GM Closure Underscores Forecast for Lower UK Light Vehicle Production

13 December 2000

Latest GM Closure Underscores CSM Worldwide Forecast for Lower UK Light Vehicle Production

    LONDON & DETROIT--Dec. 13, 2000--The decision by General Motors to close the UK Luton plant is another blow for the country's vehicle manufacturing sector.
    Already this year, Ford announced the closure of Dagenham, BMW disposed of Rover, and Honda abandoned plans to introduce a new B-segment vehicle. Although sudden, the GM announcement appeared inevitable.
    In 1999, the UK produced 1.94 million light vehicles, nearly 12% of the total for Western Europe. The UK produced more vehicles than Italy, yet trailed Germany, France and Spain. The Luton closure will reduce available UK capacity by an estimated 275,000 units and underscores the production issues facing other UK-based manufacturers.

    Looking Ahead

    A new alignment of UK vehicle production is underway where the most promising long-term scenarios surround low-volume prestige marques like the Ford Jaguar and Land Rover. Without a major indigenous manufacturer, UK vehicle production relies on a sense of "Britishness" associated with products that rely on high margins offsetting higher unit costs. "Vehicle production in the UK is quickly centering on niches -- shifting away from the mass market," says Mark Fulthorpe, European Forecast Manager, CSM Worldwide.
    OEM globalization strategies cause every production site to be scrutinized for cost effectiveness. Manufacturing costs in the UK are undermining viable low-margin, high-volume programs. Honda, Nissan and Toyota facilities established in the UK during the late 80s and early 90s have shifted or will shift future incremental output to continental Europe.
    Additional UK production rationalizations remain in play. PSA is evaluating its Ryton plant near Birmingham for future potential. In addition, the new BMW Mini is already under cost pressures and its replacement could shift to the mainland. MG Rover, the last major UK-owned OEM, is forecast to restructure and pare its future vehicle line up as it struggles to survive, according to Fulthorpe.
    The impact of this ongoing shift changes the UK production landscape. According to a recent forecast by CSM Worldwide, UK light vehicle production is forecast to slip by 23% to 1.5 million units by 2005 or 9% of total Western European output.