The Americans, Japanese
and British have always been aghast at, and very envious about,
lengthy European vacation times. France's entire August Summer
“shut-down” long centre of its engrained attitude, yet previously
seen as endemic to Europe's post-WW2 economic lag behind the overt
'Thrusting 3' nations.
Re-Balancing to the
'New Norm' -
Today, as the west
endures the slow-growth 'new normal', deflation and limited personal
income growth because of the ongoing reality of squeezed and
cash-cautious firms, the very idea of a period of summer shut-down'
within the once 'Thrusting 3' and so right across the Triad regions
might itself pose not a problem, but a solution to present
socio-economic woes.
Such a possibility
part-answer to the re-balancing of both intrinsically aggrieved
social troubles, created from financial stress and distress, and as
importantly, a route to reduce cost pressures on corporate overhead
expenditure.
But unlike cosseting
European regulation – France itself now going through much resisted
labour reforms - the concept is that of part-paid or even unpaid
time-off during the 'shut-down'. The aim to better equate to the cold
reality of a firm's true level of demand vs its costs of supply; and
so better able to manage the marginal costs of its productivity –
whether in goods production or services provision.
The always efficient
German's and the automotive sector have set the example here in the
UK some time ago, notably when BMW bought the Mini brand and invested
heavily in the Oxford plant. The business case to do so was founded
upon the need for far greater staff hours flexibility that would
match the varying customer demand for its cars over the course of the
year. Staff hours annually 'banked' so as to modulate labour
availability relative to more efficient production rates.
'Brexit': a Basis for
Re-Orientation -
That European-wide
social anger has obviously been most recently illustrated by
Britain's 'Referendum on Europe'...'Brexit'. Of those that voted the
British population decided to extricate itself from the apparent
shackles of EU regulations and their seemingly negative consequences.
[NB Although it was
obvious that the 'leave' voters themselves were themselves primed for
many years beforehand by the deluge of anti-immigration stories, so
creating 'red-top' fuelled reactionary popularism.
It is also
paradoxically noted that whilst Brits themselves drive some cars made
in the UK (BMW Mini, Nissan Qashqai, Honda Civic) the majority of new
cars bought are imported from Europe; whilst the “nation's
favourite” comedian Peter Kay is depicted driving a FIAT 500L].
Now 100 years on from
the trench warfare of the Somme, Britain could be said to stand in a
'no man's land' of its own doing, leading European politicians
highlighting the apparent lack of a credible future-forward plan
ex-EU.
This now being partly ideologically addressed via new party leadership manifestos.
This now being partly ideologically addressed via new party leadership manifestos.
The Brexit vote and its
aftermath caused hedge-funds to profusely bleed, the capital markets
to convulse, the GBP dramatically weaken to a 30 year low, the BoE to
highlight possible recession (though with policy in hand) and the UK
Treasury to state that national debt reduction targets inevitably
post-poned because of the renewed bout of uncertainty and lost
business confidence.
Hence it is no wonder
that the very notion of a tenable alternative UK economic export
model - with renegotiated EU relations – is the hot topic.
Exactly how Britain
resets its trade, commercial, industrial and overall economic agenda
remains to be seen,such a broad reformation to both continue
very valuable EU trade links and to also 'welcome the world' is obviously key.
The Economic Model
Options -
To present and simplify
the issue, the Financial Times via its 'FT Punk' video cartoon
edition explains what alternative economic models might be seen as
possible options; the cartoon using an automotive character theme to
do so; whilst effectively inferring a negative outcome of a true
split from Europe.
The themes illustrated
for the UK are:
1. “Britain Alone”
- whereby the UK looks to the Commonwealth, Rest of the World and EU
via basic WTO rules, becoming far more marginalised from access to
European trading.
2. The “Canada Model”
- seeking to mimic this positively flexible EU arrangement whereby
whilst noting that this applies to goods only (from Forestry to
Fishing to Part Finished Vehicle Sub-Systems). Hence not services
which are the bedrock of the UK export economy.
3. The “Norway Model”
(EEA) – allows both goods and services into EU and a country by
country basis for negotiation, but still requires free movement of
people.
