British Leyland Motor Corporation 1968-2005 E-Book

Mike Carver

• Herausgeber: The History Press
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 252

Veröffentlichungsjahr: 2015

Beschreibung

British Leyland Motor Corporation, formed in the wake of the post-war manufacturing boom, brought together almost all the British-owned car and commercial vehicle companies that then existed. At the head of the sixth largest car manufacturer in the world, its management confi dently expected to give the United Kingdom a leading place in the global motor industry. The eventual failure was one of the biggest and most disappointing disasters in British industrial history. Despite this, we can be proud of British Leyland's legacy: successful and much loved vehicles like the Mini and the Range Rover have endured, its working practices had a lasting effect on industrial relations policy, and brands that once formed part of the group continue to thrive in this ever-competitive market. From their unique insider perspective, three former employees of the brand reveal in unprecedented detail the ups and downs of this iconic British company.

Leseprobe

Contents

Title

Foreword

Prologue: Formation of the British Leyland Motor Corporation

1 High Expectations Confounded: 1968–75

2 The Ryder Report – Two More Years of Failure: 1975–77

3 The Edwardes Era – The Start of Better Things: 1977–82

4 Edwardes Acts on Industrial Relations: 1977–82

5 Edwardes Brings Partnership with Honda: 1979–82

6 China

7 Privatisation and Consolidation: 1982–86

8 Graham Day: 1986–88

9 British Aerospace Ownership: 1988–94

10 BMW: 1994–2000

11 The Final Chapter – MG Rover: 2000–05

12 The Causes of the Failure of BLMC in Sequence

13 The Causes of Failure – The Underlying Weaknesses

Epilogue

Author profiles

Copyright

Foreword

The British Leyland Motor Corporation (BLMC) was created in 1968 by bringing together almost all the British-owned car and commercial vehicle companies that then existed. The resulting conglomerate formed the sixth largest car manufacturer in the world motor industry, confidently expected to give the United Kingdom a leading and enduring place in that industry. In April 2005 the tiny remains of the group went into administration, bringing to an ignominious end a venture of which so much had been expected and on which so much effort and so much national resource had been expended.

Nevertheless, although the failure was one of the biggest and most disappointing disasters in British industrial history, there were a limited number of successes, one of which, the reform of industrial relations led by Sir Michael Edwardes, was not only important for the motor industry but was the launch pad for the wholesale national reform of industrial relations in the United Kingdom. An understanding of the reasons for the failures and the successes is still important for the future of British industry. Up to now there is little consensus on this in spite of much debate and writing, mainly by academics and journalists.

This book is written by three people who worked for BLMC in various roles and at various levels through most of the period of decline and who were involved in much of what happened. They are therefore able to bring an unusual degree of insight to the analysis of what happened and why.

In writing this book, the authors have concentrated on cars. The group at its formation was a conglomerate of many sorts of vehicle companies, but by far the largest component, on which success or failure of the whole group depended, was that embracing the cars businesses. However, it is not possible to divorce completely the events affecting cars from the rest – for instance, there are no authoritative financial figures for cars alone. However, most of the events, decisions and outcomes that did affect cars were separate from those affecting the rest of the group, and enable the story of cars to be isolated from the rest clearly and accurately.

Well before the formation of BLMC it had been the widely-held view that the British car industry was too fragmented to succeed and needed consolidating. Thus the origins of BLMC and its inherited strengths and its weaknesses lie in the years before its actual formation. The book therefore starts with a brief account of the industry in those years, followed by a narrative of events until the end came and an analysis of the reasons for the failure.

Finally, as an epilogue, we provide a brief summary of the relatively healthy state that the UK motor industry is in today. In particular we describe the success of the brands Jaguar, Land Rover, Range Rover, Mini and MG that have survived the demise of BLMC.ß

The success of the Range Rover Evoque characterises the resurgence of BLMC’s legacy brands.

Prologue

Formation of the British Leyland Motor Corporation

From the early years of the car, British car manufacturing was strong, and by 1938 it was clearly in second place among car-producing countries. In 1938 the country produced 341,000 vehicles, a long way behind the USA, which produced 2 million in that year, but ahead of Germany which produced 277,000.

