Essay : The great Leyland tragedy
Donald Stokes concluded his chairmans statement in the first accounts of British Leyland Motor Corporation back in 1968 with the following paragraph: ‘The world is looking to see whether British Leyland can match up to the international challenge.
I believe it can — the future potenial of the corporation is enormous. We can exploit it to the full only if we get complete co-operation from all our people at home and overseas, but if we fail we shall all suffer.’
Words: Geoffrey Robinson Originally published in The Guardian 18 August 1975
Designed to fail? Or undermined from within?
Alas, failure it was to be and all have suffered so far with the exception, so far, only of the bulk of the employees. Cetainly, Lord Stokes and John Barber have suffered in an intensely personal way and the shareholders have suffered a heavy financial loss. With the benefit of hindsight one must say that it was an act of stupendous courage to have embarked on such a mammoth task as establishing British Leyland as a major international motor car manufacturer, in the full knowledge that this could only be achieved if many of the fundamental aspects of the business, including much of its industrial relations history, could be completely changed within the first few years.
For it must be understood that such was British Leyland’s general state of backwardness at the time of the merger in terms of industrial relations, capital investment, product development and penetration of world markets that only through continuous and intensive utilisation of such assets as it had could British Leyland have stood any chance at all against continually intensifying international competition, of making the grade on its own as a private sector company. So what went wrong in those seven eventful years?
In the first place it needs to be said of Donald Stokes, John Barber and some others at or near the helm that BLMC’s lack of success was not due to lack of effort or dedication on their part. They made great efforts to get it right and in several areas progress was made that will make the job of those now in charge, a lot easier.
But the plain fact is that that essential precondition for success — the complete co-operation of the workforce, so rightly diagnosed in the first and increasingly, almost sententiously, emphasised in every successive chairman’s statement — was not achieved. The merger was completed against a background of mutual suspicion between managers and men, of a plethora of piece work agreements, of overmanning, and of, a minefield of jealously guarded differentials. The full extent of the difficulties that lay ahead could hardly have been appreciated and it is hardly surprising that in the early period more awareness was shown of the potential than the problems. It would be a rash man who would unequivocally apportion blame for the failure of the industrial relations policy adopted by British Leyland.
The history and background to industrial relations in the motor industry are usually more complex than is realised. But one thing is quite clear — a reform of, or change from, the piece-work system as it was operating in the first years of the merger became an urgent necessity. Whether this had to involve a full-scale switch from piece-work to measured day work will never be known because no alternative was tried. As it was the measured day work system was pushed through, by management against union resistance. On the side of management, from Lord Stokes down to junior foreman there is a strong feeling that they were let down by the unions on the reform of the payments system and more generally. On the unions side, the contention is that management would not act on their proposals for achieving continuous production, increased productivity, and earnings via a reform of the piece-work system. Instead, according to the unions measured day work was pressed ahead in spite of their total resistance and with the therefore, for them, predictable consequences.
My own view, after nearly five years varied personal experience of the problems is that the positive changes in industrial relations that were necessary within a relatively short period of time if. British Leyland was to survive, would have needed more vision and sheer self-confidence than the battle weary line management of British Leyland could muster. But if the lead from management was along conventional and inadequate lines, so was the response of the unions. In this situation one could only conclude that the attitudes of mutual suspicion were so deeply inbred and quarrelsome habits so endemic a part of life that changes would be hard won and long in coming. Each side knew the other’s tactics in a form of trench warfare remarkably innocuous for themselves, but ruinous for the company.
Whatever researchers may eventually conclude about the responsibility for the British Leyland industrial relations failure, there can be no doubt about the outcome in the short term of the move to measured day work. The results were catastrophic: the introduction of measured day work provoked lengthy strikes, and resulted in reduced effort for a hefty hike in basic rates. Not even the principle of ‘measurement’ was unequivocally obtained by management — and that was what it was supposed to be about. In reality it was a move to day work, without measurement, but less work for more money. It was a policy that could only pay off in the long-term. But British Leyland could not survive to enjoy it. For, having failed to get production really going in the first five years, which included the critical boom years of 1971-73, British Leyland’s financial position was deteriorating to the point of no repair.
That a profit ranging from £30 millions to £50 millions was made in some years was quite inadequate to the real requirements of the company which needed to build up to a positive cash flow of £100 millions to £150 millions in the boom years, if it was to stand any chance of achieving the necessary level of capital investment and of establishing the reserves that every prudent businessman knows his company must have for a rainy day. Money of that order could have beengenerated internally only with the fullest cooperation of the work force in terms of sustaining in all British Leyland’s vulnerably interrelated operations, continuous working and increasing productivity. And this was not achieved.
