CO-OPERATION OF MANUFACTURERS.
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Its Possibilities, Probabilities and Defects.
THE TERM "co-operation" is one that can be used in very many senses. To some people, the word conjures up visions of a full-blown Trust organized with the sole object of pushing up prices and securing inordinate profits at the expense of the purchasing public. Others look upon it as a kind of charm which has only to be applied in order to reduce the cost of manufacturing anything down to a thoroughly satisfactory figure, and incidentally as something which unreasonable manufacturers refuse to appreciate or adopt., despite its obvious advantages to the public. Clearly, if the whole or main object of co-operation were the formation of a ring which could control and increase prices, any manufacturer desirous of making the maximum profit would be only too anxious to co-operate to the full with others, and would rapidly overcome any difficulties that might he in the way.
We may, then, take some comfort from the fact that British motor manufacturers, while realizing certain of the inherent advantages of co-operation, realize also the great difficulties which have to be overcome before effective co-operation can be secured. In other words, they seek a form of co-operation which shall be good both for themselves and for the motor user, and they find it difficult of attainment. In its simplest form, co-operation among British manufacturers has already been achieved by the establishment on a thoroughly sound footing of an association to watch their special interests. Even in its loose form, co-operation may be, and is already, of great value to the industry. It enables manufacturers to conduct negotiations in common instead of singly and, therefore, at any particular point to bring greater influence to bear than could possibly result from individual action. It enables them also to get the benefit that may result from the careful compilation and periodical circulation of commercial information of a confidential kind. Such information is required by every firm, and it is evidently a bad case of duplication of labour if every firm collects it for itself instead of using seine central organization for the purpose.
The same argument applies to scientific researches of value to a whole industry as tending to improve the product or to decrease its price without decreasing its value.
Purchasing Advantages.
These are but a few of the ways in whicn co-operation in the form of association may be beneficial to the British motor industry. The question then arises as to whether any closer form of co-operation on the part of the industry as a whole, or on the part of groups of firms, is a .practical possibility. That the tendency towards it exists we know for certain. It is an open secret that manufacturers have discussed it thoroughly and frequently during the past year or so. In some industries, close co-operation of almost every kind is not particularly difficult. In others, including the motor industry, the difficulties are very great, because in the case of this industry, the product of each firm is sold largely on account of its distinctive merits or claims.
This fact is really the great safeguard of the public in the event of-co-operation in the motor manufacturing industry coming into being. It is practically impossible to form a price-raising ring when every potential member of such a ring is marketing an individual product, the merits of which are the results of experience or the adoption of special features of design. In such a ease, it would be extraordinarily difficult, if not impossible, to fix upon a universally applicable method of pushing up prices and killing competition.
CIA
• Close co-operation among manufacturers my aim primarily at a decrease in manufacturing costs, but this is not necessarily its first and direct object. It may be designed. rather with an eye to reducing selling costs, or perhaps for the chief purpose of purchasing raw materials upon more advantageous terms. Finally, it may aim at producing a combination of all these effects. It would . appear that co-operation could be most easily applied to the purchase of raw materials. In this case, the principle would be advantageously combined with the acceptance of at least a fairly high degree of standardization. This would increase the range of manufactured or partially manufactured parts which could come within the scheme.
The co-operating firms would, in this instance, place their orders in one big lump in of individually,
but from that point onwards they might not cooperate either as regards.manufacture or sales. They would depend on the magnitude of the aggregate order to obtain for them all lower terms than would otherwise be possible without necessarily reducing the legitimate profits of their suppliers or the quality of the materials. The motor industry is one of those in which the demand for any particular product or any particular type fluctuates considerably from year to year, while the aggregate demand for motor vehicles increases steadily. Fashion, also, has a considerable influence upon sales.
Restriction of Types.
The joint order of, say, twenty firms would thereiore be a much more dependable quantity than the individual order of any one firm, and the certainty of a steadily increasing order from year to year would make it possible for the supplier to indulge in expenditure upon improved equipment that might be unwise under other circumstances. Also, he would be dealing in such large quantities as to make all his processes highly economical and efficient. The writer cannot see any insuperable difficulty in the way of co-operation among manufacturers simply for the purchase of raw materials and of certain parts required by all or many. For such a purpose, any close financial connection between the participating firms does not appear to be necessary, and no extinction of individuality is in any way involved or implied.