After the Second World War, the factories that had been channelled into the war effort were converted back to car manufacture and by 1950 new models were being introduced and production was 53 per cent higher than in 1938. Underlying this growth there were structural problems, which had been recognised by the UK government as early as 1945. The Political and Economic Planning Group formed the view that there were too many companies producing at ‘uneconomically low annual volumes’. The industry needed rationalisation and part standardisation to achieve economies of scale. But by 1950 very little had changed. World car catalogues of the day showed that there were thirty-three distinct British car brands. This was more than the entire offering of the whole of continental Europe.

While the UK car industry had recovered from the war, the same was not true of the rest of Europe where in 1950 volumes had only just reached pre-war levels. A real boom, however, had taken place in the USA. Production had trebled to 6 million and this boom was to give the big three US manufacturers, GM, Ford and Chrysler, the resources to invest heavily in Europe where the 1950s was a period of great change.

Encouraged by the government, the UK’s two largest companies, Austin and the Nuffield Group, merged in 1952, bringing together the Austin, Morris, Wolseley, Riley, Austin-Healey and MG brands to form the British Motor Corporation (BMC). This new company held more than 50 per cent of the UK market and was substantially larger than any other European car company.

The Mini was launched in 1959 and the last Mini, shown here, was produced on 4 October 2000.

Elsewhere the Rootes Group brought together the Hillman, Humber, Singer and Sunbeam brands, while Standard and Triumph were integrating their activities, having merged in 1938. A few smaller manufacturers like Jowett, Lea Francis, Frazer Nash and Armstrong Siddeley went out of business.

By the mid 1950s over 90 per cent of the UK industry was made up of five companies – BMC, Ford, the Rootes Group, Vauxhall (GM since 1925) and Standard Triumph.

In Europe the picture was different. Companies were expanding on the back of rapid market growth. Between 1950 and 1960 there was a fivefold increase in production volumes. The fastest-growing company was VW, which had increased from 97,000 in 1950 to 787,000 in 1960. This growth was based solely on the enormous success of the Beetle, the only model that VW produced at that time. Although the Beetle was fundamentally a pre-war design, its sales were based on an unrivalled reputation for reliability and durability. This gave VW a presence in virtually every car market in the world. Opel and Ford in Germany also experienced rapid expansion in the 1950s, benefitting from heavy investment from their American parent companies.

Issigonis started working on a new Mini in 1967 (9X). The project was shelved by BLMC.

European growth was achieved without model proliferation. No high-volume manufacturer produced more than four models, whereas BMC continued with a range of ten or eleven models throughout the ’50s. It was proving difficult for BMC to achieve economies of scale while maintaining the separate brands, sales networks and factories that it had inherited in the merger. It is also unclear whether rationalisation was pursued vigorously by the senior management or indeed whether the need for it was even recognised as a priority.

By the end of the 1950s, BMC had fallen behind VW but was still the second largest car manufacturer in Europe. However, it was just about to launch two groundbreaking products, the Mini in 1959 and the Morris/Austin 1100 in 1962. Both models were far superior in terms of space utilisation and roadholding to any other car in their sectors – the highest volume sectors of the European car market. Pinin Farina had produced an attractive design for the 1100 and it was an immediate sales success. From 1964 to 1971 it was the UK’s highest-selling car, achieving 15 per cent of the market at its peak. The Mini took longer to reach market acceptability, but by 1965 it was firmly in third place in the UK market with a share of 10 per cent. (The Ford Cortina was in second place with a share of 12 per cent.)

Additionally, BMC owned the well-respected MG and Austin-Healey sports car brands. The small MG Midget and MGA (replaced in 1962 by the MGB) were particularly successful in the US market .

With these models, the 1960s should therefore have been a period of prosperity for BMC. This was far from the reality. By the end of 1967, BMC’s UK market share had fallen from 50 per cent to 30 per cent, total annual volumes were 11 per cent lower than in 1960 and the company was losing money.

While BMC was struggling, European manufacturers were growing strongly throughout the 1960s, increasing production by 50 per cent. VW was now making more than a million vehicles a year, having added a bigger saloon to its product range, and was exporting over 60 per cent, with the US as its major market.

