The landscape of vehicle making is changing, particularly in the manufacturing regions of France, Spain and the United Kingdom

Europe as a whole is the world’s largest vehicle making area. Germany is the biggest producer, with France, Spain and the UK following close behind. But these regions are faced with major challenges: all three have high-cost labour markets; they’re fairly heavily unionised – especially France; and their home markets are sluggish at the best of times. If this sounds like gloom and doom, it isn’t, for these regions are among the most productive, efficient and effective in the world. The competitive pressures that have led to this have differed from one area to the other. In the case of the UK, it doesn’t have a significant domesticallyowned base. As such, it has had to sharpen up its act or face losing the auto industry altogether. The French auto industry is dominated by PSA and Renault, but these carmakers have had to improve their performance as the European and global markets have opened up. ‘Made in France’ is no longer good enough, even for the historically nationalistic French consumers – the products have to be competitive on price, specification and performance too. Spain has always been export-led, from the latter days of the Franco regime to the present.

Built to sell abroad
In fact, all three countries’ industries are export-led: the UK sells more than 70 per cent of national production outside its own border. Spain produces nearly three million passenger cars annually but vehicle registrations are holding at around 1.6-1.7 million. The French market is flat in terms of new car registrations, at around two million, but its domestic plants manufacture over three million passenger vehicles a year – and a significant proportion of the new sales are taken by imports. In fact, the words ‘import’ and ‘export’ are somewhat misleading, as in all three cases, the major proportion of trade is within the European Union. Is European trade exporting and importing? How do you describe a car that is made up of components from several different countries that is sold outside the national borders but within Europe – is it an import, an export or a manifestation of an integrated, continent-wide industry?
That’s a discussion for another day. The bare figures of the three countries’ industries don’t tell the whole story of marked differences between their production bases, supply chains and markets.

If the UK is a base for multinational OEMs and with a virtually non-existent domestically-owned base, France’s auto industry is dominated by PSA and Renault. The country had long viewed the Japanese inflow to Britain with suspicion but it now has its own transplant: the Toyota factory at Valenciennes, where the Yaris hatchback is produced. Between its inception in 2001 and 2004, Toyota invested €710m ($1 billion) in the plant, which also assembles 30,000 diesel and 150,000 petrol engines annually.

A further €17.8m ($26.6m) investment – announced in 2004 – boosted production towards 250,000 vehicles a year. Peugeot-Citroën’s Valenciennes factory produced 7,100 manual and automatic transmission units a day during 2007, while also playing home to the Daimler and, since 2007, Michelin logistics centres. Asian carmakers are starting to make inroads into the European production landscape.

The auto industry is France’s leading employer, with around 290,000 directly involved, and perhaps as many as ten times that number indirectly. Over half of the more than three million cars made annually across 21 assembly plants are from PSA or Renault. Total production, including vehicles and automotive equipment, exceeded €90 billion ($136 billion) - a growth of just under 66 per cent since 1996. One in every four cars on the road in Europe has a French badge on it; across the world, 5.9 million cars and trucks were produced by French manufacturers in 2005 – 53 per cent of them made in France itself. Production remains centred in the traditional heartlands of Ilede- France, Nord-Pas-de-Calais, Champagne-Ardennes and Alsace.

All the major suppliers, including Johnson Controls, Siemens VDO, Faurecia and Delphi have production, research and technical centres in the country. Delphi, still the world’s largest parts supplier despite its recent financial troubles, chose Paris as home of its European technical centre for power, chassis and steering activities. Ile-de-France is the long-established centre of R&D, with approximately 20,000 people actively engaged in related activities. The most important of PSA’s five French R&D facilities is in Velizy and Renault’s Technocentre has over 10,000 employees.

Training the engineers of the future
The French training regime combines both State and private sector resources, producing a steady supply of highly-skilled technicians and research specialists. Two higher education institutes, Ecole Superieure des Techniques Aeronatiques et de Construction Automobile and Ecole Nationale Superieure du Petrole et des Moteurs specialise in autorelated disciplines.

In that context, the heritage of radical thinking that led to the Citroën DS and XM models, as well as a series of innovative Renaults, from the 16 model to the Vel Satis, is not surprising. The challenges of climate change are being addressed by Stuttgart-based Behr, which has 100 engineers permanently assigned to carbon dioxide reduction and control. The two main groups are responsible for nine per cent of total world car production. Output declined from the beginning of the millennium to 2006, although early reports indicate that in 2007, growth in the region reached three per cent, despite a drop in new car registrations. “France has a good market in North Africa but its main exports are within the EU,” says Garel Rhys, Professor Emeritus at Cardiff University School of Business and a long-standing industry analyst.