4. “The Lichetenstein
Model” (EEA+) - effectively a highly tailored deal for a miniscule
country of 36,000 people and simple economy, far from the 65,000,000
people of the UK and its highly diverse and complex economy.
It should be noted that
George Osborne has been a long-time admirer of the Norwegian fiscal
attitude of responsibility and propriety, and also envious of the
enormous SWF created from North Sea oil income. Mimicking such a
model as far as possible with an SWF would indeed be positive.
Much of any newly
re-constructed relationship will of course rely upon the foundations
of the 'two-way traffic' involved, critically the basis of provided
and received funding from Brussels and the new circumstantial basis
for trade.
Already we have
witnessed the efforts of the Paris Bourse talk-up its capabilities
regards the Euro-bond trade and other financial instruments, so as to
undermine The City's future role.
Devaluation Sets the
Ball Rolling -
Yet, critically here
the dramatically lowered GBP could well serve not only Britain's
international exports but also various European corporates.
Presently in-situ local
carmakers in Sunderland, Oxfordshire and Derbyshire are obviously set
to enjoy the fruits of the declined GBP, and if this devalued
situation remains could well see not only expansion, as with Aston
Martin's new Welsh plant for DBX, but also the possible return of
major European volume makers.
Remember it was
primarily the strength of the GBP that forced Peugeot to close its
factory at Ryton in the Midlands in the late 1990s, this also cited
by BMW executives as the vital cause for failure of Rover Cars (and
its EU export hopes) during the same era.
And even if the large
auto-producers don't retake the plunge back into the UK (because of
the need to provide their own national domestic employment and better
plant opportunities in EM regions) there is an argument that even
more may be gained by the less conspicuous within the auto-sector.
Namely...
1. The Supplier Base
2. Vehicle Conversion
Specialists
3. Advanced Engineering Services
The Supplier Base -
Tier 1 and 2 parts and
sub-systems suppliers who are able to more rapidly relocate at lesser
costs for an FX advantage.
Those firms in the
supplier-base could re-view Britain as a useful production location,
using both the FX tailwind to provide reduced capital costs, more
flexible European customer pricing, better attune company budgeting
via more finely honed flexible production output and critically
interact with UK research and development agencies at lower cost and
thus with potentially higher future brand value and profit margins on
more advanced products.
Vehicle Conversion
Specialists -
Newly revived business
cases are likely created for a set of firms who historically have
experienced 'feast or famine', those who seek to offer specialist
'added value' via vehicle re-specification activities by typically
substantial modification of standard “off the shelf” vehicles.
These span a plethora
of uses, and is the case for:
A. high-profile
brand-centric operators like Land Rover's internal SVO Dept.
B. lesser publicly
known firms such as Marshal AD, operating in the Defence sector.
C. the various
'body-builders' who enjoy contracts from the emergency services
D. the number of
chassis-cab based motor-home (and caravan) producers
E. those firms adapting
vehicles for the less physically able (cars to mini-buses)
For each of these the
lower GBP means a boost to their business models, which invariably
deploy a wide mix of labour types from within the skilled,
semi-skilled and unskilled broad workforce by way of degree qualified
engineers using CAD, experienced production technicians and new young
apprentices.
Thus improved
probability of either making the “business numbers stack-up” (no
doubt so for most) or adding further to sizeable per unit margins (as
per JLR's customised Defenders to Range Rovers).
Thus the GBP's fall
helps to off-set the very unfortunate detrimental commercial impact
of the recently introduced higher minimum wage, the cost of labour
very critical to designed and manufactured products, even if
seemingly more an issue related to the service sectors of retail or
hospitality.
Furthermore and
importantly, whilst it might be considered that UK based firms in
question might be said to have a captive client-base with the
emergency service type vehicles, 'blue-badge' vehicles, and the
likes of extra-niche Land Rovers and Jaguars; in the past heir respective
commercial efforts were often less secure than expected.
The emergency services
themselves have been through tough budget cuts because of austerity
measures which meant a harsh tender process for new procurement which
in turn have had a direct impact on margins, cut-to-the-bone to
obtain contracts.
Likewise what had been obtainable grants and loans for physical adaption of a vehicle, for owner-driver or charity organisation, saw funding cut so impacting upon the ability to order a specially adapted vehicle.
