Study highlights the real extent of the downturn on the West Midlands auto supply chain

A new study on the effects of the recession on the West Midlands automotive supply chain has revealed a worrying over-reliance on one customer, the introduction of widespread short-time working and the ongoing need to maximise opportunities in the low carbon industry.

The research, which was carried out by the Society of Motor Manufacturers and Traders (SMMT) in partnership with Accelerate, shows that 30% of suppliers are dependent on Jaguar Land Rover for much of their automotive business, with nearly all of respondents quoted as saying that 50% or more of their orders come from within the UK and 35% supplying purely to customers in the West Midlands.

Furthermore, component manufacturers have seen a 37.2% fall in production levels in 2009 forcing 25% to implement extended shutdowns.

Rachel Eade, Programme Manager for Accelerate, explained:

“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.

“There were also reports of short-time working, wage freezes, reduced pension contributions and 25% of companies implementing extended shutdowns.”

She continued: “A lot out 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.”

The SMMT was commissioned to carry out a supply chain mapping project and economic survey at the end of 2009, which involved more than 200 suppliers from the West Midlands.

First stage involved compiling a database of major vehicle manufacturers, tier 1 and tier 2 suppliers in the region and this was followed by mapping the supply chains involved and the extent of their independencies and vulnerabilities to reduction in overseas customers.

Phase 3 was focused on assessing the regional impact of the downturn on West Midlands companies and recommendations for future support.

Paul Everitt, Chief Executive of the SMMT, commented:

““The report demonstrates the fragility of the UK supply chain and underlines the need for concerted action to support its future development. 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 a series of questions on expectations for the next twelve months.

Strikingly, 40% said they were likely to reduce their headcount further and only 12% felt optimistic enough to forecast no redundancies in 2010.

Rachel Eade concluded: “The findings will help inform future business support going forward and, once again, highlights the need for our companies to continually diversify in order to protect their future.

“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. This expertise, coupled with an annual €8.4bn UK spend by vehicle manufacturers, proves the opportunity is very real.”

Hosted by Birmingham Chamber of Commerce, Accelerate is the supply chain initiative for the West Midlands and provides a host of strategic and networking assistance to more than 800 suppliers every year.

For further details or interview opportunities, please contact Russ Cockburn on 07812 600271.