Geoffrey Owen: Don't shed too many tears when the last Ford rolls out of Dagenham

'The British motor industry is by no means a lost cause. It has strengths in high-margin niches'

The ending of car assembly at Ford's Dagenham factory this week will be widely seen as a symbol of British industrial decline. Although the closure will be partially offset by an expansion of engine production on the site, one is bound to feel sad, and even a little ashamed, at the demise of what was once the most productive assembly plant in Britain, and one of the best in Europe.

If Ford can make cars economically in Germany, with its high wage costs and strong unions, it seems odd that the same cannot be done at Dagenham. Is this purely a Ford problem, or has the mass production of cars in Britain become a hopeless proposition?

When Henry Ford, the inventor of mass production, built Dagenham in the early 1930s, it was larger and better equipped than its two British rivals, Austin at Longbridge and Morris at Cowley. The factory lost money for the first few years because demand was depressed, but it came into its own in the booming markets of the 1950s and 1960s. Thanks to well-designed models such as the Cortina, and a professional approach to management (bright young graduates regarded training at Ford as almost equivalent to a Masters degree from a US business school), Ford took market share away from Austin and Morris at home, and became a successful exporter.

But, in common with the British-owned companies, Ford never got its labour relations in order. Ford's authoritarian style, derived from the US, and its insistence on dealing only with national union officials, allowed shop floor militants to build up a power base, and the result was almost continuous guerrilla warfare, both at Dagenham and in the newer plant at Halewood, on Merseyside.

Thus, when Ford set about integrating its European operations in the 1970s, strike-free Germany looked a more attractive location for new investment, and as a base for supplying export markets, than Britain. This was a dark decade for Ford in Britain, as it was for other manufacturers, and neither the company nor the industry ever fully recovered. Even though labour relations improved dramatically in the 1980s, the legacy weighed heavily on Britain's older car factories. The productivity gap between Dagenham and Ford's German and Spanish plants was too wide. By contrast, when Nissan and Toyota built plants in Britain, they were able to make a fresh start on green-field sites, using labour which was not infected by the habits of the pre-Thatcher industry.

Dagenham might have survived in spite of these problems if Ford had done better in the market place. But in recent years the "blue oval" has been losing market share, especially in Germany, apparently because Ford cars are perceived as less stylish than, say, those of Volkswagen or Peugeot, and perhaps too American. As a result, Ford found itself with more assembly plants than it needed. The axe fell on Dagenham, not because of the strength of sterling, or because workers are easier to fire in Britain than in Germany, but because it was the least suitable for modernisation.

In the end, then, the closure was due to a combination of historical factors affecting the industry as a whole and Ford's particular circumstances in the late 1990s. To some extent, General Motors, which has owned Vauxhall since the 1920s, is in a similar situation – hence the decision to close the Luton factory, although the other assembly plant, at Ellesmere Port in Cheshire, survives.

Where does this leave car production in Britain? It is significant that, leaving aside the Japanese-owned factories, the three businesses which appear to have the most promising future are those which, back in the 1950s and 1960s, succeeded in establishing themselves as international rather than purely British brands. These are; the Land Rover, launched in 1948 as a rival to the American Jeep, and widely used by armies around the world; the Jaguar, a high-performance luxury car targeted mainly at the US; and the Mini, a highly original design which (despite being under-priced and difficult to make) was one of the few British cars to make an impact on the Continent.

Some people may regret the fact that all these businesses are now owned by non-British companies – Land Rover and Jaguar by Ford, Mini by BMW. But in all three cases there was something to build on – they had been aimed from the start at the world market, and thus had more staying power than Austin or Morris. The failure to internationalise in the early post-war decades was one of the British motor industry's biggest mistakes, and we are now paying the price.

As for foreign ownership, there is little doubt that Jaguar, having been caught up in the disastrous British Leyland merger and then floated as an independent company in 1984, could not have survived on its own. One can only applaud the massive effort made by Ford, since it bought Jaguar in 1989, to modernise the company and extend its range of models. It should do the same with Land Rover, which is in far better shape than Jaguar was in the 1980s.

The future of the new Mini, now made in the former Morris factory at Cowley, is more uncertain, but the new, BMW-designed version is selling well.

For mass production, we will be relying mainly on the Japanese, and here the outlook is somewhat more cloudy. Nissan, Toyota and Honda chose Britain as the location for their first European car factories, partly because the government made them welcome. But it does not follow that Britain will always be the centre of their European operations. Toyota is making cars in France, and will soon be doing so in the Czech Republic. Nissan is allied to Renault. These companies are unhappy about the strength of sterling against the euro, which makes exporting barely profitable. Nevertheless, their commitment to Britain won't easily be reversed.

All in all, then, it is far too early to write the obituary of the British motor industry. It is now much smaller than its counterparts in Germany and France, but it is by no means a lost cause. It has strengths in several high-margin niches – more rewarding than cut-throat mass production – and in engines. So, yes, a few tears can reasonably be shed over Dagenham, but the gloom should not be overdone.

Sir Geoffrey Owen is the author of 'From Empire to Europe: the decline and revival of British industry since the Second World War'