History : British Leyland, the grand illusion – Part Three
Ian Nicholls, AROnline’s own resident historian, follows up his excellent run-down of the British Motor Holdings story with a five-part study of the British Leyland years, 1974-1977.
In the third part, we learn all about just how serious British Leyland’s financial situation was and the differing views on how the problem could be solved.
A job for life?
By August 1975 the concept that the Ryder Report was gospel was called into question. Now the All-Party Commons Trade and Industry Sub-Committee called into question the financial and organisational foundations of the new state-owned British Leyland Limited.
Members of the committee said the Ryder plan, on which the company was based, contained fundamental weaknesses and was inherently dangerous. The report, which came after seven months of inquiry into the motor industry by the Trade and Industry Sub-Committee of the Commons Expenditure Committee, accused the Government of committing cash on a huge scale to British Leyland without a close enough look at the aims, mechanics and desirability of such a step.
At a press conference to launch the report, members of the committee spoke of the Ryder plan as’inherently dangerous’ and ‘hazardous’ and Patrick Duffy, Labour MP for Sheffield, Attercliffe, the Chairman, said: ‘We were left with the feeling that Ryder and his team have thought of money rather as confetti’.
The report expressed strong reservations about the amount of money to be spent (£1.4bn in the next eight years plus a similar sum to be generated internally) and the effectiveness of the way it would be spent. A Department of Industry assertion that, once the company had been put on a sound footing after the initial injection of equity, part of the funds required from external sources could be raised commercially, the report said, was ‘only a hope.’
‘The call upon public funds will clearly be enormous. There is the strongest possible case for ensuring that the taxpayer gets a fair return on his involuntary investment.’ The committee said it was clear that Lord Ryder of Eaton Hastings’ team relied to a considerable extent on the old British Leyland’s own view of the future and accepted too readily a company study as part of a detailed plan of action.
One of the assumptions in the study was ‘a fairly free availability of cash and as a result it was unlikely to have rigid economy as its central theme; and it is rigid economy and high cost effectiveness which should be two of the criteria for the expenditure of public money, not to mention commercial survival.’
Barber’s plan for British Leyland unravelled
Members of the Sub-Committee spoke of their sympathy for John Barber (above), the deposed British Leyland Managing Director, who disagreed with the Ryder Report on the fundamental issue of forming a decentralised structure as opposed to Barber’s preference for a strongly centralised organization. The report saw no organisational way in which potential conflict between the Chief Executive of the holding company and the Managing Director of the powerful new car division would be resolved and found Lord Ryder’s reliance on ensuring ‘that the chemistry is right’ was not good enough.
‘We are of the opinion that Ryder has put too much of the onus on the compatibility of personalities rather than on the correctness of the structure. This is inherently dangerous’, the report said. A battle for power between the two executives might cause untold damage, the report said. It added later that the decision not to retain Barber came after the Ryder structure,’to the shortcomings of which we draw attention’, had been adopted.
Lord Ryder talked again in terms of chemistry and morale when giving evidence about the company’s international division. These might be laudable sentiments, the report said, but with the new structure inter-divisional conflicts might arise, which would weaken the whole corporation.
Other criticisms from the MPs were that the number of basic models envisaged by the Ryder Report would not allow the company to compete effectively and that the report’s predictions and hypotheses were based on assumptions subject to huge margins of error. The MPs said it was not practical to withhold the next tranche of money for British Leyland as a means of Government pressure. To carry out such a threat could well ensure the squandering of the sums already spent. The report also said: ‘Unless the corporation achieves a very much higher level of output and related sales than Ryder forecasts it must shed labour.’
The MPs believed that the decision to pump millions into British Leyland had been taken by the Government before Lord Ryder’s team had started work. The report added: ‘It must have been clear to them that their recommendations would not have been implemented if they had not matched the known views of the Government.’
Duffy told the press conference: ‘We were struck by evidence from the Department of Industry which suggested they were not unprepared for the Ryder Report and its recommendations.’
‘The Ryder team rushed their fences. They were dealing in marked cards; they indulged in questionable assumptions, and we do not accept their conclusions. They put forward recommendations on the basis of assumptions that just could not stand serious scrutiny. There have been too many fundamental mistakes. We cannot accept their conclusions. How can we?’