If the major cause for British Leyland’ s failure was the loss of output and decline in productivity, two other factors also contributed very heavily. The first was the inadequate performance of some top line management. Each year. budgets were reviewed in such minute detail as to make their achievement appear almost inevitable, solemn commitments were given by line management on achieving their budgets and invariably it was emphasised that the tough decisions taken in the previous year, or years as it became, would now pay off: the corner was turned and British Leyland could lift itself to the profit levels necessary for survival. In fact the budgets were rarely met and line management was allowed to come up with the same excuses for failure and yet retain their positions. The indulgence shown towards management failure to meet commitments was a second major reason for the failure of British Leyland.
There was not at British Leyland sufficient of that relentless pressure on managers to meet commitments or else, that characterises other moresuccessful companies that come to mind both inside and outside the motor industry. Usually, of course, the major part of the failure was blamed on industrial relations problems for which management, it was often suggested should take no blame. In fact, whilst in no way minimising or contradicting the importance of what I have just said about, events in the industrial relations area, it is often the case that management failures — in regard, for example, to facility breakdowns or material supply shortages — are disguised in industrial relations problems. It must also be said that, even if as I have suggested failure for British Leyland as a private sector company was sooner or later inevitable so long as strikes and declining productivity persisted, the company’s performance could have been far better had senior line management in all divisions been more ruthlessly dealt with in the early years.
Too often no one was made to feel, or to be, accountable for what happened. The failure of line management to perform went through all divisions —through Truck and Bus and Specialist Cars just as much as volume cars. Furthermore, it is not generally appreciated that the so called ‘profitable’ parts of British Leyland failed to make anything like their proper contribution to the company. Both Truck and Bus, Specialist Cars throughout the entire period since the merger witnessed declining profitability in real terms, stagnant levels of production and loss of market penetrations. Take Truck and Bus, for example- generally considered one of the few jewels in British Leyland’s crown of thorns, its penetration of the UK, market has declined from 33 per cent in 1970 to 24.5 per cent at present with no compensating gains in Europe against those competitors who were eating their way into the UK market. Production over the same period was static.
Much the same picture could be painted of Jaguar, Rover, Triumph. That these companies and Truck and Bus remained generally profitable is, in the case of the car companies, largely due to their up market position with its inherently higher unit profits and in all cases due to the fact that competition in these sectors was over the period less intense than in volume cars. In this situation and in spite of industrial relation problems the Truck and Bus and Specialist Car activities should have sustained profit levels far in excess of what in fact was achieved and this failure must rank as the third major cause of British Leyland’s collapse.
It also has to be realised that, whilst British Leyland volume cars were the first to come under severe attack and to be found wanting, international competition against Land-Rovers, trucks, buses and specialist cars is now increasingly severe and the ground so wantonly yielded can be won back only with great effort and at considerable cost. Confronted over the first five years with a continuing production failure, with the consequent profit and cashflow short-falls and its deteriorating position in world markets, the logical thing for British Leyland to have done was to have gone to the Government much earlier and proposed a BP type solution, involving say, a 49 per cent or 51 per cent State shareholding.
I remember during my period as financial controller 1971-72 proposing that an approach should be made on the grounds that if things continued as they had since the merger — and there were no signs of a change —recourse to the Government would be inevitable. Many senior people at that time unfortunately may have thought my views more motivated by political considerations than financial judgment. As it was British Leyland aided by a rights issue and the world boom in
car sales struggled on for another four years. The crunch came all right, accelerated, but not caused by, the oil crisis and inflation.The diagnosis I have outlined was largely formed, if not so distinctly articulated, by the time l was recalled from Italy in the autumn of 1973 to take charge of Jaguar where most of what I have written could be said to apply. It is, for example, a shattering thought that five years after the introduction of the XJ6 and a couple of years after the introduction of the XJ12 — both gaining the much-coveted ‘car of the year’ awards — production of Jaguar had not increased at all.
My immediate impression was that there existed a sort of conspiracy of disbelief which went in a vicious circle rather like this: the men did not believe management could get the parts from outside suppliers to keep the plant going; the suppliers did not believe the manufacturers schedules would be fulfilled; the sales network did not believe it would get the cars to sell; then when they did get them, they often could not sell them for lack of practice and preparation and the next time round the men even though they had the supplies and the tools to do the job did not believe the network would sell the production. To break out of this vicious circle two elements were essential. A management team competent to meet its commitments and an understanding with the unions that would give first continuous’ prpduction and then a much-needed increase in manpower productivity.
