Luxury Exports Lift UK Auto Industry

• August 14th, 2013
• superadmin

Booming demand for Jaguars, Bentleys and Rolls-Royce luxury sedans is fueling a recovery in the British auto industry.

Global demand for pricey cars and sport utilities made in the U.K. has rebounded strongly under their now mostly non-British parents, which revitalized the brands through multibillion-dollar investments in new models and U.K. production.

Bentley Motor Cars, now owned by Germany’s Volkswagen AG, VOW3.XE +0.13%says it is investing more than 800 million ($1.2 billion) to build a new luxury sport-utility vehicle at Crewe in northwest England, creating 1,000 new jobs.

Jaguar Land Rover is getting between 2 billion and 3 billion a year to expand its two brands and their geographic reach under owner Tata Motors Ltd., 500570.BY +7.49% which acquired the business in 2008 from Ford Motor Co. F -0.94% The company has created nearly 9,000 jobs in the U.K. in the last two years.

The turnaround undercuts years of predictions that auto making was on the way out in the U.K. But new ownership has revitalized the business just as foreign investment in the U.S. auto industry did in recent decades, offsetting jobs losses at Detroit’s Big Three.

Exports are driving revenue growth among the U.K.’s premium auto makers, generating auto-industry jobs. Jaguar Land Rover, BMW BMW.XE +0.32% and Bentley all export upward of 80% of their production.

Britain’s auto industry employs about 140,000 workers directly involved in manufacturing, according to the Society of Motor Manufacturers and Traders. New investment pledged by global vehicle manufacturers during the last two years has created more than 19,000 new jobs among the manufacturers and their suppliers, the group says.

It hasn’t always been easy. Bentley had to fight to get the new SUV built at Crewe rather than manufacturing facilities Volkswagen has around the world. VW’s Bratislava, Slovakia, unit, where it already makes premium SUVs such as the Audi Q7 and Porsche Cayenne was a strong contender. VW could save money consolidating production of vehicles that share the same architecture.

“We did two things, we talked with the trade unions asking them how we could win the SUV for Crewe, and we focused on increasing our competitiveness by increasing productivity,” says Michael Straughan, Bentley’s director for manufacturing. Bentley is targeting a production rate of 15,000 or more cars a year, compared with 8,510 cars in 2012.

To compete with Bratislava, where labor is cheaper and working hours longer, workers at Crewe agreed to accept more-flexible pay and working conditions.

“A third model line at Crewe is important because it means 14 years work,” says Steve Taylor, a union official at Bentley. “The trade-off was massive but the win is fantastic and gives us stability.” Foreign investment is expanding U.K. auto output. Above, a Range Rover on the assembly line in Solihull, U.K.

Rival luxury-car manufacturer Rolls-Royce Motor Cars, owned by Germany’s BMW AG, also is ramping up investment in its U.K. production facilities in response to a three-year run of record sales, helped by the recent addition of the Wraith model to its Ghost and Phantom brands.

Rolls-Royce said last month it will create more than 100 jobs at its base in Goodwood in the south of England. The positions range from engineering, manufacturing to marketing and sales.

BMW’s Mini production plants in Oxford, Swindon and Hams Hall are getting the same treatment. The company is investing 750 million, which will be used to build out facilities and prepare the plants for new models and higher production volume.

The U.K. exported a total of about 1.2 million in 2012, of which 482,702, or 41%, were premium-price vehicles, according to consultants LMC Automotive. LMC forecasts that such vehicles will account for 44.5%, or 524,602, of the overall U.K. auto export market in 2015.

The export-driven investments in the British car makers are contributing to new work for many smaller U.K. auto-parts makers.

Announcing its investment in Crewe last month, Bentley said the new jobs created would be split between positions at Crewe and others within the company’s supply chain across the country.

“We would love to take all our employees from Crewe and within Cheshire and to support an exclusively local supply base,” Mr. Straughan says. “But the demographics of the U.K. mean that we can’t get all the necessary skills and suppliers from the immediate local area.”

Foreign investment is expanding U.K. auto output. Above, a Range Rover on the assembly line in Solihull, U.K. .Jaguar Land Rover said it spends around 60% of its budget with U.K. suppliers, of which 50% are in the West Midlands surrounding the company’s home factories. The company’s renaissance has reignited industry in the area.

“It is hard to believe that only a few years ago there were fears that Jaguar Land Rover would have to close Solihull and [nearby] Castle Bromwich [where the Jaguar F-Type model is made],” says Lorely Burt, the member of parliament for Solihull in the U.K.’s West Midlands where Jaguar Land Rover makes its Range Rover models. “But they have gone from strength to strength.”

Source: The Wall Street Journal