Essay : Did Government kill MG Rover?
The history of BMC and its decendents has been inextricably linked to that of whoever has been resident at Number Ten Downing Street… Be it Conservative or Labour, the Government has been unable to maintain a watching brief; always favouring a more ‘active’ role…
IAN NICHOLLS takes a look at how each successive government has handled the company since the creation of BMC in 1952…
HOW much did the British Government contribute to the downfall of the British owned motor industry? In this article each Government’s performance in dealing with BMC>Rover will be analysed, to see how much of a contribution it made to its downfall. Ability and competence seems to be of secondary importance in political leaders compared to those who posess good public speaking skills. I do not believe any politician deliberately set out to destroy the British motor industry and often they meant well…
Harold Macmillan (1957-1963)
THE Macmillan Government’s main contribution to this story was to force British motor manufacturers to build their new factories in areas far from their Midlands base. This resulted in more costly manufacture using new and untrained workforce. Rover was repeatedly thwarted in its attempts to expand in Solihull, but it perservered, and was able to build the P6 assembly block at its main factory.
Rover seemed to be the exception, though. Leyland Trucks had to go to Bathgate in Scotland, and Triumph went to Speke in Merseyside. In addition to these future BL plants, the Rootes group went to Linwood in Scotland where the ill-fated Hillman Imp was built. By the Seventies, the appalling militancy of the Speke workforce and the consequent shoddy workmanship, all but destroyed the reputation of the Triumph marque.
However, with Merseyside’s reputation for militancy, the factory should not have been built there in the first place. Speke, Bathgate and Linwood all closed. Why did the government force manufacturers to build factories in these places they did not want to go to? Perhaps the answer lies in the personality of Harold Macmillan?
Macmillan came from a wealthy background and survived the horrors of the trenches in the first world war. Entering parliament after the war he witnessed the land fit for heroes become a nation of social injustice and poverty for his fellow survivors of the terrible conflagration. He became one of a select group of MPs on the left of the Conservative Party who argued that more should be done to help the poor, particularly after the Wall Street crash of 1929 plunged the world into the Great Depression.
Macmillan saw the damage mass unemployment could inflict on the fabric of society and this would help shape his economic policy when he became premier. Macmillan remained a backbencher until the second world war when a series of appointments under premier Winston Churchill brought him to the fore. One of the unfortunate by-products of the Labour landslide of 1945 was that many politicians of the other parties who had worked in the wartime coalitition govenment for final victory lost their seats.
The leader of the Liberal Party and Air Minister, Sir Archibald Sinclair, was one of them and Harold Macmillan was another. Macmillan, however, was more fortunate in that in a by-election held later in 1945, he managed to get back into parliament. Churchill and his annointed successor, Anthony Eden, were foreign policy specialists with little time for domestic issues. The task of rebuilding the Conservative party after the drubbing of the 1945 election fell to MPs like Macmillan and R.A Butler who recognised the British voters wanted a land fit for heroes and they would have to acept the welfare state as the new political consensus and adopt the “New Jerusalem” philosophy of the Labour party.
The Conservatives were returned to office in 1951, and Harold Macmillan was appointed Housing Minister. The need for new houses was huge in the post war period and record numbers of council dwellings were built under Macmillan’s stewardship. Macmillan rose through the ranks and following the Suez debacle under the auspices of PM and foreign policy specialist Anthony Eden, Macmillan became Premier in early 1957. Macmillan’s economic policy was based on the principles of John Maynard Keynes and full employment was maintained at all costs, and the true financial cost would not become apparent until 1964. The Government’s concern about maintaining low unemployment led to industry being denied the opportunity to expand where they wanted and being forced to build factories in unemployment blackspots such as Speke, Linwood, Bathgate, Halewood and Ellesmere Port. Wait a minute though, the last two factories are still open. Ford and Vauxhall have managed to make their factories viable and their older UK bases, Luton and Dagenham have ceased car production. So what did they do that British Leyland and Rootes couldn’t do?
