Thursday, December 18, 2008

Should we bail out our car industry? What car industry!?

Over on the Telegraph, Janet Daley ponders whether our government should bail out our car industry.

Certainly the arguments that the car companies bring to bear are pretty persuasive: if they are allowed to go down they will take thousands of jobs with them, not only in their own factories but in the steel and electronics industries which supply their materials and components. Surely, they say, this is the last thing we need now. Wouldn't it make more sense for taxpayers to pay to keep people in work rather than to pay for the benefits that would be needed if they were unemployed?

Daley concludes that the answer is no - we shouldn't, but it was right to bail out the banks as they were a special case. I don't agree entirely that the banks were a special case - if you consider that the laws of markets are good enough for car manufacturers then they are good enough for banks. It doesn't matter if banks fold because the demand for banking is still there and other banks would spring up to take their place.

The problem for the banks was not that there weren't enough people looking to use their "products" - it's that they were too busy trying to screw one another by packaging up debt and flogging it off to other gullible idiots in the industry. To use a car analogy, it's like someone selling you a car which still has finance owed on it and telling you that you are not just buying the car, but the debt as well - but don't worry because the previous owner will make the finance payments to you, plus a little extra for your trouble. Yeah, right! Would you buy that? No - but a banker might as that is exactly what they did but on a massive scale.

The banking bail out by the government is dead money. They will not see a return on it for years - and even when they do finally sell their stake in it, they will not recoup even the interest lost let alone the vast sums invested. The argument that they needed to do this to grease the cogs of trade has been demonstrated to have been false. It made no difference - the government could just as easily have used the money to directly finance industries instead - and that would have had a far more positive direct effect than giving money to the loaners who then refuse to loan to anyone.

But having said all that, the idea of bailing out our car industry falls at the first hurdle. Because we don't have a car industry. The majority of car manufacturing in this country is foreign owned. The name being bandied around as ripe for government intervention is that of Jaguar/Land Rover - but they are not British anymore. They are owned by an Indian company called Tata who are perfectly capable of bailing out Jaguar/Land Rover themselves. But as Jaguar/Land Rover are not making much money and as letting it close doesn't effect India particularly then why would they bother? It's not Indian jobs at stake. Tata would lose millions that they'd invested in Jaguar/Land Rover - but as everyone knows there is no point throwing good money after bad (well, everyone apart from our government).

But if Jaguar/Land Rover closed it would be very bad for Britain, British jobs, British manufacturing and British exports and that presents a considerable conundrum for a government which relies heavily on votes from those workers. Nevertheless, it would be wrong for our government to spend British taxpayers money rescuing an Indian owned company which that Indian owner could quite easily afford to save themselves if they so wanted.

The same applies to Honda, Peugeot and the rest of our foreign owned car manufacturers. When push comes to shove it won't be the Japanese plants that Toyota close down.

So - should our government bail out our car industry? What car industry?

What the government should do - as the opportunity arises - is buy back into national ownership companies like Jaguar/Land Rover and ensure that they stay British and competitive. They should reach agreements with companies like Honda to buy their British plants and manufacture Honda cars in Britain under licence - much like they once did with the Triumph Acclaim.

Not only does this ensure British jobs, but it also ensures we have a major industry and that is necessary. Why? Because the thing that drives a nation forward is not, as progressives seem to think, social engineering, but technological advancement and few things drive technological advancement like major manufacturing industries. A car industry needs designers, engineers and innovators as well as a highly skilled workforce. That provides opportunities for engineering and science graduates from university - but if those opportunities are not there then what is the point of studying those subjects?

If this nation is to halt its decline and start moving forward again we need a strong manufacturing industry making high end technological goods. We need a car industry, we need an aviation industry, we need an arms industry and so on. If we don't have these things we will simply wither on the vine.


Anonymous said...

But if Jaguar/Land Rover closed it would be very bad for Britain,
But not too bad for India, Tata could as they own the companies could just up sticks and move the lot to India same as the Chinese did with Rover when they took the lot to China.

Anonymous said...


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