One significant factor was that economic growth within the European Economic Community (EEC, forerunner of the EU) averaged 4–5 per cent annual GDP growth and was very much higher than the 2–3 per cent achieved within the European Free Trade Association (EFTA, of which the UK was a member). From 1960 to 1967, the car market grew by 92 per cent within the EEC compared with 39 per cent in the UK.

In the UK, Ford was putting pressure on BMC. Ford’s new product and facility investment was running at over 10 per cent of revenue, whereas BMC was investing at less than 5 per cent of revenue. In the mid 1960s Ford UK made virtually no profit. The parent was adopting an aggressive strategy to win market share and its target was BMC. By 1967, Ford’s market share was only four percentage points behind BMC. The Cortina was its most successful product; BMC could not match its 1500/1600cc engine size and had no modern attractive product to compete in the mid sector of the market.

BMC’s initial response was to launch the Austin 1800 in 1964. However, the concept was ill judged. Adherence to the front-wheel-drive layout, so successful in the Mini and the 1100, created a car that was too wide and too high to be a true competitor to the Cortina. The resulting ungainly vehicle justifiably became known as the ‘Land Crab’, and understandably sales fell well short of projections.

Rather than address the problem of the mid sector immediately, BMC decided to put its new product resources into developing the executive Austin 3 Litre, which was launched in 1967. If the Austin 1800 concept was ill-judged, the 3 Litre was disastrous. Austin had never been successful in the executive sector. The 3 Litre’s suspension was an engineering tour de force, but the car was underpowered and badly proportioned. Perhaps worst of all, the in-house styling was dictated by the use of Austin 1800 doors. These were available because the new door-manufacturing line was severely underutilised. (This fatal mistake was repeated in the desperately needed Austin Maxi, BMC’s gift to the newly formed BLMC in 1969.) Inevitably, sales of the 3 Litre were very low.

The outstandingly succesful Jaguar XJS was under development before the merger and was the first model launched by BLMC in 1968.

BMC was also finding it hard to rationalise its models and components. Despite the undoubted success of the 1100, BMC was unwilling to stop producing the models that needed replacement. Both the Austin A40 and the Morris Minor continued in production for at least five years after the 1100 launch.

Misguided product planning was not the only reason for BMC’s poor performance in the 1960s; its cost management was weak. Product costs were high because of expensive product design, inefficient manufacturing processes, low labour productivity, component complexity and poor economies of scale. Several models had marginal profitability. In particular, a well-publicised study by Ford had demonstrated that the Mini, which had become BMC’s highest seller in most European markets, was being sold at a loss.

Labour relations were notoriously bad. Strikes occurred throughout UK manufacturing, but the car industry was one of the worst affected. Soon after the creation of BLMC, the Employment Minister, Barbara Castle, tried to start a new relationship between unions and employers with the publication of a White Paper entitled ‘In Place of Strife’. However, she found it impossible to reach a consensus and the status quo remained. Poor labour relations were to remain a continuing issue for BLMC. The UK was not alone in suffering disputes between employees and employers, but by the late 1960s companies like VW and Toyota had achieved a much more cooperative relationship. At VW, for example, a workers’ representative had a place on the board.

Britain’s exclusion from the EEC had an impact on BMC. Import tariffs caused the company to set up an assembly plant in 1965 at Seneffe in Belgium, diverting financial and management resources away from the core business. BMC also licensed Innocenti in Italy to manufacture the Mini, a successful arrangement producing up to 50,000 vehicles a year.

As BMC faltered, Leyland Motors thrived. Since the Second World War, Leyland had been growing through acquisition. Its core business was in commercial vehicles; it had purchased Albion in 1951, Scammell in 1955, AEC, Thorneycroft, Park Royal and Charles Roe in 1962, Bristol Commercial Vehicles in 1965 and finally Aveling Barford in 1967.

In 1960, Leyland took over Standard Triumph. The Standard brand was dropped and Triumph undertook an ambitious product programme, introducing the TR4 sports car in 1961, the Vitesse, a small sporting saloon in 1962, the 2000, a larger sporting saloon in 1963 and the 1300, a small premium front-wheel-drive saloon, in 1965. Triumph’s volumes were small in comparison to BMC (122,000 vs 537,000 in 1967) but had grown throughout the 1960s and its UK market share in 1967 was 8.5 per cent. Like BMC, Triumph opened a small assembly plant at Malines in Belgium in 1962. Significantly, Triumph had succeeded in gaining a reputation for product quality, which allowed it to justify premium pricing.

