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Issue 47

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Issue 47, May 2000

Rover and the world-wide car industry crisis

   The crisis of over-capacity in the world car industry
    Workers and the cutbacks
   Socially useful alternative products

The Rover events, followed by the threats made against Ford's Dagenham plant, have revealed the stark crisis facing Britain's car industry. BILL MULLINS, who was a shop steward for 13 years in the Rover factory in Solihull near Birmingham, explains the processes that will determine the future existence of the industry and puts forward a socialist alternative to the chaos engendered by private ownership of the means of car-production.

THE ROVER CAR crisis has revealed in graphic form the inner rottenness of modern British capitalism. After decades of being forced to retreat on the world market by their main rivals in Europe, Japan and the USA, the dominant finance section of the British ruling class have declared that there is no future for manufacturing in the 'new economy'.

It is New Labour who express this most enthusiastically. Geoff Hoon, the defence secretary, blurted out in a debate amongst Labour MPs on the crisis in manufacturing industry, that 'metal bashing is no longer a vital national asset'. That not everybody feels like this was demonstrated by the support of Midlands manufacturing bosses for the 100,000 strong demonstration in Birmingham at the beginning of April.

Trotsky, in his book Where is Britain going?, written in 1925, commented that only the British proletariat represented the real interests of the nation. This was not a comment on workers' patriotism but a profound understanding of how it is only the working class who have any real interest in keeping the industrial economy of Britain going. The dominant section of the British bourgeoisie, myopic in comparison, care only for their short-term profits, whatever the effect on the national economy. For a modern industrial country of 60 million people to pretend that its population can have any form of a civilised existence by means of financial and service industries alone is indeed madness. But that is what has afflicted the predominant parts of the ruling class for many years now.


The demonstration in Birmingham on April 1 was overwhelmingly working class, mainly consisting of those who worked for Rover and their families plus the many hundreds of supplier companies in the region. There was a palpable feeling on the demonstration, etched onto individual faces, of personal ruin if the worst was to happen and Longbridge was shut down. New Labour, however, declared that no national government has the power to interfere with the 'natural processes' of the global economy. It can only ameliorate the worst effects by assisting workers to find other means of livelihood. On that basis they have refused to do anything about the Rover crisis.

The union leaders, taking their cue from New Labour, have refused even to raise the question of re-nationalisation. Instead they have searched the world for a new capitalist company to save Rover. But the only reason that another big car company would take over Rover would be to shut it down. All the big car companies are desperately ridding themselves of surplus capacity even before a new recession sets in.

BMW took over Rover in 1994 because they themselves wanted to enter the high-volume, low-price car market, instead of just concentrating on the luxury end of the range. They were afraid at the time of being taken over unless they broadened their base. Now ironically they are back in the same position, with rumours that Fords or Volkswagen (VW) are preparing a take-over bid for BMW.

top     The crisis of over-capacity in the world car industry


THE 1990s SAW a general growth in the industrial world's economies, within which the car industry also expanded. But driven by the need to gain new markets the car companies extended their production facilities way beyond what the market could bear. By the end of 1999, with global car sales at 47 million, the manufacturers found themselves with a surplus productive capacity approaching 40% (that is, they could actually produce 68 million cars, 21 million more than they could sell). This surplus capacity, according to William Greider in his book One World, Ready or Not, represents the equivalent of 80 assembly plants which could be closed down without affecting the car market.

The various manufacturers operate with different criteria for dealing with over-capacity. Fords, for example, have always taken a strict line on this. They did not generally join in the scramble to build new factories to try and become more efficient than their rivals. Instead they have steadily built up a huge cash mountain over the past period, amassing $23.8 billion dollars in their reserves. This means they are in a much better position to gobble up their rivals who over-reached themselves in the 1990s. When such companies' share values began to fall then Ford and General Motors (GM) moved in and took them over.

Profits for the multi-nationals though were never better than in the 1990s. Fords saw their profits increase for eleven consecutive quarters to the end of 1998 when, in the final quarter, they rose by 6.5% to $1.67 billion dollars. BMW increased its profits in 1998 by 5%, VW by 8.3%, Daimler by 5.6%, Renault by 6% and Peugeot by 2.5%. Only Fiat saw a decline of 5.4%.


