Carmakers have welcomed a £45m Government package intended to boost industry productivity and technical innovation, though, privately, few executives are convinced about the long-term benefits.

The Automotive Innovation and Growth Team, set up by the Department of Trade and Industry a year ago and headed by former Nissan UK boss Sir Ian Gibson, found that facilities like Nissan's plant in Sunderland and Toyota's in Derbyshire were struggling to compete on productivity compared to operations in France and Germany.

Its report warns that components suppliers are facing collapse as carmakers, looking to exploit a favourable exchange rate, import more parts from abroad.

The Society of Motor Manufacturers and Traders, which has been partly sidelined by the discussions, says the Government is finally recognising the importance of the motor industry. But it is unsure about how and when the money will be spent. A large proportion will be invested in an automotive academy, which sources believe could be located near Birmingham. The SMMT, which has not been given exact details, believes the academy could be a mobile institute, moving from various automotive heartlands, but points out that the project is a DTI initiative.

“The academy will promote best practice and pool technologies to help innovation,” says an SMMT spokesman. “We hope it will lead to more dialogue between all parties.”

The DTI has also earmarked cash to help components suppliers and is looking to accelerate the adoption of low pollution vehicles. Off the record, carmakers doubt whether the DTI will succeed in getting rival companies to share confidential information in an academy.

Professor Garel Rhys, director of automotive research at Cardiff Business School, agrees. He says the DTI would be better off focusing on supply and logistics issues.

“Ministers have failed to understand that our motor industry is dominated by foreign carmakers. This makes it difficult to get agreement on issues because decisions are made outside the country,” says Rhys. “Vehicle manufacturers are not going to share information if it means losing their competitive edge.”

The RMI hopes the report will spark closer co-operation between manufacturers and retailers in the run up to the block exemption changes in September.

In a meeting at Downing Street with the SMMT and other automotive executives, RMI president John Bond-Smith urged Prime Minister Tony Blair to seek dealers' views when shaping future policies.

“It is imperative that the interests of the retail motor industry are taken into account,” he says.