Three of every four vehicles produced in France are sold outside the country’s borders and the main manufacturers aren’t relying totally on their French facilities to maintain external market share. PSA has plants in the Czech Republic and Slovakia; Renault is developing a presence in Romania and new plants are being built in South America too. The French auto workforce is almost completely unionised and modernisation – which inevitably means head count reduction –has been a bone of contention. Nonetheless, the industry is investing in improvements in efficiency and effectiveness. As a whole, the country is slightly ahead of the European average of R&D expenditure – four per cent – with over €4 billion ($6.1 billion) committed to industrial investment. New techniques and technology are attracting companies from outside the industry. Groupe Dassault, better known for its aerospace activities, announced in March 2007 that it intended to enter the auto sector with hybrid and electric powertrains.

It had been working on various ideas for some years through a subsidiary, Societe de Vehicules Electriques (SVE) in cooperation with Heuliez, which specialises in convertible tops and body conversions. When it came to taking the plunge and scaling up investment to industrial levels, Dassault bought out Heuliez and has proceeded on its own. The powertrain system, Cleanova, uses a lithium-ion battery pack produced by Johnson Controls-Saft Advanced Power Solutions, a joint venture with Johnson Controls, formed in 2006.

The seat of innovation
For innovation in Spain, look no further than Seat, whose stewardship by the VW Group has brought it into a strong market position. Its vehicles are essentially based on the Golf platform but it has developed its own brand identity. Targeting younger car buyers has been a very effective strategy. As for production, Seat made nearly three million cars in 2007 and Spain is now snapping at France’s heels in the competition to become Europe’s second-largest carmaking country.

All the major production facilities are foreign-owned, its core is mass production and it has taken as its example the German model of efficiency. The unions bought into the whole concept 20 years ago, when the country’s production was ramping up and the cooperative approach has worked: output is forecast to grow between two and three per cent during 2008 to around three million units, despite a slowing domestic market, according to the Spanish Association of Car and Truck Manufacturers (ANFAC). Just about half of all production is for export.

According to Faconauto, the Spanish dealers’ association, the most conservative predictions show sales of saloon cars and all-terrain vehicles will fall by 0.8 per cent this year. The traditional January slump has been aggravated by the uncertainty that is beginning to be felt regarding the business figures of the dealerships. However data suggests that the average amount spent on buying vehicles in 2007 was €21,634 ($32,644) – 2.4 per cent higher than in 2006. The association says that Spanish drivers tended to buy larger and more powerful models in 2007. The downside to that is that those vehicles pollute more: CO2 emissions went up in 2007 – only by a fraction – but it leaves the country’s vehicle makers a long way from the 120gm/km limit set for 2012.

Strength in numbers
The principal production areas in Spain are Barcelona (Seat); Valencia, dominated by Ford’s business park, and GM’s plants in Zaragossa and Cadiz. The country is Europe’s top producer of industrial vehicles, making 570,000 in 2006 and exporting over 80 per cent of production. Total turnover in the car manufacturing sector was €31 billion ($46.8 billion), the overwhelming proportion directly attributable to manufacturing. Spain’s foreign-owned OEMs tend to carry out their R&D elsewhere, although the supply chain is different, according to ACEA, the European Automobile Manufacturers’ Association. Several leading component suppliers are domestically-owned and are growing their R&D activities, reflecting the tendency to engage suppliers in design and development. If they follow the main manufacturing trend, then Spanish component suppliers might become a major force in the years to come.

A change in the landscape
Of these three markets, the UK is perhaps the most interesting because it has changed so much over the past 20 years. It lost its last major domestically-owned producer – MG Rover – in July 2005, and its longest-established foreignowned producer when Ford stopped assembling cars at its Dagenham plant in 2002. Peugeot pulled down the curtain on the oldest car factory in the UK by closing its plant at Ryton, near Coventry, in January 2007.

To lose one major manufacturing facility is unfortunate; to see three closed in less than five years could have been a mortal blow to any industry. But the UK’s output is not far away from its peak year of 1972, when 1.9 million cars rolled off the assembly lines. Production in 2007 exceeded 1.5 million – up more than six per cent on the previous year. Exports were the highest ever recorded, at nearly 1.2 million and the value, by just about any measure you care to consider, was far and away the highest ever. It could be argued that Britain’s car production industry is even closer to its peak year than the numbers themselves indicate. “There is an interesting point about that 1.9 million units in 1972,” says Garel Rhys. “About 600,000 of them were what was called ‘countable kits’. That was the period of the massive contract for the Hillman Hunters that were sent to Iran as CKD (completely knocked down) kits. The actual added-value per car on average now is about the same as in 1972.” The British car industry has the capability of exceeding its record year, Rhys believes.

