From International Socialism, No.57, April 1973, pp.25-26.
Transcribed & marked up by by Einde O’Callaghan for ETOL.
The Motor Industry: An Economic Survey
It was Henry Ford in the USA who laid the foundation of modern vehicle production with the introduction of the moving production line and mechanical handling techniques. The idea came to him after watching the meat handling methods in Chicago slaughterhouses. The subsequent history of the Ford Motor Company certainly continues this tradition in more ways than one. Between 1904 and 1968 the number of cars used in Britain rose from 8,465 to over 11 million, so that today the motor industry plays a prominent role in both the continued development of capitalism and in Labour and Tory Government attempts to stabilise an increasingly crisis-ridden system. In 1937 car exports accounted for only 3 per cent of total UK export sales, today this figure is around 17 per cent. Successive governments plagued with balance of payments crises have continually exhorted motor manufacturers to export more. To some extent manufacturers have complied, particularly when faced with an accompanying squeeze in the home market.
But such forced exports do not necessarily meet with the approval of the manufacturers, for as Mr Rhys points out, the profitability of the motor industry depends, by and large, on its ability to run at near-capacity output. Thus between 1955 and 1958, Vauxhall invested in new plants and doubled its capacity from 130,000 to 260,000 vehicles a year. With the old plant at near maximum capacity, profits of £50 per vehicle were being made, whereas with a drop to 6 per cent of capacity production after the new investment, profits fell to a mere £4.50 per vehicle. For the whole industry government restrictions on credit and investment finance mean a general cut back in the demand for vehicles and hence falling profit margins. While some of the lost production can be offset by increased exports and low profits endured for even a few years, continual working at below capacity means insufficient funds for reinvestment.
With the cost of new model production rapidly increasing (Chrysler spent £35 million re-tooling for the Avenger, Ford £15 million for the Escort), the need for near-capacity production run over a number of years becomes more and more important. It also means taking advantage of all the benefits of large scale production; as a result the decline in the number of independent producers in Britain to a point where today four firms account for 97 per cent of all cars produced. Similarly this increased competition between the big four necessitates the most accurate of pricing policies for new models and helps account for the determination of British Leyland’s bid to smash the piece-work system, a system which at its height made assessing labour costs almost a matter of pure guess work.
If any Government gives way to the motor bosses and relaxes the freeze, the manufacturers allow exports go by the board to cash in on the newly created home demand, thereby causing further pressure on the balance of payments. At the present time British Leyland is having to ration its exports to cope with the recent consumer boom, a boom which incidentally they completely failed to anticipate.
Yet attempting to sort out the conflicts between the demands of international capitalism (54 per cent of British car output is US owned) and the Government’s desire for ‘healthy’ balance of payments is child’s play when compared with the problems generated inside the industry. While accounting for only 2.1 per cent of the employed labour force, over the period 1959-68 the car industry had on average provided 15.8 per cent of the working days lost through strikes.
Not that this was particularly important within the industry, for as Mr Rhys points out: ‘It is true that occasionally strikes, can be the main reason for a poor financial performance, but often the true cause is the underlying reason for strike action.’ Its importance lies in the fact that car workers generally, through their action, have set the pace in terms of wages and conditions for other groups of workers. And because of the economic position of the industry neither Government induced unemployment nor general deflationary economic measures had any major effect. To cut the value of the motor industry’s output by only 6 per cent would lead to a drop in total economic activity of almost 2 per cent – a measure that even the most suicidal of governments would think twice about.
Mr Rhys has written a very readable economic and historical account of the car, commercial vehicles and component industries. He shows that the advantage in USA production was based not only on the massive size of the home market but on the fact that the American economy avoided much of the expense in terms of commercial investment that the European economies incurred in the First World War. He outlines the incredible growth of the Japanese vehicle production from 11,320 a year in 1947, to over three million 20 years later, although he fails to recognise that the reason for this was so similar to that which helped give the American industry its initial advantage. The book is crammed full of information that will be invaluable to comrades in the car industry. If you can stomach the straight economist approach of treating labour as an extension of the machine and a point on the graph, it is well worth reading.
Last updated on 15.2.2008