Whatever you think of last week’s UK GDP figures, there’s good news we’ve all missed. Or so says Sir Simon Jenkins who, in a recent column, gave us a list of wonderful things about the downturn. Part of his silver lining is that: “Britain will emerge from recession with manufacturing shattered. But the services on which the economy relies should be in recoverable order.”
He spoiled it all by listing the world-class services coming to our aid: “hospitals, education, retailing, tourism, culture and even financial services.”
Yes, financial services. The corpse twitches yet. Not that the special pleaders for this discredited drag on the public purse need any help from Sir Simon. In the past three weeks the City slickers have been mounting a stout, if embarrassing (to themselves), defence against what they fear might become a tide of regulation – including curbs on those eye-watering pay deals.
The argument the slickers mount against this, says the Observer's Simon Caulkin, is that companies and shareholders really are ‘better at setting salaries than bureaucrats’. Given that ‘better’ has resulted in the almost complete meltdown of the global financial system, what, please, would ‘worse’ look like?
Caulkin also notes the bankers’ complaint that paying them less would ‘choke off innovation. By innovation, note, we mean the poisonous derivatives and other financial instruments that have led the global economy to the brink of collapse. “If this is innovation,” Caulkin thunders, “give us less of it.”
As recession takes hold, however, it’s worth pointing out that financial wizards aren’t the only ones both begging for a subsidy and at least partly the authors of their own downfall. The present recession was signalled a month or two ago by a dramatic slump in car sales. August’s figures from the UK’s Society of Motor Manufacturers and Traders showed the lowest number of new car registrations since 1966. September’s showed the same picture – Land Rover down 50 per cent though Jaguar, oddly, up about four.
Don’t let anyone tell you the dependency culture is confined to the slickers. At the beginning of October European car makers demanded that the EU hand them €40bn ($54bn) in cheap loans to match a $25bn US loan to its car makers, allegedly so that they can invest in ‘green’ technology.
The way the car industry operates has long been a puzzle. For years its factories have been a lean examplar to, say, those cost-plus-reared fatties in aerospace. The added value in most cars as they leave the factory is a dazzling example of just what can be accomplished.
From then on, it’s all downhill. The manufacturers sell the cars to their own sales organisations, who then make dealers buy cars by quota – six of this, three of that. They charge the dealers interest on the purchase price if the quota cars remain unsold after a certain time. So all that lean ‘demand pulling’ that went on in the factory is completely wasted as the sales organisations push cars onto forecourts already heaving with them.
It’s asking for trouble. My car-trade source says car dealers can’t get enough small cars to meet demand. Whatever the latest news on a suddenly-low oil price, its earlier rise gave car buyers a sharp insight into the long-term trend. The cars that won’t sell are still the quota – the sports cars and 4x4s that the manufacturers have made most of and want to unload on the dealers. To see this at work watch the TV ads. The sales organisations don’t use their marketing budgets to sell the cars everyone’s already clamouring for. They use the cash to try to offload gas-guzzlers.
If the jobs of the car industry top brass were in peril because of all this, I’d suggest they too deserved all they got. Sadly, it is the heroes and heroines in already-lean car factories across the land who are now being laid off or having their pay cut.
Categories: Commentary ,
Comments
All comments
You need to be registered with the IET to leave a comment. Please log in or register as a new user.