“Although there have been closures, there has also been a lot of expansion,” he says, “the Japanese plants have grown; BMW has expanded its MINI plant in Cowley [Oxford]; the Vauxhall plant in Ellesmere Port can make more than ever if the demand is there. The plant closures have been offset by the improved capacity and efficiency of those that are left.” The traditional heartland of the UK auto manufacturing industry was the West Midlands, but that is no longer the case. In terms of car plants, the north-west of England is the centre, with the Jaguar/Land Rover plant at Halewood, Vauxhall’s Ellesmere Port facility just across the River Mersey and Bentley in Crewe. Ford’s main engine plant is in Bridgend, in South Wales. In terms of absolute output of finished vehicles, then Sunderland, located in the north-east of England, is Motor City UK.

The Nissan plant there has been Europe’s most productive car plant over the past eight years. It has delivered well over four million vehicles since the first Bluebird rolled off the production line in 1986 and in 2007, the facility manufactured a reported 190,000 Qashqai crossover SUVs, as well as Note, Micra and Primera models – more than 400,000 vehicles annually, representing 20 per cent of the country’s total production.

The bean counter’s dream
Output of the Qashqai exceeded the first-year projections of 100,000 by a vast margin. Kaizen – continuous improvement – is an established feature of Japanese-owned vehicle makers but those changes tend to be gradual. Nissan in Sunderland used Witness simulation software to analyse production and identify opportunities to accelerate the assembly line. After conducting hundreds of experiments across the whole of the billion-plus operations in the plant, the company was able to add more robots, speed up existing machines and hire another 180 employees.

The improvements raised Qashqai output by more than 20 per cent, or by 2,900 vehicles a month. When Nissan announced its intention to build a new manufacturing facility in 1982, Sunderland had neither a car plant nor any history of auto production. Now, with more than 15,000 people employed by suppliers locally, it proudly claims to be a cluster in its own right.

Burnaston, Derbyshire is home to Toyota’s UK manufacturing centre, while further south, in Swindon, Nissan, Toyota, Vauxhall and Honda represent another area of mass production. Toyota’s factory – in the East, rather than West Midlands – is, like Nissan’s Sunderland facility, rated as one of Europe’s most productive car plants. Another greenfield site, it is home to the Avensis and Auris. Burnaston’s history is even shorter than Sunderland’s: its first car – a Carina E – rolled off the line in 1992. Annual output now tops 285,000 units. The Japanese giant has invested over £1.85 billion in the UK, at both the Derbyshire factory and at its engine production plant in Deeside, North Wales – a 30-minute drive from Merseyside’s Vauxhall facility.

Investment in training pays off
In 2007, GM made nearly 2.2 million cars across its European operations – a new record. Meanwhile, Ellesmere Port produced its four millionth Astra in 2005 and is scheduled to begin production of the successor model in 2010. It gets its seating from Faurecia’s factory, also in Deeside. That plant was established in record time, when Vauxhall ended car production in Luton, and now handles over 2.5 million parts each month. Defect rate is below 10ppm, which says something for the investment in training. Two examples of the real change in the UK’s car industry over the past decade are to be found not far from Ellesmere Port. Halewood, on the outskirts of Liverpool, used to be a byword for industrial disputes and poor quality in the days when the Ford Escort was its production staple. Since the blue oval was replaced by Jaguar’s leaping cat, the factory has achieved some of the best quality standards in Ford’s global empire. Having been completely rebuilt in order to house the Jaguar X-Type production line, its initial targeted output was 100,000 units a year. To say that sales have not matched expectations is an understatement.

The company struggled to shift half that number and actually paused production in 2005, the same year that Halewood won the JD Power and Associates Initial Quality Study award – receiving the same award again in October 2006. The slack at Halewood has been taken up by the production of Land Rover Freelanders, which share the same assembly line, and by production of MT82 six-speed transmissions for the Transit van, the result of an £8 million investment in 2005/6.

Supplier park
Nestled around the assembly plant is a supplier park featuring such names as Johnson Controls and Lear, which deliver JIT to lineside in an outstanding example of effective scheduling. Jaguar’s Midlands-built XJ saloons and XK sports cars continue to sell well – in greater numbers even than before Ford took ownership –and the new XF model was named What Car? ? magazine’s ‘Car of the Year’ for 2008. Freelander production at Halewood is a timely addition to its capacity at Land Rover’s Solihull home, which makes the Range Rover, Range Rover Sport, Discovery 3 and the workhorse of the line-up, the Defender range. “Land Rover production exceeded 200,000 units for the first time in 2006,” according to Garel Rhys.

