Flexibility surrounding tooling finance will form a key component in addressing supplier needs during the next year, say consultants, KPMG.
Addressing an audience of suppliers and bankers at today’s (21 November) inaugural ‘Meet the Funder’ day near the UK’s second city of Birmingham, KPMG partner, Mark Orton, highlighted the importance of tooling finance.
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“As long as I have been involved in the automotive business, tooling has been a debate,” said Orton. “The OEMs want to control the IP so that if a business fails they own that IP.
“The issue for the component supplier is they have to buy that tooling, but as soon as they acquire it, they have to pay up front, but not actually have title to it. What is required is some flexibility and compromise, so if a business fails, the debt of a tool can transfer to the next supplier.
“I am confident we will reach a successful conclusion in the next 12 months and it is in everybody’s interest that happens sooner rather than later.”
Despite raising the tooling issue at today’s SMMT event that brought together 70 suppliers to meet 25 financial institutions – the KPMG partner nonetheless painted a rosy picture of the UK automotive landscape – in stark contrast to the turmoil currently being experienced across the English Channel.
“Why is the UK so attractive?” said Orton. “No matter what we think about the woes of the UK, compared to the Eurozone, the UK is very stable. We have low tax rates [and] a government supportive of the UK manufacturing sector, perhaps a little later than we would have liked.
“We have a weakening of the Pound, a favourable labour pool, some of the lowest labour costs in the whole of Europe, productivity levels second only to Germany [and] labour laws conducive to inward investment.”
Also in stark contrast to Europe, KPMG is forecasting the UK car market to grow to around 2.2m units by 2019 with an incremental increase in the British supply chain of some EUR3bn (US$3.8bn).
Orton emphasised the success of multinationals in the UK such as Honda, BMW, with its EUR1bn investment in Mini production and Nissan with its Leaf, as well as Toyota and General Motors.
