A new study of the effects of the recession on the automotive supply chain in the UK’s automaking West Midlands region has revealed widespread short time working and a reliance on one customer.

The research, undertaken by The Society of Motor Manufacturers and Traders (SMMT) in partnership with the Birmingham Chamber of Commerce-supported ‘supply chain initiative’ group for the West Midlands, Accelerate, showed 30% of suppliers were dependent on Jaguar Land Rover (the sole remaining volume automaker left in the region after MG Rover’s 2005 demise and Peugeot‘s later pull-out) for much of their automotive business.

Almost all respondents said 50% or more of their orders came from within the UK and 35% were supplying only customers within the region.

Component manufacturers saw a 37% fall in production levels in 2009 forcing 25% to implement extended shutdowns.

“This study demonstrates that the impact of the recession is far wider reaching than we originally anticipated with 75% of respondents indicating they had reduced their headcount,” said Accelerate programme manager Rachel Eade.

“There were also reports of short time working, wage freezes, reduced pension contributions and 25% of companies implementing extended shutdowns. A lot of our suppliers are still over reliant on one big customer, with JLR and Ford topping the list. In short, the case for diversification within the auto sector and into other markets has never been so relevant.”

Recent reports in US media have highlighted how suppliers in US states particularly affected by the downturn in auto business have diversified into products such as solar enery arrays and components for the aerospace industry.

At the end of last year, the SMMT was commissioned to carry out a supply chain mapping project and economic survey involving over 200 suppliers in the West Midlands.

The first stage was to compile a database of major vehicle manufacturers, as well as tier one and two suppliers in the region, followed by scutinising the supply chains and the extent of their vulnerabilities to any reduction in export customers.

Phase three focused on assessing the regional impact of the downturn on West Midlands companies and recommendations for future support.

“The report demonstrates the fragility of the UK supply chain,” said SMMT chief executive Paul Everitt. “This demands a more collaborative approach between industry and government to identify and maximise the opportunities available, particularly in the transition to a low carbon economy.

“SMMT is working throughout the sector to match suppliers and buyers through programmes such as the Automotive Supplier Finder database, but companies need to engage now to secure their role in the development and production of tomorrow’s new technology.”

The final element of the study was gauging future business confidence, with companies asked about expectations for the next year. About 40% said they were likely to reduce their headcount further and only 12% felt optimistic enough to forecast no redundancies in 2010.

“Currently 60% of the UK automotive industry’s R&D is generated in the West Midlands, which has particular strengths in low carbon vehicle engineering,” added Eade. “This expertise, coupled with an annual EUR8.4bn UK spend by vehicle manufacturers, proves the opportunity is very real.”