Likewise what had been obtainable grants and loans for physical adaption of a vehicle, for owner-driver or charity organisation, saw funding cut so impacting upon the ability to order a specially adapted vehicle.
Whilst (in real terms) JLR SVO was (all
too ironically) late to either recognise or reach into the 'hi-Performance', 'Premium
Urban Warrior' and Hi-Luxury' markets, because of restricted CapEx and Research and Development monies for so long. Having seen other small ventures initiate the
trend by mimicking what had happened with Hummer H2/H3, Mercedes
Gelanderwagen and Jeep's auto-show concepts, via names like 'Twisted, 'Chelsea Truck' etc. (Even though Land Rover
had itself shown many 'tailored-tough' concepts often drawn from its
own product placement in movies (007, Lara Croft etc) it had been unable to truly exploit the trend beyond periodic special editions. Whilst it
hesitated the market grew without its presence and became increasingly larger but also increasingly competitive.
As regards motorhomes
and caravans, for decades the Germans, French and Italians have
effectively owned this vehicle space, unsurprising given the size of
the leisure and camping market across Europe thanks to a mix of
product choice and good destination facilities. Though a few motorhome
brands have gained traction (such as Swift) Britain never really had
a comparable leisure-camping market because of the impact of package
holidays from the mid 1970s onward.
However, typically in
times of reduced economic circumstances, the UK does indeed see a
return to such more affordable (often motor-based) leisure pursuits, noticeable off of a relatively small constant volume baseline.
And today's mix of constrained disposable incomes – especially for families, the much reduced buying power of the GBP in Europe, and rise in British patriotism (seen with 'Brexit') appears to indicate that the UK domestic motorhome, caravan and camping scene could well see a positive boost.
And today's mix of constrained disposable incomes – especially for families, the much reduced buying power of the GBP in Europe, and rise in British patriotism (seen with 'Brexit') appears to indicate that the UK domestic motorhome, caravan and camping scene could well see a positive boost.
That boost
domestically, plus the potential for export sales and ironically the possibility of
lower-cost sub-contracted work for European counterparts, would
undeniably assist the likes of Swift and its peers.
Advanced Engineering Services -
Given its automotive
history and its precedence as a leading actor in future-forward
engineering – presently illustrated by Britain as the construction
heartland for Formula One – the country obviously seeks to
re-bolster the national economic agenda with Advanced Engineering.
These primarily
spanning both 'Eco' and 'Performance' realms to befit the needs of
the automotive and wider and transport sectors. (Yet also
interestingly, with possible efforts directed toward the broader
reaches of industrial design, architecture and elsewhere).
New and more apt
engineering design solutions achieved via ever better computer
modelling capabilities, the ongoing development of materials
sciences, innovation in production techniques and the enormous
influence of electronics, have over the last four decades allowed
for a relatively rapid evolution of exacting answers.
Whilst the ideals of
common platforms for vehicles to aid scale production efficiencies
have morphed into common module sets and adaptable platforms, such
seeming homogenisation has been off-set by the adoption of ever more
sophisticated engineering, both as ambitious, progressive technical
routes and often equally important as a powerful 'performance' and /
or 'eco' marketing story for the brand.
Although comparatively
much smaller in size and GDP percentage contribution than in its
industrial heyday, much of heavy industry long since departed, the
remainder of the UK's engineering sector can still count itself as
at, or at least very near, the forefront of technical discovery,
innovation and productionisation; albeit typically at the smaller end
of the scale in mid-volume (JLR) and niche (McLaren) production quantities.
However, it cannot be
overstated that others in automotive technologies, namely Germany,
Japan, S. Korea and America have demonstrated themselves as leaders
in their respective fields.
BMW regards the
scaling-up of carbon-fibre structures, stressed panels and
components, aswell as duty-specific “mix and match” of advanced
lightweight metals. Toyota (via a heavy early phase investment by its
government) in the proven mass-production and so cost-reduction of
hybrid-drive powertrains. Hyundai-Kia (with its access to domestic
electronics research, development and integration) in the mainstream
adoption of increasingly intelligent electronic systems. Tesla Motors
in the provision of hi-performance, mid-distance range, all-electric
vehicles thanks to evolutionary improvement of lithium-ion battery
technology and the real-world provision of part-time, restricted
environment, autonomous driving (even with the tragedy of a recent
single death due to the failure of 'visual recognition' aids).