In 1967 Leyland took over Rover. Rover was a historically staid company producing luxury saloons and the utility Land Rover. In 1963 it broke the mould when it launched, to great acclaim, the Rover 2000. This model competed directly with the Triumph 2000, marginally outselling it. Although Rover was now producing more saloon cars than at any time in its history, the utility Land Rover was its highest volume and most profitable product with an annual volume of 36,000.

In 1966 Jaguar, fearing that it did not have the financial strength to fund its new models, had joined BMC. All major British-owned brands were therefore owned by Leyland and BMC. The government then encouraged Leyland and BMC to merge, convinced that scale was essential for long-term survival. However, at that time BMC’s assets and share value were greater than Leyland’s. Donald Stokes, managing director of Leyland, declined the proposal because he was unwilling to be a junior partner in any merger. Eighteen months later the situation was different. BMC’s poor results had reduced its share price. Leyland’s acquisition of Rover and Aveling Barford had increased its asset value and share price. The merger could now take place with Leyland, with Stokes at the helm. On 17 January 1968 the formation of the British Leyland Motor Corporation (BLMC) was announced.

Pundits were optimistic about the future. BLMC was the sixth largest motor manufacturer in the world after GM, Ford, Chrysler, Fiat and VW. It held 41 per cent of the UK car market with the first and third bestselling vehicles. With MG, Triumph and Jaguar, it held a dominant position in the sports car market, which was thriving in the US. The Land Rover had established its own niche. Rover and Triumph were now accepted as premium brands and together were twice the size of the growing BMW. The commercial vehicles under the Leyland umbrella were market leaders in virtually every sector.

Nevertheless, as already stated, there were many weaknesses in the car companies on which the success of the venture depended, and bringing those companies together would require a great deal of foresight while at the same time repairing the many weaknesses.

Critically, the car line-up bore no comparison with any of its competitors:

BLMC

VW

Ford

Renault

Citroen

Opel

Daimler -Benz

Brands

11

1

1

1

1

1

1

Model Lines

21

3

5

4

3

3

5

Volumes ’000s pa

762

1089

441

707

419

540

200

The difference was essentially due to BLMC consisting of four car-producing companies before any rationalisation, between them serving three different market sectors (volume cars, specialist cars and sports cars) compared with the other listed companies, which all produced cars, with a very few minor exceptions, for the volume car market. This made rationalisation even more complicated than the bare figures in the above table indicate.

Overall control of the whole corporation was to be exercised by an eleven-man board composed of eight executive directors and three non-executive directors.:

Chairman and Managing Director

Sir Donald (later Lord) Stokes

Deputy Chairman and Chairman/Chief Executive of Jaguar

Sir William Lyons

Deputy Chairman –Non-executive

L.G. Whyte

Deputy MD and Director of Engineering

Dr A. Fogg

Deputy MD with special responsibilities for Overseas Operations

J.H. Plane

Deputy MD and MD Austin-Morris

G.H. Turnbull

Director of Finance and Planning

J.N.R. Barber

Director, Austin-Morris

R.J. Lucas

Chairman of Rover

Sir George Farmer

Non-executives

R.A. Stormonth-Darling and J.D. Slater

Before the formation of BLMC, Lord Stokes had been deputy chairman and managing director of the Leyland Motor Corporation; Sir William Lyons chairman of Jaguar, Sir George Farmer chairman of Rover; G.H. Turnbull managing director of the Triumph Car Company; Dr Fogg director of engineering for Leyland Trucks; R.J. Lucas company secretary of BMH; J.H. Plane was a South African businessman with extensive business interests there; J.N.R. Barber had been finance director of Ford of Britain and more recently finance director of AEC; R.A. Stormonth-Darling and J.D.Slater were prominent businessmen.

