Essays : China can learn lessons from British Leyland

Martin Hayes

We won't see this in China, but there are lessons to be learned

We won't see this in China, but there are lessons to be learned

Think of a country which, halfway through the 20th Century, was the raging tiger of the world’s motor industry, with its cars, trucks and buses exported to just about every country in the world and with brands which were renowned for their advanced technology and customer appeal. Think of a country which – for a so-called developed nation – today has one of the smallest, indeed virtually invisible, domestically owned automotive sectors yet which is still at the forefront of vehicle design. You would be thinking of the same country – Britain.

Britain gave the world such iconic motor brands as Bentley, Jaguar, Rolls Royce and many, many more but is now viewed by some observers as being like an aircraft carrier moored off the coast of Continental Europe, serving as an assembly source for American, Japanese and now Indian car makers.

Might then the rise and dramatic fall of the British-owned motor industry have lessons for the burgeoning and apparently invincible motor industry of today’s China? That’s what I am trying to address in this article – and I have inside knowledge since I was employed by Britain’s largest vehicle maker during its most difficult period.

In 1950 Britain dominated the global automotive market. Three quarters of British car production and 60% of its commercial vehicle production was exported (up from just 15% less than 15 years previously) and Britain provided 52% of the world’s exported vehicles.

There are complex reasons behind that meteoric growth, many to do with the consequences to Western countries of World War 2 (1939-45), but nevertheless it was a remarkable achievement yet one which was sadly short-lived with real global power turning – during the 1960s and 1970s – into weakness, collapse and the decimation of output, jobs and companies.

The symbol of Britain’s transient strength and eventual weakness was the conglomerate known as British Leyland. An unlikely combination of a successful, profitable and world-renowned truck maker (Leyland) and a creaky, hastily assembled collection of car brands (BMC), this company came to be a metaphor for the ills of the entire industrial sector in Britain in the post war years. What went so wrong then?”

The symbol of Britain’s transient strength and eventual weakness was the conglomerate known as British Leyland. An unlikely combination of a successful, profitable and world-renowned truck maker (Leyland) and a creaky, hastily assembled collection of car brands (BMC), this company came to be a metaphor for the ills of the entire industrial sector in Britain in the post war years. What went so wrong then?

While this is a highly complex argument, and one which has been argued over for decades by brains much more powerful than mine, the key factors in the decline are fairly clear. They span: a failure to recognise the pace of improvement amongst competitors; weak management; overly powerful trade unions; too high costs coupled with poor product quality and a singular failure to care for brand values. Oh, yes, and one other ingredient, contentious in the Chinese context – the dead hand, towards the end, of Government intervention.

Without trying to fully analyse each of these, let me briefly address these issues and draw some parallels with the Chinese motor industry during the first decade of the 21st Century.

Post the War, Britain’s motor manufacturers still relied heavily on sales to what had once been the British Empire and which, even in the first half of the 20th Century, remained areas of British influence – I’m thinking particularly of Africa and India but stretching, for example, to Hong Kong and elsewhere. Those countries shared two key attributes which opened the door to British imports – a lack of indigenous competitors and an undemanding consumer base.

This combination meant that ailing British makers (they didn’t know they were ailing at the time but lack of investment and a realisation of competitive pressures meant that they certainly were) could still sell second-rate and poorly produced and supported vehicles without difficulty.

The Chinese parallel here is obvious. Most of China’s vehicle exports – really quite small given total output – today are going to undemanding markets such as Africa, Chile, Ukraine, etc. These are countries which do not demand the latest technological developments or impose the latest legislative standards, particularly in respect of emissions and safety.”

The Chinese parallel here is obvious. Most of China’s vehicle exports – really quite small given total output – today are going to undemanding markets such as Africa, Chile, Ukraine, etc. These are countries which do not demand the latest technological developments or impose the latest legislative standards, particularly in respect of emissions and safety.

The management of Britain’s motor makers was intrinsically weak and inward looking. It lacked the resolve to deal with some deep-seated labour issues and failed to notice the dramatic growth of competitors from Germany and, later, Japan and Korea.

Well, Chinese managers do not have to address labour issues such as those (though recent wage inflation and worker unrest, though minor, is perhaps a worrying trend) but they do need to keep very careful track of what overseas rivals are doing, driven in many cases by the legislative standards which China is only slowly embracing both at home and in export markets.

