The following is the speech of the SMMT President, Nigel Stein (Chief Executive of GKN plc) at the SMMT Annual Dinner in London on 27 November 2012:
My Lords, Ladies, distinguished guests and Members. It’s my great pleasure to formally welcome you to the 96th SMMT Annual Dinner.
It is testimony to the health of our industry that this year we are hosting our biggest Annual Dinner in recent times, a clear indication of the value we all place on spending time together as an industry.
And our shared wish for a successful UK automotive industry, not only for the benefit of those who work in it, but also for the good of the UK economy as a whole.
We’re maintaining the format of last year; a short speech from me followed by Alexander Armstrong – who I have no doubt will amuse you more than I ever could.
We also have two awards to make tonight recognising some remarkable people and activities.
First, is the Award for Automotive Innovation which I’m delighted is supported by GKN and The Times.
Only by innovating can we maintain our position at the cutting edge of the future and maintain the strength of our industry.
Second, is the Autocar Courland Award which recognises the best in young automotive journalism and reminds us of the necessity to attract more talented young people into our industry.
So we look forward to marking these achievements in a moment.
2012 has been another good year for the UK automotive industry.
In the next few minutes I would like to use my last official platform as President to review the state of the industry, to comment on the SMMT’s activities and to look at our relationships with Government.
And to suggest some actions that are needed to make the UK auto industry even more successful in the future.
We are privileged to work in an industry that so positively impacts the lives of millions, indeed billions, of people.
It is an industry which has been responsible for bringing major advances in the standard of living in countries across the world. Affordable, flexible personal transport provides access to education, healthcare and economic opportunity.
And we should remember that globally, the automotive sector is estimated to account for $2.6 trillion dollars of economic activity.
Automotive is an industry that never stands still.
Thanks to fierce competition it has been at the forefront of technological innovation and lean production methods.
A car today is 25% more fuel efficient than one made 10 years ago; is far more comfortable, more reliable, safer, and is cheaper in real terms. Not many industries can claim that track record for their products.
Turning to the UK, in spite of the difficulties in much of the rest of Europe, we continue to move forward.
On the sales front, we have seen continuing strength with the outlook for this year’s UK passenger cars now at two million units, 4% higher than last year. Indeed, SMMT recently increased its forecast for the next few years.
But importantly, we expect to produce 1.6 million cars here this year. And based on the recently published SMMT/ KPMG industry report, in 2016, when committed capacity expansion comes on stream, output could potentially rise to nearer two million units a year, beating the 1972 record and making the UK one of the larger car producers in Western Europe.
This would be a remarkable achievement for an industry that in public perception was all but dead and buried only five or six years ago.
I can’t help thinking that if I had stood in front of an SMMT dinner 10 years ago and predicted today’s situation, you wouldn’t have called me an optimist, you would have called me an ambulance.
The video that’s been playing on the big screens around the room highlights a steady stream of good news – where global manufacturers have committed to invest large sums of money into UK manufacturing.
In total, over £6 billion has been committed in the last 18 months.
That’s a huge vote of confidence in the UK. Something we should broadcast when we talk about this great industry.
And remember, most of this is not investment by government, although its help and support is gratefully acknowledged, but rather by hard-nosed global car manufacturers, who have a choice of where to go and where to invest and have decided that the UK is the best place to build their product.
Unsurprisingly, in this great global contest for investment, we don’t win everything and the recent announcements regarding the closure of Southampton and Dagenham shows what can happen to plants that are on the wrong side of the cost and scale equation.
It is obviously a great blow for the employees at those sites and they have our sympathy.
But we have to fight the battles we can win. And the good news is that overall the UK auto industry is winning and will see growing car production over the next few years.
Of course the health of the industry is not just about additional assembly capacity, although that is an important constituent. It also requires innovative technology and a strong UK Supply Chain to deliver it. Here, the picture is more mixed.
On technology, there are good reasons to be positive. The UK has technology, products and manufacturing processes that are real winners, not least when it comes to fuel efficiency and advanced propulsion.
We British are a highly inventive race. The old auto industry adage has some truth –
“The British invent it, the Germans make it better; the Americans make it bigger; the Japanese make it smaller; the Italians make it prettier and the French- well the French just make it different!
Of course now we have to add – “the Koreans make it guaranteed for seven years and the Chinese make the most”!