When we COVIC to the proposition of co-operation in manufacture, we are on much more awkward ground. The first step in this direction would in effect have to amount to an agreement amongst certain manufacturers to limit themselves to the production of a small number of specified types. Each manufacturer would, instead of producing, say, six types, produce only one or at most two. These he would, of course, produce in much larger quantities, and therefore at lower manufacturing cost than would be otherwise possible. The difficulties are, however, evident. Suppose that one manufacturer had agreed to build nothing but two-tonners, another building three-tonners, and so on. Next year it might happen that the public demand will almost all run in the direction of the heaviest types. It is a curious fact that these changes in the character of the demand frequently occur. It is not safe to assume that because, say, 20 per cent. of the industrial vehicles sold in one year are two-tonners, the percentage during the next year may not drop to five or rise to forty. Thus, the participating manufacturers would run. a great risk of finding either that they could not fill their orders, or else that orders would be insufficient to keep their shops busy. In the latter case, they would be prohibited from building models of other and more popular capacity. Consequently, any agreement of this sort would have to be coupled up with a close financial connection' providing for division of profits and of losses, and the more one considers the subject the more is one driven to the conclusion that one cannot have co-operation in manufacture at all without forming what would amount to a combine or syndicate.
Here, the personal element comes in very strongly. Each manufacturer, having built up his business on individual lines, is unwilling to sacrifice entirely his own individuality or that of his product. Moreover, if twenty firms combine to form one large firm., there is not room for twenty managing directors and other necessary offieials on a corresponding scale. Reductions in this sort of direction would, of course, appear to make for economy, but the individual can hardly be expected to favour a proposition that would lead to his own extinction.
Combination in manufacture would inevitably en: tail eombination also in respect of sales, but it would seem possible for some degree of combination in sales to be brought about without any combination in mannfacture. This, if it applies at all, applies mainly to the Overseas markets, and with sale should be coupled the service which ought to follow the transaction. Oneof the principal complaints of Overseas buyers has always been the difficulty of obtaining spare parts, while another has been based on the belief that the manufacturer in Great Britain takes little interest in his Overseas agent, or in the users to which the agent sells the vehicles.
Co-operative Depots.
These facts suggest the possibility of co-operative depots for sales or for service or for both. There ought not to be any insuperable difficulty in the allocation of the costs of the working of such depots among the participating firms, and perhaps the principal possibility of trouble lies in the question of personnel. It would evidently be very undesirable that any member of a managerial, sales or engineering staff, co-operatively employed, should have any prejudices for or against specific vehicles. At the same time, such men can hardly avoid having their own opinions, which might be brought out by astute crossquestioning. Enough has probably been said to show that cooperation is not a thing which manufacturers can take up at a day's notice, merely because they would like to do so. There are innumerable difficulties in the way, and it is still questionable whether these difficulties can be sufficiently overcome to lead to the formation of co-operative groups of lorry. manufacturers,. producing in the aggregate a complete range of vehicles for all loads, but not in any degree coralietitive among themselves.. Such co-operation is eminently desirable from the point of view of the user if it can be achieved with sound finance. It would make manufacturing cheaper and would save a great deal in the sales department. It would also effect some economy in the purchasing department. The to-operative groups would still remain in corn-petition with one another and with the products of foreign .firms, and for this reason they could not exploit the public by pushing up prices.
What Can Be Done.
Co-operation, carried to such an extreme as-to be dangerous to the public interests, is, in the opinion of the writer, a downright impossibility in the British motor industry. The question is not whether cooperation may be carried too far to the detriment of the motor user, but whether it will prove possible to carry it nearly so far as it ought in the interests of true economy to go. Afeanwhilh, without necessarily going so far as amalgamation or financial combination, much valuable co-operative work can be done in the direction of establishing standards, eliminating odd sizes, and working together on questions of research and also in certain directions on the More commercial side of the business of the industry. We have already gone some distance, niasmuch as the principle of co-operation is firmly established in all quarters. The petty jealousies which used to react to the detriment of many British industries are no longer to be found in the industry with which we are particularly concerned. The spirit is there, and if the thing is possible, co-operation will continue to evidence itself in more and more concrete forms from now onwards.
If, however, it does not come immediately, and in an obvious form, we must not assume that the delay is due to inertia or lack of vision among manufacturers. 'The difficulties to be surmounted are not a few, and not the least among them is due to necessity for considering the susceptibilities of the prospective purchaser who, while anxious to see big quantity production tending to works economy, would be the first to protest against anything.which could conceiv
ably be regarded as a trust. VECTIS.