Recession is not helping the fight to match Japanese efficiency. By Roger Eglin.
Detroit's car-makers have been savaged by the Japanese onslaught. After losing several billion dollars on its North American vehicle operations last year, General Motors is closing 21 plants and cutting 74,000 jobs. Ford lost $2.26 billion last year and Chrysler is in deep financial trouble. In a year Japanese-owned transplants have raised their share of US car output from 21.7% to 24.9%. By 1993-94, the Japanese will be able to produce 2.7 million cars a year in America - more than a third of current output.
Detroit knows that the battle is close to being lost. The Japanese have shown that using American workers, they can consistently produce more saleable cars more efficiently than other US rivals. The increasingly shrill demands that the Japanese should adopt a more co-operative attitude suggest Detroit knows that there's nothing it can do to stop them. But the second front has already opened to Europe. Nissan Sunderland will have the capacity to build 300,000 cars a year by 1993. The Toyota and Honda plants will start production this year; in Holland the Mitsubishi-Volvo venture should reach 200,000 cars a year by the mid-1990s.
In some ways the threat to Britain will be greater than that to Detroit. By 1995, Japanese-owned car plants could account for around half of UK output. Take into account the fact that the Mergers and Monopolies Commission (MMC) report, New Motor Cars, suggests the future of the voluntary agreement restraining Japanese imports to 12% of the UK car market should be reviewed, and the outlook for the big three - Rover, Ford and GM/Vauxhall - is gloomy.
The pain is showing. The Japanese challenge comes as the recession is cutting deep. After the balmy days of the Thatcher years, the 1990s has seen the boom go into reverse. In 1991 output was 1,236,922, down for the second successive year. In a tough market the brand leader is at risk. This seems to be so with Ford UK, the only British producer whose output failed to rise between 1986 and 1990. Ford finds itself disadvantaged in the market-place. Vauxhall new Cavalier is more than a match for the ageing Sierra; sales of Rover's 200 series have overtaken the Escort in some months, and the competition is sharper than anything the traditional market leader has experienced. As the industry frantically restructures to match the Japanese, Ford seems to be losing out on productivity.
Ford has announced that 2,100 jobs are to go a its UK plants: 500 at Dagenham, 600 at Halewood, 450 at Southampton and 300 at its South Wales engine plant. Though Ian MacAllister, the chairman and MD of Ford of Britain, says its UK productivity has improved by nearly 40% over the past six years, its European operations were up 50% less efficient than the leading Japanese manufacturers.
Calculations by the MMC suggest that Ford is falling behind its UK manufacturing rivals efficiency. In a table based on data from the companies, the MMC said that both Vauxhall and Peugeot scored large productivity gains between 1986 and 1990. For both companies it was over 70%. Rover advanced about half this rate but Ford by only 9%.
The MMC asked the big three makers to rate their UK plant productivity against that in other European countries. Ford said its costs manufacturing in the UK were "higher by a considerable margins than its costs on the Continent. Conversely Vauxhall said Luton is "extremely competitive" compared with the productivity of its sister company in Europe though Ellesmere Port is not so competitive. Rover's view was that, measured by the hours needed to produce a car, it was fully competitive with other European plants - though in terms of other costs, it is disadvantaged by low output.
There must be a question-mark over the long-term future of Dagenham and Halewood which, Ford admits, lag far behind their European partners. This suggests that, even taking a generous view, Ford's British plants are only half as efficient as, say, Nissan Sunderland. As Japan switches the car war to Europe, Ford UK is certainly in the firing line.
Roger Eglin is managing editor of The Sunday Times.