Real green shoots in a world of hammers
Posted on 19 July 2010
Even robots still need humans, but car makers use Welsh workers less and less
The closure of the Linamar factory in Swansea shows once again that Wales is far too often buffeted by the misfortunes of international business. Now is the time to take charge
PEOPLE in politics – like people in other walks of life – will frequently tell you how hard they work, how tired they are. It’s understandable – after all, elbow grease is an attribute that voters take into consideration come election time.
But even from inside the bubble, it is easy to become cynical about such claims. Last week, as the Assembly entered its final week of sitting before the summer recess, the 200-strong workforce at the Linamar plant in Swansea agreed, with heavy hearts, to accept the redundancy package put forward by their Canadian auto manufacturer employer. Their decision brings to an end half a century of component making on the site and effectively closes the chapter on car manufacturing in the city. It’s also a huge personal disappointment, as I had been working with the union and workforce, attempting to liaise with Ford (a principal customer) and lobbying ministers in an attempt to secure the plant’s viability, as closure has loomed over Linamar Swansea for the best part of a year now.
All of this, however, must take second place to support for the workers, who now have to begin hunting for jobs in a recession. Therefore, I was very surprised when they told me that Ford, now recruiting at Bridgend ahead of the start of its Ecoboost engine programme, had refused even to send application forms to staff at Linamar, or extend the deadline for getting them in, which was a week ago last Friday. What introduces doubt where Ford’s actions are concerned, if the claims are correct, is that many of the Linamar boys and girls have extensive experience in auto manufacture not only through the present company, but because they have in the past worked for Ford and Visteon, previous occupants of the Fabian Way site. In a world where industry voices continuous concern over the sourcing of skills, why would any business shut its doors to such experience?
Ford’s name is often less-than-glorious in this part of South Wales West. Constituents who worked at the Fabian Way plant will tell of their suspicions of disputes and walk-outs contrived at times of over production, along with a whole host of other clever tricks to keep costs in check. But its reputation has really gone to the wolves over its involvement in the life and death of Visteon UK.
Prior to 2000, the cost of transferring car parts manufactured by Ford between its many plants (and, at this time, the corporation was still producing vehicles in the UK, at Dagenham) was paid for in what was known as “wooden dollars”. What this meant was that the cost of the part was added to the ultimate price tag of the vehicle.
But with workforces in the BRICs economies beginning to become available, Ford – like many other companies at this time – saw that it could reduce its component costs while retaining the prices it charged, thereby increasing its margin. It took the decision to spin out its components division, assisting in the creation of the Visteon Corporation, and effectively creating an internal market.
What happened after this is well documented and likely to form the basis of a forthcoming court case between Ford and the Visteon workers’ union Unite. Having been involved with this campaign to recover the pensions of 700 former Visteon workers from Swansea for over a year now, I – along with my Plaid Parliamentary colleagues – am currently in correspondence with the new government, calling for a Parliamentary investigation into the cause of Visteon UK’s collapse (the last Labour government – oddly – had no stomach for such an inquiry), as well as liaising with the Pensions Regulator, which continues to look into the company’s demise.
What is clear is that Ford didn’t give Visteon a chance. It insisted that component manufacturing staff that switched to the new company had their terms and conditions ‘mirrored’. Saddled with high contribution final salary schemes and having been told almost immediately by Ford to cut prices by a third, the new company took a three-year pension holiday. During that time, it retired most of the longest-serving members of staff and filled their posts with new staff on less generous terms. This presumably answered short-term cashflow challenges, but had two far more detrimental effects longer term.
Firstly, as those staff moved into early retirement, the number of contributors to the final salary scheme fell sharply, from 11 contributing to 1 receiving to 0.2 workers for every retiree. Secondly, when Visteon UK went bust on March 31 last year and the company applied to enter the Pension Protection Fund because its own scheme was in considerable deficit, it led to the situation where, among the 3,500 former Visteon workers who were left pension-less, there are workers that spent 30 years contributing while working at Ford and only six months at Visteon who have been left with nothing for their retirement.
