Essay : Graham Day, the case for the prosecution
Ian Nicholls looks into Sir Graham Day’s period at the helm of the Rover Group and wonders if he could have done more to guarantee the company’s future he’d been drafted in to save…
In preparing the company for privatisation, was he too tight with the purse strings, not allowing for a new wave of models to carry Rover forward confidently into the Nineties?
Sir Graham Day has often been hailed as a hero in the BMC>Rover story. But was he? In the light of MG Rover’s final collapse in 2005, a lot of what he achieved seems to have been for short-term gain to please his political masters; the Thatcher Government. The Iron Lady and her cabinet had been continually frustrated by British Leyland’s inability to wean itself off state aid.
By 1986, the eleventh year of state ownership, the Government’s cash injections had resulted in the underwhelming Austin Maestro and Montego which were meant to take on Ford and GM in the vital fleet market and generate the profits to fund the next generation of BL cars. However, they failed to do so, and the British Government was faced with the dismal prospect of having to find funds to develop another new generation of BL cars in order to keep British car workers in employment.
The Thatcher Government decided to try and offload Austin Rover to Ford and Land Rover to GM, which led to an almighty political furore – and an uncharacteristic U-turn meant the sales were called off at the last moment. Accusations that the Conservative administration was being ruthless, uncaring and unpatriotic were bandied around Westminster. This ignored the fact that Austin Rover’s market share was shrinking. However, while the Government took a lot of flak for this policy, it had to do something. Post 1983, the political consensus moved towards a free market philosophy and whatever party had been in power in 1986 would have been faced with some hard decisions regarding BL’s future.
Quite simply the existing management had not been performing and something had to be done.
The appointment of 52-year-old Graham Day to head British Leyland produced a feeling of foreboding. Formerly the boss of British Shipbuilders, many saw him as one of Thatcher’s hatchet-men, about to inflict another round of mass redundancies on BL.
Day’s plan was, in reality, the only one left to take. At the time, would have been impossible to further rationalise the company – there was no fat left to trim. BL was stuck at a production level of 500,000 per year, so Day decided the survival of Austin Rover lay in taking the company upmarket. Day insisted the Government had given him no directives when he joined BL, only to develop a corporate plan that would lead the company into privatisation.
He also knew some parts of the Rover Group could be offloaded quicker than others: “I am concerned that any deals must make commercial sense. Some units clearly can stand alone, others cannot.” The first fruits of this statement would soon follow. Contradicting Sir Michael Edwardes, Day stated in response to the old “unsaleable rump” argument, “Does it make sense to cross-subsidise something that might be a perpetual loss-maker?”
Day believed the Rover 800 would play an important role in this new chapter of the company’s history, “If that model is well-received through 1987 and 1988, it will take Austin Rover down a more encouraging path. Two or three years back, or even longer, there was, I believe, customer dissatisfaction with the quality and reliability of Austin Rover’s cars. It takes a long time to get people back to a brand with which they once had difficulty – that is true for toothpaste, let alone high price cars. If the Rover 800 is as successful as we think it will be – that message will get out to the UK market. It will have a halo effect. The public will feel the other cars in the range could be just as good.”
Soon after Graham Day’s arrival, Austin Rover boss Harold Musgrove departed.
Musgrove was truly a product of a past era and this was never more apparent than at the press conference to mark the announcement of the Rover 800 when he was asked why it did not come with ABS as standard across the range, like its main rival the Ford Granada. He said: ‘We didn’t fit ABS as standard on the 800 because it isn’t as necessary with transverse engine (sic) front-wheel-drive cars as it is with rear-wheel drive.’
There is no doubt that Musgrove played a part in the development of this car but, at the end of the day, this attitude of, “we know best” didn’t wash in the new regime. Day believed the company should always give the customers what they wanted.
Day also felt that Musgrove had misled him over the company’s newest product – and that did no help the situation one bit: an insider put it like this: “The key cause of the falling out was that Day felt he had been misled by ARG senior managers as to the readiness for launch of the 800. It should ideally have had a few more months of problem-sorting but, then again, an even later launch would have caused other kinds of problems – a no-win situation.”
Within months of his appointment, Day drew up a realistic business plan that centred on the “Rover-isation” of the entire range – and that, in the future, all new Rover (or MG) badged cars would be priced at a premium over their mass-market rivals. This marked a significant about-turn in the company’s strategy and certainly made a change from the previous management’s insistence that they were chasing a twenty per cent share of the UK market.