The MPs said they would be exerting pressure for the earliest possible Commons debate. ‘We believe that, in the light of our findings, the public must be told it is a bad bet.’
The report also vindicated John Barber, the Deputy Chairman and Managing Director of British Leyland, saying: ‘The motor industry cannot afford to lose a man of Barber’s stature. We do not think the British motor industry can afford to lose the able managers it possesses.’
The pessimists and critics were proven right as British Leyland stumbled through 1975. A messy withdrawal from Authi in Spain and Innocenti in Italy took place while UK production was hit by strike after strike. Alex Park and Derek Whittaker became the hapless front men for the company. The firm was simply called Leyland by the media, effectively completing the domination of the British motor industry by the Lancashire truck and bus manufacturer.
Company spending effectively frozen
In December 1975 Derek Whittaker, the Managing Director of Leyland Cars, shocked 650 management and union representatives at a meeting by announcing that the company’s financial position was so serious that he had practically stopped all capital expenditure.
This meant that, within six months of its formation, the largest company in the state-controlled British Leyland concern was being forced to break its commitment to the Government not to use money earmarked for capital investment to meet day-to-day running costs. Whittaker said he had no alternative. If he had not halted capital spending he would have been forced to go to the National Enterprise Board for more money before the end of March 1976. The next tranche of Government cash was due in May 1976.
The sense of urgency at that meeting was underlined by the revelation that sales were now so poor that they were not sufficient to cover the weekly payroll. In its first six months, losses through unofficial strikes were as bad as in any six-month period since the old British Leyland Motor Corporation was formed in 1968. More than 40,000 cars with a showroom value of £90m were lost and about 25,000 cars could not be released to dealers because they were being held at the factory by poor rectification performance and parts shortages.
Starved of sales, Leyland Cars share of the home market had collapsed from a record 40 per cent in September 1975 to an average 24 per cent for October and November 1975. This had caused a cash flow crisis which was being overcome only by heavy drawings from the £200m already injected by the Government.
In 1975 British Leyland had lost 12 per cent of production because of strikes and, in the closing months, this rose to 15 per cent. Eric Varley, as Trade and Industry Minister, did his utmost to impress on his colleagues in the labour movement that British Leyland was not just another part of the public sector, dependent on a bottomless pit of state resources, a state-owned monopoly with no other alternative source of supply.
British Leyland’s loss is its rivals’ gains
During this period the Japanese and Ford made hay, as British Leyland went from bad to worse. The disputes seemed to spiral out of control. Even the Development Engineers were in dispute over attempts to merge the various Design Teams from the British Leyland constituent companies. In March 1976 Managing Director Alex Park said: ‘We are in the embarrassing position of having people screaming for cars which we just have not got… You cannot have too many disputes before you begin to lose dealers and customers who are not prepared to wait forever.’
On 5 April 1976 James Callaghan succeeded Harold Wilson as Prime Minister. A leading opponent of Barbara Castle’s ‘In Place of Strife,’ in 1969, James Callaghan believed in strong links between the Labour Party and the trade unions. He believed he could control inflation through pay restraint agreements with the TUC.
Only two days later it was revealed that British Leyland’s inability to cope with the demand for new cars on the home market in March 1976 had meant that the state-owned company had lost its leading position in the car sales league table. In March 1976 Ford took the top position with sales of 32,250 and captured 26.9 per cent of the market, 1 per cent ahead of Leyland Cars.
The importers’ grip on the United Kingdom market continued to strengthen. Sales of foreign cars in March 1976 totalled 41,217, a penetration of 34.4 per cent against 32.3 per cent in March 1975.
Michael Heseltine, the shadow Secretary of State for Industry, demanded that the Government stopped further financial aid to British Leyland, which would shortly seek a further injection of £100m unless there were firm guarantees from workers to maintain output and drop claims over differentials. He said: ‘Giving further aid is pouring money into a bottomless pit. Every day it becomes clearer that the rescue of the company was carried out in the wrong way by the wrong people and at the greatest cost.’
Heseltine had made his fortune as co-founder of the Haymarket publishing group, whose increasing portfolio was to feature many motoring titles. Publishing was a competitive arena where giving the customer what they wanted was paramount, so it was not as if Heseltine was unqualified to give a viewpoint on British Leyland.