Harold Macmillan soldiered on as PM until 1963, when ill health forced him to resign. By that time he was being portrayed as an out of touch Edwardian, his Government was tarnished by scandal and it was under attack by a new breed of trendy satirists, many of whom went on to lead more scandalous lives than the man they were mocking. “Supermac” was replaced by Alec Douglas-Hume and the Conservatives lingered on in power until late 1964 when they narrowly lost the General Election to Harold Wilson’s Labour party. When Wilson and his team closely inspected the books they found Britain was practically bankrupt and went cap in hand to Washington for a loan.
Harold Macmillan’s reputation today rests on his maintainence of full employment, which was an admirable achievement but he broke the bank to do so.
Harold Wilson (1964-1970)
IN THE Eighties, it was fashionable for the left of the Labour Party to deride Harold Wilson for having practiced watered-down socialism. But what is forgotten is Wilson was a winner. He fought four General Election campaigns and won three – no mean achievement. Wilson narrowly won the 1964 General Election, overturning a 100-seat Conservative majority in the process, by promising a new and vibrant Britain using the “white heat of technology”. He was marketed as the British version of John F. Kennedy, which seems laughable now as he was slightly podgy and not good-looking!
Harold Wilson’s team believed it could have a planned economy, and this would be the route to prosperity. On assuming power the new Labour Government found the economy was in a mess, there was a balance of payments deficit and Britain was practically bankrupt. The first stop was Washington to negotiate a loan to prop-up the ailing economy.
The Wilson Government cut defence expenditure and hastened Britain’s withdrawal from empire in an effort to balance the books. The planned economy concept took a severe knock with the 1967 devaluation of sterling. This led to Wilson becoming a target of satirists as public disillusion set in only a year after Labour had been re-elected with a thumping 100-seat majority. However, Wilson salvaged the situation by getting Chancellor of the Exchequer, James Callaghan, and Home Secretary, Roy Jenkins, to swap jobs. By common consent Roy Jenkins was one of Britain’s most successful post-war Chancellors of the Exchequer. A wartime Bletchley Park codebreaker, he left the job in 1970, with the economy in better shape than in 1967 – or indeed 1964.
However, it was James Callaghan who ultimately became Premier while Jenkins was exiled to Brussels. The “white heat of technology” philosophy was symbolised by the Labour Government’s backing of the Anglo-French Concorde project. At times they may have had cold feet about the programme and it may have led to clashes with Paris, but ultimately they stuck with it. It is only with hindsight that the project came to be seen as a financial mistake. The metal fatigue problems with the early Comet jet airliners had given the American aircraft manufacturers such as Boeing and Douglas a huge lead and Concorde was a justifiable gamble to regain the initiative.
That an energy crisis lay ahead and the American Government would put economic pressure on Governments not to buy Concorde for their state owned airlines could not be forseen. The Minister of Technology associated with Concorde was one Tony Benn and he would be a major player in the formation of British Leyland.
The above outline of the 1964-70 Labour Government is meant as a guide to the kind of thought process that existed in the corridors of power. The formation of the British Leyland Motor Corporation was entirely in keeping with the Wilson administration’s concept of a modern Britain. Rather than nationalising the remaining British motor manufacturers at great cost to the taxpayer, they would be persuaded to merge amicably and the formation of BLMC took place in the belief that it was in the national interest to have a large British manufacturer to take on the American and European giants. If one takes the view that the original formation of BLMC was a mistake, then the Wilson Government was culpable and a villain of the piece, but nobody thought so at the time. And who to lead the new grouping? I can but repeat a line from a previous article:
“Harold Wilson was looking for a way of creating a British motor industry to take on the world and Donald Stokes was the obvious man for the job. BMC’s financial results certainly did not point to Sir George Harriman as the man to lead the British motor industry into the Seventies.”
Where the Wilson Government can be held at fault is over the thorny issue of legislation to control Trade Union power. In 1968 a white paper entitled “In Place of Strife” appeared. It proposed restricting trade union power and the debate within the Labour Government had two main protagonists. Advocating “In Place of Strife” was Barbara Castle and opposing was James Callaghan who had relied on trade union support to ascend the political heights.