Day stated the opposite, by saying that it was not market share that mattered, so much as profit – indeed, Day was not concerned in the slightest at the contraction of the company’s market share. He said that he would be quite happy with a ten per cent slice of the UK market, as long as he could choose what ten per cent. The reasons for this downfall were down to the fact that Austin Rover made a conscious decision to stop competing with Ford and GM by buying into their market share (this practice had been widespread since the early Eighties).
The strategy of going upmarket looked risky in light of the fact that the Metro, Maestro and Montego could not comfortably wear a Rover badge – and that market research now showed that the Austin name carried all kinds of unfortunate connotations with the past. Also, the marketing of the brand needed to be given “more punch” because the company was losing sales due to lack of product awareness. Day put this down to the Engineers taking control of the company’s marketing – strange until one recalls that Austin Rover’s Chief Executive, Harold Musgrove, took a leading role in the development of the company’s cars since the Metro.
The position in which Musgrove had placed himself was certainly strange, as it is received wisdom that the Chairman should let his staff get on with the day-to-day development of any new product. Be that as it may, Day was quick to point out that the “Edwardes era” had produced new facilities, a modern range of cars and stable industrial relations. However, what it had also done was to, “ignore the fact that the company was selling consumer goods and needed to satisfy the consumer.”
Somehow Day’s management team began to get results. The newly-named Rover Group made £27.9 million before tax in 1987, with the newly-launched Rover 800 now on stream. This was enough to encourage British Aerospace to take Rover off the Government’s hands in a controversial deal. By 1989, Day was in the process of disentangling himself from the Rover Group, with control passing to George Simpson and then John Towers, but the Rover-risation policy he had instigated was well underway.
In the short term it would pay dividends, but it would eventually result in the devaluing of the Rover brand.
In 1986, the Rover brand was epitomised by the SD1 and, although the smaller 213/216 had been on sale for a couple of years, the large car still symbolised the marque. One couldn’t drive anywhere without seeing David Bache’s finest creation; it exuded a road presence that the 800 couldn’t match. If you drove an SD1 as a company car, it meant you were making progress up the career ladder. The Rover SD1 was an automotive styling icon and, although the car was dogged by poor reliability, it didn’t stop rival manufacturers taking styling cues from it.
One of them was the Mk 3 Ford Granada/Scorpio of 1987. BL’s obsession with beating the Granada in the sales charts led to a serious error. The company’s product planners decided the all-alloy Rover V8 had no place in its range, and the 800 was sold with 2- and 2.5-litre engines; a similar range to the Granada. Although as a Granada rival, the 800 was excellent, and much more competent than the Rover SD1 in smaller-engined forms, it meant Rover had no car to compete with BMW, Jaguar and Mercedes-Benz in the three-litre-and-over class.
This was an arena where the P4, P5, P5B, P6B and SD1 had competed and had embellished the status of the brand. The Germans would gradually provide most competition to the Rover 800, as public enthusiasm for Ford-badged executive cars began to wane. Perhaps the solution would have been for Rover to have continued manufacturing the V8 SD1 in low volumes, in the same way RSP produced the MG RV8 in later years. An SD1 with a 3.9- or 4.6-litre engine would have made a very appealing car!
When Margaret Thatcher arrived at 10 Downing Street in May 1979, it was in a P5B, a car deemed suitable for Government and Royalty. The Auntie Rovers of the Fifties and Sixties were the choice of middle-class professionals, but the original Rover company decided to break the mould with the P6 in 1963 – it defined the modern day executive car. The smooth 3-Litre P5 ditched its engine in favour of the ex-Buick 3528cc V8 in 1967 – the beginning of something very special.
Spen King, Gordon Bashford, David Bache and all the Solihull design team could do no wrong, and the Range Rover, launched in 1970, introduced a new type of vehicle to the world. In the eyes of the public, the Rover was an executive car of not less than 2-litres. Where did it all go wrong?
Perhaps the rot began in October 1989 with the launch of the Rover R8. It was a great car and deservedly a best seller. 950,000 were sold in six years, but should it have been badged a Rover? Graham Day is quoted as saying that market research indicated that:
“Young people do not want to drive an Austin.”
That was certainly true, but they probably didn’t want to drive a Ford either, and they were market leaders. The same could be said for drivers of other mass market cars such as Vauxhall, Renault, Peugeot. Graham Day’s solution was to use his company’s prestige brand, Rover, on some of its most basic sub 2-litre products. He quite literally cheapened the Rover brand to bring it within the price range of Ford and Vauxhall buyers. Yes, perhaps the Austin marque had to go, but the Rover Group had a more suitable brand for sub-2-litre cars – and one that had been very successful – Triumph.