On 28 April 1976 Sir Richard Dobson, the Non-Executive Chairman of British Leyland since 1 April, told a Commons sub-committee that ‘a situation could easily arise where neither I nor the board could recommend that the Government put more money into British Leyland. That is not too remote a possibility.’
Later, in evidence to the Sub-Committee examining the rescue of Chrysler UK, Sir Richard replied: ‘If you are asking me if there is a real possibility of the Government finding it unwise to give more money to British Leyland, I must say I think there is. The more people who understand that the better.’
He went on to say that only the Government could ‘decide overnight’ whether British Leyland’s ‘self-destructiveness’ could be made a fait accompli but that would be a drastic decision. ‘It is not just a question of punishment to make us better boys. It has almost been a way of life in the motor industry to strike for more money when they saw the opportunity was right.’
Strikes cripple British Leyland’s output
Derek Whittaker revealed that the group lost 17 per cent of its planned car output in the first six months of the financial year, which began in October 1975. He said 10 per cent was due to disputes, 1.5 per cent to shortages, a further 1.5 per cent was attributed to absenteeism and the final 4 per cent was lost in ‘facility breakdowns’. The 10 per cent lost due to disputes was ‘much higher than we could afford’, Whittaker said. It represented some 60,000 vehicles worth £120m.
Only two days later Derek Whittaker spelt out the dire situation to the Leyland Cars workforce in a letter. ‘Lost production also means lost cash, and lost cash means less capital investment, which also means lost jobs. The situation today is even more serious, and measures must be taken now to put it right. We must immediately achieve not only the increased production programmes we had planned but also make up all of the production we have lost before the July holidays.
‘Productivity is still far too low. Many employees acknowledge the precariousness of Leyland Cars’ position, but fail to reflect this in their every day action. Our collective action up to the summer shutdown and beyond will determine the future for every employee in Leyland.’
The next month the Leyland Cars Product Planning Committee submitted to the British Leyland board its recommendations for a new medium range car, codenamed LC10, incorporating the following features:
- Front-wheel drive.
- The first of the LC10 family was to be a hatchback, followed by a notchback.
- A good performance fully competitive with the opposition cars.
- An excellent package to maintain Leyland Cars lead in this area.
- A very airy package with a lot of glass area.
- To be conceived from the start as a family of cars to obtain the maximum commonality in both body structure and manufacturing facilities, leading to a series of derivatives covering the whole medium sector.
- Outstanding economy.
- A good aerodynamic style, but combined with good stability on the road, especially in high cross winds.
- Low weight.
- A high specification level with many features as standard. It had to be engineered from the start to meet world market requirements.
This was the start of the project that resulted in the Austin Maestro of 1983 and the Montego of 1984.
The union view: a National Motor Company needed
The same month the Technical, Administrative and Supervisory Section of the Amalgamated Union of Engineering Workers published a report that advocated the nationalization of Ford, Vauxhall and Chrysler and their integration with British Leyland as an answer to the motor industry’s problems.
In a foreword to the report, Ken Gill, TASS General Secretary, said: ‘Here, however, is a document that is different, because it has been written by men and women who actually work in the industry.’
TASS believed 2.5 million cars a year could be produced and sold, although there should be only half as many models as at present. ‘There is no prospect, however, of maintaining an industry with a capacity of 2.5 million cars a year without a massive export capability and effort. Yet more than half of the industry is United States owned, with car exports severely restricted and Leyland, in spite of massive capital injections, will still be, in world terms, a small company incapable of such a programme.
‘If, on the other hand, the whole United Kingdom capacity were in one company, the whole perspective would change drastically. The combined company would be large enough to build and maintain a comprehensive worldwide marketing network and to respond to the growing demand for cars in developing countries, both through direct exports and collaborative arrangements.’
The union did not believe that Ford or General Motors would refuse to cooperate with a new National Motor Corporation: ‘In a negative sense, there is an added reason why Ford and Vauxhall must be brought into the National Motor Corporation. Ford and General Motors are increasingly likely to pull out of the United Kingdom of their own accord, because they will not want to have to compete, un-subsidized, against the subsidized, publicly owned Leyland and the subsidized Chrysler UK.’
