Opinion: Alan Pinkney on pertinent issues in Automotive

January 2010: Alan Pinkney aims both barrels at the bankers and predicts tough times ahead

CHK Engineering MD Alan Pinkney sits on The Manufacturing Institute board, the Northwest Automotive Alliance (NAA) and the Supplier Development Working Group. A seasoned supplier of steel components, he reflects on a vulnerable automotive sector.

"The biggest issue in automotives is about gearing up for volume to keep prices down, and then that volume disappearing. If companies can’t adapt to lower levels of demand they will go out of business.

There are some horrendous stories. Such as our tenants here from Germany, Karmann, a soft-top manufacturer which has been around for donkeys’ years. They invested 400 million Euros on a new paint shop two years ago and now it’s empty. They went from 3,600 people to 700 designers and contractors. That issue will be prevalent around the country.

But people are not making losses because they don’t know what they are doing. The automotive sector doesn’t get enough help. The Government says a lot of good things delivered through Manufacturing Institute and NWDA but the main money goes into financial services - to keep them in business so they can make us go bust!

This recession has been caused by the over zealous gambling on the roulette table on investment markets all over the world. When they cock it up big-style, we get hit.

CHK has had two rounds of redundancies and we’ve taken pay cuts. Show me the bankers doing that?

Instead of lending anything to anyone at any price, now they don’t lend anything at any price. There is this idea that you can’t subsidise manufacturing but you can subsidise the banks. But restricting the availability of funds leaves us in desperate trouble - because the banks on the one hand are restricting available investment capital, they’re not giving freely for people to buy machinery, trucks and cars even. So, demand is reduced and the people making components are under pressure. And, in turn, the banks are putting them under pressure. It’s about supporting the supply chain and supporting the front end of credit.

We can do as much as we can in improvement, learning and training, but none of that matters if your factory needs twice as much throughput as you have at the moment. We are vulnerable. Supply companies are hanging on and, unless there is some movement forward, the attrition rate is going to worsen next year.

Soon there isn’t going to be a skills base because companies cutting back aren’t going to be taking on apprentices, meanwhile young people don’t want to come into the sector.

Electric cars are all well and good, but while hybrid cars are the way forward, they are a fraction of the value market. Until they become a part of the mainstream, they aren’t going to help. It’s the little bit of gold dust that people grab on to, but the reality is that companies are going to struggle.

I’m a great believer in nature will play its hand. And in the end, overcapacity will mean reduction, of some kind. Why? Because you can’t sustain any business, any industry or any sector that is geared up for a demand that’s not going to be there. If it’s going to take 10 years to come back that’s too long. They will be gone. Companies have got to adapt and do different things.

It is all about demand. There is going to be some massive rationalisation and what we are going to go through is last man standing philosophy. Long-term I’d like to see an industrial bank where funds are made available for manufacturing companies, but not from the same source as investment markets and roulette tables. The best thing we can do now is not latch on to the big six in the banking world.”