Callaghan won the argument and the proposed legislation was shelved. When James Callaghan became premier in 1976 he fired Barbara Castle from his cabinet…
“In Place of Strife” was a lost opportunity. The Seventies political landscape was dominated by strikes and Trade Union power that destroyed Britain as a major industrial power. British Leyland was brought to its knees by endless strikes that financially destroyed it from within and tarnished the reputation of its products. One can only speculate what the British motor industry and indeed Britain would be like today if Barbara Castle had won the argument…
Edward Heath (1970-1974)
Edward Heath’s Conservative Party unexpectedly won the 1970 General Election. At first the new Government practiced an early form of moneterism, indulging in public expenditure cutbacks. However, when unemployment hit the one million mark in 1972, it embarked on a rapid U-turn and began pumping money into the economy.
This reduced unemployment to half a million by 1973, but also resulted in chronic inflation and a balance of payments deficit. The high inflation rate also caused more industrial strife as workers sought to keep pace with the escalating cost of living. The Heath Government’s Laissez Faire attitude to industry was put to the test in 1971. Rolls Royce went bankrupt and the Government stepped in to nationalise the concern on strategic grounds. Also that year the government decided to close down the loss making River Clyde shipyards. The Daily Mirror had the emotive headline “CLYDE BUTCHERED” and the shipyard workers responded by organising a sit in led by their articulate senior shop steward Jimmy Reid.
This resulted in widespread public sympathy and the government backed down. Indeed, many strikes did have the support of the public. The Government did legislate against Trade Union power but in the public relations war it was successfully portrayed as an attack on the working class. Heath had two run-ins with the National Union of Miners in 1972 and 1973/74 and lost on both occasions.
The last occasion combined with a power workers strike resulted in early evening power cuts and a three-day working week. To many on the right of the Conservative Party, Edward Heath had proved to be a weak premier, lacking the resolve to see things through to the bitter end, to floating voters the Heath administration seemed all at sea with its vision of Britain.
Edward Heath went to the polls in February 1974 in the midst of the second miners’ strike in order to obtain a mandate from the British people over who really governed Britain. The public decided it wasn’t Edward Heath and Harold Wilson’s Labour Party gained a few more seats. Heath tried to negotiate a deal with the other parties in order to cling onto power, but it was Harold Wilson who entered Number 10 Downing Street.
So how did Edward Heath’s Government affect British Leyland? Not directly or immediately but decisions taken by his Government did have some long term effects. Both Macmillan and Wilson had failed to gain Britain entry into the European Union (or Common Market as it was then known), Edward Heath pulled it off and in 1973 Britain became a full member of the EU. The dropping of tariffs on imported EU cars gave consumers more choice and exposed British Leyland to increasingly tough competition.
In the Sixties, European small cars were often seen as quaint and technically outdated with strange engines in all the wrong places. By the Seventies, the European family car was a much more competent creature and products such as the Renault 5, Fiat 127 and Volkswagen Golf increasingly found favour with British buyers. EU membership also enabled Ford and Vauxhall to import cars into Britain from their European factories and bring into play their greater economies of scale.
The production of some Ford models was even transferred to Germany. The Granada and Capri were made in Germany and imported into the UK where they competed against BL products that were badly assembled by a workforce who had been brainwashed into not caring about their jobs. In the late Seventies, the Society of Motor Manufacturers went on endlessly about the threat of imported Japanese cars, but kept quiet about the vast quantity of cars some of their members were importing from their continental factories. And by the Eighties, this had become a torrent of imported cars, and many of their buyers honestly believed they were buying a British-built car.
If this sounds like an anti-European diatribe then I must state the opinion that a Europe working together after centuries of bloody warfare is a noble concept.
Harold Wilson (1974-1976)
HAROLD WILSON’S Labour Party returned to power in February 1974 and increased its parliamentary majority in the October 1974 general election. As the Heath Government had in reality been brought down by the Trade Union movement, Wilson was in debt to them and his new Government had a more left wing agenda than that of 1964 to 1970. Wilson appointed as Trade and Industry Minister Tony Benn, a cradle-to-the grave socialist, who believed (and still does) the state should provide full employment and top notch public services without explaining where the money to pay for it would come from. Between 1964 and 1970 he had reinned in these views, but became more vocal after 1974.
The Wilson Government gave in to the miners and began to impose higher taxation on the wealthy. But the Britain of 1974 was a much more divided nation than that a decade earlier and it would remain that way for another two decades. Within months of coming to power, British Leyland became a matter of the greatest urgency for the Government. BLMC ran out of money in December 1974 and went to the British Government for financial aid.