The document said a deal could be made if there was sufficient determination to use all the available sticks as well as the obvious carrots: ‘The National Motor Corporation would succeed because it would have the good will of its employees. That good will would, however, have to be developed through a greater level of workers’ control than has ever before been tried in Britain.’
Ken Gill was a Communist who had refused officer training during the Second World War because he politically despised the officer class.
Longbridge: Mini-centric production
During June 1976 it was revealed that Leyland Cars was considering turning Longbridge into a one model plant to produce the ADO88 (above). This had become British Leyland’s wonder car in the eyes of the media, the product that would propel the ailing giant back to the forefront of world motor manufacturing.
In 2001 the world was introduced to the new BMW-financed MINI but, back in 1976, ADO88 was going to be the new Mini. Leyland Cars visualised producing 6000-7000 ADO88s a week, or 350,000 a year - a figure far in excess of the peak production of the Mini in 1971 of 318,475 - and that was from plants scattered all over the world, some now closed. In June 1976 Longbridge produced a mixture of Minis and Austin Allegros.
It was rumoured that, when the new Mini/ADO88 came on stream, production of the Austin Allegro would be switched to Seneffe in Belgium. It would be accompanied by a restyling operation designed to give it an upmarket appeal. The figure of 350,000 ADO88s a year illustrated the kind of fantasy world British Leyland was existing in.
Ray of hope: Rover SD1
On 30 June 1976, the Rover SD1 was launched as the new Rover 3500 (above). Unquestionably the best British Leyland car (developed and planned following the 1968 merger), the SD1 had superb David Bache styling combining Ferrari Daytona looks with a five-door body.
The Rover SD1 was the car that demonstrated that British Leyland was a doomed enterprise. Its basic design was brilliant, but build quality was lamentable and niggling faults, often with bought in components, soon tarnished the car’s reputation.
However, that was still to come…
Behind the scenes Rover had been marginalized by the Ryder Report. Rover was the best-managed of all the constituent companies which had made up British Leyland – in the space of 40 years, men like Spencer and Maurice Wilks, William Martin-Hurst, George Farmer, AB Smith and Bernard Jackman had dragged the company from insolvency to prosperity.
The backbone of the company’s fortunes had been the Land Rover along with the advanced P6. The Design Team fronted by the likes of Maurice and Peter Wilks, Gordon Bashford, Spen King and David Bache had created vehicles that consumers wanted to buy in large numbers. One example was the Range Rover – the late Peter Wilks was credited as not only being a great Engineer, but a man who knew instinctively what the public wanted.
The Ryder Report, at a stroke, destroyed Rover’s autonomy, the company was stripped of its board and Managing Director and responsibility for production of the new Rover SD1 lay at the door of the Solihull plant director, who in turn was answerable to the more remote Leyland Cars management team. All the plum jobs in the Leyland Cars organisation had been taken by ex-BMC/Austin Morris men and there was no place in it for Bernard Jackman and Rover Triumph Sales Director John Carpenter.
Leyland Cars’ new £31m Rover car plant at Solihull had managed to produce barely half the planned number of units for the official launch of the Rover SD1. The company had intended to have 2700 units available in the showrooms by launch day, but less than 1000 cars were still at the factory awaiting final completion.
The plant, one of the most advanced in Europe, was now producing only 100 cars a day and using just one of the three production lines. The target for the SD1 3500 model was 2000 units a week, but this was thought unlikely to be reached before the spring of 1977.
The reception for the Rover SD1 seemed to offer some hope for the future and soon after Eric Varley approved yet another tranche of taxpayers, money for injection into British Leyland Limited. The media reported every strike at the new Solihull plant producing the Rover wonder car.
Callaghan’s disapproval of the strikes
Prime Minister James Callaghan voiced his opinion on the spate of strikes that continued to hit British Leyland on 3 September 1976. Speaking in Liverpool, Callaghan said: ‘We cannot afford this kind of sudden stoppage which interferes with production flow. I am totally opposed to it.’
Soon after in a statement Derek Whittaker said: ‘We are, of course, worried and disappointed about the rash of strikes which is currently affecting our production so badly. It is obvious that the warnings which have been given so often in the last year about the need for us to improve our industrial relations as a condition of continued Government support have not been properly understood by a large number of our people.
