Survive and thrive
The backdrop isn’t promising. In late July the CBI Industrial Trends survey indicated that manufacturing order figures were the worst for 17 years. And figures published by the Liberal Democrats indicated that 10,000 motor industry jobs have been lost this year.
But sometimes you don’t need statistics.
In the Midlands the newspapers and local television news channels have been full of job losses at the likes of JCB and Wedgwood over the past six months. The LDV saga seemed like a death by a thousand cuts while fears for the future of Jaguar Land Rover (JLR) haven’t gone away.
But there is another side to the Midlands manufacturing story. It is a story of winning against the odds, of tailored support packages for different manufacturing sectors and of innovation, in terms of underlying product and process development, and identifying niche markets.
The key to this is the understanding that plain vanilla products that can be made more cheaply elsewhere will be. To survive, manufacturers need to offer something different or better. And the intelligence behind such strategies needs to stay in the region.
A good example of a company employing this type of approach is Fracino in Birmingham, a producer of cappuccino and espresso coffee machines, which ended 2008 with a record turnover of £2.6m. It now exports its machines to five different continents and is the first company of its kind to gain the coveted ISO 9001 quality standard. Fracino’s new bean-to-cup coffee machine, the Cybercino, won the top prize in the Caterer and Hotelkeeper Equipment & Supplies Excellence Award for technical innovation and expertise for 2009.
Customer service is also an important part of manufacturing success, as Fracino’s managing director Adrian Maxwell confirms.
“Because all products are produced on site, parts are always in ready supply. This means repairs and customisations are swift and customer service is consistently strong, with rapid responses to customer queries – all factors held in high regard by our clients in the Middle East and Far East,” he says.
The mention of foreign markets is not accidental. Because the pound is weak companies are being encouraged to export their way out of recession. Fracino has used the economic climate as a springboard to move into the Middle and Far Eastern markets as well as increasing its market share in Western and Eastern Europe.”
Another company in Birmingham looking at opportunities overseas is lifting engineering specialist Lloyds British Testing. It is capitalising on the growth of the West African oil business by opening a division in Takoradi, Ghana. The office will support demand in Africa for Lloyds’ products and services from the oil and gas industries.
Chief executive Ian White says: “This is a big investment for us. But we are convinced our market in Ghana and its surrounds will reap sizeable benefits for the business and enhance our international client base.
“Customers in West Africa will gain access to our network of facilities, which include lifting equipment, certification, inspection training and repair.”
Taking opportunities of this kind is another indicator of a manufacturer that should do well even in difficult markets. Simon Griffiths, the chief executive of specialist support body the Manufacturing Advisory Service-WM, is convinced the West Midlands can still be a force in world manufacturing as long as it continues to innovate and make the most of the region’s research and development (R&D) facilities.
Griffiths, a mechanical engineer who spent more than 25 years in the automotive sector, says an opportunity exists in making the most of advancements in the automotive, aerospace, rail, medical technologies and low carbon industries.
“Manufacturing is still the biggest creator of wealth in the West Midlands,” he says. “The sector has been hit hard by the global recession, but it is again showing its resilience by facing challenging trading conditions head on and looking at ways of improving efficiency, eliminating waste and winning new business.
“Manufacturing in the West Midlands has already been forced to evolve, adapt and toughen up to compete, not just as a result of the recession but as a result of decades of economic restructuring.
“Innovation holds the key to the continued success of manufacturers. However, investing in innovation and new products is not easily achieved when budgets are being cut and cash flow is tight.”
Often the problem is that manufacturers are so busy with day-to-day survival that strategic planning has to take a back seat. This is where outside help – whether R&D facilities and consultancy services at a university, or national or regional support initiatives – can really help. Private equity firms taking a stake in manufacturers can also introduce a new way of thinking. As Mitch Titley, partner at private equity firm Gresham in Birmingham, says: “We can help in areas such as strategy. Businesses don’t always stick their head above the parapet.”
Titley says the criteria his firm looks for in a company are no different in a recession to any other time. “I’ve got no problems about being involved in businesses hit by the recession,” he says. “One of our investments is in East Midlands-based Dimensions Corporate Wear, which supplies uniforms to companies such as Tesco. It has been hit hard by recession but it is a good business and needs to ride the storm.
“It comes back to management. A team that tackles issues early and reacts quickest will survive and thrive. Others that don’t will struggle a bit more.”
One of Gresham’s big investments in the Midlands has been with stairlift manufacturer Minivator in Kingswinford. “When we took it on it was a fairly small, unsophisticated business,” says Titley. “Since then the company has focused on improving its products and service. We wanted to help improve some of its core areas.
“The business isn’t hugely linked to recessionary spend. It has different drivers. Its turnover was £38m this year, compared with £24m when we took it on. And it’s on target to exceed that this year.
“One of the areas where we help is the money we spend on R&D to help improve systems and service levels. It’s about putting new technologies in to make products more user-friendly. For example, we can now monitor some of the stairlifts remotely. From a safety and security perspective that has wide implications.”