Although BL would become a major headache for successive Governments, Harold Wilson and Tony Benn had little real choice but to save British Leyland from going under – if BL had folded then the economic damage to the Midlands would have been enormous. But where Harold Wilson’s Government can be brought to account is how the now state-owned British Leyland was managed.
Tony Benn imposed on BL something called “industrial democracy” to disastrous effect. This was operated in BL’s factories, presumably to reduce the number of stoppages and produce an atmosphere of industrial harmony. In reality, the factories were controlled by the workers representitives, the shop stewards, who indoctrinated into the workforce the concept that all symbols of management from foreman to chairman were their natural enemy and not rival car firms.
“Industrial democracy” may have worked in theory, but in reality some individuals are naturally lazy and Tony Benn’s naive concept that the workforce would pull together to rescue BL without the whiphand of management was undermined by the shoddy workmanship of many individuals who couldn’t be bothered to do their jobs properly.
And these individuals knew they would be protected by the shop stewards if management did try to remedy matters. During this period the build quality of BL cars was truly appalling. One car badly affected was the ADO71 18-22/Princess which had the potential to be a great success. It must be remembered that BLMC had asked the Government for aid because of cash flow problems, it had a series of exciting new cars in the pipeline and with state aid there was no reason why the company should not have been a great success. “Industrial democracy” put paid to this and a look at the sales charts reveals a continuing of the decline in BL’s market share since 1973.
However, in 1973 BLMC still had many ageing models, by 1976/77 they had some new and exciting cars such as the Princess, Rover SD1 and Triumph TR7 and still the sales decline continued. This has to be put down to the shoddy workmanship in the factories and the lack of will in the DTI to remedy the problem. This period probably in reality marked the end of any dreams that BL could be saved in its current form and remain a world player. Too many stories of BL cars’ appalling build quality and unreliability abounded for it to survive without major surgery.
In 1976 Harold Wilson announced his surprise resignation and his place as premier was taken by James Callaghan.
James Callaghan (1976-1979)
James Callaghan inherited a mess. Britain was broke again, unemployment stood at 1.5 million, inflation hit 26 per cent, strikes ravaged the country and the Chancellor of the Exchequer, Denis Healey, had to go cap in hand to the International Monetry Fund for a loan.
The price for this was that the IMF demanded public expenditure cutbacks and public services began to feel the squeeze. To control inflation James Callaghan persuaded the TUC to restrict their wage demands to an agreed level and during 1978 this began to bear fruit. The economy began to stabilise and the possibility that the Labour Party could win the next general election against the opposition Conservative Party under their dynamic new leader Margaret Thatcher looked like it could become a reality.
As far as British Leyland was concerned, James Callaghan at last took some decisive action to help the ailing company and fired Tony Benn as Trade and Industry minister. In his place he appointed the far more realistic Eric Varley who displayed such competence that he was later able to leave politics for a business career. Callaghan was astute enough to realise that the endless scenes of striking BL workers that went into every home through the television screen was politically damaging and the company had to be turned around. New BL Chairman Sir Michael Edwardes had Callaghan’s ear and there is every evidence that the premier had the best interest of the company at heart.
Back in 1968 James Callaghan had opposed the proposed “In place of strife” legislation to restrict Trade Union power. In late 1978 he was about to be hoisted upon his own petard. In 1978, the Labour Government proposed a 5 per cent ceiling on the next wage round. At that years TUC conference the unions rejected this, advocating free collective bargaining, to use the phrase of the era, and the TUC were set on a collision course with the Government. At the 1978 Labour Party conference James Callaghan was expected to call a General Election when the odds of victory were good.
Instead, Callaghan sang a music hall song and the country would have to wait until 1979. Then Ford workers went on strike after rejecting a 5 per cent pay offer. The Government had stated that it would inflict penalties on any company that settled above 5 per cent, but Ford UK under Sir Terence Beckett did just that and soon other workers went on strike for higher pay. The scene was set for a chain of events that would lead to 18 years of Conservative rule. Public sector workers all over Britain went on strike, rubbish piled up everywhere and the Callaghan Government’s economic policy collapsed in tatters.
