History : The complete BMH story – Part One
Ian Nicholls, AROnline’s historian-in-residence, charts the history of the short-lived merger between BMC and Jaguar in this four-part account of the British Motor Holdings years from 1966 to 1968.
It’s a tale of ill-judged hirings and firings, odd and disastrously bad product decisions and a night of the long knives. Read on to learn more about this short but turbulent period of automotive history.
Was BMH doomed to failure?
Leyland Chairman Donald (Lord) Stokes: A feared but highly-respected statesman prior to the fall of BL
‘When I think back we were pretty cheeky really to attempt to do everything we have done with very limited financial resources. But if the merger had not taken place it would have been the end for the British motor industry. BMC would have been broke in a year and Leyland would have just plodded along,’ Lord Stokes, Chairman of the British Leyland Motor Corporation, May 1972.
The traditional story of the creation of British Leyland is that British Motor Holdings, bereft of exciting new models, saw its UK market share slump to 27 per cent in 1967 and then announced a £3m loss in the financial year ending July 1967. Sir Donald Stokes’ dynamic Leyland Motor Corporation with Government backing, moved in and engineered an effective takeover of BMH and embarked on revitalising BMC with the urgently needed new models.
In the papers
This was the view was propagated by the book ‘The Leyland Papers’ by Graham Turner, which some might see as a hagiography to Lord Stokes, who was the Richard Branson of his day, backed by ace PR man Keith Hopkins. Only later was an alternative viewpoint available, ‘Men and Motors of the Austin’ by Barney Sharratt, featuring interviews with people who worked under the new Leyland regime.
So was BMH really going bust?
PART ONE : 1966 – THE ANATOMY OF A CRISIS
We shall start our story on 9 June 1966. The previous year the British Motor Corporation had purchased the Pressed Steel Company, the car bodybuilding firm.
Today BMC announced a management re-shuffle.
Sir George Harriman, the Chairman and Managing Director, was appointed Executive Chairman and Joe Edwards was appointed Managing Director. Mr Edwards continued as the Managing Director of the Pressed Steel Company. Joe Edwards had left BMC in 1956 after a falling out with the then Chairman, Sir Leonard Lord. Joe Edwards had a record of wielding the axe during his previous tenure at BMC and seemed to have the ruthless management streak that Sir George Harriman lacked.
He later said. ‘I found that nothing had happened in the 12 years I had been away. The company had unwound. It was the Lord Harriman regime just staggering from one thing to another. There was no forward thinking. There was no question of getting hold of new people. They did not believe in training management. The management was just not equipped to run that size of company.’
The next big development came on 6 July 1966 when Sir William Lyons of Jaguar Cars agreed to a takeover by BMC for £18.2m.
There were four reasons for Sir William Lyons agreeing to sell his Jaguar company to the British Motor Corporation.
- Lyons was without a son and heir. His only son John Lyons was killed in a car crash in May 1955 on the way to Le Mans.
- Jaguar needed to secure its body supply, which came from the Pressed Steel Company now owned by BMC.
- Jaguar needed access to the funds necessary to put the XJ4 saloon into production. Although the company was profitable, its most advanced car, the Mk10 saloon, was not a strong seller, the other saloons were based on the ageing Mk1 of 1955 and the E-type was allegedly barely profitable.
- Jaguar was already discussing a Mk2 replacement and BMC had the resources to bring such a project to fruition. A compact executive saloon was an area where BMC were weak.
The Jaguar/BMC merger was announced on 11 July 1966.
Then, on 20 July, 1966 the newly re-elected Labour Government announced hire-purchase restrictions and an increase in purchase tax also generally termed as a credit squeeze. Typically, the anti-inflationary measures bore down hard on car buying.
The 25 per cent auto-purchase tax was increased to 27 per cent, minimum down payments were hiked from 25 per cent to 40 per cent and the time allowed for payments was cut from 27 to 24 months.
On 1 August 1966 the stocks of unsold BMC vehicles stood at 70,000 – the distributors held 60,000 and the factories 10,000. This compared with the equivalent figure of about 45,000 vehicles for the year before of which distributors held 42,000 and the factories 3000.
On 18 August 1966, with the Government having inflicted a credit squeeze, the British Motor Corporation assured the unions that no short-time working was being planned for the time being.
Then on 1 September 1966 at Longbridge, BMC Managing Director Joe Edwards met the heads of BMC’s nine distributor association zones. The distributors were asked for their assessment of home sales decline in the next six to nine months as a consequence of the credit squeeze: they predicted a drop of 15 to 20 per cent.
Stocks mounting up
By 3 September 1966 the British Motor Corporation now had a total of 115,000 unsold vehicles spread throughout the country; distributors held 80,000 (many of them stored in specially rented fields and open plots of ground) and BMC had another 35,000.
After the 1 September meeting, BMC’s cost accountants had prepared a revised production programme for the remaining 11 months of the financial year up to 31 July 1967. Hand in hand with this went the vital question: redundancy or prolonged short-time working to meet the diminished schedule?