Much of the increase in capacity was in the Far East 'tiger economies' of South Korea, Taiwan, Malaysia, and Indonesia, as well as Japan. New plants produced cars owned by local capitalists, or cars from established firms like Toyota or Datsun. Much of this expansion was based on phenomenal indebtedness and not self-financed investment. The collapse of the regional currencies and share prices that resulted meant a major contraction of the industry. For some manufacturers it meant their removal altogether from the scene. Firms like Kia, Asia Motors, Samsungs and SangYong were gobbled up in the bloodbath that followed the stockmarket crash. In Malaysia production fell by 60%, the Philippines by 54%, and Thailand by 50%. The number of South Korean car-makers was reduced from five to two, with production also halved. Indonesian production collapsed to less than 20% of its pre-crisis level.

Since then the South East Asian car companies (or what is left of them) have made some recovery but now the focus has shifted to Western Europe. This region has 35% of the world's overcapacity. European companies could produce seven million more cars per year than they could actually sell. For the capitalist system this is unsustainable and many of the big companies have become victims of mergers and take-overs. Ford took over Volvo, Renault took over Nissan, and Daimler took over Chrysler. Ford has also stalked Fiat and BMW, while Mitsubishi was taken over by Peugeot. A similar process is also taking place in the truck industry with Renault taking over Iveco, and Volvo taking over Scania.


Most of these mergers are also financed by heavy borrowing. Professor Garel Rhys, a motor industry commentator, points out that many of these mergers remain 'undigested' (as the Rover/BMW take-over was) and could lead to new problems.

top     Workers and the cutbacks

IN EUROPE THE major manufacturers have already started the process of contraction. Renault closed its Belgian Vilvoorde plant three years ago, which led to the first ever cross-border solidarity action by Renault workers in France as well as Belgium. General Motors laid off 1,700 workers from its Antwerp plant in 1998 while Ford sacked 1,400 workers in Genk in the same year. Now Ford UK is getting rid of thousands at its biggest plant in Dagenham, if not ending production altogether.

A common theme running through all these cut backs has been the bosses' constant demand for more work from those that are left. The workers have been forced to accept flexibility of hours, temporary contracts, new starters being paid less than existing staff, and the sub-contracting out of work to other companies.

Workers at Ford's Dagenham plant in London have been subjected to a barrage of propaganda over a long period. They were told that they worked in the most inefficient car plant in Europe - although as the Economist Intelligent Unit pointed out, Dagenham produced 62 vehicles per worker per year compared for example to the 39 vehicles per worker of the VW Wolfsburg plant.


This hasn't stopped the employers' propaganda against 'lazy' workers who 'take too much time off sick'. But it has had a big effect on the union leaders. They were behind the speed-up proposals of Ford management in 1998/1999, with Ken Jackson, the general secretary of the engineering union, AEEU, boasting that they thought up the proposals in the first place! These included removal of demarcation between jobs; reducing absenteeism by a more ruthless disciplinary procedure; more use of contract labour on lower rates of pay and not subject to union control; staggered holidays; new shift rates (ie less money for working nights); and mobility of tasks, including sending paint shop labour to work on the tracks in periods of slackness. This was on top of the introduction of other management techniques to screw the workforce even more, in particular 'team working', which has been a main means of going over the heads of the trade unions and undermining the stewards on the shop floor.

The car bosses have traditionally threatened to build their factories elsewhere if the workers don't accept the speed-up proposals, but as commentators like Rhys have pointed out, the cost of labour in the overall cost of producing a car is a relatively minor factor. The reason that the capitalists build new plants overseas is not just to take advantage of cheap labour. Differences in wage levels are obviously wide - for example, the average Mexican car worker is paid only one sixth the wages of a US worker, whilst BMW workers are paid ?22,600 per year for a 36-hour week compared to a Rover worker on ?16,000 for a 37-hour week. But this isn't the key figure for the employers. Labour costs account for only 20% of the total costs of building a GM car whilst purchasing of components for GM accounts for 50% of total costs.


More important is the potential for an expanding market. If this isn't the case then they will not invest in new plant. Other factors then become more important for where they produce their cars, including location and accessibility to the bigger markets of the main economies, familiarity with their 'own' governments, and the power of the political lobby industry. All these are factors in the thinking of the strategists of capital, and they become even more important in a recession.

The union leaders have no answer to the bosses' propaganda. Each auto-maker tries to convince their own group of workers that they have no alternative but to 'become more efficient' than their rival. The union leaders to one degree or another sing the same tune. That is why in country after country the car bosses are able to ram through changes to working practices and shift patterns. The workers are faced with the dilemma that both the bosses and the union leaders seem to be saying the same thing. But even when the new speed-ups are in place this doesn't mean there will not be resistance.

To respond to the capitalist-created crisis the socialist movement has to put forward a series of demands that can meet the needs of the hour. These have to correspond to what the autoworkers need to fight for against the plans of the bosses as the crisis develops and, on the other hand, to act as a bridge that raises the consciousness of car workers of the need for a democratic socialist plan of production based on need not profit.


