The car industry boss who says we aren’t ready for EVs

Liam Butterworth was always destined for a life in the car industry. As a lad growing up in Lancashire, he would spend his days tinkering with old bangers at home or helping his mechanic father at his garage. “There was always a different car appearing in the drive every week, which he’d renovate, repair, rebuild and sell,” he recalls.
Butterworth’s first car was an old Opel Kadett that they rescued and rebuilt together.
He never dreamt, though, when he was doing his apprenticeship at a Burnley metalbasher, that he was destined to run the London Stock Exchange’s biggest — and one of its last — vehicle engineering companies.
Dowlais, formerly GKN Automotive, makes more of the world’s drive systems than any other company. For the non-petrolheads among you, drive systems are the propshafts and sideshafts that connect the wheels to the engine — and no fewer than 95 per cent of car brands use the ones made by Dowlais. Without its kit, the Merc, Peugeot or Tesla in your drive wouldn’t move.
Equally fitting, given his dad’s hobby as a fixer-upper of knackered vehicles, is that Butterworth was hired six years ago for the job by Melrose, a controversial FTSE 100 investment company that had a similar business model. Melrose would buy big, troubled engineering businesses on the cheap, fix them up, and sell them for a profit. “Buy, improve, sell” was its catchphrase.
GKN was Melrose’s biggest project, bought after a bitter takeover battle for £8.1 billion in 2018, amid howls of protest that the bidders were, as Labour put it, “short-term asset strippers”. GKN was a sprawling piece of British engineering history, once having helped make Spitfires during the Battle of Britain.
Melrose split it last year between aerospace — building bits for F-35 fighter jets — and Butterworth’s automotive division. He rechristened his side Dowlais, after the village in South Wales to which GKN traces its 18th-century roots, and floated it on the London Stock Exchange in April last year.
It has not been a jolly ride since. Due in part to the utter confusion in the global car industry wrought by the stuttering transition to electric vehicles (EVs), Dowlais has gone from a starting value of just over £2 billion — or 145p a share — to £743 million, or just 56p.
Critics of the “Melrose way” say such value destruction is what happens when the short-termist asset-strippers take over. It is a charge that Butterworth, unsurprisingly, scoffs at.
“If it weren’t for Melrose, this business would have gone bankrupt during Covid. We’d have run out of cash. Definitely. In the six years since I joined the company, every single penny I needed to invest was approved by Melrose.”
He is talking over the din in Spain as we tour a vast Dowlais plant in the Galician port town of Vigo, in the heart of one of Europe’s automotive hubs. Robots whirr, bang and whizz around, servants to the deafening machines tooling metal with hair’s-breadth precision. We pause by a section making the hard-wearing joints that connect the shafts. Each sells for £40-£50.
On a table by a deafening 825C heat-treatment machine sit eight joints at various stages of manufacture. Shave a fraction of a second off each stage and you go from making 7.1 million a year to perhaps 8 million, boosting productivity and profit margins — one of the key targets by which Butterworth has said he should be measured.
Why is this so important? Because while he can’t change the chaos in the global carmaking industry, he can make Dowlais as efficient as possible. “The team here have a constant challenge because it’s a high-cost country so they need to keep running fast,” he says.
The Vigo plant’s survival deserves some applause. Since arriving at GKN to run its automotive unit in 2018, Butterworth has overseen a massive restructuring, moving many factories from high-cost countries to cheaper ones. Ten have made the switch, with another two moves underway.
Victims have included a plant in Birmingham, which he shut in 2021 with the loss of 500 jobs amid loud protests from unions, the media and local politicians.
Butterworth says he had no choice. “It had lost £10 million over ten years. I went there in about week two of my arrival at GKN, and on my way out, I said: ‘This is one of the worst plants I’ve ever been in in my life, in terms of lack of productivity, lack of investment, lack of will to change. You’ve got two years to sort it out.”
The plant manager — “a good guy”, he says — did his best, “but … the expectations of the workforce were very different to what our expectations were”.
It’s a version of events disputed by unions and the former management. One old GKN source says: “Sorry, but that’s bullshit. We’d been investing heavily in getting ready for EVs at Jaguar Land Rover — that would have been why it was losing money. And I remember we’d spent heavily on putting in cobots [a type of robot] to make it more efficient.”
One union convenor adds: “We’d been flexible on modernisation, but Melrose just wanted to move everything to Poland and pocket the savings. Which was exactly what they did.”
