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UK Car Industry: How Significant Is Jaguar's Jobs Boost After Years Of Spluttering Decline?

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Two unusual terms were trending on Twitter on Thursday - "#ukgrowth" and "Jaguar Land Rover" - and the surprising thing is that their appearance was related.

Sparked by the announcement that Jaguar Land Rover (JLR), the UK's largest automotive employer, would be adding 1,000 jobs at its Solihull plant, the sheer volume of tweets demonstrated the general relief - even gratitude - that people felt about the news.

So, if you kick the tyres, does this announcement illustrate a turnaround for the UK auto industry?

At JLR, at least, the new jobs seem to be grounded in some solid success. Manufacturing volumes are up by more than a third over last year, JLR says, and the new jobs will "well paid" positions for highly skilled workers.

Bodies representing UK manufacturing have also claimed it represents long-term strength.

Terry Scuoler, chief executive of the UK manufacturers' body, the EEF, said: "This is very positive news in every respect. It highlights the fact that manufacturing is at the forefront of providing exactly the kind of high-value, high-skill jobs that we are going to need in high technology companies and a rebalanced modern economy of the future."

And from one perspective JLR's announcement is just the latest in a slow but steady trickle of good news coming out of an industry that already supports around 700,000 people in the UK.

In February McLaren Automotive began production of its high-performance sports car at its technology centre in Woking, and March saw Opel/Vauxhall confirm that a plant in Luton would produce its Vivaro light commercial vehicle from 2012.

Aston Martin, MG and JLR all made announcements of investment in April, and two major announcements by Nissan and BWM in June gave the industry another jump-start: Nissan said it would invest £192m in design, engineering and production, safeguard 6,000 jobs and commit to build its electric vehicle in Sunderland, while the German manufacturer invested £500m in Oxfordshire and safeguarded 5,000 jobs.

In all nine new vehicle models and three 'next generation' cars will be built in the UK over the short and medium term, and according to the European Automobile Manufacturer's Association those announcements has safeguarded more than 12,000 jobs, created 8,400 more and invested £3.9bn in the UK industry and its supply chain.

Sales are also relatively steady - if soft compared to pre-2008 levels. The Society of Motor Manufacturers and Traders (SMTT) said that 134,944 vehicles were registered in October 2011 - the second increase in three months, up 2.6% month-over-month.

Anecdotally these trends can be explained by some of the UK's long-term strengths, which include strong infrastructure, a deep well of skilled workers and a relatively solid economic foundation compared to some European competitors.
 
Government has also had a role to play. handing grants through the Business Regional Growth Fund to Lotus, Bentley and others to boost jobs, training and research.

“Everyone recognises that any sustainable recovery needs to be built around improving our manufacturing base," said Chris White MP, the chair of Policy Connect's Associate Parliamentary Manufacturing Group.

But before we celebrate, analysts warn that the long-term future of UK car manufacturing is still clouded in uncertainty.

The anaemic growth of the UK economy, which saw new car registrations drop dramatically in 2008, has not recovered. SMTT says registrations are down by more than 4% so far in 2011.

Manufacturers like the Indian company Tata, which owns JLR, have said they plan to close factories in the UK and move production to Asia or Eastern Europe by 2014.

The long-term wounds caused by years of job losses in UK car manufacturing in the Midlands and elsewhere will take more than JLR's new 1,000 jobs to salve. As JLR admitted in its announcement, they "expect to receive many thousands of applications" for these new jobs. Many will be disappointed.

There have been new losses too. More than 130 jobs were cut in Staffordshire when Kongsberg Automotive moved its production to Poland in July.

Worse still, Europe's car industry is massively over-capacity, points out Ali Al-Saffar, Automotive Industry Analyst at the Economist Intelligence Unit. It has 297 factories in 28 countries, but runs at just 65% of capacity.

"This announcement is significant given the fact that it goes against the grain," said Al-Saffar. "When you consider the fact that most of the manufacturing jobs are going to eastern europe and Asia that significance is multiplied."

Others worry that while the UK builds significant numbers of cars many of the parts used to build them come from overseas.

"“We are having to import too many components," said the European president of General Motors, who own Vauxhall. "That goes all the way back to the 80s and 90s when the UK lost a lot of its components industry."

There is also an argument that much of the UK's current growth in auto manufacturing is unequally distributed between certain manufacturers. JLR is doing better under Tata than it has done in the past, but General Motors continues to experience long-term woes.

“We’re not going to rule anything out, we have to look at the whole picture,” said Dan Ammann, the Detroit carmaker’s chief financial officer, earlier this month after GM said it would not break even in Europe this year.

As a result it is difficult to see this announcement as evidence of any long-term positive trend, Al-Saffar says.

"The fundamentals are still quite weak and they still suggest a shift towards the East," he said. "Car registration growth here is driven by the need to replace a car, not the need to buy a first car. So the growth rates are always going to be much, much smaller and have been negative recently."

Al-Saffar says that the UK should be cautiously optimistic - but that it must find new production niches - perhaps electric vehicles - to ensure it can work with the production powerhouses in Asia once they come online after 2014.

"We would not be starting from scratch," he said. "It would be starting from quite a good vantage point. One of the less positive aspects when it comes down to it is just the amount of money that would need to be invested - and whether that can be made available right now."

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