Reference no: EM132075608

CASE

CLOSING THE MG ROVER PLANTS: THE AFTEREFFECTS

BACKGROUND The closure of the MG Rover plant at Longbridge, Birmingham, England in April 2005 was one of the largest industrial failures seen in the U.K. for some 20 years, with around 6,300 workers losing their jobs when MG Rover went into administration, and several thousand more affected in the supply chain. The scale of the job losses in an already economically disadvantaged region and the loss of the last remaining British-owned car manufacturer combined to highlight the consequences of the ongoing decline of manufacturing and the associated human costs of structural change. By February 2006, of the 6,300 unemployed resulting directly from the collapse, around 4,300 were back at work (90% of whom were working full-time). A further 667 were in training or awaiting training, 398 had received training but were still not working, 530 were not working and had not received any training, 443 had unknown destinations, and 257 had claimed alternative benefits after claiming Job Seekers' Allowance (RTF, 2006). THIS REPORT This report presents findings on where people now live and work relative to before the closure. It also provides a survey that investigates their lives. KEY FINDINGS Key points from the report's findings are:  Most workers are now in full-time employment on permanent contracts;  Most employees have witnessed a significant drop in salary relative to their MG Rover wage, on average a decrease of £5,640 (adjusted for inflation), but post MG Rover salaries are highly differentiated;  Managers are earning about the same as they were at MG Rover, just £1,280 more (adjusted for inflation). Those now working in some service sectors took average cuts of more than £6,000 per annum compared to their final salaries at MG Rover;  25% reported being in debt or needing to draw on savings and 36% were ''just about managing;''  66% of all ex-MG Rover workers reporting being financially worse off now;  Those who found re-employment sooner use similar skills to those they used at MG Rover and earn more than other ex-MG Rover workers;  Of those who were still unemployed eight months post closure, 80% underwent some forms of training;  Overall, 60% of workers received some form of training or educational support, with 40% taking up the offer of free training;  Workers who took up training reported higher satisfaction and less of a decline in health than those who did not receive any form of training;  Workers re-employed sooner reported higher levels of overall job quality with higher life satisfaction and lower anxiety levels. Overall, the vast majority of ex-workers surveyed (90%) are back at work, with most in full-time work on permanent contracts. Behind this ''success story,'' workers nevertheless reported difficulties in finding a job, with the main perceived barriers being age, skills and experience, and the simple fact that there were too many people applying for the same jobs (not a surprise given the scale of job losses at MG Rover and the level of unemployment in parts of Birmingham when the plant closed). In overcoming such barriers to find work, personal initiative and networks have been the key to ex-workers finding jobs. The jobs that ex-MG Rover workers have found are highly diversified, with only 30% working in manufacturing and a mix of both lower and higher occupational status. The gross average salary of workers has decreased (on average by £5,640, adjusted for inflation, for workers in full-time employment) even three years after closure. A third of respondents have actually reported an increase in salary. People who found work in four sectors--wholesale and retail, real estate and business services, education, and health and social work--took average cuts of more than £6,000 in annual income (adjusted for inflation).

ived some form of training relative to those in our sample who had not. Only a third of ex-workers surveyed felt that their current job was better than the one they had at MG Rover. Nearly half felt that their job was worse than the one they had at MG Rover. Nevertheless, a majority of workers still like the work that they do and expected to be doing it for the foreseeable future. Some Policy Implications Much work was done by the RDA Advantage West Midlands and other agencies before the MG Rover closure in diversifying the supply chain and economy. This work may have ''saved'' as many as 10,000-12,000 jobs in the supply chain (Bailey and MacNeill, 2008). When MG Rover finally closed in 2005, the MG Rover Task Force Mark II was able to hit the ground running on the day of the announcement of the closure. Such advance preparation could work well in future closure situations, since it is unlikely that a future closure would happen without at least some prior warning. This lesson points toward the need for good ''institutional memory'' of how to work in such a situation and having a permanent capacity to deal with such situations. Keeping knowledge available would help with advanced planning and avoid ''fire fighting'' in the future. Our research has identified three ''pathways'' back into re-employment, looking at different groups of workers (those employed by three months after the closure, those employed eight months on, and those still unemployed at eight months but in employment by three years after the closure). The impact of the closure across these groups has varied, suggesting that a greater degree of differentiation in support may be appropriate in similar situations in the future. Such tailored support would combine to help psychologically, in making training and education available and accessible, enabling mobility (both in occupational and physical terms), counseling and support regarding finance and debt, and help for partners to retrain and/or enter work.

Questions for Discussion

1. How do you evaluate the outcomes described in this case?

2. Should workers be forced to change industries?

3. What key dimensions would you evaluate to determine success?

4. Compare these findings with more recent changes in Detroit and Toyota City.