‘It is true, of course, that there are a few extremists who are always trying to forment trouble but, by and large, they are unsuccessful. The sober truth is that most of the people taking part in our current disputes are neither extremists nor are they led by extremists. They simply fail to see that their own particular grievance, important though it may be to them, is immeasurably less in importance than the good of the whole of Leyland Cars and the 120,000 people we employ.
‘We will continue to work with the trade unions and to persuade our people that only by cooperation and putting the need for quality, improved productivity and continuity of production before any other consideration can we make progress.’
‘I urge all Leyland Cars employees who are currently in dispute to return to work at once for their own good and for the good of their fellow employees.’ Derek Whittaker
By 5 October 1976 it was reported that workers were not impressed by a management memorandum circulating at Longbridge and said to originate from Derek Whittaker. ‘There has to be significant improvement in performance immediately for any commitment to be credible and acceptable to Lord Ryder or the NEB.’
Unless he got a’total commitment’ from them to improve productivity, accept mobility of labour and end unofficial strikes, the £120m project to build a new Mini/ADO88 would not go ahead. In meetings with Shop Stewards Whittaker had given a warning that, in the absence of such a commitment, Lord Ryder, the Chairman of the National Enterprise Board (NEB), would not give approval for such a huge capital investment programme. The board said that that the ‘necessary commitments’ on productivity had been accepted by all but one section of Leyland Cars.
In spite of pressure from the management, the Shop Stewards were adamant that they would work only within the framework of existing agreements or modified agreements, which might be negotiated in the future. They were clearly determined to preserve their cherished ‘mutuality’ i.e. acceptance by management that any changes in working methods or pay would not be implemented until both sides had reached agreement.
Product plans under scrutiny
The management memorandum also said that the loss of the Mini/ADO88 replacement could cost the company and its component suppliers more than 100,000 jobs and could lead to the closure of the Longbridge and Cowley plants. The threat was apparently based on the loss of some 250,000 front-wheel drive units and other components for a new Mini/ADO88 and the effect that would have in pushing up the price of the much smaller number of similar units required for the Austin Allegro, Princess, and Austin Maxi models.
The memorandum pointed out that, when the British Leyland board had recently met the NEB, it was able to report an outright commitment to the new Mini/ADO88 only from the staff unions at Longbridge. Lord Ryder’s answer was reported to have been ‘No commitment, no ADO 88.’
The media blew up Derek Whittaker’s memorandum into an ultimatum to the Longbridge workforce. Leyland Cars said in a statement: ‘Derek Whittaker has made it clear to all Plant Participation Committees in his recent visits that neither he nor his Directors will be submitting any major capital expenditure for final approval to either the British Leyland board or the National Enterprise Board unless he has commitments to the necessary improvements in productivity from employee representatives of all sections and of management involved in the respective project.
‘All the new capital expenditure requests must have productivity improvements at least comparable with those of European competition if we are to sell our products successfully here and overseas.’
The NEB said: ‘It is true that the investment project for the new small car is provisionally scheduled to go before the NEB on Friday, but as stressed in the NEB report on the performance and plans of British Leyland laid before Parliament at the end of July, the investment in new projects and facilities must be accompanied by improvements in productivity which will ensure that British Leyland is competitive internationally.
‘One of the conditions of NEB approval will be that the necessary improvements in productivity associated with each programme have been discussed and accepted by the representatives of the work force. To date, the necessary commitments on productivity have been accepted by all but one section of Leyland Cars, but in the remaining section the matter is still under discussion. It is not a question of a deadline, but clearly the project cannot be considered by the board on Friday unless commitments have been made by all the managements and workforces concerned in the new project. It is understood by everyone concerned that in order to meet the launch programme it is essential that the decision to go ahead is reached as soon as possible.’
At the time it was believed that Longbridge productivity per man was an astonishing 40 per cent below that of their major European and Japanese rivals. The unions disputed this figure, insisting that it had been calculated using dissimilar yardsticks. However, even they accepted that Longbridge was behind the competition in both productivity and, perhaps even more importantly, in the stability of output.
