August 2009 Archives
After years of watching rival car firms close factories and lay off workers, Toyota - the world's largest producer - finally joined the club this week.
Its announcement that it will close a plant in Japan for a year, and completely shut down its factory in California sent a strong signal that its growth days are over - for a while at least - and that it doesn't expect the market to recover until 2011.
With car sales in Japan at a 30 year low, Toyota will stop production at its plant in Aichi, reducing its output by around 220,000 units.
Toyota has a global capacity of around 10 million vehicles a year, but this year a third of that will lie idle, and is likely to produce only around 6.7 million cars this year. The firm recently announced its first loss in it 72 year history, and forecasts an even bigger loss next year.
Another bad month in yet another very miserable year for Japan as the unemployment rate hits a record high and deflation worsens again.
This near 20-year period of varying degrees of misery shows no sign of ending yet despite the most recent huge government stimulus aimed at encouraging consumers to spend.
Clearly with household expenditure continuing to fall consumers are not spending. And given that the unemployment situation continues getting worse plus that those in work are seeing wages being cut it is no surprise that they are in no position to spend.
If it wasn't still getting worse the current position of Japan gives all the appearance of long term stagnation and it is something that we in the West would do well to take note.
Back in the dying days of the Blair government, the informal EU summit at Hampton Court Ok-ed a Ã¢ÂÂ¬500 million pot of money - called the 'European Globalisation adjustment Fund' (EGF) - to help workers made redundant as a result of "major structural changes in world trade patterns" (i.e. globalisation). At the time, then Commission President Barroso said "We want to show that the EU cares".
The EGF aims to support people, not firms, through interventions in the labour market such as counseling, job search and mobility allowances, retraining such as in new ICT skills, and entrepreneurial support (such as micro-credits).
From 2007 to early 2009, the EGF spent Ã¢ÂÂ¬68 million helping over 15,000 workers find new jobs. Initially it could be used in situations where 1,000 workers were laid off but this was relaxed to 500 workers earlier this summer.
Indeed, a range of countries have applied for and used the funding, and the success rate in getting workers back into work has been described as 'astonishing' (OK that was a comment by the European Commission, but with around 69% of workers back into work, it's difficult to disagree much).
Whilst the Tories are lining up a cunning plan to kill off most Regional Development Agencies (RDAs) if elected (frontbencher Mark Prisk said as much on a recent Radio 4 Beyond Westminster programme), the government has, of late, been sending out some rather mixed messages.
Business Secretary Lord Mandelson, for example, has taken flack in recent months for calling on RDAs to take the lead on the economic fight back whilst simultaneously cutting millions from their budgets.
So it was especially interesting and welcome that - in a pronounced change in government policy - Lord Mandelson has this month put his considerable political weight behind the RDAs in their battle with Whitehall over venture capital funding.
HMRC have adopted the policy for some time now of referring to tax payers as customers. I have never been quite sure why they have insisted upon this since most of us would choose not to be customers of HMRC, if we had any choice.
If we are customers then we must ask ourselves whether the customer care we receive is all it should be.
A client of my firm recently received a notice stating that their gross payment status was being withdrawn under the construction industry scheme. Anyone in the construction industry will know only too well the cash flow problems that can be caused by having gross payment status withdrawn.
The reason given for the withdrawal of gross payment status was 'that the 2008/09 P35 hadn't been received'.
Having submitted the said 'P35' by recorded delivery on 5 May, the client rang HMRC to find out what the problem was. They were informed that HMRC had indeed received the P35 in early May, but hadn't logged, or processed it, until 25 June, thus giving the impression that the P35 was late in being submitted.
At this point the client called their HMRC construction industry scheme contact to pass on the information, only to be told that they would still need to officially appeal against the withdrawal of their gross payment status.
In other words, having failed to log and process a customer's P35, another department of HMRC had then withdrawn their gross payment status because of the first HMRC department's failure! Then, to add insult to injury, the "customer" was told that they had to appeal against the notice withdrawing gross payment status, which should never have been issued in the first place!
