When the prime minister sweeps in and out of Downing Street in his chauffeur-driven Jaguar XJ Sentinel limousine, it is meant to deliver a powerful symbol: sleek elegance and bulletproof British power. Designed in Britain, made in Britain.
Under the bonnet, though, it is an Indian-owned conglomerate, Tata, providing the financial firepower. And that is a story repeated across the “British” car industry: Bentley and Mini are owned by German giants; Vauxhall is owned by France’s PSA; Aston Martin is still controlled by Italian and Kuwaiti investors. It may be draped in the union jack, but Britain’s car industry (like much of its economy) is dependent on the kindness of strangers.
Kind thoughts from foreign owners have been in short supply during 2019 – and little wonder. The decline of diesel following emissions scandals, slowing global growth, weighed down by the US-China trade war, and Brexit uncertainty have all contributed to the worst period for British car manufacturing since 2001. Output from UK car factories has slumped for 14 consecutive months, according to the Society of Motor Manufacturers and Traders, the industry’s lobby group.
The roll-call of lost jobs is painful. Jaguar Land Rover, the manufacturer with the largest UK operations, delivered the first blow, cutting thousands of jobs this year, many at its Coventry HQ. Nissan U-turned on a previous promise to build its new X-Trail sports utility vehicle in Sunderland. Honda followed Nissan’s lead, announcing the closure of its Swindon plant in 2021, and Ford in June said it would close its Bridgend engine plant amid a Europe-wide cull of jobs.
The government has been given these warnings for years. It seemed at times that it was listening, even as Theresa May monotoned that “no deal is better than a bad deal” on repeat. “No deal is fully acknowledged, certainly by me and the industry, as being ruinous for our prospects,” the former business secretary Greg Clark told parliament in February following the Nissan shock.
In normal circumstances, the government would be throwing money and freebies at the sector to try to keep it onside. Indeed, Clark tried that approach: Nissan snubbed an offer of £84m (later reduced to £61m) in government support, while Clark’s parting shot was persuading Jaguar Land Rover to build the new electric version of the XJ at its Castle Bromwich plant. A £500m government loan guarantee sweetened the deal.
Yet under the administration of Boris Johnson, even the hopeful private pledges that the government would do everything it could to get a deal – cold comfort even then – have disappeared. The emphasis in meetings with ministers such as new business secretary Andrea Leadsom has shifted towards preparing in earnest for a no-deal Brexit. Brexit secretary Steve Barclay last week tweeted that the UK and EU “need to start talks now” on securing car-part imports in a no-deal Brexit – three years after his government was warned of the problems ahead.
Meanwhile unions and workers from some of the UK’s biggest factories, including carmakers, say they got little but calls for patriotic belief in Britain last week from Michael Gove, the minister in charge of no-deal planning.
Now the signs are that carmakers, already low on patience, are bracing for turmoil. The first straw in the wind came last week from Toyota, which plans to shut the day after Brexit day in case of disruption at the border. It may not result in lost output if the company makes up the time later, as planned, but anyone who still maintains that carmakers have been bluffing should ask themselves why they are now taking such expensive decisions.
Exit YouTube as costs rocket in battle with Netflix
YouTube’s decision to make its original programming free to watch is an acknowledgment that even one of Silicon Valley’s most profitable companies has become wary of the rocketing financial cost of success in the battle for streaming subscribers in the Netflix era.
The strategic volte-face from focusing on a paid service – YouTube Premium costs £11.99 a month – comes as the subscription streaming market becomes increasingly competitive. Netflix has raised its programming budget to $15bn this year before the launch of rival services in November from deep-pocketed Disney and Apple. The market will become even more crowded next year as services from NBCUniversal, owned by Sky’s parent Comcast, and WarnerMedia’s HBO Max, join the fray.
Google-owned YouTube has decided that trying to convert its 2 billion global users into paying subscribers will be a hugely expensive gambit. YouTube will continue to make original shows, and hardcore fans can still pay to watch ad-free, but its budgets will now be much more modest.
The new model takes it away from trying to challenge Netflix and other rivals and directly into competition with traditional TV companies in the fight for advertisers’ budgets. YouTube made about $14bn from advertising last year and will be hoping its slate of shows, led by Cobra Kai, based on the Karate Kid movies, will give it more pull.
All of which is bad news for ITV, which now faces another front in its fight to staunch the exodus of viewers to online services. As YouTube pulls back from Netflix’s territory, Carolyn McCall, ITV’s chief executive, is preparing to charge straight in. By Christmas BritBox – ITV and the BBC’s rival to Netflix – will be up and running, and McCall will hope she has made the right bet in the global streaming wars.
Dark side to man who made VW a roaring success
Not everyone would welcome a leader who takes high-stakes gambles, disdains governance rules, manipulates and occasionally humiliates those around him and remains vague about the number of his offspring. But Ferdinand Piech, the engineer who turned Volkswagen into a dominant force in global car manufacturing, lauded after his death last week, shared those traits.
Born with a place in the ruling class, and hardened by boarding school, Piech – the grandson of Ferdinand Porsche, and son of Anton Piech, who ran the VW works under the Nazi regime – combined ability and passion for car design with vision: bringing VW and Porsche back together and adding a stable of other brands, built with common components to bring economies of scale to their manufacturing processes.
Beyond his automotive prowess, he was also known for machiavellian tactics of management with his own executives, which included dividing up projects to ensure he was the one able to piece together the company secrets. Critics said that his ruthless leadership style shaped the culture of a company where outbreaks of controversy erupted over the decades: ranging from alleged industrial espionage to a bribery and prostitution scandal, all eventually topped off by VW deceiving inspectors into allowing 11 million dirty diesel vehicles on to the roads. Piech left in 2015 just as it was discovered that VW had been fitting its cars with defeat devices designed to cheat emission tests, leaving the company synonymous with scandal.
In business, as in politics, the tension between projecting corporate responsibility and the desire for cutthroat success is ever present. The Piech style might seem an anachronism from the macho world of car manufacturing; yet many a board or shareholder might still hanker after such a win-at-all-costs leader. His legacy of a vast VW corporation is not in doubt. But the world has been choking on its fumes.