British Leyland needs to ‘buckle down’
An unnamed senior colleague of Derek Whittaker said: ‘Without some considerable improvement in the way our people buckle down to making not only the new Mini but all the other new models in the pipeline, we are never going to be anything but a state-subsidized, second best always struggling to keep up with the Fords of this world. And yet if our labour force would get down to consistent work we now have the financial means to become international pace setters.’
Derek Whittaker’s overtures soon got results when the Longbridge workforce voted 10,828 to 2934 with 328 abstentions, to accept most of the productivity improvements and changes in working practices demanded by the management as a condition for making the ADO88.
A PR disaster on television
By October 1976 it was reported that so great was demand for the Rover SD1 that dealers were quoting six months’ delay in delivery. On 22 October, ITV transmitted the first episode of the ‘New Avengers’ television series. Produced by Brian Clemens and Albert Fennell, this was an update of the classic 1960s series ‘The Avengers’ and starred once again Patrick Macnee as John Steed with Joanna Lumley as Purdey and Gareth Hunt as Mike Gambit.
The cars for the series were provided by Leyland Cars: a Rover SD1, Jaguar XJ-S, Jaguar XJ12C and an MGB Roadster. It was not a happy experience. Producer Brian Clemens later elaborated: ‘The Rover was still under wraps at that time, literally; it was transported from place to place under disguising covers. It was not reliable – and BL were slow in making repairs, or providing an alternative car.
‘Amazingly when the Jag went wrong we actually had to go elsewhere and hire one, BL being unable to fill the gap. The Jag saloon that Pat occasionally drove was a special suspension model intended for circuit racing. Everyone hated it because it was such a handful to drive under normal conditions. The stuntmen particularly, because it was difficult to skid or do handbrake turns. The Jag sports on the other hand was excellent for stunt work.
‘BL sent us an MGB. I borrowed it one evening and sat in the car park for nearly an hour trying to engage reverse. Eventually I had to have it pushed out – and drove home knowing I could not select reverse. Later I found out that the gear knob – on which the gear patterns was etched – was actually from an Austin Princess on which the reverse is in exactly the opposite direction to the MG! I never thought to question the gear knob and spent all that time trying to get a gear where there was none.
‘Later, on ‘The Professionals’, we involved Ford – a US company – and received excellent and professional treatment. I have never bought a British car since and I doubt anyone associated with the ‘New Avengers’ drove a BL car for a long time after that.’
A Mini reason to celebrate
On 22 November 1976, British Leyland produced the four millionth Mini. The commercial and industrial climate had changed somewhat since the cars 1960s heyday, with 203,575 being produced in 1976, but the loss of the Authi and Innocenti factories had drastically reduced output and sales now reflected its status as an economy car rather than a fashionable mode of transportation.
To its critics the Mini was now an outdated antique, a crude, unrefined buzz box that was well past its sell by date and only survived in production because its manufacturer had continually fudged the issue of its replacement. In the Britain of 1976 the optimism of the Sixties when mini-skirts and Mini cars were all the rage had been replaced by strikes, industrial decline, 26 per cent inflation and the reality that Britain needed an IMF loan to stay afloat.
Why, though, were the strikes in British Leyland still occurring? Surely the worker participation schemes implemented during 1976 were meant to stamp out disputes?
Bill Roche, a senior figure in the TGWU was chosen as secretary of the union Cars Council, said: ‘I welcomed the Ryder Report. One felt here was an opportunity but it all went disastrously wrong. We failed initially because we didn’t start with the membership. If we had had time and it had been practicable we could have had shop floor elections for people to go forward. Then not only would we have had different people, but they would have had a stake in it. At the end of the day the committee was trade unionists looking after their own – and their own trade unions.’
In other words workers with no direct representatives on the various union-management committees had no way of airing their grievances other than the time-old method of walking off the job. There was nothing wrong with the idea of some sort of employee input in the running of British Leyland, but the execution of it was bodged from the outset.
Another problem was that workers often paid lip service to their union – because of the closed shop operating in industry, workers had to be in a union to retain their job, but their loyalty was first to their colleagues. Full-time union officials had very little influence on them and some found their presence was resented by their rank and file, often because they were men skilled in the art of negotiation, diplomacy and compromise, for it was part of their job to help solve disputes and get men laid off back to work.