British trade union history – in its quest for perceived worker rights and improved pay and conditions – is almost synonymous with British Leyland and its fall. At that company (and, it has to be said, at other British car makers at the time) strikes and disputes were a part of the industrial scene in a way which was totally unsustainable and which led – in the fullness of time – to the switch of Britain from a manufacturing nation to a service economy, with dire results for many in society.

In China such problems seem inconceivable and both the work ethic and the traditionally disciplined society mean that they can be avoided in the long term. Yet, as I said in my last point, there are one or two minor trends becoming visible which concern labour costs and commitment and which should concern industrial leaders.

Labour-intensive methods and wide model ranges hindered opportunities to reduce manufacturing costs inside BL in the 1960s. Britain’s unit production costs were higher than those of its major Japanese, European and American competitors. This is a fundamental economic fact which even the very best managers cannot overcome. At the same time, in BL, product quality was abysmal to the point where ‘Made in Britain’ became a label consumers avoided at all costs.”

Labour-intensive methods and wide model ranges hindered opportunities to reduce manufacturing costs inside BL in the 1960s. Britain’s unit production costs were higher than those of its major Japanese, European and American competitors. This is a fundamental economic fact which even the very best managers cannot overcome. At the same time, in BL, product quality was abysmal to the point where ‘Made in Britain’ became a label consumers avoided at all costs.

Here, at least, there seems not much of a lesson to be learned for China. Its production costs are some of the lowest in the world – that’s why such a very high percentage of the world’s manufactured products are ‘Made in China’.

Although some other Asian nations are challenging that low-cost role, the sheer scale of China’s workforce surely means that such competitors can never overtake it. In terms of quality, though, Chinese makers need to be continually alert – they still have some way to go to catch the best of the rest.

At its peak, BL controlled some of the best and most iconic car brands in the global motor industry lexicon including Austin, Morris, MG, Riley, Wolseley, Triumph, Jaguar, Daimler and many more. Yet this enormous heritage – each brand had its own distinct personality and buyers – was largely squandered by an uncaring management who failed to understand the power of these assets.

When you hear that the Jaguar factory (then, and thankfully now once again, restored as one of the highest prestige sporting brands) was briefly renamed ‘Large Car Factory No 2’ you know all you need to about the brand management skills of BL management of the time.

Despite China being a nation of brand lovers – just go down any high street and see those Western brands plastered all over shop fronts and billboards – attitudes to Chinese motor brands seem surprisingly lax. Little effort is being made to educate audiences outside China about brands such as BYD, Changan, Lifan and the rest – yet all claim to have strong export sales ambitions. Global brand building takes years and costs millions – it’s a process which should be well underway right now.”

Here, I do think, Chinese makers have some lessons to learn. Despite China being a nation of brand lovers – just go down any high street and see those Western brands plastered all over shop fronts and billboards – attitudes to Chinese motor brands seem surprisingly lax. Little effort is being made to educate audiences outside China about brands such as BYD, Changan, Lifan and the rest – yet all claim to have strong export sales ambitions. Global brand building takes years and costs millions – it’s a process which should be well underway right now.

Finally, BL’s end came after an unhappy period of Government control. Despairing politicians effectively nationalised the business in the late 1960s in a desperate bid to preserve it. When I joined the company – as a fresh-faced innocent – in 1975 it had just been awarded the then unimaginable sum of RMB 10bn (about £1bn) with which to invest in new models. However, by then the politicians’ efforts were too little and too late.

In China, of course, many motor makers are completely controlled by the State and all are heavily influenced by its strategic direction. That is, of course, the way in China and few could argue that that result has been anything but positive – up to now.

Politicians, though, do not understand issues such as branding, specifications and the ingredients which make one model desirable and another less so. Professional world-class managers are required for that and, if there is one thing Chinese leaders could usefully do now to consolidate the power of the Chinese motor industry, it is to grow and attract more such people and then let them get on with the job of growing their businesses without undue central control.

What do I draw from all of this? On the face of it China is becoming the dominant power in global automotive production. It has strong, well-equipped auto companies which are fast acquiring the technological resources and skills to compete internationally. Its factories are new, its workers are well educated and trained and are keen to succeed. It has the enormous benefit of the fastest growing home market in the world.

Chinese products will not be taken seriously until they compete and succeed in the world’s most demanding car markets – and that means in North America, Europe and Japan. Chinese brands are, so far, conspicuously absent there… There is a real lack of perception about what brand-building really entails. It involves high investment, consistent application, a really close understanding of the values of the brand and a sure fire means of communicating those values to a mass audience.”