It may be too early to call the bottom of the recession, but it’s encouraging that companies that have suffered are starting to show signs of recovery. One is specialist engineering business Metalrax in Birmingham, where the jobs of hundreds of workers look much safer than a few weeks ago now that a refinancing deal has been agreed with a bank. Fears grew for the company’s future when it reported a £16.2m loss for 2008.
Speaking about the refinancing package, chief executive Andrew Richardson said: “The refinancing of the business is a crucial step in securing the future of the business and re-establishing us as a major force in the UK engineering sector.”
And Staffordshire digger maker JCB, which has laid off hundreds of workers because of reduced demand from the construction sector, has won a number of big orders, including a multimillion-pound deal to supply Copart UK with a fleet of 42 wheeled loading shovels.
It’s agreed that the future of Midlands manufacturing lies in innovation and clear strategic thinking, but the skills base needs to improve. Stewart Towe, chief executive of manufacturer Hadley Industries Holdings in Smethwick, says apprenticeships could be one of the solutions to that problem and he has invested heavily in this area.
“Our apprenticeship scheme is integral to Hadley’s continuing success,” he says. “To support that we have built a dedicated training and development facility. Our apprentices train in a proper working environment with machinery that duplicates what is on the production shop floor.
“The facility is self-funded. All our technical apprentices move around the company to gain full experience. Our technical apprentices often go on to higher education – they don’t have to stop learning. We encourage them to take an engineering degree if they want to and fund them for one day a week over three years. They are still our employees, and when they finish their degree they come back to us.”
AUTOMOTIVE
The Midlands is intrinsically linked in people’s minds to the automotive sector, and with the collapse of LDV and car factory closures at Rover in Birmingham and Peugeot and Jaguar in Coventry it’s hard to counter the perception of an industry either in decline or moving to cheaper production centres.
But the Midlands automotive sector is more varied and complicated than that. The pool of engineering talent in the region builds specialists cars such as Aston Martin, does a lot of the technical work behind Formula One motor racing and involves a huge supply chain working with vehicle manufacturers nationally and internationally.
Many of these manufacturers are still very successful. Birmingham’s Grayson Thermal Systems, which produces cooling, heating and air conditioning products for the bus and coach market, specialist off-highway vehicles and diesel-powered engine industries worldwide, is one of them.
The company has invested millions of pounds in a new premises and equipment to develop products and enter new markets in Europe and the US. The premises include a furnace to boost production by 400 per cent. The associated infrastructure and additional equipment is being specified and installed.
Chairman Graham Hateley said: “We made the decision to expand late in 2007 and developed a strategy that would help us achieve our goals.”
But then the recession came along. So it should be mentioned that the latest phase in Grayson’s growth has been made possible by a £249,000 Grant for Business Investment from regional development agency Advantage West Midlands (AWM).
“Over the past two years we have done a lot of work on developing export business in Europe and opened a business in North America, which is making good headway,” says Hateley. “We are redoubling our focus on export markets in 2009 because the pound’s weakness against the dollar and the euro enhances our proposition.”
Another company supported by AWM is Wednesbury’s Sirus Automotive, which makes wheelchair-accessible vehicles. AWM provided a £249,000 grant to help the company move to larger premises and invest in new equipment to increase production.
The company’s potential has been recognised – it has been awarded the Queen’s Award for Enterprise in the category of innovation. Simon Pearson, co-founder and managing director, says: “It shows that a young company such as Sirus can succeed in today’s difficult times. We have heavily invested time and money into new product development over the past five years, which has allowed us to push the boundaries of the mobility market.”
Organisations such as AWM have been fighting a rearguard action to deal with the effect of closures while trying to promote new initiatives. Companies are being encouraged to explore new and growing overseas markets in the automotive sector by attending the Auto Expo in Delhi, India, in January 2010.
The automotive supply chain has also been boosted by a £3.5m support package, launched by Ian Austin, West Midlands Taskforce chair and regional minister. The funding, which will come from AWM and the European Regional Development Fund, is designed to provide struggling component part-makers with up to £50,000 of strategic consultancy to help with consolidation, refinancing, new product introduction and restructuring. The Automotive Recovery programme will be delivered by the Manufacturing Advisory Service, in partnership with Accelerate, and try to help more than 120 companies ranging from small businesses to tier ones and even local car producers.
As far as future products are concerned, most seem to agree that at least part of the future is green. Coventry van-maker Modec has led the charge. The self-styled ‘first manufacturer of purpose-built zero-emission vehicles,’ was set up in 2004 by a team of automotive engineering specialists.
The potential for green vehicles is there for all to see. Modec is expanding rapidly and international dealers are being established in France, the Netherlands, Spain, Germany, and Ireland.
These initiatives also have backing from regional business bodies. The West Midlands Business Council (WMBC) wants vans to be given equal status with electric cars in the green agenda. David Caro, WMBC board member and Federation of Small Businesses’ West Midlands Regional Policy Unit chairman, welcomed the establishment of a low-carbon transport strategy and hoped it would boost the region’s automotive sector.