The group that the board had to control consisted of a headquarters and the following operating divisions:

Austin-Morris Division

Specialist Car Division

Truck and Bus Division

Foundry and General Engineering Division

Pressed Steel Fisher Division

Construction Equipment Division

Overseas Division

The headquarters was established in Berkeley Square in London and the new company came into being officially on 17 January 1968.

1

High Expectations Confounded: 1968–75

Those responsible (the government through the Industrial Reorganisation Corporation, and the companies themselves, apprehensive about remaining alone and too small to survive) for putting the new corporation together saw certain opportunities in BLMC: its size would provide the means for successful growth and the ability to concentrate resources by rationalisation would save money and raise the standard of each new product. This last belief in particular was strongly held by many of the management, who clearly assumed that the performance standards of the concentrated activities were, or could be made to be, of a sort and standard to compete with the rest of the world. Thus the formation of BLMC was seen as the opportunity for building a company that would be a powerful force in the world motor industry.

It will help to understand what happened in the early years if those beliefs and assumptions are examined to see how realistic they were.

The first matter to consider is whether it was realistic to expect to draw into a coherent whole the many and varied companies that were being brought together. The companies involved were designing and producing a range of cars that covered just about the whole car market, the same for commercial vehicles and then a wide variety of such things as construction vehicles and equipment, rounded off by the production of refrigeration equipment and a printing works.

The British Motor Holdings 1967 company report included the following list:

• Austin, Austin-Healey, MG, Morris, Vanden Plas Princess R, Wolseley and Riley cars, Austin and Morris Mini-Cooper cars.

• Austin and Morris light vans, light commercial vehicles, trucks, tractors and Gipsy cross-country vehicles

• Jaguar and Daimler cars

• Daimler buses and military vehicles

• Guy trucks and buses

• Vehicle bodies and press tools for the motor industry

• Marine and industrial engines

• SU Carburettors

• Fisholow and Gridway products and domestic appliances

• Prestcold refrigeration equipment

• Nuffield Press

In fact, on closer examination things were not quite as difficult as they looked. The companies fell into three groups – Cars, Commercial Vehicles and a miscellaneous group broadly related to construction. These three groups were operationally and commercially very different from one another and required little rationalisation with one another. However, as part of BLMC they would need to adopt common administrative practices in such things as financial reporting, controls over investment and matters of major policy. Within each group, and BLMC-wide in some cases, there would have to be common terms of employment, payment structures and so on. Changing all these practices would take a lot of planning, explanation, discussion and administrative effort before they could be put into practice. This would take time, but there would be no great practical difficulties in the way – except the not-to-be-underestimated inbuilt resistance to any changes to the existing company cultures, different for each company and ingrained over many years.

The greater problem is the much more important matter of rationalising a company’s product range and with that its production facilities and design and development resources and practices. This rationalisation can apply both within one company and, with more difficulty, between companies. Within BLMC this work lay almost entirely in the Cars Group, by far the biggest of the groups and on whose success the whole future of BLMC depended. The other groups had much less need for product rationalisation within their companies, little between companies and almost none with the other groups.

In the Cars Group, rationalisation was needed both within companies and between companies. On paper, a logical and coordinated range of models and major components could be planned with relative ease. In practice, to replace an established wide model range with a more limited one to be produced in the same, or perhaps greater, volume than the wider range being replaced has many difficulties. New models cannot be developed and brought into production quickly, even if unlimited resources are available – and BLMC resources were limited not only in numbers but also in skill. Introducing several new models in a relatively short time requires more investment in a given period than that needed for a properly spaced and steady replacement cycle. Over and above this, if a new model is to replace more than one existing model there may not be enough appropriate production capacity available to produce the higher volumes of the new model, especially if the replaced models were produced in more than one factory, and so yet more extra investment is required.

The same thing was true for engines. When BLMC was formed it was producing eleven unrelated engines between 1 and 4 litres. Of these, only BMC’s 15-year-old A series was made at a competitive scale. The investment required at that time for new high-volume engines involved large transfer lines. The investment cost per unit of capacity was broadly similar for engines and vehicles. New vehicles were expected to generate additional sales, but it was hard to see that investment in engines would have the same result. In an investment-constrained environment, vehicle investment was to take priority.

Whether the vehicle range or the engine line-up is rationalised, the factories not needed must be closed. With the trade unions’ attitude to plant closure, BLMC faced a very formidable task indeed in the early years.