On the first score, in order to achieve what was wanted it was necessary to make far reaching changes
Ten people at director and staff director level left Jaguar employment in the first few months. The decision seemed hard at the time — and I was criticised for them by the shop stewards as well as by some in management — but the changes were, generously carried out by the company. The benefits of the changes came through quickly after an initial and understandable sag in morale, we developed a highly motivated and competent management team at all levels. We all knew that meeting our commitments was all that mattered and that from myself downwards we must give a lead in this both by precept and example. Manv of those at Jaguar have moved to positions of considerable responsibility in what is now the integrated BL Car Division.
The tougher nut to crack was how to get continuous production and it was anything but a smooth ride. Within the first month, after making it clear several times to the steward, I felt not enough was being done to keep the men at work I was subjected to the worst ‘going over’— as the trade union vernacular has it — I have ever experienced in my life. That was in fact, my first encounter with Bill Lapworth the T and G Coventry district official, who was called in to the job. Fortunately subsequent meetings were less harrowing experiences. We had the same problem’s at Jaguar as existed in the rest of British Leyland and had to cope with the periodic crises on differentials, grades and wage rates. Throughout these we evolved a simple and clear philosophy for management :
Tell the men through their stewards as much as you sensibly can about all aspects of the business and in particular, give, to the fullest extent possible, the reasons for unpalatable decisions;
Never make commitments to the unions on something you could not deliver;
Having given a commitment, maintain it;
In a strike situation, if you are going to give something, give it before the men go out and not as an inducement to get them back. This was all very fine in theory but extremely difficult in practice — particularly on the question of when and where to make a concession. The industrial battlefields of the Midlands are littered with the remains of famous last stands undertaken by management and which almost invariably ended in a concession, perhaps minor itself, but fatally damaging in that it was made in order to end a strike and thus reinforced the suicidal, belief that strike action paid off and that there was always something more for the having.
Continuous production was achieved at Jaguar by the joint efforts of unions and management and the improving trends in all areas of company’s activities demonstrated what a prize for both sides keeping the place working could be. The simplest way to illustrate this is to compare some relevant key figures for Jaguar as between British Leyland’s financial years 1972-3 and 1973-4, the latter year beings the first year that continuous working was achieved, with no increase in direct and a decrease in indirect manning standards.
|Shifts lost due to internal dispute||23%||1%|
|Shifts lost due to external disputes||56%||5.5%|
|% achievement of production programme||71%||84%|
These figures speak for themselves — an increase of 50 per cent in United Kingdom market share and world record sales in spite of the recession. Profit on a normal trading basis was 60 per cent up year over year. Most importantly we had gained credibility, not just with suppliers and the network, but also with the men who would often comment to me with evident pleasure on the continuing improvement in their P45s (take home pay) and who were building up a vested interest in perpetuating the virtuous cycle into which we were breaking. What we had not done was to grasp the nettle of overmanning which Jaguar had in common with the rest of British Leyland.
We took continuous working as our number one priority — ahead of improving manning levels — not just because this could give the most immediate and significant gain in the productive use of manpower and other assets, but also because we considered that only if we kept the men at work would we be able to have the right conditions in which to negotiate on better manning levels. Whether we would have achieved that essential next stage at Jaguar, no one can say with certainty. But it remains one of the key problems that the new management has to solve in most areas of the corporation. What are its changes on this and the rest of the tasks that confront it?
Events, at least in the car division, in the period since the new management has been effectively in charge have an all too familiarly depressing ring about them. A strike of 800 men at one British Leyland plant halted production of all Jaguar and Triumph cars and of the 18/22 and MG models in the Austin-Mini range. Some, tens of millions of pounds of production has been lost, heavy lay-off pay has been shelled out, and the already frightening loss that was projected when the new team took over must look a lot worse now. What is equally regrettable of course, is also the impact of lost production in terms of credibility with the men and the network and in some cases, customers awaiting delivery of their vehicles. Of course, however inauspicious the beginning may have been, it is obviously much too early to reach any conclusions. At this stage one can only consider what has changed post Ryder and what still has to change if we are to have some hope that the vast sums of money proposed in the report are to give some sort of return to the taxpayer.
