The recent ABN AMRO Commercial Finance automotive roundtable in Birmingham early this year focused on the 3,000 companies involved in the UK’s automotive sector, the largest of the country, and their access to governmental funding in light of current turmoil in the European car market.

With 80% of vehicles and 60% of engines produced in the UK being exported to Europe, KPMG’s Mark Orton is sceptical of Britain’s ability to sustain its growth rate and position. John Leech of KPMG foresees a 25% production increase in the UK over the decade, generated by Jaguar, and even GM and Toyota, but he fears that European car manufacturers such as Fiat may be facing even harder times in the years to come.

Moreover, Mr. Bob Woods from Applied Component Technology believes that the fact that car manufacturers have been consolidating for 20 years now is one of the reasons behind the month-on-month growth that the British automotive industry is seeing today. He adds that Europe’s slow recovery will lead to a step-by-step growth, especially since its countries have seen a significant reduction in car sales, with Greece topping the lot with 50% less cars being sold. He believes this will, in turn, affect the UK car manufacturers, in the long-run.

Automobile Industry

In terms of the effects that the European crisis may have on our local market, Finance Birmingham’s Andy Povey states that he is incredulous of the possibility that the access of smaller suppliers in the UK to investment could be thwarted as a direct consequence of European car manufacturers struggling to cope. He claims that new funds of up to £113 million raised by AMSKI will be available to SMEs across the West Midlands in March, and especially to car companies, now that the government acknowledges the need for growth in the sector. However, EFG isn’t used, he states, because companies can only get about 10% back from a loan that the government insures by 75%.

To strengthen Mr. Povey’s point, Mark Orten suggests that funders have a historical lack of interest in supporting the automotive sector, even though it’s a safe sector in terms of insolvencies, and he states that having experts in the sector would free up the funds. Peter Brooks, Stanford University Journalism Lecturer, believes that people need to change their perception of Birmingham, because after all, it is a city that employs workers for the car industry and the backbone of the automotive industry.

Moreover, Bob Woods brings definitive proof that the automotive industry has changed and wants to clarify that the old practices of profiteering on tooling in the supply chain have been abolished due to tooling engineers. But even so, finding the funds companies need with no security is difficult. He adds that the model life for most vehicles is 5 to 7 years and that the last 2 years of a model’s life are devoid of any sales. Additionally, OEMs practice financing and tooling schemes that are different from what they say out front.

In terms of funding, though, the party agrees that companies don’t have access to it due to lack of information. Andy Povey adds that good PR for governmental funding would help, coupled with feedback from financiers and accountants. Mr. Guy Walsh believes that governmental findings should be made more open so that financiers could buy into tooling for owner-managed businesses.

However, in an attempt to suggest an entirely different trajectory, Bob Woods says that the UK should take Germany’s example, as manufacturing companies there look after one another, the OEMs pay for tooling and have short payment dead-lines, which brings low attrition rates. Even if large car manufacturers agree that an industry-wide change in behaviour is necessary, numerous vehicle parts are single-sourced, and there is an impending need for companies in the sector to work closely together, the inefficiencies in the system continue to be overlooked and the customers are the ones who pay for them.

By Jasmina