SMMT Open Forum September 2011

Richard Parry-Jones Co-Chair -- Automotive Council UK

Purpose

1. Update delegates on the work of the Automotive Council UK

2. Summarise recent very positive developments in the UK industry

3. Discuss the opportunities behind the headlines and the approach being used to exploit them

Reality

• Updated facts: 1. “We are growing and we are the one of the largest in Europe. 2. “The Government understands we are crucial to a better

balanced UK economy and is committed to our success” 3. “Our products flaunt cutting-edge technologies” 4. “Our factories are globally competitive high-tech showpieces” 5. “Our products win global reliability and quality awards” 6. “We have among the best labour relations anywhere, and the

greatest flexibility” 7. “Our exhausts are 99.5% cleaner we are slashing CO2 emissions”

• Therefore we know:

1. It’s a great place to invest 2. It’s a fantastic career choice

Challenges

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Cars CV's

•Severe and sustained ‘Hollowing out’ trend over 10 years

•Reduction of R&D intensity among Supply base

•Scale challenges – assembly 1.8 M -- less than half major competitors

•Weakened supply base

Opportunities

• Strong powertrain sector with competitive scale -- >3 m engines annually Bridgend Dagenham Hams Hall Deeside Swindon Wolverhampton (soon) •Strong Premium and Niche sectors

Jaguar Land Rover Bentley Rolls Royce Aston Martin Lotus

Opportunities

• Low Carbon revolution – technology and manufacturing centre • Supply lines stretched – OEM desire for more locally sourced parts

Invest in the UK

• Automotive is the UK’s biggest manufactured export sector, bringing £21 billion into the UK economy.

• Eleven of the world’s volume vehicle manufacturers have a base in the UK, supported by 19 of the world’s top 20 suppliers

• Home to some of the best Universities in the

world, with a workforce of 30 million that is highly trained, flexible and enjoys excellent industrial relations

Leading the Low Carbon Revolution

• UK manufactured vehicle emissions have

dropped 21% since the end of the last decade

• The UK as a leader in the development and exploitation of low carbon vehicle technologies

• The UK as a world leader in the development, demonstration, manufacture and use of ultra-low carbon technology

Investing in UK base for

Low Carbon Technologies

Nissan – sourced Nissan Leaf in UK --invests £179m and recent massive expansion of Sunderland plant with a further £192m

Toyota announces Auris Hybrid production in UK

Investing deeper in UK base

• Nissan announces £420 m expansion of Sunderland Plant and development of new Qashkai in UK

• JLR announce £490m to develop CX-75 low carbon supercar STOP PRESS – JLR Announce £355 m engine plant in Midlands

Investors deepen their UK base:

• Ford – announced £1.5 Bn investment in

UK, two thirds of workforce in R&D

• Jaguar Land Rover expansion and R&D recruitment

Investors deepen their UK base:

• BMW Mini – announced £500m investment in new Mini production

• GM announce re-investment in Luton to produce next generation Medium Commercial vehicles in 2013

Investing in UK base

• Optare announces first new bus assembly plant in 40m years

• Tata Motors announce expansion of

TMETC in Warwick by 40%

Investing in UK base

• MG resumes production in the UK at Longbridge • Aston Martin announces repatriation of

Rapide production to the UK

Investing in UK base

• McLaren cars – Invests £800 m in R&D and production -- developing all-new range of luxury sports cars based on F1 technology

• Lotus Cars – invests £500m in UK expansion of model range and hybrid technology

Making the most of new investment

• Outstanding progress on OEM investment

• Need to mirror this in deepening of Tier 1 Supply base – also opens up more opportunities for UK SMEs to participate at Tier 2/3 levels

• Need to increase R&D content, especially at Tier 1 level

Strategic Approach

Positive and supportive business environment

• Consistent, aligned positive messages • Education and skills for STEM

• Stable, sustainable macro- economic management • Tax reforms to encourage

business in the UK

Automotive Council agenda

• Promote completed industry consensed Technology Roadmap and within

that, secure R&D investment in the highest priority technologies

• Develop Commodity Roadmap based on prioritised sourcing opportunities for the UK to leverage collaborative scale. Strengthen and support candidate suppliers as required

• Develop communications plan to promote positive image for industry among stakeholder groups

Technology Activities

• Focus technologies

High technology ICE engines

Energy Storage and Management

Lightweight structures

Low cost power electronics

Intelligent Transportation systems

Technology Issues

• R&D investments by OEMs with existing R&D centres positive

• TSB Innovation Platforms highly successful in getting collaboration between OEMs and UK innovative SEMs

• Slow progress on R&D with other OEMs and all Tier 1 suppliers

• Strengths of Universities and SMEs recognised but large inertial barriers still to be overcome

• Additional measures being investigated by Industry

• UKTI and Ministerial sector advocacy well received and recently reinforced in Frankfurt

Commodity Sourcing Roadmap

ISSUE:

• OEMs want to source more to the UK and would like a stronger UK supply base

• They can’t place much of the potential business presently primarily because of supply base capability or cost competitiveness issues

• The lower value of the Pound presents us with a window of opportunity we must exploit

• New technologies provide opportunities but only in the medium to long term– much can be done with the present commodities in the near term

Commodity Sourcing Roadmap – Short Term priorities

Significant short term opportunities have been identified where OEMs have a current need that could potentially be met from a UK-based supplier: • ‘Powertrain & body’ components, where virtually all needs can be met,

with the exception of ‘heavy metals’ processing capabilities (casting, forging,) that were identified as supply chain constraint by all parties

• ‘Interior and exterior’ components, where virtually all OEM needs can be

matched with supplier growth intentions.

• ‘Electrics & electronics’ components, where some needs can be matched. Critical parts missing are batteries, and electronics in general

Recent achievements • Significant new investments by key players in the UK build positive

momentum • TSB Project support strongly aligned around focus technologies –

more projects funded • Supply chain Report published and sourcing priorities defined • Meet the Buyer events launched – most recently at Rockingham • MIA Auto-Motorsport transfer activity initiated – first event

‘Exhibition of High Performance Engineering Capability’ • See Inside Manufacturing initiative piloted by the Automotive

industry • London ACEA Board dinner and Prime Ministerial dialogue • Frankfurt visit with OEMs and Tier Ones

Thank you

http://www.automotivecouncil.co.uk/