Introduction
Mr. President, ladies and gentlemen, I am privileged to respond tonight on behalf of the guests. This is the second time this year that I have had the honour to speak to a distinguished business audience here in the West Midlands. It is a region renowned as the home of car manufacturing and so many of the vital engineering industries on which it depends. (Notes: all W. econ. depend on car ind.)
Few industries inspire such loyalties or arouse such passions as yours, Mr. President. Nor, if I may say so, quite so many newspaper headlines. [end p1] And many other industries and financial institutions depend on your success. As First Lord of the Treasury, I speak for one of the latter. As a trustee shareholder for the public interest, I hope one day for a profit.
I remember well the fierce debate about moving the Motor Show from its traditional home in London to Birmingham. I was always one of those who felt the move was right. Not only to take advantage of the excellent facilities of the National Exhibition Centre. But also because Birmingham seemed to be its proper home. Your decision, Mr. President, was fully justified by the record crowds two years ago. I have no doubt you will set a new record in 1980. [end p2]
The Motor Industry's Problems
I know that the motor industry—cars, commercial vehicles and components—has had to face up to some harsh economic realities this year. Some painful adjustment has been necessary. (Note: Not quite all my fault.)
Of course, some of the problems have been caused by the world recession. These are being felt, not just here in the West Midlands, but across the world.
The motor industry is suffering not only in Europe, but in the United States—where almost a third of those who work in it have been laid off indefinitely. From Detroit to Turin, the industry is experiencing serious difficulties. [end p3]
So there is a world-wide problem. [(Note: largely caused by oil, etc.)]
But you will agree, Mr. President, that our industry is suffering as well from longer term problems
Ten years ago, in 1969, we produced 700,000 more cars than were sold here.
Production was 1.7 million cars, whereas new registrations were 1 million.
Last year the position was almost entirely reversed.
New registrations were 1.7 million but production was only 1.1 million.
That is the extent of our decline.
It occurred steadily regardless of wide fluctuation in the exchange rate—which went from $2.40 to $2.60; it then fell all the way to $1.56; and now it is back to $2.40. (Note: decline didn't depend on exchange rate.) [end p4]
This year, we have the lowest car production for twenty years. Not because home sales are the lowest—far from it. But because people are buying foreign cars rather than our own. And some of those come from high wage, high exchange rate economies. If they can sell and design cars, why can't we?
The world recession may have exacerbated our problems, but it is not the root cause in the motor industry.
What has happened to the motor industry since the 1950s exemplifies what has been going wrong in too many other parts of British industry: —higher pay not matched by higher productivity; —low profits, so low investment; —too little going into R & D and new design.
In short, investment, innovation and development have been stultified. So we have slipped behind our competitors overseas. [end p5]
And why haven't we had the productivity? —overmanning; —resistance to change; —too many strikes and stoppages. [end p6]
In the study done by the Government's think-tank in 1975, it was found that plant managers had to spend half their time on labour disputes, compared with 5–10 per cent in Belgium and West Germany.
That study cited examples of over-manning. One of them, I am told, still holds true in parts of the industry today. On the Continent, if a multi-weld machine (used to weld body panels together) breaks down, it needs only two men to repair it—one mechanical and the other electrical. In Britain, it needs six: an electrician, a jig fitter, a pipe fitter, a mechanical fitter, a toolman and a repairman. [(Note: It must he over to you.)] All this because some of our unions used to think that restrictive practices save jobs. [end p7]
Our experience of the last four years has taught us that it is the efficient countries that get the business, and the inefficient which lose it. What over-manning has done is to export jobs overseas, and to leave us with unemployment and in decline.
Sometimes, too, access to particular jobs has been artificially restricted, so that even now we hear of skill shortages. [end p8]
Take the recent example of British Leyland, who tried to build the Titan bus at Lowestoft. Because of a shortage of skilled coach body builders in the area, they planned to train 300 unskilled workers to the necessary standard. But the 500 craftsmen already there objected. So the Titan bus will not be built at Lowestoft, although they need the work desperately. In that particular case the work did stay in Britain. In others it has gone abroad.
Of course the problems cannot all be laid at the door of the unions. Design, marketing, development, and corporate planning, which can make the difference between success and failure, are the clear responsibility of management. So, too, is consultation and explanation.
One of the most encouraging signs at present is the revival of the vigour and vitality of management, and the way they are tackling the challenges which face them. Management matters again. [end p9]
You will say, Mr. President, that Governments too must take their share of the blame. I agree. Too much of the country's resources has gone into public spending at the expense of private sector industry. Governments have weakened your incentive to innovate and take risks—by imposing too many controls, by shielding failure and by failing to reward success. Some of this we have already reversed. But there is more to be done. [end p10]
THE INDUSTRY'S PROSPECTS
But, Mr. President, your distinguished predecessor said recently to the Trade and Industry Select Committee that poor industrial relations were probably the number one factor in the motor industry's decline over the years. It was a sad but honest admission. I hope the long tale of lost opportunities is now past. I detect signs of change: —a growing sense of realism on pay; [(Note: What a pity it didn't come before.)] —a new recognition that the customer can't be commanded but only tempted to buy, and the choice is wide; —a greater understanding that unless we use new technologies, and new equipment to the full, we will not survive; [end p11] —above all, a dramatic improvement in industrial relations. (Note: And I do welcome it.)
So far this year there have been far fewer strikes including those apparently trivial stoppages which can be so acutely damaging to output. During 1979 over 3 million days were lost through industrial disputes in the motor industry. In the first eight months of this year, only 346,000 days were lost: still too many, but a great improvement. This must reflect better leadership from management, better communication with the shop floor.