This period was christened by the media as “The winter of discontent”. Anti-trade union feeling grew and the demand for something to be done about union power grew and many voters began listening to the right wing agenda of Margaret Thatcher’s Conservative Party as their worst fears had seemed to have been realised. James Callaghan finally called a General Election in May 1979 and the result was a foregone conclusion, although the Conservative majority was only 30-odd seats. The Labour Party then embarked on a period of infighting as the left, led by Tony Benn, blamed the party’s defeat for not practicing radical socialist policies. James Callaghan, like Edward Heath, was overwhelmed by outside events and lacked the will to take on those elements seeking to de-stabilise both his government and the country. His successor as PM would take on a more pro-active approach.
Margaret Thatcher (1979-1990)
SATAN’S representitive on earth or national saviour? The jury is still out. The descriptions of the preceding governments were necessary because they explain the reasons for their demise as well as their competence. However, Margaret Thatcher displayed an indomitable determination to stand firm against strikes, wars and three Labour Party leaders, only to be brought down by her own jittery backbenchers. By and large the Thatcher Government controlled events as opposed to her predecessors who allowed events to control them.
Margaret Thatcher came to power in May 1979 with a mandate to break the power of the Trade Unions who had just brought down their second Government in five years. The TUC may have defeated the Callaghan Government’s 5 per cent incomes policy but it was a short term victory that had put into power a hard line right wing Conservative Government that was determined to smash the TUC as the de-facto third force in British politics and by 1981 wildcat strikes and sympathy strikes were outlawed.
BL Chairman, Sir Michael Edwardes, managed to convince the new Government of the need to continue to support the company and all went well to start with. The Metro was launched in 1980 and the Government agreed to fund the development of the new K-Series engine. The Tories wanted BL returned to the private sector as soon as possible and Jaguar was indeed privatised in 1984.
The BL board had hoped that the forthcoming LM10 and LM11 medium cars would provide the company with the profits to enable it to go it alone and provide the funds for the next generation of models. These cars were launched as the Maestro in 1983 and the Montego in 1984. For reasons outlined in the respective development stories, the cars simply did not sell in the numbers expected and this led to the Thatcher Government becoming frustrated at the inability of BL to free itself of the state life-support machine.
All this disenchantment became public knowledge which did the company’s market share no good at all, as the media speculated over the company’s future. In 1986 it was revealed that the Government was trying to sell the volume cars division to Ford and Land Rover to General Motors. On the face of it, this was a disgraceful state of affairs and the media outcry forced a climb-down. However, to be fair to the Thatcher Government, they had been sold a business plan that had failed and were now expected to pump yet more taxpayers money into a company that seemed incapable of producing cars that the public wanted to buy. And as the patriotic fervour that had surrounded the launch of the Metro dissipated, more and more people were asking questions about BL’s prospects.
A night of the long knives followed and the Government appointed a new BL Chairman in the shape of Graham Day. A clearing out of old management occurred which itself was the subject of a BBC Panorama documentary and the company was re-christened the Rover Group. However, the Thatcher Government was determined to rid the public purse of the money pit that had been British Leyland and, in 1988, the Rover Group was offloaded to British Aerospace. Was this a right move?
It would have been had BAe been determined to make a go of a non-military business which would have been desirable as the cold war was gradually winding down. BAe had agreed to hold on to Rover for five years and, if there was any will to make Rover succeed it soon disapeared as penny pinching, cost cutting and asset stripping of Rover occurred by BAe. Thus, the Thatcher Government has to be held to account for finding the wrong partner for BL/Rover if indeed it should have sold off the company when it did.
The Government adopted a new approach to the British motor industry and that was to start afresh with new factories making the cars of foreign investors. And who were the foreign investors. Why the Japanese car manufacturers who needed to build cars in Europe to circumvent EU tariffs. The Japanese were persuaded to set up in the UK and those buyers who wished to purchase a British-built car had a wider choice than for a long time. They could choose between Rover, Ford, Vauxhall, Peugeot, Honda, Toyota and Nissan.
