The decline of the British tyre industry - Newcastle University

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1973 Britain joined the EEC and in July 1977 duty on Community imports was removed, which allowed the continental producers to exploit the British market. The elimination of tariffs was not the sole cause of the increase in imports. The British car industry had a legacy of uncompetitive plant and an ageing model range due to the lack of investment in the 1960s. 37 The oil crisis caused a shift in demand away from large-engine cars and by 1974 cars with an engine capacity of less than 1200cc accounted for 25 per cent of total sales. 38 The foreign assemblers were able to meet this demand whereas the British producers were unable to respond. As a consequence, original equipment tyre production fell from a peak of nearly 11 million car tyres in 1972 to under 6 million in 1975. 39 The second strategic issue facing the tyre manufacturers was the shift away from the crossply to the longer wearing radial tyre. The spread of the fabric belted radial in the British original equipment and replacement markets coincided with the oil crisis. The cutback in vehicle mileage combined with the longevity of the radial caused the replacement market to dramatically shrink in size. The industry was further depressed by the adoption of the steel radial in 1975 which captured 38 per cent and 25 per cent respectively of the original equipment and replacement markets. 40 The feasible life of a crossply tyre was 18,000 miles compared to 28,000 miles for a fabric radial and 40,000 miles for a steel radial. 41 As a result, car tyre production slumped from 26.64 million units in 1970 to 22.22 million in 1975. 42 In 1977 the Rubber Processing SWP set itself the task of arresting and reversing the decline of the British tyre sector. The SWP identified two key policies: first, to improve domestic production efficiency; second, to increase the producers’ sales and marketing efforts. The SWP’s guiding principle was that improving performance should be underpinned by security of employment, and that increases in productivity should be determined by increased output and a higher world market share. 43 The NEDO quantified the target output level from market forecasts and productivity data provided in confidence by individual companies. The information suggested that British productivity (measured by
weight of throughput per man hour) needed to increase on average by 30 per cent to match international standards. 44 If this target was achieved, an average 30 per cent more capacity would be needed to absorb the surplus workforce and guarantee security of employment. 45 The NEDO estimated that a further 20 per cent production increase could be obtained from more intensive use of existing plant. Therefore, to guarantee security of employment an increase in production of 50 per cent might be required. Discussions in the SWP suggested that the prospects of increasing production over the following five years were good providing efficiency increased, but ‘forecast market growth was insufficient to support guarantees of secure employment’. 46 A subsequent policy document was more conservative and focused on increasing domestic production by up to 18 per cent from the current level of 32 million tyres. Relative production efficiency would still need to increase by up to 30 per cent. However, the reduction in unit costs and the planned increase in production were premised on more intensive plant utilisation and selective investment. 47 Security of employment was dependent on increasing efficiency and sales. 48 The SWP identified increasing exports as one way of expanding production and sustaining domestic employment. An analysis of the global competitive position showed that British tyre exports were concentrated in the Commonwealth and the developing world, whilst penetration of European and North American markets was notably shallow. Europe was identified as a prime target for export led growth because it was a production intensive market with a high degree of international sourcing, and established distribution channels. 49 Increased efficiency would enable the domestic producers to reduce their unit costs and gain a larger share of the European market. 50 The SWP also canvassed the government to encourage the Japanese car manufacturers to establish operations in Britain. This would potentially increase original equipment production by 2.6 million tyres. 51 The combination of this extra output with the 30 per cent productivity improvement target implied a contraction
Page 1 and 2: Discussion Papers in Management and
Page 3 and 4: According to McKay and Grant the im
Page 5: institutional constraints that impa
Page 9 and 10: The SWP proposed a two-pronged atta
Page 11 and 12: productivity (productivity index) f
Page 13 and 14: None of the voluntary targets were
Page 15 and 16: Professor Bain found that Dunlop ha
Page 17 and 18: structure, but it soon became morib
Page 19 and 20: prepared to discuss common problems
Page 21 and 22: Bhaskar, Krish. The Future of the U
Page 23 and 24: 1983. NEDO. Industrial Strategy. Re
Page 25 and 26: 10 Grant, “Government,” 101. 11
Page 27 and 28: 61 Ibid, 7. 62 Ibid, 8. 63 NEDO, Th
Page 29 and 30: 119 Wilks, Industrial Policy, 268.

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