“We believe the process of ensuring more vans become electrically powered is more straightforward than for electric-powered cars because the production process for vans is less complex in terms of assembly,” he says. “It may well be easier to create facilities for charging/fuelling in an industrial environment and conurbation, and be more commercially viable for companies than for the domestic user or commuter. As a consequence the uptake of the technology may well be more rapid.”
Experts believe initiatives of this kind may well play a part in the future of the regional automotive sector. Gill Bentley, a specialist in industrial policy at the University of Birmingham, says: “Toyota has gone down the green technology route and the government is trying to get JLR to do this as well.
“Advantage West Midlands’ automotive industry strategy is very much focused on the green agenda.”
But Bentley says companies need to do more to innovate and that universities have a larger role to play in the future. “It is important for companies to work with the universities,” she says. “It is something that has been promoted by us but more work needs to be done in this area. But it also comes back to the point that companies need to have a strategic overview.”
AEROSPACE
Aerospace is often promoted as a successful sub-sector of manufacturing that automotive could learn lessons from. Whether this is a fair assessment is debatable, but there seems to have been fewer negative headlines about this sector.
That doesn’t mean progress has stopped in the sector. The government has announced a £151m package of measures to boost advanced manufacturing to encourage take-up of new technologies and address specific challenges.
Measures include £45m for Rolls-Royce to build four advanced manufacturing facilities in the UK – three in aerospace and one civil nuclear. Whether the Midlands will be home to one of these bases was unclear as Insider went to press. And the Manufacturing Advisory Service will be expanded to help a wider range of businesses improve efficiency and increase orders.
Advanced manufacturing relates to businesses that use a high level of design or scientific skills to produce technologically complex products and processes. The government’s latest proposals include at least £40m is to be invested in a collaborative aerospace project focusing on productivity and environmental improvements – with £28.5m from the Technology Strategy Board, £11.5m from the Engineering and Physical Sciences Research Council and more support with regional bodies.
The Technology Strategy Board will invest a further £5m in collaborative R&D projects as part of its high-value manufacturing competition, in addition to the £24m invested this year. Business leaders have welcomed the launch. Bridget Blow, president of Birmingham and Solihull Chamber of Commerce and Industry (BCI), says: “It’s about time manufacturing is recognised for the great contribution it has made to the world, particularly in the West Midlands.
“The announcement provides a strong signal to manufacturers about the government's priority markets, sectors and investments, which will help them plan their growth. Innovative technology is vital to the success of our manufacturing plants.”
A team led by Birmingham’s Dunlop Aircraft Tyres has secured £120,000 of funding from the Midlands Aerospace Alliance (MAA) to research new ways to embrace modelling technology to reduce the time and cost of aircraft tyre development.
The project, which will involve significant investment from Dunlop Aircraft Tyres, is being run in conjunction with the University of Birmingham’s School of Mechanical Engineering, with support from Airbus.
It will help Dunlop Aircraft Tyres identify how it can use modelling to improve the design process of aircraft tyres and bring advanced products to market quicker.
Airframe, landing gear and wheel and brake manufacturers will be able to use output from this supply chain partnership to improve aircraft and landing gear system modelling and simulation – helping them reduce design time and cost.
Dunlop Aircraft Tyres’ chairman Ian Edmondson says: “We have an aggressive new product programme as part of our overall expansion. This funding gives us the chance to research new ways to make advancements in aircraft tyre design and remain at the leading edge of the industry.”
The project is part of the MAA’s Aerospace Technology Exploitation Programme, funded by the European Regional Development Fund and AWM. It is being led by DrWei Ding, head of research at Dunlop Aircraft Tyres.
As is the case elsewhere in manufacturing, aerospace companies in the West Midlands have been urged to diversify their plans and invest in new programmes. The messages were delivered by industry leaders at the Aerospace Cluster Forum, coordinated by AWM. Speaking at the event – held at TRW-Conekt’s conference facility in Solihull – Robert Nuttall, vice president of strategic marketing at Rolls-Royce, said the global power systems giant was broadening its portfolio to be in the best position possible when the economic recovery arrives.
“If you don’t invest now, you will not be ready for the upturn,” said Nuttall. “It is a tough message – we are all broke – but if we miss that upswing we are all in real trouble.”
Jim Coyle, aerospace cluster manager at Advantage West Midlands, added: “The challenges make it more important that the region’s aerospace cluster works together to identify and develop new niches.
“AWM will continue to bring businesses together. The cluster is strong and enables companies to exploit opportunities through collaborative business strategies. Our aerospace and defence sectors include more than 480 companies employing 20,000 people and generating an annual turnover of £3bn. These businesses underpin a huge amount of high-value jobs.
“Growth is forecast in the industry over the next 20 years, with developments including a programme to replace short-range aircraft such as the Airbus A320 and Boeing 737.”