From the Herald to the Dolomite, the Triumph badge had adorned a series of cars with sporting pretensions – indeed, the 16-valve technology used by the R8 had an antecedent in the Triumph Dolomite Sprint. To badge the Metro with its Mini heritage as a Rover was, perhaps, an act of long-term marketing insanity. Although these sub-2-litre Rovers sold well, the sight of these vehicles decaying, unloved and uncared for on Britain’s roads today has led to the gradual decline of Rover as a prestige brand.
The Rover 620 was a car that deserved the badge, but the cars that followed did not. Perhaps the car that put the nail in the coffin was the HHR. By the time it was launched, the 16-valve technology that made the R8 so exceptional had been adopted by rival manufacturers. The HHR was overpriced at a time when Ford had upped its game with the Mondeo and, if some consumer reports are to be believed, appallingly unreliable. The decision to enlarge the K-Series engine to 1.6- and 1.8-litres led to the much-publicised head gasket failures and a serious loss of consumer confidence. To many, Rover was now simply an anagram for Austin – in code! The brand had become a Ford/Vauxhall rival for which buyers were expected to pay a premium for an inferior and less reliable car – and most people knew they were the cars formerly known as Austin.
The Rover 75 was the kind of car that deserved its badge, but relied heavily on retro styling, which the original Rover company had abandoned in 1963. The 75 was too small and cramped for a prestige car, appearing to have little more internal room than Alec Issigonis’ Mini!
It could be argued that Sir Graham Day had departed the scene by then and had nothing much to do with Rover. However, one biography states: “From 1983 to 1986, Sir Graham was Chairman and CEO of British Shipbuilders and from 1986 until 1991, Chairman and CEO of the Rover Group, a specialist automotive manufacturer. Appointed to these positions by Prime Minister Margaret Thatcher, his task was to restructure and privatise these companies which have been owned by the Government. Also, in the early 1990s, including during the Gulf War, he was Chairman of British Aerospace during a period of management and strategic realignment.”
Hence, it appears that, after British Aerospace purchased the Rover Group, Graham Day was promoted to run the parent company. The Whole Story section of this site states:
“The replacement for the R8 Rover 200/400 came up for discussion in 1991 and, right from the beginning, it was clear that BAe would not allow Rover enough money to build their own car, and capitalise on the position of strength that the R8 had been establishing for itself and the company on the marketplace. Basically management issued an ultimatum that the new car would be heavily based on a Honda model – as the Rover 600 had been – and, if that could not be made to work, management threatened, the company would be closed! So under these conditions, the Rover design team set about working on a replacement for the R8. As detailed in the next chapter, Honda also ensured that the new Rover (codenamed HHR) would be so heavily based on the Honda version of the car (HHH) that there would be little room to make the cars stand apart from each other.”
There, the reader can also discover BAe’s attitude towards replacing the top of the range Rover 800, where the greatest profit margin was. “R17/R18 (launched 1991): This was the replacement for the 1986 Rover 800 but, instead of being the new car that the company needed, cost constraints meant that it would end up being a fairly comprehensive facelift of the original car. This proved to be a short-sighted policy, given the way it was outclassed towards the end of its life in 1998.”
“BAe also made a considerable amount of money by closing two-thirds of the Cowley factory (all Rovers built at the site now were actually products of the old Pressed Steel Fisher site) and selling it to land developers, whilst also doing the same at Canley. This policy also flew in the face of Professor Sir Roland Smith’s proclamation back in 1988 that Rover was safe in the company’s hands. It had, of course, become perfectly clear by this time that BAe was merely acting as a steward for Rover – and any long term ambitions of ownership had been washed away when Professor Smith had been replaced at the top of BAe and the company ceased making the large profits they had enjoyed during the 1980s.”
The demolition of the original Morris Motors factory at Cowley and subsequent sale of the land was handled by a BAe subsidiary called Arlington Securities. Some people might use a more simplistic description of these goings on – asset-stripping. So how involved in the under-investment and asset-stripping of Rover was Sir Graham Day? Certainly, he was in charge of BAe for some, if not all, of this period.
So, Sir Graham Day’s master plan came unstuck. It worked long enough to enable the Rover Group to be sold successively to British Aerospace and then BMW. However, Rover skimped on the investment required for cars in the 2-litre-and-above sector, surrendering sales to the Germans, where the profit was – and, in the sub 2-litre sector, produced uncompetitive cars that dragged the emblem of the Viking longship through the mire.
Most young people can’t remember when Rover was a prestige brand, it is a badge that belongs on hack, runabout Metros and banger R8s while the streets are littered with BMWs – everyone seems to have one. However, this writer remembers the days when Rover SD1s were everywhere to be seen and the TWR Group A SD1 Vitesses showed Europe’s finest who was boss…