Automotive industry

Battery failures like Johnson Matthey’s risk to leave UK manufacturers disconnected | Automobile industry

The end of the internal combustion engine was one of the goals identified by Boris Johnson before the Cop26.

The Glasgow climate summit has partly yielded results – some automakers and a few major countries announced last week that they would end sales of fossil-fuel cars by 2040. Neither Volkswagen nor Toyota, both more The world’s largest automakers, did not sign up, due to concerns about the availability of electricity from chargers in poorer countries, but nonetheless the way is clear. Gasoline and diesel are on the way out. Battery-powered electric cars are on the way.

It is therefore surprising that Johnson Matthey, the chemical company of the FTSE 100, announced on Thursday that it was abandoning plans to expand into the lithium-ion battery market. For years, the FTSE 100 company had touted its bespoke battery technology as the perfect replacement for its revenue from catalytic converters for diesel cars – nearly two-thirds of its sales. Now he says he will try to sell the company, abandoning a factory in Poland and a planned one in Finland.

The withdrawal from the company – accompanied by the “retirement” of its chief executive, Robert MacLeod – suggests that the blue-chip company’s vision for the future is no longer so clear. A further breakup of the business, a few years after its 200th anniversary, is a serious possibility, according to investment bankers. Without a compelling growth story, Johnson Matthey himself might be advised to hire bankers to prepare a defense against well-funded private equity firms that have already done light work of a series of engineering pillars. British.

Beyond the implications for one of Britain’s oldest listed companies, the signal it sends to UK industry is unwelcome. Johnson Matthey emphasizes – accurately but belatedly – that battery manufacturing is a game of scale and that its competitors are far ahead. China, Korea and Japan have a huge lead. The EU and the United States have also woken up and are investing quickly in new “giga-factories”.

In the UK, the government-funded Faraday Institution suggests that automakers will need an annual battery output of around 140 GWh by 2040 to support the auto industry at a level comparable to its weight. current economic. There has been one verifiable success so far: Chinese manufacturer Envision’s pledge to produce 38 GWh per year in Sunderland. The Britishvolt startup is gaining momentum to fund another. Still, some observers are skeptical that the UK will one day come close to what the government is hoping for – suggesting the auto industry could contract quickly.

There are reasons for hope, especially in the UK’s unchallenged academic excellence. It’s now a well-known trope in the industry that the UK (or academics at Oxford University) gave the world the lithium-ion battery, but it’s Sony of Japan that gave it to the world. has put on the market. Now British scientists (including, always, those of Johnson Matthey within a separate division) are among those battling to produce a solid-state battery – possibly the next step in crucial energy density research – and government-funded organizations are poised to commercialize any technology that emerges from the laboratory.

But, as senior officials point out, Britain can’t afford to wait a decade for the next generation of batteries. Automakers are investing now, and once these relationships and supply chains are lost, they are not easy to regain.

Most economists use a gravity model of international trade: the closer and larger two companies are, the more likely they are to trade. Decisions like Johnson Matthey’s will not on their own destroy the UK auto industry, but every time someone decides not to invest in the sector, the UK’s attraction to new investment wanes.

Bright sparks amid the gloom at M&S

Marks & Spencer gave its long-suffering shareholders an early Christmas present – and some hope – last week as it put the financial turmoil of the pandemic behind it. Annual profits would, he said, climb to £ 500million as shoppers returned to his clothing shelves and food halls.

Jaded followers of M&S, with its record of false dawn, may find it hard to believe their ears. But credit where credit is due. After more than four years, the duo of turnaround expert Archie Norman as president and uncompromising M&S Steve Rowe as managing director are starting to prove their worth, with a 10% increase in food sales and a “Substantial improvement” in its clothing and housewares divisions. The pair did what previous teams failed to do: make unpopular decisions to close stores and perform serious surgery on their clothing business.

But it’s more than a two-person show, though big decisions like the joint venture with online grocer Ocado now seem smart, even though the city questioned the price at the time. An experienced team of fashion executives assembled their clothing lines as part of a project led by Richard Price, who returned after a stint at Tesco, where he managed his home goods and F&F clothing.

In food halls, Stuart Machin – who is seen as a candidate for the next CEO – is leading the charge with the new products and lower prices needed to lure the top-spending families into department stores.

But let’s not get carried away. M&S has benefited from pent-up demand for wardrobe updates triggered by the end of the lockdown – it might not be as robust next year – and the closure of hundreds of Debenhams and Arcadia stores.

M&S shares nearly doubled this year and ended the week at an over two-year high of 240p. Major rivals privately admit that a strong M&S is good for everyone on Main Street. Hopefully this is a trend that M&S ​​can make last for more than a season.

Free ports are a zero-sum game played with taxpayer money

This week, the government’s much-vaunted free port project will become a reality. Promised by Chancellor Rishi Sunak, as a vital part of the leveling toolbox, and as a Brexit benefit, the low-tax zones will be enabled by government legislation on Friday.

Three sites in England will be the first to emerge – Teesside, Humber and Thames – and five more will follow. Free ports in Scotland, Wales and Northern Ireland are also planned, subject to talks with a recalcitrant Treasury.

Offering tax breaks and streamlined customs arrangements, Freeports are being sold as a way to revive the economies of cities abandoned after decades of neglect, while also boosting the UK economy as a whole.

But the Treasury’s own economic watchdog, the Office for Budget Responsibility, warns there will be little noticeable benefit. At best, they will move business activity from elsewhere in the UK to the new areas. Indeed, companies will benefit from tax breaks for having mixed the pack. It is a zero sum game that is played at the expense of taxpayers.

Teesside has the best chance of success, with large tracts of brownfield land adjacent to the few remaining high-tech manufacturers, and first-class but underutilized port infrastructure. All of them constitute the backbone of a future cluster.

Providing a place of activity could stimulate growth. Public sector activism and ownership of key assets in the freeport area – under the leadership of local conservative mayor Ben Houchen – paired with a private company, could well prove powerful – if the project is executed well.

But there are risks. Free ports can be a haven for secrecy, tax evasion, crime and cronyism. The involvement of workers – to whom the benefits of economic regeneration are supposed to go – is sorely lacking, so that capital could be housed in free ports at the expense of labor.

Decades of austerity will not be reversed by more spinoff economy experimentation. While the ambition to catalyze regeneration is to be applauded, serious questions remain as to whether free ports are the way forward.