Blog: Dave LeggettJerry Flint

Dave Leggett | 19 June 2008

There's an interesting article by Jerry Flint on the Forbes website. It's projecting the possibility of a UK industry scenario for the US in which the US ends up with very little US-owned vehicle making. Does that matter if you have the jobs and all the economic activity that comes with foreign investors? I've always argued that actually, it does matter and that ideally you want the right balance and that is not a domestic: international ratio of 0:100. Flint is exaggerating slightly I feel, but he has a point. 

Here in Britain, the term 'water boys' might be a bit harsh and there is plenty of high value added stuff going on here besides just assembly - Britain's workforce is relatively cheap in Western European terms and there are also highly trained engineers and highly creative people (like designers) here. International OEMs take advantage of these things. But when automaker profits are repatriated overseas to where megacorp's home is, you are always vulnerable, potentially, to changes of company policy, shifts in international costs or relativities and also currency movements.

And there are the intangibles. Sometimes decisions that are 50-50, say on sourcing a major part or system, can be swayed by cultural or 'home team' factors (the 'German way'). Maybe several local carmakers or Tier 1s would see a collective interest in keeping supplier critical mass going, or say investing in training, in a location that foreign companies would naturally have less interest in.

I don't want to sound parochial here - Britain's 'open and deregulated' experience has not been all bad by any means - but a balance of domestic and FDI involvement is what ideally should be sought, strategically, in my view. And once home-owned volume car manufacturing is gone, it really is gone. In Britain, we now have to make the best of being 'water boys 2.0' and make ourselves so attractive that foreign investors stick around. That's fine when things are going well and the industry is expanding but perhaps the potential vulnerabilities are more of a worry in the bad times.

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