This programme has to take into account the different stages that autoworkers are at in each country. From the need for basic democratic rights like the right to be represented by genuine independent trade unions, to raising those economic demands that will unite the maximum number of car workers across the globe in the fight against their common oppressors, the giant international car companies. A socialist programme to unite car workers internationally would include:

  • The right to join a trade union and the right to organise without the threat of state repression.
  • The right to a job on trade union rates of pay and trade union control.
  • Opposition to all job losses as a result of the crisis of overproduction.
  • Share out the work without loss of pay.
  • For a 35-hour week or less, according to the country affected, without loss of pay.
  • For the nationalisation of any plant under threat of closure.
  • No transfer of work between factories without the agreement of the workers affected.
  • No behind the scenes deals of the bosses and the trade union leaders.
  • All decisions to be put to mass meetings of the workers.
  • No worsening of conditions.
  • Opposition to all attempts to contract out work.
  • Opposition to the introduction of temporary and contract labour. All jobs in the industry to be full time and on trade union conditions, as part of the negotiated collective agreements covering all workers.
  • Equal pay for equal work irrespective of gender or age.
  • Open the books.

A key demand has to be 'an end to business secrets, open the books to the scrutiny of the trade unions'. The big international car monopolies are well aware of each others 'commercial secrets', they only hide behind 'the threat to competition' to sew confusion into the minds of workers. Price rigging between the big companies is now well exposed. Prices of cars in Britain, for example, are at least 15% higher than the same cars on the continent. The big dealers in Britain have secretly conspired with the manufacturers for years to keep their prices artificially higher.

The car companies in particular have a long history of cooking the books. One example is so called 'price-transferring'. Companies like Ford in the past made the engines for the Fiesta model in South Wales, the axles and drive-shafts in Germany, the gear boxes in France, and so on, and the final assembly in Dagenham, London. If Britain had a higher corporation tax than say Germany at the time, then Fords would 'sell' Welsh engines to Ford Germany at well below the cost price and thereby declare a 'loss' in their published accounts in Britain. Meanwhile, by this method they had 'increased' the profits of the German Ford company but ended up paying less in corporation tax.

Similarly, the big car companies have traditionally played off one country against another. BMW threatened to move production of the Rover 75 to Hungry in 1998 unless the government coughed up ?250 million aid to develop the Longbridge plant. The government finally conceded a figure of ?152 million which, although in the end BMW pulled out and didn't 'collect', is just one illustration of how the process works.


It is impossible on the basis of private ownership to get to the bottom of the financial jiggery pokery of the big monopolies but the trade unions should nevertheless demand complete transparency of the capitalists' accounts. They should use this demand to prove again the need for public ownership under democratic workers' control of the car industry.

top     Socially useful alternative products

EVER SINCE THE Rover crisis hit the headlines the Socialist Party has called for the Rover shop stewards to organise a conference of shop stewards from all the main car companies and component suppliers across the country. This conference would debate out the need for a publicly-owned and democratically controlled car industry. It would have the role of bringing to bear on the problem the expertise of the workforce, not just for the immediate issues of saving the jobs of tens of thousands of workers and their families, but also to develop a real socialist transport plan to meet the needs of the mass of the population in Britain and internationally.

Over twenty years ago the shop stewards committee of Lucas aerospace, a defence industry company, were faced with job cuts in their factories. They did not just oppose the loss of jobs but came up with an alternative plan to produce socially useful products. Rather than using their skills to make weapons of death they said, why not make things like road/rail vehicles or motorised wheel chairs? Of course the Lucas bosses refused to even consider the plan seriously, saying there was no profit in it.


But the shop stewards plan was taken up by the labour movement as a practical answer to the capitalists who said that the market should determine whether you had a job or not. Car workers internationally can emulate them now when they are facing the crisis of over-capacity in their industry, drawing up a plan to use the skills of car workers in the production of efficient and convenient means of public transport, and more environmentally-friendly models of road transport. Such a move would be a devastating answer to the pro-market propaganda that dominates the thinking of the unions these days.

  • For a publicly owned auto industry under democratic workers management in all auto-making countries. Develop a plan of production under workers' management and control involving the unions in the industry and the national unions as a whole, plus representatives from the community such as environmental groups.
  • For a development of international co-operation of these industries based upon meeting the needs of the working class in each country and not upon the profits of the few.
  • Don't subsidise; nationalise!
  • For an integrated, free transport system for each country and region of the world involving the bringing into public ownership of the production of transport vehicles, linked to a socialist planned system to meet the transport needs of people throughout the globe.


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