The three most obvious changes consequent on the Ryder Report are the new corporate structure, the’new’management and the cash. There is much to be welcomed in the corporate structure— especially the delegationof far greater authority to the chief executives. The most controversial aspect, and the one, as is made clear in the report, it was most difficult for the team to decide, concerned British Leyland’s car operations. Personally, I strongly resisted the total integration of these activities and the creation of an International Division along precisely the lines that had proved a total failure in the old BLMC.
It was my view, shared by a number of very senior colleagues in the corporation, that the car side would have had a surer and quicker turn around if it had been reorganised into two separate divisions —one for volume cars and one for specialist cars—and with responsibility for export sales vested in each division. A paper was submitted to the Ryder team outlining the logic for such a reorganisation – in terms of product compatibility, facilities rationalisation and manageable-sized operations
Broadly the General Motors approach to organisation though of course on a smaller scale. After a brief flirtation with the idea, the team found against such a scheme preferring the orthodox Ford logic of a single integrated unit. Now that the decisions have been taken, however, there is no point at all in reawakening any controversy, the important thing is to recognise that a clear structure has been established with well-defined and adequate responsibilities delegated to the line chief executive who in turn must be given a sufficient period — say a year— of continuity and stability to prove they can make a success of the organisations they are running. But no-one should delude himself that a new organisational structure will in itself solve the problems. Structures, systems organisation charts and the rest are only as good as the people who work them. Good people with clear policies to implement are the key ingredient for success and, only if sufficient are found in or attracted British Leyland, will the seemingly insurmountable problems be overcome.
Certainly few people can be, more aware of how intractable are the problems that defeated the former chief executive and managing director than the three men who after the Ryder reshuffle occupy the most key positions. Alex Park, now chief executive of British Leyland: Derek Whittaker now chief executive of British Leyland Cars and David Andrews now chief executive of British Leyland International, who in their previous senior positions in the corporation had direct personal experience of the very same complex problems that are still bedevilling them in their present positions of greater seniority. In fairness to the previous managing director it is worth stressing that all three of the above appointments, together with the chief executive of Special Products Division and many other very senior men were recruited to and promoted in British Leyland by John Barber. Indeed, when John Barber, after the publication of the Ryder Report, took his leave of the corporation’s senior executives, it was Derek Whittaker who, with characteristic objectivity and generosity, expressed his regret at the departure and put on record that he together with all those present had failed to meet his objectives.
Of the third main change post-Ryder, the availability of the cash, one must first say that there seems to be far too much of it. Certainly, British Leyland has not got the resources in product or manufacturing engineering properly to plan and execute capital expenditure at the level proposed in the report. Moreover, the projected sales level, which must at least in part be correlated to the capital expenditure provisions, looks unrealistically high: In particular, the 4 per cent penetrations set for British Leyland in Europe appears too ambitious an objective — or too expensive if achieved by the costly marketing and low pricing policies which would certainly be required in the competitive and over-supplied market that is likely to prevail over the next three to five years. Commercial prudence and the sheer physical resources available are bound to scale down the commitment of public funds and no doubt the Ryder team itself was aware that whatever figure they put up the Treasury would cut back anyway.
The availability of the cash, even at sensibly reduced levels, will be far in excess of anything that British Leyland could have envisaged generating on its own and it will give the opportunity for British Leyland to establish a competitive model range, competitive manufacturing costs and quality standards and a sound European dealer network. In spending the money the new management must be firm about the manning levels and working practices that will be required to secure the maximum utilisation of the new facilities. There can be no compromise on that and indeed the mere knowledge that it has substantial capital backing gives the new management the strength to take a strike, and not to concede, that was not really available prior to state ownership in such an integrated business as British Leyland. From the start the men must be given to understand that British Leyland is no obliging ‘milchkuh.’
From my experience In Coventry, I fear that a one sided minatory posture from management will provoke from the refractory Midlands and Cowley car workers the same obstreperous response as did the move to measured day work. There is no need for that to happen. The new British Leyland team has the opportunity to make a new start, not just by being firm, but across the board in industrial relations in the motor industry. But management at the very top must believe in such a policy and have the vision and self-confidence to commit itself to it with conviction and not as a genuflexion to a Central Staff or perhaps now even a Central Government directive.
It is only on that sort of basis, firmly backed with tangible evidence of professional confidence and of solid excellence of management in all departments that there is a real chance of getting the unions to play their vital role in such things, as settling differentials, eliminating restrictive practices, and increasing productivity. Any other route, looks long, hazardous and costly.