Duncan’s Economic Blog

From the ashes of LDV…

Posted in Uncategorized by duncanseconomicblog on June 2, 2009

The news is coming through that WestStar, the purported buyer of LDV vans is dropping out of the deal – putting at risk up to 2,000 jobs.

I think this is a test of the Government’s committee to industrial policy, especially in light of equally uncertain news at Vauxhall.

As I wrote this week on LabourList:

What would an industrial policy look like? It would not be a rerun of the 1970s, I am not advocating ‘picking winners’ and backing individual companies. Nor would it be about subsidising specific firms that have no future. Whilst I don’t want any more British Leylands, I wouldn’t mind the odd Chrysler. Equally it should not be an excuse for a return to protectionism.

I am certainly not arguing that we need to draw up a ‘National Plan’ as detailed as the Wilson Government’s document of 1965 that asked each industry how much timber it would need in coming year. Instead we need more of a ‘National Blueprint’, some outline of where we want the economy to be. I’d suggest concentrate on our strengths and industries where there is a long-term future – pharmaceuticals, advanced manufacturing, green technology, telecoms & communications, biotechnology, renewables, green engineering. In each case we could then support the industry through large R&D tax credits, direct tax breaks, government funded venture capital schemes, government backed lending schemes, extensive training grants, direct support of university and FE courses to train future workers. This would involve working hand in hand with business (and ideally trade unions) in a way we haven’t really since the 1970s.

Lord Mandelson has been one the Government’s most vocal supporters of industrial policy, and here is the test.

WestStar aimed to focus on green technology:

Weststar, which already has a joint operation with LDV to import Maxus van kits for assembly and sale in the Far East, will invest in “green” technology, focusing on production of electric vans.

Here then is a chance for the Government to act. The best model may well be what the US has done with Chrysler.

The advantage are many – relatively little cost (liabilities estimated at £60mn), helps develop green technology, protects jobs and, perhaps best of all, could be the first demonstration of what a new industrial policy would look like. I don’t go as far as Dave Osler’s call to nationalise, but I do think we have a clear case here where state intervention would be welcome.

As I have noted previously, I suspect the UK auto sector will have to shrink, but what is important now is managing the transition.

It would be wonderfully ironic if out of the ashes LDV, the last remnant of British Leyland and failed industrial policy of the 1970s and new more successful economic industrial policy could be born.

20 Responses

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  1. newmania said, on June 2, 2009 at 1:50 pm

    Perhaps some heroic symbolist artwork of a god like worker erecting a Wind Turbine might look nice in Trafalgar square ? Do you think five years might be a good period for our blue print objectives , and can we have some tractors ?

    • duncanseconomicblog said, on June 2, 2009 at 1:58 pm

      Oh dear Newmania, I expect better.

      Over at LabourList even my tory critics welcomed this. Indeed one compared them to the ‘supply side reforms of the early 1980s’.

    • thelocalgovernmentofficer said, on June 2, 2009 at 3:47 pm

      Isn’t there a spare plinth? Step forward Weldon the Welder.

      Stamps. What we need is a range of commemorative stamps celebrating the new Britain that will be forged in the white heat of the technological revolution. One for each key industry.

  2. Andreas Paterson said, on June 2, 2009 at 2:26 pm

    Not sure what to add to this, except that I agree completely (although I have to say I thought Newmania’s comment was quite funny).

    • duncanseconomicblog said, on June 2, 2009 at 2:36 pm

      Careful Andreas… you’ll encourage him. (I will admit, I smiled – although I’ve always prefered combine harvestors to tractors personally).

  3. Mr. Mxyzptlk said, on June 2, 2009 at 3:57 pm

    The right wing tory vermin Newmania shows his contempt for the British working man and woman as usual…

    He is what we working class call a ‘WANKER’

    • duncanseconomicblog said, on June 2, 2009 at 4:06 pm

      Mr Mxyzptlk,

      Play nicely.

  4. Mr. Mxyzptlk said, on June 2, 2009 at 5:49 pm

    I’ll try my best.Grrr

  5. charliemarks said, on June 2, 2009 at 11:40 pm

    If not nationalisation, perhaps turning Vauxhall into a cooperatively-owned company would be a good idea?

    If we are to keep jobs in the UK, the best people to do that are the workers themselves – and this form of ownership would mean that in order to survive, the company would have to adapt to consumer demand.

    So, in my view, the government should be supporting workers who want to show some entrepreneurial spirit and take ownership of the ailing company they work for.

    • duncanseconomicblog said, on June 3, 2009 at 9:59 am

      Charlie,

      More than happy to look at co-op models. The question is whether the business can be put on a stable footing. I don’t want an open ended govt commitment to fund it.

