Iain Cameron's Diary
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2006-09-08 - 8:24 a.m.

James enjoyed Crimea – one of his long essays for his finals was on the Yalta conference and so he liked seeing the real locations where the historical drama unfolded.

I am drawing some mild psychic satisfaction from the fact that my estimate of the value of Aston Martin seems to be in the same ballpark as better qualified industry observers – which is around half Ford’s initial asking price. I got to my number by taking a time horizon, an expected production volume annually and a profit per car. The Harvard study of Porsche was particularly helpful on this latter parameter – it has a figure circa 1998 for the profit per car. The more one looks at how Porsche in the 90s the more interesting it gets – not least their deployment of Japanese lean thinking. They were one of the first German companies to pick this up.

Porsche linked up with a Finnish firm which has an interesting history. Finland was on the wrong side in WW2 and at the end of the war the USSR demanded reparations. As part of this the Finns consolidated a number of their engineering firms into a single organisation – which in the event didn’t get handed over to the USSR. Anyway in the 1990s this Finnish niche outfit linked up with Porsche. I have a chance to go to a conference in Finland in early October and I am currently in two minds whether to go.

Reasons against include the tendency for it to combine excessive academic arrogance with the bad aspects of EC bureaucracy which can drive you mad with two or three hours. Reasons in favour include getting a better idea of Finland which is globally right at the top of competiveness rankings and also staying closer to the Germans. There is also the fact that Finland isnt far from St Petersburg and there is a massive amount of global investment homing in on that region.

I used a link from this source to get to the Fraunhofer and get hold of a copy of an internal national review they had done on technical education – in german. Then I got the launch team for the national maufacturing skills academy to translate it into english and I have been able to feed it into my Coventry paper. In fact I sent the paper to a contact in Oxford yesterday – it’s a research council centre of excellence – as far as I can say this is the same institutional form that is funding James’ research.

At the moment I am thinking in terms of a central european luxury automotive cluster which starts in Stuttgart and extends through Munich then Steyr in Austria and Gyor in Hungary where the Audi TT is made. Stuttgart is especially interesting as it is where the HQ of Mahle and Bosch are – two very succesful organisations which happen not to be companies but charities. In fact discussing this with a colleague who used to work for Ford we reflected on what charming company Bosch senior management make – aristocratic German engineers with a liberal education.

There is a firm on our business park that supplies into this grouping which is moving into some complex private equity arrangement with a quirky US entrepreneur. I am going to a conference on niche automotive engineering next week in Norwich which is organised by Lotus – they are owned by Malaysians I think.

I came across a good article on global light commercial vehicle production. The uk has about 10% of european total production – which is in line with our share more generally in automotive . Just hangining onto this 10% is a reasonable objective given that automotive is much more dominant in French and German economies. I am trying to understand how this segment works – Ford and Toyota make light commercial vehicles in Turkey – maybe 350k per annum. There is also a Ford plant in Southampton and obviously the worry is that this will migrate east.

The question is whether certain dynamics in the value chain prevent this – I am thinking of the way that light commercial vehicles are only half finished when the come out of the large maufacturing plant. Finishing and customising takes place subsequently but I don’t understand quite how this works. I can see companies in this area doing this with the classic Land Rover – but this is an extreme case and the vehicles end up as amazingly expensive and specialised units, For example if you wanted to put an operating theatre on a reliable 4WD base and take it into the Sahara desert then these are the people to make you one. They also do firefighting units and very very heavily armoured units too. In fact the deeper you dig into the west midlands niche vehicle cluster the more defence vehicle production you find. JCB have won a big order for armoured diggers etc from the US army.

The new Nissan SUV-light that was launched in Paris this week is interesting in that it was designed at Cranfield and in London and will be built in Sunderland. Nissan-Renault are now heavily based in Paris and are trying to link with GM. This whole configuration has ‘UK so what’ written all over it – GM unlike Ford regard the UK as a branch of a branch. But the UK integration of the value chain in this way is a positive sign. If Sunderland can make a more specialised vehicle with the same efficiencies that it achieves in volume car production then the longer term looks a lot better.

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