However, all is not quite as strong as it first appears because, as I have tried to point out in this article, Chinese products will not be taken seriously until they compete and succeed in the world’s most demanding car markets – and that means in North America, Europe and Japan. Chinese brands are, so far, conspicuously absent there.

There is a real lack of perception about what brand-building really entails. It involves high investment, consistent application, a really close understanding of the values of the brand and a sure fire means of communicating those values to a mass audience. Just look at the globally strong brands such as Coca Cola, IBM and McDonalds or, in the automotive sector, BMW, Mercedes-Benz and Ford.

All those companies share a single-minded commitment to the brand and a complete dedication to protecting, nurturing and growing the brand in every market. Do we see that amongst indigenous Chinese auto brands? We do not, I am afraid.

Executives from one of China’s best known car companies, one with imminent plans for European market entry, recently told me that they had ‘sub-contracted’ brand management – along with dealer development, sales and everything else – to a single distributor for Europe. I was astonished! It’s inconceivable that BMW, Mercedes-Benz or VW would do that in China – they work with the JV partners of course but they control and manage their own brands in minute detail.

That is the way to succeed and, as I‘ve already said, it’s a long drawn out process to fashion and launch a new brand in these highly competitive and critical markets. Just getting the best from an influential but sceptical and free media is a whole chapter in itself – and one where my company has been trying to help Chinese brands develop. Unfortunately, progress is slow at present and that will, before very long, be a real dampener on overseas sales growth for Chinese makers.

Executives from one of China’s best known car companies, one with imminent plans for European market entry, recently told me that they had ‘sub-contracted’ brand management – along with dealer development, sales and everything else – to a single distributor for Europe… It’s inconceivable that BMW, Mercedes-Benz or VW would do that in China – they work with the JV partners of course but they control and manage their own brands in minute detail.”

There is therefore much to praise about the modern Chinese motor industry – but there are also some significant concerns.

Meanwhile, Britain, having gone from being a world force in vehicle supply, has not lost everything. For example, 80% of the world’s motor racing cars are developed in the UK, many of the Formula One teams are based there and many British-trained Designers are at the helm of major car design teams worldwide. The country’s reputation for innovation and engineering excellence remains and it’s no accident that some of the best brand and marketing talents are to be found in the UK.

When Korean motor industry companies focused on Western markets a couple of decades ago it was no accident that they hired largely British talent to manage their businesses and drive them forward. Maybe the future for British exports to China is in brains and skills rather than cars? The heritage of British Leyland may not – in the long term – be viewed so negatively if that turns out to be the case.

[Editor’s Note: Martin Hayes, is the Executive Chairman of Automotive PR Limited – a leading supplier of specialist public relations services to companies in the automotive sector which has offices in London, New York, Shanghai, Cologne, Paris, Milan and Madrid and a Joint Venture partner in China with offices throughout the country.]

Posted in: Essays
Clive Goldthorp

About the Author:

Clive claims that his interest in the BMC>MG story dates back to his childhood in the 1960s when the family’s garage premises were leased to a tenant with an Austin agency. However, back in the 1920s and 1930s, his grandmother was one of the country’s first female Garage Proprietors so cars probably run in his genes! Admits to affairs with Alfa Romeos, but has more recently owned an 06/06 MG TF 135 and then a 15/64 MG3 Style… Clive, who was AROnline’s News Editor for nearly four years, stood down from that role in order to devote more time to various Motor Racing projects but still contributes articles on as regular basis as his other commitments permit.

17 Comments on "Essays : China can learn lessons from British Leyland"

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  1. Simon Weakley says:

    A very interesting article. The parallels with Japan in the 1960s and 1970s are obvious. Arguably, of all the Japanese brands, only Honda, Nissan and Toyota are world class and even Nissan had to merge with Renault.

    The Chinese have over 100 car and truck brands and need to rationalise and identify just a few for export to world markets.

    I think SAIC Motor’s problems relate to brand development as much as the cars which the company actually produces. The cars are getting better and better all the time but are still only in the bottom quarter of automotive competitors – think Ford and VW Group as being in the top quarter.

    However, in terms of brand awareness, perception and desirability they are not even visible – to quote Claude from The Apprentice : “Your not a big fish, your not even a fish.”

    I fear for the MG6 and MG3’s launch in Western Europe when so little effort has been made at securing Dealers and building the brand through advertising and PR. The results for the relaunched TF spoke volumes – not even a 1000 cars were sold in two years compared to nearly 10,000 a year under the old MG Rover.