Bentley, in Crewe, is producing 10,000 cars a year in the same factory that just about managed 1,300, including 250 Rolls-Royce models, 10 years ago. Aston Martin is producing in record numbers and BMW’s MINI plant in Cowley is capable of producing close to 300,000 units a year. They are all seriously added-value vehicles. “If you add Bentley, Aston Martin and Rolls-Royce production together – about 17,000 units – the ex-works value is more than 200,000 superminis,” says Rhys, “if Aston Martin achieves its objective of 5,000 vehicles a year from its Gaydon plant, it will be a bigger manufacturer than Ferrari. That’s a decidedly varied base.” He continued, “The UK is the only country, other than Germany, that has major parts of its industry in both higher added-value and mass-market production,’ says Rhys. “Britain has brilliant upmarket offerings but it also has among the most effective mass-market manufacturers in terms of production efficiency, in Nissan, Honda and Toyota. They demonstrate the fallacy that the UK and Western Europe cannot make mass-market vehicles. You can make a lot of money in the mass-market, so long as you can get efficiencies in production planning and effective use of labour and R&D.”

Focused investments reap rewards
It doesn’t happen by itself and there have been a number of examples of focused investments made in training and up-skilling, as well as robotics and automation. Bentley’s parent, VW Group, challenged the Crewe management and workforce to make room for the Continental within the footprint of the existing factory – there would be no new facility for the new car – to improve production efficiency and raise annual output from 1,000 vehicles to 10,000, within five years.

Six months of preparation was followed by intensive training in lean manufacturing techniques, to develop the Bentley Production System. As a result, the Arnage and Azure line was redesigned, freeing up 55 per cent of the floorspace. The management structure was remodelled and based on smaller teams and takt time was brought down from 21 minutes to 17 over an 18-month period. With an additional minute saved in late 2006, Crewe achieved the required 10,000-vehicle capacity within the five-year deadline.

Training of the UK workforce has been ongoing. BMW invested over £22m ($44m) on building a skills infrastructure in the West Midlands to support its Hams Hall engine plant. The money went on hard product, computers and facilities for local colleges, as well as developing training skills and a curriculum that would deliver NVQ Level 3 qualifications in 60 per cent of the time taken by other established advanced modern apprenticeships.

Tier One supplier Visteon, located in Essex, amended its highly-regarded internal training scheme in association with the National Skills Academy to achieve NVQ accreditation. That said, the UK wasn’t an unskilled country to begin with. The pulse of the country’s auto industry R&D sector was set by the world’s leading motorsport research, design and manufacturing cluster, but a sustained underinvestment in apprenticeships, training and development of around 20 years had significantly reduced the flow of new blood into the industry. The collapse of MG Rover and the closure of Ford’s Dagenham plant freed up thousands of skilled people to work where they were needed. But the upheaval in the supply chain, with components increasingly sourced from low-cost countries and emerging economies, could have threatened the country’s critical mass.

“There are some strong suppliers and some are withering on the vine,” according to Garel Rhys. “There is a danger that the prosperity of the OEMs could be at the expense of suppliers, in Britain and Europe. The OEMs will look for the most efficient suppliers wherever they can find them; they could be the same firms but located elsewhere.” The UK is, in fact, weak in domestically-owned Tier One and Two suppliers – only GKN could be counted in the global premier league. Unipart is successful within Britain, but not on a global scale – in production, anyway; remarkably, its UEES (Unipart Eberspacher Exhaust Systems) joint venture company recovered from its 75 per cent dependence on MG Rover to achieve more revenues from its global third-party training contracts than in manufacturing exhaust systems, filler pipes and engine components.

CovPress, formerly French company Sofedit’s Coventry facility, worked closely with Toyota to develop lean and effective manufacturing, and is as efficient as any component manufacturer in its field – steel pressings for structural, underbody and powertrain applications. But that isn’t always, of itself, good enough. “It’s becoming essential to have overseas locations. When I speak to customers about upcoming projects, some simply aren’t interested, no matter what facilities we have here, if we don’t have facilities overseas,” Mick Taimiot, quality director, said recently. “Conversely, a low-cost link overseas actually helps our business in Coventry.”

As Garel Rhys says, “Europe as a whole has more than its fair share of global top 100 suppliers in size and efficiency. Japan has been found wanting in the last decade; Renault’s Carlos Ghosn blew the whistle on this. The European supply chain still has critical mass and GKN shows that you don’t have to go into electronics to survive – it is, ironically, still essentially a metal-basher. They’ve shown it can be done very efficiently.”

As France, the UK and Spain show car production is not doomed in high-wage economies. As Rhys points out, achieve efficiencies in production planning, scheduling and application of R&D and the end result is a region of industry ready to compete on a global playing field.

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