How Overseas Investors Saved UK Car Makers

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Byline: INDUSTRY ANALYSIS By Bob Bischof

BRITAIN'S car industry is booming. After decades of decline, the UK for the first time since the mid-1970s is making more cars for export than are being imported. Investment is rolling in and production is up and rising substantially.

Just this week Jaguar Land Rover announced its Halewood factory would move to 24-hour round-the-clock production for the first time with the introduction of an extra shift.

The car maker has created another 1,000 jobs at its Merseyside plant to meet demand for its 'baby' Range Rover Evoque - launched by Spice Girl Victoria Beckham who also created a special edition version and Land Rover Freelander offroader models.

Most of the UK car industry is now in foreign hands, and thriving. So how come, whilst it was in British ownership, the reverse was the case? Some people blame the unions for their part in its downfall, but recently employees have shown themselves prepared to work hard and agree to flexible deals to preserve jobs, so it seems unlikely there is anything inherently wrong with the British workforce.

Others blame management for the failures.

However, an analysis of the management structures of the German, Japanese and Indian car owners show that many of the managers in their UK operations are not only British but are doing a first class job.

So if Britain has top flight workers and managers, why did it all go so wrong in the past? The answer has to lie with the different corporate governance models that are used.

All the above mentioned car manufacturers are from countries where companies and their managements are not beholden to the Anglo-Saxon short term shareholder value model.

This ethos inflicts a pressurecooker obsession with quarterly results on managers.

If boards are incentivised through share prices, they would rather pay higher dividends or try to please the markets with share buy-backs, takeovers or break-ups than invest in skills, modern equipment, new products, or research and development. …