Nick Reilly: 'We need to stop thinking that the world owes us a living'

The West does not realise the challenge from Asia, the chief executive of Opel/Vauxhall, tells Sarah Arnott

Nick Reilly does not pull his punches. "We need a radical change in the way we look at ourselves," the chief executive of Opel/Vauxhall says of the world's developed economies. "We need to stop thinking that the world owes us a living."

He is not grandstanding; he speaks from experience. Mr Reilly is one of the superstars of the British car industry. He started in 1975 at Opel/Vauxhall's parent company General Motors, and has had a globe-trotting career which included stints running Vauxhall's Ellesmere Port factory, then the whole UK business. He has spent the past eight years in Asia – six of them in South Korea, then two in China – before being parachuted in to turn around GM's European operations after the resurrected US parent company decided to pull the plug on the sale of Opel and Vauxhall to the Canadian auto parts maker Magna International.

Mr Reilly, who has been back in Europe since November, says the most striking difference between developed and developing countries is the work ethic. "People in Korea, in China, even in South America, work very hard. There is a genuine desire to improve, and a recognition that to do that they need to work pretty hard."

It is a commitment rarely paralleled in the West. "We are still complacent despite the massive economic shift that is taking place as these countries start to flex their muscles," Mr Reilly says. He is a large man, but he speaks softly – with deliberation, not drama. "We will become the developing rather than the developed countries soon, at least in terms of standard of living."

In the old-world splendour of our meeting room at the Royal Automobile Club on London's Pall Mall, the spectre of economic decline seems a world away. From the Red Bull F1 racer in the thick-carpeted atrium, to the oil paintings of presidents past, to the fabled Turkish bath in the basement, the RAC is a monument to tradition.

Such history does have advantages – but only if we make the most of it. Mr Reilly says the West still just about has the lead in terms of technical capability, and our universities are second to none. It also has the benefit of years of trading experience, where other countries just learning to do business overseas are more prone to mistakes. "We have the know-how and you have to be optimistic," Mr Reilly adds. "But we are complacent and I don't think we understand where we stand."

GM should know. The behemoth of the global automotive business was brought to its knees by last year's recession, becoming the biggest bankruptcy in US industrial history when it filed for Chapter 11 protection last June. Now reborn, it hopes to be at the vanguard of the West's continued economic competitiveness – starting with a massive structural overhaul. In Europe, Opel/Vauxhall is negotiating with EU member states for €1.9bn (£1.7bn) of loan guarantees to help the embattled group fund its turnaround. The British Government was the first to put its hand in its pocket. It underwrote €300m earlier this month and was relieved to escape with "only" 500-plus job cuts out of the 8,300 Opel/Vauxhall will make across Europe as it slashes production capacity by a fifth.

The Government's pledge is not only a desperate effort to keep the company's British factories open. It is also a prime opportunity for the "new industrial activism" espoused by Lord Mandelson, the Business Secretary, over the past year. To rebalance Britain's ailing economy with "less financial engineering, more real engineering", ministers have put together an industrial strategy supporting designated "strategic" sectors, such as clean energy and green cars. Electric vehicles are already a central theme in the global automotive industry; the challenge for the Government is to bring the work to the UK.

Opel/Vauxhall is a prime target. Its Ampera model, pictured right, will hit the streets of Europe next year, and Ellesmere Port, which already builds the similarly-sized Astra – is angling for the production contract. Until the Ampera goes on sale, and the company can judge the scale of demand, GM will not make any decision about building it in Europe. But if demand does prove sufficient, then the Cheshire factory is certainly a front-runner, Mr Reilly concedes, getting as close as the company has come so far to expressing a preference. But he makes a deliberate point that investment sweeteners and even an established supply chain are not the only factors weighing the balance. "If the UK goes the way the current Government is talking, and incentivises purchases of very green vehicles, it will build a domestic market, and that makes a stronger case for Ellesmere Port," he says.

In the meantime, Lord Mandelson claims to have already made significant progress in establishing Britain as a hub for electric vehicles, with a major boost from Nissan's decision last week to build its all-electric Leaf in Sunderland. Mr Reilly says the vision of a burgeoning new industry is not entirely far-fetched, if major car-makers' plans attract component suppliers and develop an effective supply chain. But talk of expansion plans and industrial strategy takes the conversation straight back to Asia. "In the UK we are starting behind because we haven't had a specific strategy to go after advanced vehicles," he says. "China has been investing billions and billions for the past three or four years already, as has Korea."

To compete, Britain will need more than trickles of public money to tempt multinationals. Mr Reilly believes it will need to involve the universities, conduct highly focused research that is available to the domestic industry, and tweak the tax regime both to draw in suppliers and boost demand for their products. "For anybody in Western Europe to become a real centre of expertise it will have to be a deliberate strategy," Mr Reilly explains. "It is not an unrealistic aim, but it will not happen by accident."

There has been some progress, Mr Reilly says. The Government's attitude is undoubtedly "very different" now, compared with the last time he was doing business here. And he has no time for the criticism that Labour is misguidedly returning to a "picking winners" industrial policy that was discredited in the 1960s. "You can call it 'picking winners' or whatever, but every serious government around the world that values manufacturing is doing exactly the same," he says. "We are naïve to think it is an open playing field."

So many years of living abroad has clearly not taken the edge off the lifelong attachment that Mr Reilly has to British industry. "It depends whether you think the country needs manufacturing or not." He shrugs. "I honestly believe we need a mixed economy and I'm encouraged by the recent changes, but we will have to see whether or not there is real intent behind the rhetoric."

From his new base at Opel/Vauxhall's headquarters in Rüsselsheim in Germany, Mr Reilly has a ringside seat for the next round in the West's response to the challenge from the developing world. "It depends whether we want to stay with a relatively high standard of living or to fall rapidly behind," he says. "And it will be rapid."

Scared at the scale of the threat? "You should be," he says, laughing, but not joking.