Skinflint's City Diary
It is obvious nonsense to put Chrysler UK onto the taxpayers' heart-lung machine that is currently infusing a semblance of deceptive life into moribund outfits like Leyland and Alfred Herbert. European car manufacturers probably have around 25 per cent surplus manufacturing capacity, and worldwide the under-utilisation could be upwards of 35 per (cent. That means that no foreseeable pick-up in the world economy. will be swift enough to start using that and get the companies working to full production this side of 1980. With British manufacturers being dependent on exports while the Americans themselves are moving into the small-car market and the Japanese are winning sales and the UK home market clamped firmly down, there is little prospect of profits for small manufacturers of cheap cars.
And if somebody has to drop, Chrysler is obviously the most vulnerable. It had some 12 per cent of the market in 1967 but has been steadily declining to fourth place and now commands under 7 per cent, with Datsun and Renault yapping at its heels. The Imp is failing to beat the Honda, Mini, Fiat and Renault alternatives, and the Avenger is fading fast.
Little wonder then, that despite costs of up to E120million for a complete closure, Chrysler has decided that may in the long run be the cheapest alternative. The problem is that unemployment in Britain is already on the uptrend and likely to stay that way for at least another four to six months, so the extra 25,000 Chrysler workers (plus any consequent lay-offs from suppliers) could be embarrassing for the Government.
But if the Government supports the company it would only be providing competition for struggling Leyland which itself has far
too many plants already — remember the motorcycle lunacy perpetrated by Wedgie Benn which ensured that the workers' cooperative was competing with Norton Villiers Triumph for a market not big enough to support either, from plants that were not economically suitable.
All of which seems a logical case for allowing Chrysler to die, tough though the result would be on its workers, and expensive though it would be for the country. But there is a flaw in the logic. It tacitly assumes that the market economy works nationally and internationally and so will reallocate the Chrysler resources to more successful and profitable industries. Which is wrong. The market is not working, and just what industries are thriving and profitable and currently short of resources? Or to put it another way, how many industries can we afford to have founder?
Food for thought is the excellent consultancy report on the failure of the British motorcycle industry. Faced with energetic Japanese competition, the UK companies just opted out of sectors one by one rather than join vicious marketing battle. As a result the product base gradually contracted and could not support even the increasingly etiolated remnants. Is it possible that Britain is adopting just such a national policy?
Darwinian selection may not be the effective answer — Britain could dig in and fight and so iilsist that if car companies go bust it4s in other countries. The point about British industry is not that investment has been inadequate, but rather that for some time it has consistently yielded a lower return than comparable countries have managed. It is probably right for the British government to have told Chrysler that it had got itself into this mess and there was little reason for the overburdened public purse to bail it out, but somebody perhaps ought to be thinking out why the Japanese are increasing their share of world market, and also where Britain ought to be putting its national resources.
Previous page