But Butterworth insists the business that the old GKN left him to fix was a mess. It had, he says, evolved a labyrinthine geographical structure. “We were sending components made in Spain to [customers in] Mexico; from Japan to North America. We had boats and planes all over the world.”
This meant GKN could have finished making a driveshaft in Vigo but would not get paid for it for another six weeks while it was crossing the Atlantic to the customer in Monterrey. “Have you any idea how bad that is for your working capital?” Butterworth asks.
Again, the GKNer from pre-Melrose days describes this characterisation as “complete crap”, saying “our whole mantra was ‘think global, make local’.”
Butterworth says that, as well as localising production, he also had to renegotiate loss-making contracts. “When Melrose bought the business, they had £285 million of loss-making, onerous contracts … The commercial strategy was all wrong. GKN was obsessed with chasing market share at all costs.”
So much for the past. What of the future, in a car market where there been profit warnings in the past week from Aston Martin and Stellantis — owner of Chrysler, Jeep, Fiat, Citroën and Peugeot, there came after similar warnings from Mercedes, BMW and Volkswagen.
“All I know is that we’re in an industry that’s more volatile, more unpredictable than it’s ever been,” Butterworth says. “I couldn’t tell you what the market’s going to look like next year. We have our forecasts, but we had our forecasts last year, which were wrong … completely wrong.”
This is a reference to a warning he gave to the markets in August that Dowlais would not be making the revenues it had hoped for amid the industry downturn.
He adds: “European vehicle production is four million down on 2019. The continuing growth of Chinese manufacturers is really hurting western ones, and the EV transition in Europe is a mess.”
Governments in Europe keep “switching on and off” their subsidies for pricier electric vehicles, pumping up, then deflating demand, and making it impossible for manufacturers to plan their production, he says. Ministers’ targets for ending the sale of petrol and diesel cars by 2030 (in the UK) or 2035 (in Europe) are also “unachievable”. “They’re just not realistic,” Butterworth insists. “I don’t think the consumer is ready.”
Some manufacturers are now moving their investments back towards developing more hybrid models. “To be honest, if I was an OEM [original equipment manufacturer — jargon for carmaker], I’d be scratching my head about what to do.”
Dowlais products go into EV and internal combustion engine cars, but the company still suffers from the overall decline in sales volumes.
Butterworth is glowing about his time working for Melrose. Decisions got made quickly and meetings were professional but fun, often ending up in the pub. He concedes, though, that the management of one business run by the investment company, called GKN Powder Metallurgy, was not the best. “It has been a business Melrose didn’t spend as much time on under their ownership,” he says, delicately.
Melrose had rejected £1.5 billion takeover offers in 2018, but it is now on the books at just £894 million. Butterworth has put its future under review.
The fanatical Manchester United fan — who has a gym-honed frame and retains a robust Lancashire accent -— must be proud that such multimillion-pound decisions are in his gift. He left school after his O-levels for a toolmaking apprenticeship with car components maker Lucas Industries, “trekking over the moors to Burnley on my moped every day, come rain, snow or hail.”
Lucas invested in him, making him apprentice of the year in 1992 and putting him on an MBA programme when he was just 25. He is glowing in his praise of the firm, which encouraged him to move from the shop-floor into commercial roles that took him around the world. When he was headhunted by Melrose, he had just floated an arm of US car components giant Delphi on the New York Stock Exchange as its chief executive.
“I joined Melrose in the October and it was quite eye-opening. I turned up at the GKN plc headquarters in Pall Mall [in central London] and I was literally on my own; they had fired everybody. Talk about a blank sheet of paper.”
His career is a tremendous achievement, but it would not have been possible without his Lucas apprenticeship all those decades ago. Lucas was, over the years, gobbled up by a succession of foreign players, its British operations boiled down and shipped overseas, just as GKN’s were under Melrose. No more toolmaking apprenticeships for young Lancashire school-leavers at Dowlais.
And, perhaps, the outlook for manufacturing in Britain is equally bleak — for Butterworth, the country’s industrial decline seems inevitable: “I struggle to see how manufacturing can grow again in the UK.” His plant at Vigo is thriving because the Spanish and Galician governments invested alongside Dowlais to modernise it, he says. The public and private sector worked together to create colleges pumping out a ready supply of engineering graduates to fill the local factories. “There’s a whole ecosystem here … people see manufacturing as a career.”
He concludes: “The whole sector of manufacturing in the UK is not conducive to supporting companies wanting to invest. I think that will be very difficult to change.”
If he’s right, Butterworth’s shop-floor-to-boardroom story could be the last of its kind.