1. After the Budget: The current state of the UK Auto Industry Hammonds / Birmingham Post Dinner Professor David Bailey Coventry University Business School

2. The economy Govt: -3.5%, 1.25% in 2010, above trend 3.5% in 2011 Frankly, optimistic… past recessions where credit crunch take longer Monetary and fiscal stimulus, fragility emphasised by MPC deciding to inject another 50 billion Other forecasters IMF, EC, Deloitte more pessimistic. -4% this year, -1% in 2010. EC: -4%, just 0.1% in 2010

3. Public finances and when we do grow… Pub deficit figs can be serviced, but little room for manoevre Govt deficit figs not credible Govt spending: very limited indeed SO, govt not a driver… and consumers probably not either Need to see more balanced pattern of growth Depreciation of sterling: TWI of sterling has fallen by over 25% since its peak – more than what saw after black wed in 1992

4. Possibility of a rebalancing? Towards the export sectors (man and services?) However J curve… recession in key markets J or L curve – need the capacity in place now Supporting manufacturing – part –time wage subsidy Danger – loss of manufacturing (-6.2% in 1 st quarter, following contractions of 4.9% and 1.9& previous two quarters) Production levels back to where they were in 1992. 8.6 – 9 % ma output in 2009 (EEF, BCC)

5. Auto: An unprecedented situation UK auto output down 6% in 2008: annualised 12% 2009: 20%+ output fall (1 st quarter -57% before) Job losses: around 20,000 Key UK industry: over 800,000 jobs Exports 70-80% of UK output – effect of collapse would be a £10 billion hit on the UK trade position Key technologies of the future: hybrid engines, electric vehicles (cars and commercial vehicles, lightweight materials).

6. Part time working Agency staff laid off Extended shutdowns LDV Techtonic plates – uncertainty over GM Vauxhall Chunks of the supply chain going under on a weekly basis Credit insurance all but disappeared

7. Auto Support Package Announced in Jan: £2.3 bn package of loans and loan guarantees; procedures unveiled in early March Too little too late Small Beer financially – how fits with other policies? Green support useful

8. The Budget Attempt to stimulate demand: car scrappage scheme but 50 / 50 Credit insurance measures

9. What else could be done? Support for finance arms (US, France, Japan…) Export support (links to financing arms) - ECGD Part-time Wage Replacement / Subsidy Scheme

10. Wage subsidy… FTs Lombard column: if certain industries at the top of their game – productive by international standards – get kneecapped by a cyclical demand shock, it makes sense to protect the human capital they have painstakingly built up BUT… short term, time limited, and any better than retraining? Yes – see our MG Rover closure study

11. ESRC Project on MG Rover 3 years on: 90% back in work (then), 60% retrained or taken up education, 12% set up in new business BUT average drop in real wages; £5600 Quality jobs matter

12. Jaguar Land Rover FT Lex column: it is hard to imagine a less deserving candidate. The luxury carmaker fails the public interest test on two key grounds. First, its products are of questionable social utility… The second reason… Mandelson should refuse to bail out JLR is that Tata Motors, the Indian company that paid $2.3bn for it, is capable of doing so itself, if it wishes. Neil Winton: FT sounds as it has been reading class warfare pamphlets over the holidays

13. Jaguar Land Rover It is NOT asking for a Bail Out – loan or loan guarantee at commercial rates Tata investing heavily already and is itself affected by downturn and credit crunch The Green Agenda, e.g. LRX concept car, Limo Green £800million green R&D programme Crown Jewels in UK Auto Industry (50% R&D, £400 million a year, 7 th bigger spender, 15 worldwide…) Benefits for government £1.3 billion. Costs of Inaction are Huge

14. Some key themes from the recent auto summit: Short term Themes: Consumer credit + finance Exports Wage subsidy Streamlining Drawdown time frame given application rules unveiled last week at auto summit Long term Themes: Skills Green technology Potential future equity stakes by government?

15. Thanks for listening and I hope I havent given you indigestion… d.g.bailey@bham.ac.uk david.bailey@coventry.ac.uk