Successful British engineering and innovation is graphically illustrated in motorsport where the UK indisputably leads the world. And that same talent for innovation is also seen in the awards you will see later this evening.
But it is one thing to have a good idea; quite another to bring it into mass production and thereby get sustained success.
For that a strong Supply Chain is critical and here the UK picture is rather patchy. Before the tide began turning in the last couple of years, we had suffered 20 or even 30 years of decline, with under-investment in plant, technology and skills.
The Automotive Council has done a fantastic job in mapping the problem and establishing a Working Group to come up with solutions.
But, let’s not kid ourselves; there is still a long way to go. I believe that as an industry, we must strongly support this effort, as without a strong Supply Chain our recovery could easily be undermined.
We need sustainable supplier profitability, because without it, companies won’t invest. One-off grants help, but alone don’t do it.
And to achieve sustainable profitability, investment is needed not just in plant, but also in people, in skills and in technology which in turn lead to greater productivity and more competiveness. And as that virtuous circle of investment and profitability begins to turn, so we will improve our supply chain.
Government help here is vital and I applaud the initiatives for both a competitive UK corporation tax rate and above the line tax credits for R&D. These will both make a real difference.
I am pleased to say that the SMMT has also played its part in the Supply Chain initiative by holding two successful ‘Meet the Buyer’ events – and last week joined the gap between the supply chain and possible sources of finance at a ‘Meet the Funder’ event.
Last week, Richard Parry-Jones, Co-Chair of the Automotive Council paid tribute to the way the SMMT has worked with them and contributed to the industry’s success.
The fact that the Council and SMMT speak with one voice for the whole industry has made us extremely effective and is something we must strive to continue. Industry and Government working in partnership is the best solution.
So we are doing the right things, but don’t expect overnight success. This needs to be a sustained, consistent campaign over many years.
Importance of Europe
I mentioned earlier that here in the UK, we were managing to buck the difficult times in the rest of Europe.
But we should certainly not underplay the importance of Europe. And not just because it is a market for 12 million cars. It is in Europe that many of the rules and regulations that govern our industry are debated and decided. Brussels chooses the projects which are supported by EU funding. And in Geneva where global standards are set and where powerful lobby groups speak for America, for Japan, for China and other emerging markets, there is no UK voice. It is the EU which speaks for us.
So whatever the political considerations, we must ensure that the UK keeps a strong voice in the European auto industry.
In my experience, they want our participation and respect it. After all, two million cars makes us a significant player in the market.
Turning now to the SMMT, I want to publicly thank my Vice Presidents and the Executive Board for their hard work, advice and enthusiasm that has helped strengthen the SMMT over the past year.
In time honoured fashion, the outgoing President uses this slot to reveal his successor.
I’m pleased to announce that Tim Abbott, Managing Director of BMW Group UK and, for two years, chair of the SMMT Car Section, will be succeeding me as President of SMMT.
Also, Mark Ovenden of Ford, and Gareth Jones of ebm-papst become Vice Presidents.
I’m sure you’ll join me in congratulating all three.
As I start to pack up my presidential briefcase, I’m delighted to report that SMMT remains in very good shape.
Now firmly settled into the offices in Great Peter Street, we have secure finances and a growing membership.
We have paid off some of our pension deficit and have a healthy investment fund, which we will be careful to preserve in real terms.
There is much I could talk about of the work of the SMMT in the year, but I would highlight just three particular successes.
First, the International Automotive Summit held in June, which provided a forum for senior executives across the industry. It was very well attended and we were very grateful that the Business Secretary attended and spoke.
This event is going from strength to strength and plans are well underway for next year.
The second is an initiative started this year to support the Foyer Federation.
This is a charitable body which helps engage young people with vulnerable backgrounds in the automotive industry. SMMT has long supported BEN which offers help for people in later life, but this is the first time we have done something at the younger end. And it has proved very worthwhile and successful.
The third achievement I would highlight is the excellent work Paul, Konstanze and the team did in ensuring Automotive was one of the industries selected by the government for a national long term industrial strategy.
These are but a few of the achievements of the year and I would like to put on record a huge thank you to Paul Everitt and the entire SMMT team, who in 2012 have again done a superb job representing and promoting our industry, in the UK, in Europe and in the wider world.
It is no exaggeration to say that SMMT is admired and indeed envied by other Trade Associations in its achievements of the last few years.