With customer service like that, commercial businesses would not be expecting to keep their customers for very long!
Now we know then and the Turner colours are nailed firmly to the mast! Little wonder that Tory Shadow Chancellor George Osborne proposed just a few weeks ago to scrap the Financial Services Authority - along of course with the failed Tripartite Agreement and a plan that would completely overhaul the regulatory system placing none consumer protection and responsibility back to where it always belonged - in the hands of the Bank of England!
As uncertainty hangs over the future of GM Europe, it is reassuring that Lord Mandelson has grasped the seriousness of the situation facing the firm's UK operations at Vauxhall, and has indicated that the UK government is prepared to commit funding to help protect UK jobs.
With the GM board weighing up a sale to either Magna or RHJ or keeping GM Europe in-house after all, it is thought that the UK government is willing to offer up to ÃÂ£500 million to support Vauxhall operations.
Meanwhile the GM board has still not made a recommendation - rumours suggest that the board is split between new, post-Chapter 11 board members who are concerned over the sell-off, and the 'old guard' who want to off-load GM Europe and stabilise GM in its core US market.
It was expected that last Friday GM would announce a preference for Magna or RHJ and that recommendation would go to the board of the Opel Trust, which overseas GM Europe's operations.
But the board did not make a decision and instead said that they were now looking at all of the options. These could include a sale, GM retaining GM Europe, or even putting GM Europe into insolvency. The latter is unlikely.
With only limited MGTF production to date, and soft-top sales set to fall off as Autumn and Winter fast approaches, concern is growing that TF production will be halted later this year in order to stop a stockpile of unsold cars building up.
In a statement released yesterday in response to questions by Peter Plisner of the BBC, MG Motor UK Ltd said "no final decision has been made regarding a temporary shutdown of our production facility... if such a decision is taken we are likely to make a statement at that time confirming our intentions."
In other words, they're clearly considering a shut down, if they haven't already decided.
There has been only token TF production at Longbridge - it was started last year as a sign of commitment by the owner, Shanghai Auto, in the plant. The car is basically a 16-year old design with nearly all of the parts brought in from China, and is not sustainable beyond the very short term. If production is halted one wonders one wonders whether it will actually ever restart.
Whilst there has been some positive economic news of late and green shoots do finally seem to be appearing, unemployment is set to rise well into 2010.
With job losses growing faster in the UK than much of the rest of the EU, there have been numerous calls for greater efforts to keep workers in jobs through the downturn. Whilst the government should be praised for measures to help unemployed workers find training and/or employment (such as its ÃÂ£1 billion Future Jobs Fund), it has failed to act in terms of actually keeping workers in jobs.
This is in stark contrast to the situation Germany, where some Ã¢ÂÂ¬6 billion has been spent on a temporary wage replacement scheme that has helped keep people in jobs through the downturn and positions Germany so that skills and capacity are still in place when the upturn comes. Short-term wage subsidies are also being used in France, Italy and Spain.
Of course, we were told that Britain's 'flexible labour market' would position us well for a speedy recovery. Yet the reality is that France and Germany are already emerging from recession.
UK car production continues to fall, but the rate of decline slowed markedly last month as scrappage schemes in Europe and the UK helped to stabilise a battered industry.
UK car production fell by 18% to 107,635 vehicles in July compared with July last year, the Society of Motor Manufacturers and Traders (SMMT) announced today.
Normally this would be an awful figure, but is actually the smallest monthly decrease this year. So far this year, output has been almost 46% down - at 518,375 - compared to the same period last year.
In the UK the cash-for-bangers scheme has helped to stabilise sales (July sales were even up by 2.5% on a year ago, although that is against a dismal figure a year ago). Moreover, scrappage schemes on the continent - which in several cases are more generous than the UK scheme - have stimulated UK exports and have helped slow the decline in production here.