    A monumental effort will be required in order to re-establish the MG brand in the UK and Europe and I am not sure that SAIC Motor truly understands this. I believe that, if they are going to be the next Honda in 30 years time, they need a compelling product offering, low prices and superior quality combined with relentless brand-building through customer satisfaction ratings, endurance trials, motorsport victories and high profile advertising campaigns. Quality volume Dealers also need to form part of the mix and that will take many decades.

    I am sure the ambition is there but will SAIC Motor be prepared to lose money on exports for at least a decade because brand-building takes such huge resources? The jury is still out but the initial results don’t look promising…

  2. Keith Andrews says:

    Fascinating…

    I’m still digesting some points, but I think that there are many parallels which go beyond China and are useful in analysing the present state of the US Automotive Industry.

  3. Simon Woodward says:

    @Keith Andrews
    Bob King of the UAW will destroy all the hard work and effort the American Auto Industry has put in since its Government bailout. He is America’s Red Robbo, some of his demands are just as ludicrous.

    The American taxpayer has spent billions on bailing out their car industry. The result has been far greater quality and productivity which has, in turn, led to increased demand for their home-grown product. Not only that the American OEMs drive forward towards greener, more efficient cars is very commendable and achieved without a interfering unions.

    Bob King and the UAW should take a look at JLR to see how working together with management gets results. I’m not against unions – in British Leyland’s case the management was just as bad – but I am against interfering bullies like Red Robbo and Bob King.

  4. Jonathan Carling Jonathan Carling says:

    State intervention in manufacturing industry might work okay in a planned economy like China but, on the world market, the products are subject to open competition and the best quality design and manufacture will always win in the end, even against competitvely priced machinery (cf Lada, Skoda and the rest).

    SAIC Motor are clearly keen to compete worldwide and are using British design, engineering and branding to achieve this. You have to admire their ambition and, if there really are 100 car makers in China, then you’d have to assume that SAIC Motor are streets ahead of most of the others. However, it will take time and possibly a few false starts. Daihatsu was the first Japanese manufacturer to launch in the UK back in the 1960s, but they had to withdraw. Similarly, Dacia launched in the UK in the 1980s but didn’t last.

    One of the reasons BMC failed so quickly was that, with the end of Empire, the export markets were opened up to competition from other countries and the Japanese in particular moved in quickly with products of far superior quality. BMC was found out and, shortly afterwards, that happened in the home market too.

  5. Andrew Elphick says:

    I think the Chinese onslaught will be won or lost on quality – British input or not, if the quality isn’t there, they are screwed. People are far more careful in austere times.

    Asian market cars also have to be IP theft free to sell in Europe – which is why BYD have yet to appear on our shores.

  6. Paul Taylor Paul T says:

    Simon Weakley : I fear for the MG6 and MG3′s launch in Western Europe when so little effort has been made at securing Dealers, building the brand through advertising and PR. The results for the relaunched TF spoke volumes – not even a 1000 cars were sold in two years compared to nearly 10,000 a year under the old MG Rover.

    … and this is exactly the kind of information and statistic that is ignored by all the people who accuse others of ‘MG UK bashing’ and not giving the company a chance when they voice their concerns.

    SAIC/NAC might, with hindsight, wish they had got into bed with Phoenix rather than picking up the cheaper corpse – at least then they would have had people on board who could help with the UK market. Now they are on their own and not making a great fist of it…

  7. Paul Taylor Paul T says:

    “The country’s reputation for innovation and engineering excellence remains and it’s no accident that some of the best brand and marketing talents are to be found in the UK.”

    Hopefully, someone in southern Germany will read this and reassess previous ill-informed comments…

  8. Ross Armstrong says:

    It’s amazing that our biggest exports are pharmaceuticals and weapons – both at opposing ends of the scale but just as corrupt under the surface.

    This country has the largest available pool of bankers and marketing people in the world but, in my opinion, you can’t just run a country with bean counters and bullshitters…

  9. Paul says:

    I think it’s a bit unfair to refer to Britain as an aircraft carrier assembling foreign cars – particularly with reference to India.

    I assume by this the author means Jaguar Land Rover. The company may be owned and, to some extent, financed by Tata Motors, but nothing it manufactures here is Indian in origin. The company and its cars are British through and through.

    Oh, and before someone shouts Ford, yes some of Jaguar Land Rover’s technology is related to Ford’s. However, some of Ford’s technology is related to Fiat as Fiat’s is to General Motors and Peugeot whose technology is also shared with BMW. That’s the reality in the global Automotive Industry these days.