The rationalising of the model range also brings other risks. The first is that the normal level of production will not be maintained while the changes are being made. The second is that a reduction in the model range will bring a loss of sales even if the new models are of a higher standard than the old ones, because the limited range will entail the dropping of some marques. Buyers, however illogically, may have a loyalty to one of the dropped marques and will not necessarily turn to its supposed replacement under a different marque name.

To add to these difficulties, the very senior management in the companies were mainly hostile to the centralisation and rationalisation. Given that the constituent companies had been independent (this was true even of Austin and Morris, even though they had together formed BMC for some years), it was inevitable that most of the executive board members who had their own operating empires would be strongly in favour of being allowed to continue without interference from the centre. In this view they were supported by almost all their company management and workforce

Thus there were many risks facing the most important part of BLMC – the cars business. However, within the Cars Group there were strengths. One was that Austin-Morris had a core range of successful high-volume front-wheel-drive cars (Mini, 1100/1300) that was ahead of its time. Subsequently all the successful European manufacturers based their product line-ups on such a range of front-wheel-drive models, but at the time of BLMC’s formation Austin-Morris was leading the world. This leadership, properly developed, gave it a great chance to prosper. Other product strengths lay in the Jaguar and Rover brand and, most of all (although not well perceived in BLMC), in Land Rover.

One of the biggest risks (perhaps the biggest) lay in the very poor state of industrial relations. There were many, many bargaining units – each product company had several. Any serious change to working practices had to be taken to the unions and they normally opposed any change, so everything had to be argued about, which took a long time, and the bosses of the companies – the Managing Directors and Manufacturing management – spent their time dealing with the unions and were not able to concentrate on manufacturing improvements. In the end, they came to ignore the task of making improvements.

Inevitably, strikes were frequent, directly costing sales and steadily eroding customer confidence – and indeed becoming something of a public joke. They also had serious practical effects – in Austin-Morris, when production facilities were installed they were made larger than forecast demand indicated to allow for production losses from strikes. Between this and the inability to improve manufacturing efficiency, it was clear a great improvement in industrial relations had to be made if BLMC was to be successful. Bringing about this improvement would require great management determination and skill.

One other big risk was that the product development resources, especially the skills, in the Cars Group, particularly Austin-Morris, would not be adequate for the task of producing the more limited range of new ‘better’ models. Both the Mini and the 1100/1300 ranges had been just about competitive in quality and reliability for their time on introduction, but there were ominous signs of falling behind, referred to in the Prologue. The Maxi, which was in development at the time of the merger and which was launched in 1969, was to fall well below competitive standards despite its good innovative concept. The risk that new models would be anything but completely competitive was as serious as that posed by poor industrial relations.

The third serious risk came from profitability levels. The 1968 after-tax profit of £20 million on sales of £974 million was quite inadequate. As already said, the hope of those responsible for the formation of BLMC seems to have been that rationalisation would raise profitability to adequate levels. Even this (defining rationalisation as making BLMC into one coherent whole) was unlikely to be enough. Improvements in matters that would not come directly from rationalisation, such as industrial relations and standards of operational performance, particularly in product development and manufacturing in cars, would certainly be needed as well.

Altogether, turning BLMC into a successful, sustainable company was going to be a tough mission – not just because of the task of rationalisation, but because there were serious risks to the rationalised company from the poor state of industrial relations, doubts about product development strength and an underlying financial weakness.

The seriousness of these risks seems not to have been fully foreseen by those responsible for putting BLMC together, or it was believed to be outweighed by the foreseen advantages. So the company started its existence.

The first actions were mainly administrative. The corporate staff was led by John Barber, who had been finance director of Ford of Britain and had been recruited to take up the position of finance director of BLMC. Inevitably he turned to Ford as a source of people to staff the central organisation and also as company staff for the corporation’s operating companies, mainly Austin-Morris. Ford at the time deservedly had a very high reputation as being a well-managed company, with good management systems and able people. Some corporate staff members, particularly for senior positions, were also recruited from outside the motor industry. Recruitment from outside the industry brought in able individuals and fresh ideas but also slowed things down while the recruits adapted to their new environment.