The warnings come in an unprecedented attack from the Society of Motor Manufacturers and Traders following a decision by Brussels to implement the End of Life Vehicles Directive. The SMMT says this means 750,000 employees working in the UK motor industry 'will have to share the burden of the £300 million annual bill which this directive will impose'.
Every year in the UK 1.5 million vehicles are scrapped. The Department of Trade and Industry estimates each will cost £200 to recycle, but the value of the reusable parts is just £20. A spokesman for the SMMT called the decision 'a fiasco' and added: 'The current climate of new car prices and the Consumers' Association's 'Great British Rip-Off Campaign' will not allow manufacturers to put this additional cost on to the front end of a vehicle. Therefore savings will have to be made in the manufacturing process. Manufacturers will say they can no longer build components in the UK because of high labour costs and the strong pound.'
And it will be the industry's biggest names that will suffer the most. The SMMT gave Rover as an example of a company that was 'hugely exposed' to the risks the directive raises. Ford is also suffering from a squeeze on profits because of a slump in European car sales, prompting questions about the viability of the company's Dagenham operation.
Professor Garel Rhys, director of the Centre for Automotive Industry Research at Cardiff University Business School, said: 'This could well be the final pressure on the bottom line that pushes companies with large numbers of older cars into the red and threatens the status of Europe as a car manufacturing centre.' Manufacturers had hoped the European Parliament would allow them to continue a voluntary agreement to take back all new cars built from 2001 onwards.