The UK's Automotive Industry Is Improving
The British car industry is doing exceptionally well, performing far better than its European competitors but the UK economy as a whole is lagging behind. Germany on the other hand is striding forward, so is there anything we can learn from the example of the Germans?
The British car industry is doing exceptionally well, performing far better than its European competitors but the UK economy as a whole is lagging behind. Germany on the other hand is striding forward, so is there anything we can learn from the example of the Germans? The German economy is largely based on engineering, of which the car industry is a major part. Volkswagen recently announced a profit of almost £10 billion, which makes it the most profitable car company in the world, beating giants like GM and Toyota. The VW Golf also won the 2012 car of the year award at this year's New York motor show, which was an excellent present for VW's 75th birthday.
In the UK, wages are static or falling but in Germany they continue to rise. The German economy is growing too and unemployment is half that of France. The chancellor, George Osborne, has said the German economy is "the envy of the world" so where did it go right for Germany and can anything be done in the UK to emulate this performance?
In the 80s and 90s, as the UK and USA shifted towards technology and a more service oriented economy, Germany stayed true to its engineering and manufacturing roots, a strategy that was heavily criticised by many western economists. Furthermore, wages in Germany were high and industry was widely unionised, with workers' representatives actually sitting on boards and joining in the decision making process. This arrangement is almost unknown in the UK but when VW considered moving manufacturing to countries with cheaper labour, it was instrumental in allowing the two sides to work closely together to achieve new deals, which saw VW production remain in Germany. Flexible hours and pay were married to initiatives with performance targets and training to create a new, leaner labour market.
Two other things define the differences between the UK and German economies. In Germany much of the economy is made up of small to medium (SME) companies based in the regions. These, mostly engineering, companies are more flexible than the giants of industry and more able to quickly adapt and respond to market changes. Secondly, Germany aims its products squarely at the luxury and quality end of the market. This strategy means that they are not so exposed to low level competition from the likes of China as economies respond to increasing globalisation. The triumph of quality brands can be seen in the UK car industry, with Jaguar Land Rover and Bentley but can the rest of the economy follow suit? Perhaps we no longer have the engineering base.
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