Inevitably this would hit sales of the longer established UK manufacturers, more choice means less market share. In two decades Ford’s share of the UK car market slumped from 33 per cent to a measly 14 per cent in 2005. By 2004 the Nissan factory at Sunderland was producing more cars than any other British factory, so clearly there is a demand for these Anglo-Japanese vehicles.
The Thatcher regime ushered in the era of consumerism and freedom of choice. Consumerism would have happened anyway, the Thatcher Government sped the process up. Consumers became more cosmopolitan in their choices and the days when people blindly bought British cars was over. If consumerism and freedom of choice is wrong then the Thatcher Government can be blamed for that.
John Major (1990-1997)
JOHN MAJOR succeeded Margaret Thatcher as a compromise candidate and, against all odds, defeated the hapless Neil Kinnock’s Labour Party in the depths of a severe recession in the 1992 General Election.
It was an era of never-ending incompetence and ineptitude. The Conservative Party only had a small majority but behaved like it had won a landslide and would be in power for all eternity.
The party was racked with scandal, both sexual and financial and, on Black Wednesday 1992, Britain was forced to withdraw from the ERM. This policy kicked off the Euro-sceptical procrastination that has since stopped the UK taking on the Euro – and was cited by BMW as being a major economic handicap for any company producing cars in the UK.
No sooner had the last ballot paper been counted in the 1992 General Election then Britain began regretting re-electing John Major’s Government.
After the “Iron Lady” the John Major years marked a return of the weak style of government of the Seventies and the total collapse of his party at the 1997 General Election revealed the contempt most British people felt for it.
The main contribution to the Rover story played by the Major administration was in assisting BMW buy the Rover Group off BAe… and then ensuring that the subsequent economic climate in the UK was far removed from the Euro-centric policies followed in Germany, just at the time BMW needed all the help it could get in making Rover cars viable for export.
Should the Major Government have done more to persuade Honda to take a majority share in Rover? It was probably out of its hands, even though Honda was the ideal partner for Rover. The BMW deal may have ultimately proved disastrous but, at the time of its annoucement in 1994, many people in government thought it was a winning combination…
Tony Blair (1997-2007)
TONY BLAIR is an election-winning machine; three landslides in a row. Blair seems to have learned from the mistakes of the past and has adopted a strong but pragmatic approach to government. He knows the public don’t want a dogmatic government, just a competent government that tries to do its best for the people whatever their background or social standing.
The Blair Government’s first encounter with what remained of BL was in 1999 when BMW wanted the Government to offer state assistance to help re-develop Longbridge for production of the upcoming R30 model. In the end, Trade and Industry Minister Stephen Byers offered some of the money BMW was offering, but not the original amount of £130m, and, shortly afterwards, the company took to talking to the Venture Capital Company, Alchemy about purchasing remnants of the Rover Group for £50m.
Once BMW was well on the way to committing itself to offloading the Rover Group and its Longbridge factory to Jon Moulton’s Alchemy Group, Byers stepped in again and became a player in the deal that saw control of Longbridge pass to Phoenix Venture Holdings.
After the final collapse of MG Rover in 2005, the media accused the Government of backing the wrong horse but what must be remembered is that Jon Moulton and Alchemy were subject to a vicious media campaign aided and abetted by the trades union over the number of redundancies they intended to implement at Longbridge. The Government simply backed what seemed like the best option at the time.
By the time MG Rover did finally collapse in April 2005 it was well beyond government aid.
SO, did the politicians kill BMC/BL/Rover?
Well, yes and no.
Who, then, was the prime suspect? If one selects Margaret Thatcher, then her defence would be had the Maestro and Montego been more desirable motor cars then she would not have acted as she did – the fact that the Maestro and Montego were not desirable motor cars can be blamed on BL management.
Certainly some figures emerge with credit. One wonders what would have happened if Eric Varley had been Trade and Industry minister responsible for BL from 1974 instead of 1978. So who else could I demonise? James Callaghan for opposing laws curbing Trade Union power in 1968, as Britain stared into the industrial relations abyss that became the Seventies?
However, in the end, I have to settle for socialist hero Tony Benn whose simplistic world view entrances so many to this day but whose “industrial democracy” experiment at BL between 1975 and 1977 resulted in so many badly built and unreliable cars that those unfortunate enough to buy one vowed never to buy a British car again and told the world and the world decided not to buy British either.