  10. Adrian says:

    I agree about the problems which British Leyland had with brands. The reputations of the Austin and Morris brands were ruined to such an extent between the late 1960s and the early 1980s that the two marques had to be dropped in the mid 1980s. Furthermore, whilst this was happening, much-loved marques like Wolseley were unceremoniously scrapped.

    I think that BL should have been formed either a lot earlier or else not at all – after all, GM was formed as long ago as the 1920s…

  11. KenS Ken Strachan says:

    @Paul T
    That’s a good point about picking up a running brand vs. a “corpse”. It’s enormously expensive building a Dealer Network and brand image from scratch – it can take 30-40 years to be really successful!

  12. Dan says:

    The position will be further complicated by the Chinese manufacture of modified Western and Japanese models for the home market – the VW Santana (a Passat Mk1 with a boot) led the way but the very different Citroen C6 is to be the latest example of this trend.

    Foreign brands now appear to have a luxury “cachet” for the Chinese consumer and the domestic brands (if they are not to be outclassed) will have to keep a close watch on what appeals at home, given their weakness in developed markets abroad.

  13. Jemma says:

    There is a scene in Star Wars where Threepio and Chewbacca are playing Dejarik …

    I quote:

    Chewbacca: Aaaaaaaaaaaaaaaarrrgh!
    C-3PO: He made a fair move. Screaming about it can’t help you.
    Han Solo: Let him have it. It’s not wise to upset a Wookiee.
    C-3PO: But sir, nobody worries about upsetting a droid.
    Han Solo: That’s ’cause droids don’t pull people’s arms out of their sockets when they lose. Wookiees are known to do that.
    Chewbacca: Grrf.
    C-3PO: I see your point, sir. I suggest a new strategy, R2: let the Wookiee win.

    I suppose that, if the two protagonists were BL and the Chinese Government, the line might be

    “That’s ‘cos BL don’t shoot you in the head if you don’t fulfill your production quota. Chinese officials are known to do that…”

    The biggest problem that the Chinese will have is stuff like NCAP and emissions – other than that, I don’t think that they have an issue at all.

    Industrial strife? No, because the Chinese psyche is nothing like that of the UK worker. Years and years of repression and Tienanmen Square – if that happened in the UK there’d be uproar while, in the Soviet Union, fear of similar caused the final collapse. However, in China everyone moaned for a bit and then went back to doing what they were doing before. It isn’t in the Chinese psyche to strike or not, at least, compared to virtually any other country.

    The Chinese also have a major advantage… The reason? Chinese companies are basically OEM manufacturers – they build a fair percentage of the sub-assemblies for foreign vehicles anyway – all they are doing is going from parts/OEM kit to making and exporting the complete vehicle.

    We may think things have been bad for British/Euro/US manufacturers but it’s going to get a whole lot worse in the next few years. The Chinese have a production base second to none, they have all the currently mineable (ie currently exploited) rare earths and their development plan is not to try and catch up with ICE techs, it’s to go directly to electric – either hybrids or PHEVs/EVs. There is a very good chance we will be looking at the end of companies like BMW… aww, shame.

  14. Paul Taylor Paul T says:

    @Jemma
    Maybe BMW Group will have another Isetta waiting in the wings to save the day! (…again) :).

  15. Alex Scott says:

    I think that perhaps some interesting lessons can be taken from Japan too.

    I’m not sure how many “Japanese cars” are made in Japan now but certainly many are not. Many “Japanese cars or vehicles” are made in other adjacent Asian countries and some of them aren’t made very well at all.

    China, on the other hand, is probably quite eager to please the worldwide audience but Japan can, in some areas, be as stubborn as the British car manufacturers were in the 1970s.

    I think Japan could easily be the next “Britain”. The Japanese Automotive Industry probably needs to be very careful from now onwards in order to fend off the competiton which will come from Chinese cars when they are marketed right around the world.

    Alex.

  16. Roverman says:

    @Jemma
    One area SAIC Motor certainly aren’t having a problem with is achieving excellent results in NCAP.

  17. Steve McGill says:

    All the problems (it seems) this country ran into started when the Labour Government was in power – lazy, complacent attitudes ruled and companies were strangled by these idiotic left-wing policies.

    Labour taught people that everyone who worked hard and was successful was the enemy and should be fought against. Armchair critics who couldn’t be bothered to work for as living were king.

    It’s a shame that this is still the attitude today – people think the world owes them a living and hard work and dedication are a swear words…

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