Yes, there is a great story to tell, but it is also about the way it is told and the way SMMT has approached the issues that have won their respect. So thank you Paul and the team for a job well done.
To tackle many of our challenges and ensure that this sector is at the top of departmental priorities requires close cooperation with Government.
The relationships we have with Ministers, officials, shadow ministers and parliamentarians of all colours are strong and I’m pleased to see some of you here tonight. Thank you for your support.
Those connected to Government sometimes ask me, what do you think we should do to get the UK back to growth. So before I sit down I am going to offer my three pennies worth.
These are points that can’t only be addressed by the industry, they require political will and activity.
First, good people. It is almost a cliché that we lack sufficient engineers in this country, but it is true.
Part of this is the training and education infrastructure, and part is image. We must attract good people into the automotive industry and into engineering generally for that matter.
James Dyson has recently captured the spirit of this, bemoaning the drain of good technical graduates into the financial services sector rather than “great engineering companies like GKN” (his words not mine!). But he later went on to point out that good potential graduates are lured into taking soft and unfocussed degrees.
But Government is not the only partner that needs to step up and help deliver a better image for automotive, for engineering and for manufacturing, we all have a role.
We have to make our industry somewhere that’s exciting and fun to work. Somewhere respected, with promising career prospects. People want to work at the cutting edge with a useful social purpose; and in a workplace where people stick together, not one where their shoes stick to the floor.
For too long we have allowed the most talented youngsters to drift away from manufacturing and we have a lot of catching up to do. And yes, I agree with James Dyson, the government does need to intervene to make it more financially attractive to do engineering and science, than some other degrees.
And to ensure more of our apprenticeships are in the engineering industry rather than the “health and beauty” trade.
Making it work
My second point is about getting things done.
We need a Britain that works; with a modern infrastructure and a can-do attitude.
It’s not about new initiatives, new programmes, new everything.
In fact if you look, much of the supposedly new thinking is actually going back to what we had before. Improving schools, restoring playing fields, and reintroducing apprenticeships – I could go on.
What we need is often what we have now, but working properly! No queues at Passport controls, no excessive motor insurance premiums in respect of spurious “whiplash” claims, no drain on the public purse through millions of fictitious PPI claims.
When issues like this are sorted out, British business will benefit.Look at the Olympics. When we really want to do things well, we can.
And as a frequent traveller, I can testify it sent a hugely positive signal about the UK around the world.
And finally risk and risk taking. As an engineer stroke accountant from Scotland you might expect me to be pleading the case for risk mitigation. Far from it.
There are too many people in the professional ranks in the UK who make a living out of avoiding risk.
There is no reward without risk and a risk-free society is an enterprise free society. …And one that will slowly decline.
We need to push back against this tendency and I was delighted to hear the Prime Minister say something similar in his speech to the CBI last week.
There will always be someone to tell you why it can’t be done. We need fewer nay-sayers and more entrepreneurs.
And here’s one suggestion from me.
Many of you sitting in the audience work for companies with a deficit in their UK pension scheme.
If your company has been in business for more than 20 years, it’s hard to avoid it.
The SMMT certainly does, and so does GKN.
Obviously these obligations have to be met and commitments to pensioners honoured. And a deficit can’t be left uncovered too long. But the problem is that almost everything paid into a pension fund today ends up, one way or another, invested in government securities.
So we are taking money out of companies and lending it to the UK government. Is that really a way of creating value and driving growth?
It may sound trivial, but GKN alone currently pays £30m a year in this way and rising. That’s the investment for one brand new UK factory each year, instead being lent to the government.
And why?….To reduce risk. And in our view reduce risk more quickly than we need to.
Perhaps it’s time to recognise the real risk we face as a country…is a lack of risk taking and a lack of ambition.
So let’s get our young people excited about science and engineering.
Let’s get our country working efficiently, and let’s see risk accepted as part of life and part of a successful and entrepreneurial economy.
In closing, I would like to say that it has been an absolute pleasure and a huge honour to have been your President for the past two years.
I would again thank my SMMT Board colleagues and particularly Paul and his executive team for their great support in that period.
Our industry is a great industry that is not only steeped in history but blessed with a great future.
Our job is to build on the excellent work that has put us in the best position for many decades and to take UK automotive to the next level.
Looking round this room I am very confident that together, we can do it!