The workers at your own company, Mr. President, are amongst those that have shown that way. There is a realisation that if we do not earn our own living, no-one will do it for us. Attitudes are not easy to change, but in the motor industry they are changing more quickly than many of us expected. (Note: Most important and difficult to change attitude, changing more quickly.) [end p12]
The industry is driving into the 1980s with a new determination—and with new products, the equal of anything the rest of the world can offer: — the Austin Metro, star of the Show and fruit of one of the biggest investment programmes ever by a British company; — the new Leyland Roadtrain and Landtrain trucks; — the new Ford Escort, a “world car” maybe, but one with a major share from Britain; [(Note: drove one for years. Prefect 25 years. Escort.)] — the splendid new Rolls Royce.
I shall be looking out for all those in the Exhibition Hall tomorrow.
There is no need to tell you, Mr. President, that the list is not just confined to the vehicles themselves. [end p13]
There are plenty of important and exciting developments in components too. Micro-electronics, for example, are only just finding their way under the bonnet of a car. The potential is enormous.
Your own company, Mr. President, is in a commanding position in many of these areas, and I congratulate you on selling the entire output of your fuel injector factory at Ipswich to General Motors. [(Note: Success for you and UK.)] I am delighted to see you are now expanding this capacity. It is companies like yours that have kept up our exports and contributed so much to yesterday's excellent trade figures. [end p14]
If the product is right, it will sell, but it takes plenty of hard work to make sure it is right. £1,700 million worth of overseas sales show just how much the components industry has got right.
May we also applaud the work going on to develop the next generation of cars, trucks and buses—to make them quieter, cleaner, safer and more economical than ever before. The motor vehicle of the future will be a high technology machine, and we would like Britain to return to the forefront. [end p15]
GOVERNMENT POLICY
Now Mr. President, you had certain things to say about the Government. I agree that it is our job to create a climate in which you can succeed.
Our priorities have been to: —get down the rate of inflation; —reduce the burden of the public sector; —improve the rewards for success and hard work; —return the responsibility for business decisions—how much to charge, how much to pay, where to invest—to managers; —help to redress the balance of bargaining power in industry. [end p16]
I believe we have made progress in all these areas; the Employment Act; the ending of price controls, wage controls, dividend controls and exchange controls; major reductions in personal income tax; an enterprise package worth £150 million in the last budget of particular help to smaller companies; public spending—yes, too high—drastically cut from the plans we took over; and inflation now coming down.
Mr. President, you mentioned “North Sea gold” . Of course we must not squander the revenue from North Sea oil. It is expected to yield £4 billion this year—a sum that is almost exactly equal to the amount we are spending to finance the nationalised industries (£3 billion) and to provide other forms of industrial support (over £1 billion, some for car industry). (Note: Making cuts to release resources for pte. sect.) [end p17]
In two areas at least, I know that there is widespread disappointment in industry.
I know you feel that the burden of getting inflation down and returning to sound money has fallen too heavily on the private sector. And you are concerned that interest rates and the exchange rate have remained so high.
There is also disappointment about the cost of the public sector—notwithstanding the cuts we have made.
I am the first to understand and share your concern.
The fact is that interest rates are high because between us Government and industry together are trying to borrow so much. To print more money to meet the demand for credit would pile inflation on top of inflation and create even worse problems in the future. [end p18]
We for our part will try to reduce the amount that Government borrows. If between us we can borrow less, interest rates will fall.
If, over the past year, we had not paid ourselves so much—22 per cent more for producing 4 per cent less—we should not be having to borrow so much now. High pay settlements have left companies short of cash, and have given employees an average increase in real earnings of 8 per cent over the past two years. [(Note: drained of cash.)] They will be the first to understand that revival of their firms must now take top priority. They know that higher pay must now be earned by higher output. [(Note: pay = prod. It will not do.)] Unit labour costs in Britain must be comparable to those of our competitors if we are to provide good jobs for the future. [end p19]
This will not come about just through exhortation or speeches. I believe it will happen because of a wider understanding of the consequences for jobs of unrealistic pay bargaining.
It's no coincidence that, despite the constant demand over the last twenty years for ever more unrealistic wages, the workers in this country are among the worst paid in the developed world. The path to prosperity lies through higher productivity, not merely higher pay. [end p20]
IMPORT CONTROLS
I come back to some of the points you mentioned, Mr. President. I do recognise the industry's particular concern about car imports from Japan. I was greatly encouraged to hear of the successful conclusion of the talks, led by yourself, Mr. President, with your opposite numbers in in Japan last month. I am sure effective voluntary restraint, provided it is effective, is the best way of dealing with problems of this kind. You can be assured of the Government's continued strong support in making it effective.
I believe we can compete fairly. After all, we still export two out of every five vehicles we produce. Unfair competition is a different matter. We will act promptly and firmly against goods which can be shown to have been unfairly traded or dumped.
I believe in free trade, but it must also be fair trade both ways. [end p21]
TYPE APPROVAL
I want to mention a related point. It is often said that importers of commercial vehicles have an unfair advantage because Britain has no system of Type Approval for these vehicles—standards which must be complied with before the vehicle goes on the road. The industry has a good case. The Government is therefore looking urgently at the possibility of introducing such a scheme. We will be starting discussions with you over the next few weeks. [end p22]
MOTOR TAXATION
As regards motor taxation, alas I cannot hold out any hope of a reduction. I do believe it is much more important to get Government borrowing down—so that we can reduce interest rates as soon as possible. (Note: Tax less = borrow more.)
CONCLUSION
Mr. President, the motor industry is a barometer by which the rest of our industrial life is measured.
I believe the industry is tackling the new decade intent on success, and determined to regain the pride of place it once enjoyed in world markets.
We have learnt the hard way that the world owes no-one a living. But it will yield us a good living if we are prepared to go out and earn it. I wish you every success.