Supporting information for the press release

The cost of losing LDV

Effect on UK economy

• Up to 4,000 jobs lost in manufacturing, engineering and sales forever
• £60m p.a. in parts purchased in the UK would be purchased abroad
• £50m p.a. export revenue lost and replaced by imports
• £100m in wages spent in the UK lost
• Investment in major manufacturing infrastructure lost forever
• Investment in UK engineering, research and development lost

Effect on Birmingham and the West Midlands

• Up to 1,000 jobs lost at manufacturer, suppliers and dealers in the area
• Jobs lost in high unemployment area increasing social issues
• Jobs lost are skilled in technology, manufacturing, sales and marketing
• Up to £25m p.a. wages spent in the local community lost

Effect on the UK government

• Over £40m p.a. in PAYE, NI and VAT lost from LDV, suppliers and dealers
• Replacement sales are from products made in foreign countries and UK government income lost
• Up to £13m p.a. in unemployment and associated benefit payments required

The investment required to finance a new LDV

• £60m total
• Assumes no investment from other parties which is clearly possible with support
• The £2.3 bn government Automotive Assistance Programme is not able to be accessed for these funds as this is for future R&D and not working capital to relaunch the business
• LDV would be eligible for the Automotive Assistance Programme and EIB loans if it can secure the funding to refinance the business first

The new management team
A highly experienced new executive team has been appointed over the last 12 months to deliver the change required in the business, with key appointments in the following areas:-

• Engineering
• Manufacturing
• Purchasing
• UK sales
• Export sales
• Marketing and PR
• Finance

Light commercial vehicle production in the UK status
Production of heavy trucks has all but disappeared from the UK, apart from niche specialists, with vans and light commercial vehicles about to follow which will impact car production.

Vans and light commercial vehicles are currently built by Ford in Southampton, Vauxhall (GM) in Luton and LDV in Birmingham.  Ford production is declining in Southampton and has been replaced by vehicles built overseas.  The Ford decision looks irreversible, due to the investment made in other overseas plants.   The future of Luton is complex and deeply uncertain until the GM Europe position is clarified.  The vehicle produced there is a joint programme between GM Europe and Renault. This only leaves LDV.

LDV is a stand-alone business that holds its own intellectual property rights, with design and manufacturing capability for MAXUS products in both diesel and electric form.  LDV is therefore a simple business model to make work to secure design, production and jobs in the UK.

In recent years over £600m has been spent in the design and launch of the MAXUS product range and a state of the art, lean, flexible manufacturing facility.  The business is now in a position to see a return on this significant investment – it should be unthinkable that this investment in the UK now goes to waste.


The building blocks to profitability for LDV
The biggest issues behind LDV losses in recent years have already been addressed by the new management team.  The remaining items have been identified and will be quickly addressed and the current economic climate favours the MAXUS product range.

Firstly the financial performance of the business. LDV lost £44m (EBITDA) in 2008 but well over half of this (£23m) was an exceptional one off loss on the sale of used vehicles.  This was due to a high level of used vehicle buybacks committed by the previous company, exacerbated by the collapse in used vehicle prices in 2008 which is well documented by CAP and BCA. This business has been eliminated in 2009.  The build quality of MAXUS has been continually improved since launch resulting in a reduction in warranty costs of over £1m p.a. from 2009.

Until 2009, LDV was structured to deliver high volumes to support major expansion into growth markets such as Russia with the associated costs.  In the first half of 2009 the business has been restructured by the new management team, to meet the needs of trading in the current global market.  Cost savings in fixed overheads and labour of £5-7m have already been delivered and a further £3-5m will be delivered from the restart of production.  The break even volume will then be brought down to 10,000 units from 17,000 making this an extremely viable, flexible, modern production plant.

After this business restructure, LDVs success now depends upon its ability to respond to the market and sell the required number of products at a competitive price. LDV now only produces the modern range of MAXUS light commercial vehicles from state of the art production lines only installed in 2005 and 2007.  

MAXUS is a lightweight, fuel efficient product that can carry nearly a quarter of a tonne more payload than key European competitors such as Mercedes, VW and Ford.  It was designed to be extremely reliable (using one of the worlds most proven diesel engines), to have a low cost of ownership, backed by a long warranty with dedicated commercial vehicle dealers to support customers.  At the launch of MAXUS, bigger, heavier, more expensive vehicles were seen as more attractive, however the market has now changed in favour of MAXUS.

LDV is also ready to be the first major brand and volume manufacturer to be able to offer customers the choice of both electric and diesel LCVs with the launch of the Electric MAXUS.  These vehicles have been designed in conjunction with major fleets and the DfT to provide the ideal solution for businesses, councils and local authorities.  They have already been tested in advance prototype form with key customers and feedback is that Electric MAXUS is the best product of its type in the market. Given customer, press and dealer feedback, LDV expects to take a leading position in the rapidly expanding and profitable electric LCV market from 2009.  It also expects to play a leading role in the supply of vehicles to the British public sector as one of a small number of suppliers to the DfT Low Carbon Procurement Programme.

With a UK manufacturing plant, LDV can attack Europe with the benefit 40% positive swing in the Euro/Sterling exchange rate during the last two years.  This will give additional profit of up to £5m (dependant upon forward exchange rates) and allow LDV to expand and compete in new markets which were cost prohibitive two years ago.

With global partners LDV can expand into new international markets such as Asia and other Euro territories conservatively increasing profits from £3-5m p.a. from 2010 and reducing the cost base of the vehicle with this additional volume by £3-5m.  The expansion into those new profitable markets allows LDV to withdraw from unprofitable market territories saving up to £2m p.a.

Market prices have increased by an average 9% since MAXUS last took pricing action. In addition to pricing action, LDV will increase the average profit per unit with the continued expansion of specialist vehicles and the addition of electric vehicles to the mix.  The net effect of these actions above material cost increases will be an increase in profits of £4-5m.

The profits generated from this investment into product, lean manufacturing and new markets will fund the necessary product development and improvements in the core product to maintain competitiveness over the coming years.