Ford, UK: Business creation and entrepreneurship
In 2000, the Ford Motor Company announced its decision to end vehicle assembly at its main UK production site in Dagenham in east London. As a result, the company wished to make a concerted effort to help compensate for the loss of employment at the site and its resulting impact on the local economy. In conjunction with local colleges, Ford established and developed the Centre for Engineering and Manufacturing Excellence, along with a business incubation centre.
The Ford Motor Company is a US-owned multinational motor vehicle manufacturer and finance company, with worldwide sales amounting to USD 177 billion (about €130 billion as at 9 May 2007). In 2005, the company recorded a loss of USD 3.9 billion (about €2.9 billion) in its vehicle manufacturing operations, although this was still more than compensated for by a USD 5 billion (around €3.7 billion) profit in its finance division.
The company employs approximately 13,000 workers in the UK at its production, administration and research sites in nine locations. These sites do not include the other UK vehicle manufacturers owned by the company – namely, Land Rover, Jaguar and Aston Martin. Ford’s UK operations form part of the company’s European division, which is managed from its European headquarters in Germany. The site at Dagenham in east London is the company’s largest site in the UK and has been operating since the 1930s.
Ford has long recognised the presence of trade unions; the largest trade union presence in the company is maintained by the manufacturing, technical and skilled persons’ union Amicus and the Transport and General Workers’ Union (T&G). Negotiations over pay and conditions at the company are seen as a benchmark for the rest of the industry and, more widely, for the manufacturing sector.
The worldwide overcapacity in the car industry has had a substantial impact on operations in the UK, with all of the major companies cutting back on production and reducing employment levels. Beyond complying with the minimum legal requirements in terms of consultation and redundancy payments, companies closing facilities in the UK are under no obligation to make any further social provisions aimed at lessening the impact of downsizing on their former employees or on the local economy.
Description of the initiative
In May 2000, Ford announced its decision to close the vehicle assembly operations at its main site in Dagenham, east London. The process lasted nearly two years, with the closure effective from February 2002. During that time, Ford set up a two-level joint advisory board, appointed to oversee the process of redeployment, retraining and redundancy.
District trade union officials, along with local authorities, the London Development Agency and the Learning and Skills Council, joined forces with Ford’s management in the first-level board. At local level, plant managers and company human resources and training representatives worked together with the trade union representatives.
In addition to enhanced voluntary redundancy and early retirement packages, employees were offered a range of training opportunities. In the end, around 800 workers were redeployed to other Ford sites, while 1,100 took voluntary redundancy; the majority of the employees took advantage of some form of vocational training or other support.
In 2004, the company made a long-term commitment to the Dagenham site, investing GBP 169 million (about €249 million) in a new diesel engine facility, which resulted in the creation of around 400 jobs. However, the company had already decided to make more of a contribution to the local economy and to adhere to its corporate social responsibility commitments.
On the one hand, the company wanted to contribute to developing skills in the local area. The local authority areas nearby – namely, the boroughs of Barking and Dagenham and of Newham – are among the most deprived in the country, consisting of a high proportion of low-skilled workers and diverse minority ethnic populations. On the other hand, the company was also aware of the future potential of the area, in particular its location in the Thames Gateway area to the east of London, which is the focus of a major government housing and development project. The area is also set to benefit from the transfer of the Eurostar terminus from Waterloo to Stratford in 2007, along with the preparations for the London Olympics in 2012 with most of the new facilities being constructed in east London.
Against this background, the Ford company decided to establish a partnership with local stakeholders, including the London Development Agency, the London branch of the Learning and Skills Council and two local colleges at Barking and Havering. Each organisation committed funds to the project, along with the European Regional Development Fund, the Single Regeneration Budget, the Department of Trade and Industry (DTI) and the New Technology Institute Innovative Clusters Fund. Apart from these main stakeholders and funding bodies, several other supporting institutions and companies ensured that the initiative had access to a wide range of business connections in the area. The key element of the planned project was the establishment of a Centre for Engineering and Manufacturing Excellence (CEME), along with a business incubation centre for start-up enterprises.
The objective of the CEME is to provide a wide range of manufacturing-related courses, ranging from basic skills training to degree-level courses. As a result, Loughborough University was brought in as a partner. Although the university is based in the East Midlands, it has a reputation as a leading provider of degree-level engineering courses, particularly those linked to the motor industry.
The CEME proposal was put forward for approval to both Ford’s European headquarters and the board of directors of the US parent company. The project did not form part of the negotiations with the trade unions on restructuring, redeployment and redundancy. Instead, the trade unions were informed about the development rather than consulted over it.
The CEME and business incubation centre were opened in September 2003. However, some initial problems were encountered with the project, with cost overruns experienced both in terms of capital expenditure and running costs. In order to balance the budget and to ensure the centre’s long-term survival, Ford committed itself to investing a total of GBP 8 million (about €11.7 million) over a five-year period, which was matched by an equivalent injection of funds from the London Development Agency.
In 2004, a reorganisation of the centre’s management improved its operations, with the centre achieving a small surplus at the end of 2005. A new commercial director was appointed to market the facility, not just as a training centre but also for events and conferences. As part of the Ford contribution, the CEME acquired the training management subsidiary of Ford Britain and set it up as a wholly owned subsidiary, called the Outsourced Training Company. Management of the business incubation centre was contracted out to a specialist business centre operator.
Although the CEME is still in its early days, the centre is already providing training to Ford apprentices as well as a range of courses channelled through the two local colleges at Barking and Havering. In 2005, the centre appointed a dedicated person to oversee the development of pathways from lower-level vocational training to higher education courses in engineering, manufacturing and business studies.
From early 2007, the London Borough of Havering will transfer its training department to the CEME site. This will not only provide the centre with a substantial, long-term income, but also ensure more opportunities for attracting other businesses to use the centre’s facilities.
The Outsourced Training Company, once part of the Ford company, is now owned by the CEME; although it is still reliant on Ford as its main customer, the company has also been developing a wider customer base with local businesses.
The business incubation centre had initially been run by a company called London BIC, but this initiative faced its own financial problems and, by the end of 2004, the CEME had only managed to increase occupancy rates to 25%. A new three-year agreement was subsequently signed with a company called Basepoint in 2005 and, by April 2006, the occupancy rate in the business innovation centre grew to 66%.
The centre can provide space for about 40 businesses employing a workforce of between two and 10 people per unit, allowing for a total of about 200 active personnel in the centre. The 25 companies active in the centre in early 2006 employed just over 100 workers altogether and were involved in a variety of fields, including information technology (IT), fuel cell development, catering, food preparation, financial services, website development and human resources consultancy.
The business support centre provides the start-up companies with a range of advisory services, including banking and business planning services, and the aim is to restrict access to start-ups or small companies with a manufacturing or engineering link insofar as possible.
Exemplary and contextual factors
The CEME and business incubation centre represent a unique initiative in the UK in the way that they have attempted to address the impact of restructuring on an economically deprived and ethnically diverse area. Although Ford developed the basic idea, the company involved a range of partners at an early stage. These partners consisted not only of local stakeholders, but also of key organisations such as Loughborough University; the latter institution has helped to ensure that the CEME provides a unique possibility for students, enabling them to follow a vocational training path all the way from basic skills training to degree-level education.