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Why The UK’s Auto Industry Remains Crisis Free

Liza Jansen, special for CNBC.com
Friday, 17 Aug 2012 | 1:29 AM ET

It’s not all doom and gloom for Europe’s car industry. Although continental European auto car makers are facing strong headwinds from the euro zone’s economic woes, the industry in the U.K. is flourishing and has managed to remain unaffected.

UK Auto Sector a 'Phenomenal Success'
Philippe Houchois, autos analyst at UBS, told CNBC, the industry virtually disappeared in the 80's but the UK's technical skills remained strong as well as the car brands, so from there foreign ownership came in and revived those brands.

This year alone Britain sold more cars abroad than it has imported for the first time since 1976 and U.K. car production jumped 22 percent in July, bringing the year-to-date increase to 15 percent, the U.K.’s Society of Motor Manufacturers and Traders (SMMT) reports.

In the past two years nearly £6 billion of investment has been committed to the UK automotive industry by international automotive companies, according to the SMMT.

In addition the multinational auto firm Jaguar-Land Rover has recently announced it is creating another 1,000 jobs at its site in Halewood in Merseyside.

The U.K.’s performance contrasts starkly with results of continental European automakers like French carmaker PSA Peugeot Citroen , which has announced restructuring plans that includes axeing 8,000 jobs by 2014, and weak results from Italian carmaker Fiat which reported second-quarter net income plummeted by 92 percent.

French automaker Renault also had a negative cash flow of €200m in the first six months of the year.

The U.K. car industry also benefits from a close collaboration with the government, Paul Everitt, chief executive of the SMMT, told CNBC.

Although the U.K. lost many of its top auto brands in the 1980s and 1990s, with flagship names like Rover, MINI, Jaguar, Land Rover and Aston Martin being taken over by non-U.K. firms such as Germany’s BMW and American carmaker Ford, the manufacturing of those cars continued to be based in the U.K. and allowed for a revival of the brands.

More recently, Asian original equipment manufacturers have reconfirmed confidence in the U.K. with Japanese automaker Nissan announcing it would produce its new hatchback at its Sunderland plant in North East England, and Indian automaker Tata Motors buying Jaguar-Land Rover for $2.5 billion from Ford in June 2008.

Although the U.K. has proven to be more resilient than other European auto industries, it isn’t shielded entirely from the euro zone crisis. “Without a return to sustainable economic growth across Europe all manufacturers will continue to face very difficult operating conditions,” Everitt said.

Contact Europe: Economy

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