Develop further the technology roadmaps for low carbon vehicles and fuels and exploit opportunities to promote the UK as a strong candidate to develop these and other technologies

– Develop a stronger and more competitive supply chain

– Provide a stronger public voice for the industry to support the value of the industry to the UK and to global partners

– Ensure a strategic, continuous conversation between Government and the automotive industry

• Subsidiary Technology and Supply Chain Groups have been established to address key areas of the remit

Background data

• Sector adds £9.5bn to the economy

– 0.8% of UK economy

– 0.6% of UK employment

– 13% of manufactured exports

• Direct UK employment

– Job multiplier of 8.5

– 384,000 direct employment, of which 330,000 could be offshored

• Shift from volume cars to premium vehicles and engines

• UK is competitive in terms of labour cost and productivity

The UK car industry todayCompetitive but fragile

• An industry that has transformed itself in the last decade and is now competitive with global peers– Outstanding quality and reliability

– Excellent labour relations and labour flexibility

– World class productivity

– Diverse manufacturer representation

• Critical issues– Loss of scale drives “hollowing out” of the component supply

chain

– Some structural issues have remained over decades• Government ambivalence• UK supplier base• Availability of skilled workforce

• UK is competing as an assembly location

Weaknesses and opportunities

• No global major headquartered in UK

• Sub-critical scale for car production and R&D

• Tier 1 suppliers only assemble – no R&D or core component manufacturing

• Limited R&D by global majors – Ford the exception

But…..

• Pro-active collaboration between industry and Government

• More active promotion and communication

• Take advantage of the low carbon revolution

– Encourage OEMs and Global Tier 1 suppliers to increase R&D in the UK

– Halt the ‘hollowing-out’ process in the supply chain

The competitive supply chain challenge

• Vital to retaining OEMs – our competition is Mainland / Eastern Europe

• Challenge of total supply chain efficiency (partnership)

• Poor ‘matchmaking’ reduces UK value add

• Internationalisation challenge for UK suppliers

– Access to new international markets

– Access to best cost production potential

• SMEs find it difficult to access (the right) support

• ‘Market failure’ interventions are not forward-looking

• Poor image of UK manufacturing – nobody cares

The competence and capability challenge

• More “hollowed out” than elsewhere in Western Europe

– Low value added production/development at Tier 2 / 3 level

– Tier 1s tending towards jis/jit final assembly

• Manufacturing technology/automation below world class

• Structural gaps – machine tools, metal/plastic processing

• Unattractive environment (skills, investment incentives, stability, infrastructure) to compete for new business

• But…

– Opportunities in the total cost/value equation

– Opportunities in niche vehicle sector

– Opportunities in Low Carbon technologies

The research and innovation challenge

• Current systems of support are complex / not transparent / tactical in terms of interfaces, funding, etc.

– Categorised by £5m 3-year ‘band-aids’

– Where is the strategy?

• Research Council funding is overly focused on academic review – need to balance with wealth creation for UK plc

• Need to spread best practice in industry collaboration, eg JLR/WMG PARD programme

• UK – ‘great ideas but no volume business’

– Insufficient focus on productionisation of process

– Can we learn from the MIT/Frauenhofer models?

The inward investment challenge

• How can we get VMs/key suppliers to see the UK as their ‘second home’ for development of new automotive technologies?

• Something special required

– Large scale strategic intervention, not multiple projects

– Bringing together industry and academic support

– Providing prototype/testing/demonstration facilities

• Opportunities

– Manufacturing and production technology development to ensure UK benefits from production stage

– Incubator for ‘leapfrog’ technologies, products and processes

– Tier1’s as bridge between a good idea and volume supply for the mass market

Electrification of transportTest Bed UK

• A partnership between automotive manufacturers, infrastructure providers, regulators and consumers

• Leading the development of new customer / user behaviours to get best out of new technologies

• Giving UK plc a voice in advanced technology development e.g. standards, regulations

• Attracting global players to the UK

• Demonstrating Government commitment – OLEV and £400m+ over four years

• A catalyst for change

Supply Chain Group tasks

• Leverage and market the pilot Test Bed UK to global Tier1 suppliers as a reason for investing in the UK

– Foster links with innovative/niche technology companies to generate upscaling partnership opportunities

• Develop a Sourcing Roadmap to identify value adding opportunities to reverse the current ‘hollowing out’ trend

– Promote the value of local value chains

– Promote the UK supply chain internationally to identify insourcing and export opportunities

• Address the internationalisation potential for UK Tier 2/3s

• Engage with those responsible for existing training and support budgets to seek to reflect these priorities