      • charliemarks said, on June 3, 2009 at 11:59 pm

        “I don’t want an open ended govt commitment to fund it.”

        No, neither do I. But the government has offered financial assistance in the form of loans to Westar, so a workers-buyout is one option to be considered.

        • duncanseconomicblog said, on June 4, 2009 at 3:12 pm

          Charlie,

          Westar wanted £5mn. Obviously what I advocate will cost more. But I am happy to consider a co-op option. In the US Chrylser unions’ got a large stake – admitedly the situations are different, the unions 9thropugh healthcare obligations) were creditors.

  6. newmania said, on June 3, 2009 at 9:34 am

    It seems pretty clear , there is no future in making unwanted vans and I am not convinced the effort to disguise this fact is not throwing good money after bad as well as adding new distortions . By distortions Duncan remember we mean other people losing their jobs in good viable companies
    I see the circle you are trying to square but in practice good intentions get lots along the way , what do you think has been achieved by the Regional authorities who have wasted billions and billions . Like most super plans tower blocks and so on it might work without the people
    I think the answer to our Labour immobility which is the real problem , not this or that company failing lies in housing but the part of the economy that pays for this gets no help and when you are redundant you have to get on with it .

    Believe me I know,

    • duncanseconomicblog said, on June 3, 2009 at 9:58 am

      Newmania,

      I agree no one wants LDV’s vans. But there is potnetial demand for eco-friendly vans. I would rather such technology weas developed in Britain and I think, given the state of the venture capital industry and the bank lending markets, the private sectir is currenkty unable to take this technology forward. Even though it is potentially profitable.

      So what I am suggesting is government loans to fund the transition. Find a decent managment team and restructure the company through bankruptcy, as with Chrylser. Creditors could be given a stake in a debt-for-equity swap.

      I am not suggesting nationalising it or subsidising it in its current state.

    • Andreas Paterson said, on June 3, 2009 at 10:34 am

      Newmania – My take on this is that the concept of some kind of pure undistorted market is a false one. If the state does not intervene in the market directly, it will still be shaped by more subtle biases. Business will be shaped by educational backgrounds and areas of expertise and also limited by it.

      I just don’t buy the idea that government intervention mean diverting resources from an optimal market driven alternative use. We may not be able to use the East Asian solution and look for the next industry up on the value chain, but we can still make educated guesses at future economic needs and direct our efforts there.

  7. newmania said, on June 3, 2009 at 12:55 pm

    Andreas -I quite agree that the “Market” is shaped by the society it is in which is why globalisation is such a special problem for Conservatives . You assume however that the country is chiefly a product of the State. Au contraire
    Take education ; despite a huge and failed experiment in social engineering in which bucket loads of cash have been squandered the state has been the soft rock and but the country the sea, the sea wins sooner or later . We end up with a more stratified , more arts biased , worse prepared population than ever . This is partly to do with the interaction of the developing housing market and schools partly what appear fairly steady characteristic about the people and much more . As usual the State has made a pigs ear of it . but it was hardly likely to succeed. Think of the unknowns .What you are in effect saying then is that the market will grow to fit the country and situation it is in. This is a good thing not bad thing.

    The story of State`s failure in education and its success ,( after all I would not leave it entirely to the private sector …) are a good guide to where the state can fit in. Filling gaps maintaining a minimum smoothing the bumps this is , I think what Duncan was thinking of as his conceptual starting point . Unfortunately he extrapolates a role for the State should in picking products and taking investment gambles . He is insane .

    I have already alerted the authorities who will presently be at his door with restraining devices and drugs .

  8. charliemarks said, on June 4, 2009 at 12:03 am

    The problem we face is that the usual investors have got cold feet, so in this situation, collective action is being used to try to bring back confidence.

    Duncan’s view that we might use democracy to influence our economy is not that crazy, Newmania… Unless there are a lot of crazy people wandering around!

  9. newmania said, on June 4, 2009 at 5:56 pm

    I think myself that if there was any money to be made out of Green Vans coming out of a restructured LDV the money would have turned up.

    • charliemarks said, on June 4, 2009 at 9:57 pm

      Banks aren’t lending to manufacturing – so says the EEF.

      There’s a reluctance to invest because we’re in the biggest recession in over seventy years.

  10. LDV Vans said, on August 14, 2009 at 10:23 am

    Hello. The LDV is appalling! It has done only 5000 miles and is the second one of these I have driven and the first was just as bad. Awful gearchange, turbo kicks in at the wrong time, naff interior, controls all over the place. Mirrors are rubbish, engine is noisy, radio is like an old transistor thing, it’s like been put in the driving seat of a Mk1 Transit but without the presitigious badge. I have absolutely nothing positive to say about this van at all. Thanks and have a nice day!🙂


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