But there is a wider picture to consider here, too – one that I made during a short debate in the Assembly several months back, and one that I have been trying to impress upon the new Pensions Minister, Steve Webb. If Ford is allowed to escape its pension obligations where Visteon staff are concerned, it gives a green light to every less-than-scrupulous corporation around the world that the UK provides a no-questions-asked dumping ground for in-deficit pension funds. This would only place further pressure on the PPF – or, more importantly, its contributors. These are businesses that are compelled through a levy to finance part of the fund – something they might justifiably challenge if there is further reason to doubt its equitability.
But it also brings us to the point where, in the depths of this recession, we should be asking what kind of companies we want here in Wales. Do we want blue chip names at any cost, even if they play fast and loose with the vagaries of international corporate responsibilities, skipping in and out of different countries, with inevitably poor consequences for their Welsh workers – and for the tax payer, too, when Unison estimates that it costs the public purse around £16,000 every time a person is made redundant? Or should we rather instead focus our attentions on turning our many, many SMEs into world beaters?
I recently met with a project team working on an incredibly exciting project near Port Talbot. If the scheme goes ahead – and there are a number of significant ifs to be answered – it will be anchored around a plant built by Scottish Energy. As I heard this, I wondered to myself: “Why couldn’t it be built and run by a Welsh company?” This may have been prompted by research I read earlier this year which showed that a large number of SMEs in Wales are sold when they are between five and seven-years-old. The research concluded that it was because too often the boards and management teams simply to not have the wherewithal to take their business to the next level.
The new Economic Development Programme goes some way towards addressing the issue of focusing on bringing along homegrown businesses, despite what the immediate responses of some Tories suggested. This is because it is in the development of the skills base that we can provide people with the tools to start and develop their own companies into ones like Scottish Power.
There has been criticism that the ERP contained no numbers, simply policy flavours. That’s true. But it’s a hugely ambitious programme of work. The proof of its worth must come in its delivery, and here it could learn from the outcome of the Linamar closure. By the company’s own measurement, the Swansea plant was one of the best performers across the business. What work there is will go to Linamar’s Mexico factory, one of its worst.
Can we blame Linamar? Certainly. But it is worth remembering that Linamar came to Swansea with reassurances that it would be sourcing contracts from Ford. Those contracts – certainly where Ford Bridgend is concerned – never came. Meanwhile, the Welsh Government has given Ford a £16 million grant towards the development of Ecoboost facilities there.
Did it insist on a degree of local sourcing when it made the award? Not as far as we know. Should it have insisted? Well, there are arguments for and against, and here’s where the difficulty in giving grants – or loans, as they shall be from now on – lies. A company like Ford can dangle the carrot of plenty of work before a government and then coyly ask for grants to make it ‘viable’. Terrified that not only will the contract slip through their fingers but also with it will go any existing work, ministers hastily reach for their cheque books. They simply don’t have the time or the bargaining position to attach strings, we are led to believe. Quite simply, this makes inward investors too powerful.
But much of this would be moot if the Welsh Government was to adopt a recommendation in the recently-published final report of the Holtham Commission, seeking successful discussions with the UK Government in order to vary Corporation Tax in Wales. Although the commission admitted that such a move would “carry acute budgetary risks”, it concluded that such a suggestion should be weighed against its “potential … as a development tool”. Such a recommendation would put Wales ahead of Scotland because, as the Campaign for Fiscal Responsibility pointed out this week, it would give us greater devolved financial powers. CFFR founder Ben Thomson said of Holtham the report: “This certainly is a move in the right direction and goes a lot further than the proposals put forward by Calman.”
But it could effectively hand the power over inward investment back to the Welsh Government. This is crucial, not least because it has far wider economic consequences to take account of than simply the narrow considerations of a business looking to set up in Wales.
Both the ERP and the Holtham reports provide clear ways for building a successful future Welsh economy. But, in many ways, they seek to turn a battleship, unpicking and redrawing ways that were established as far back as the Post War period. It is my belief that Corporation Tax variance could be won for Wales significantly sooner. We need indigenous world-beating Welsh businesses, but they need time to develop. In the meantime, Wales must protect and enhance its reputation by continuing to attract blue chip companies. However, we must do it on our own terms. This recession, and lessons like Linamar, shows us why.
- This piece also appears on WalesHome.org