To this end, though
Britain illustrates itself with Formula One engineering (systems
integration to aerodynamics to seemlessly merged propulsion), has a
wide spectrum of specialist vehicle knowledge (from leisure
sports-cars to military armoured cars), has renowned and historical
Engineering Services companies (such as Ricardo plc), and has a
wealth of more recent and start-up customisation and personalisation
firms (such as Kahn), there is a danger that the very breadth of
necessary deep engineering knowledge across all systems is being
incrementally surpassed by foreign organisations.
As seen, Germany able
to draw strong financial resources from its position as premium
auto-makers to the world and now very low cost ECB generated lending,
Japan from its leap-frog lead since the Kyoto Summit and its volume
sales learning, S. Korea from a combination of electronics expertise
since the 1980s aswell as the cross-learning from its conglomerate
structure, America from a combination of IT-orientated 'disruptive
technology' fever driven Silicon Valley venture funds thereafter
re-supported by access to a massive national and international
capital markets base via Wall Street.
Each of these
progressive ambitions and nurturing financial environs has
indubitably assisted marches forward in specific disciplines and
fields.
To this end Britain
does indeed still has relevance as an engineering tour de force,
especially regards the arenas of lightweight structures (as seen at
JLR) and in the assisting of other countries' own motor industries
(from Turkey in the 1960s [the then Rootes Group] to China in the
early 2000s [with Ricardo-SAIC]), but that once unassaled position of
leadership has been arguably degraded over the last twenty years.
Beyond own UK brand
domestic engineering for JLR, Aston Martin, McLaren etc in advanced
structures ,on-road dynamics and bespoke engines , it is seems the case that the UK is viewed today by the rest of
the world of conventional EM auto- companies as simply useful 'go-to' experts in very specific one-off topics. Akin to the manner in which Malaysia's Proton utilised its ownership of Lotus Engineering.
These ranging from aerodynamics improvement to NVH suppression to 'ride and handling', to hybrid systems, to engine testing to whole car performance modification, thanks to a marriage of ever more refined and comprehensive computational software programmes and hands-on human experience.
Proton's and other client uses done so in an ad-hoc, piece-meal manner, making use only as necessary.
This should be of concern to the UK as other advanced countries demonstrate the right to their monikers with various proven engineering progression, and as ambitious emerging nations absorb ever more learning from those incumbent major manufacturers operating plants locally, and those new disruptors who can lure EM nations with a 'spoil of the profits' and simultaneously enable their own technical learning through good policy alignment of their national economic agenda and academic efforts to 'search, learn, adopt and adapt' internally transferred foreign technology.
These ranging from aerodynamics improvement to NVH suppression to 'ride and handling', to hybrid systems, to engine testing to whole car performance modification, thanks to a marriage of ever more refined and comprehensive computational software programmes and hands-on human experience.
Proton's and other client uses done so in an ad-hoc, piece-meal manner, making use only as necessary.
This should be of concern to the UK as other advanced countries demonstrate the right to their monikers with various proven engineering progression, and as ambitious emerging nations absorb ever more learning from those incumbent major manufacturers operating plants locally, and those new disruptors who can lure EM nations with a 'spoil of the profits' and simultaneously enable their own technical learning through good policy alignment of their national economic agenda and academic efforts to 'search, learn, adopt and adapt' internally transferred foreign technology.
To this end the British
“Catapult” Scheme must itself deliver and be seen to deliver the
automotive advancement necessary to maintain the UK as a
multi-dimensional Advanced Engineering Hub to the world.
Nonetheless...
The following Part 2 of
this weblog very pointedly, and intentionally paradoxically, uses the
1971 French film 'Trafic' as a guiding light for both Britain's need
for much regenerated creativity and the manner by which it should engage with Europe from here onward.
The relatively unknown
but cult figure of Monsiuer Hulot has much to teach, from his
design-engineer character to the ability to engage and innocently
charm European border officials.
Monsieur Hulot conveys the very meaning of “entente cordial” that underpins and bolsters
international trade.