On 6 September 1966 the BMC management chose redundancy. This was their argument: they were in the position where they produced only four-fifths of what was possible; yet had a labour force geared to producing one million plus vehicles – if BMC didn’t prune their excess labour, they faced a huge excess of overhead charges during the year.
Ford sees it coming
Ford of Britain claimed it had seen the crisis coming back in May of 1966 and immediately cut back on overtime to avoid stockpiling unsold cars.
BMC’s answer to the armchair critics who said they had neglected to read the market thermometer earlier in the year, was to point to their predicament in the previous year. Industrial disputes and the West Midland gas shortage had robbed them of 100,000 vehicles.
Their results for the first half of the 1965-66 financial year were appalling; profits had dropped from £11,600,000 to £7,149,000; a planned production target of 521,500 vehicles (which would have meant an increase of 61,000) turned into a gloomy below par output of 435,750.
‘Consequently, we were going full tilt to try to make up for these very heavy losses. Unfortunately, we were going so fast that we ran into the arms of another crisis,’ said a BMC spokesman.
During the 1956 credit squeeze 6000 men were sacked by BMC. Even within BMC the word ‘brutal’ was used to describe it. By the time of the 1960-1961 credit squeeze, Joe Edwards had left BMC and the firm took the other way out. Two-thirds of the labour force went on short time; eventually many of them were down to two days a week.
BMC chose short time then for two reasons: it was banking on the recession being over by early spring, and it didn’t want to spoil the improving employer-employee relationships.
But now Joe Edwards was back and harsher measures were the order of the day. Sir George Harriman and Joe Edwards of BMC then went to see the Minister of Labour, Mr Ray Gunter, at his office in London on September 9th 1966 to inform him of their redundancy plans.
A meeting of minds
Having gained the Minister of Labour, Mr Ray Gunter’s approval, management heads from each of the 22 factories in the BMC group met at Birmingham, presumably Longbridge, on 10 September 1966, a Saturday. They decided that individual managements should be responsible for deciding which workers were to be made redundant and to produce a programme that would get most people back on a full working week afterwards.
Over the weekend more than 130 letters were prepared for sending to all national and local union officials signed by BMC’s Director of Personnel and Welfare, Barry Mackie, and Robert Chapman, Personnel Director for the Pressed Steel-Fisher group.
The British Motor Corporation announced on 13 September 1966 that between 20,000 and 30,000 workers – about a quarter of their labour force – would be placed on a three or four-day week immediately because of the economic situation resulting from the credit squeeze. BMC gave warning that ‘short-time working does not always produce the economies needed. Therefore there will be some redundancy.’
‘The object is to have everybody working a five-day week as far as possible and this can only be effected by having redundancies. During the next few weeks of short-time working, the corporation will be studying its labour requirements in the light of credit and other restrictions which have reduced demand for vehicles in the United Kingdom.’
‘Details of short-time working will, as is customary, be discussed with employee representatives in the factories involved. Where a reduction of establishment is necessary, the corporation will of course fulfil its obligations both under domestic agreements and under statute.’
Sir George Harriman, the Chairman of BMC, said: ‘Naturally this decision has been a great disappointment to us although it was the only possible one for us to take.’
‘No organisation, however large, can withstand indefinitely the effects of a national economic crisis and the credit restrictions and other measures resulting from it.’
BMC had made every effort to inform the workforce first but, unfortunately, the press had got wind of the story. The day after the news broke, local union officials finally received the letters from BMC informing them of the short time working and redundancy programme, which caused much anger.
Two thousand men at the BMC’s tractor and transmissions factory at Washwood Heath stopped production for the afternoon of 14 September when they walked out to hold a meeting. They voted unanimously that redundancy should not be accepted and that available work should be shared.
Mr Arthur Harper, the works Convener of shop stewards, said: ‘We as shop stewards do not accept redundancy and our instruction to you is that if any redundancy notices are handed out they should be handed back immediately. If the BMC workers stick together, which I have no doubt they will do, we can lick Harriman and his henchmen. Our policy is no redundancy and we must get hold of our MPs and get hold of this Government and tell them we are not having it.’
After a two-hour meeting, shop stewards of the Austin works committee issued a statement which said: ‘We shall resist any dismissals with all the power at our disposal and to the extent that the workpeople are prepared to back us.’
Mr Dick Etheridge, the Longbridge Convener, said: ‘I am prepared to lead any action, including strike action, to fight redundancies. We will not accept redundancy—we will resist it with all the means at our disposal. Let’s face it, if you are going to get the sack, you may as well have a bash.’
Mr George Evans, regional organizer of the National Union of Vehicle Builders, said the men had now been told which models were to be cut back and what the new production schedules would be. He added: ‘There are no figures for the men, they do not know who will work two days, three days, or four days. They know redundancy will begin on 4 November, but they do not know the details. Our people are bitter and we shall do everything we can to fight this.’
Production cut back
On 16 September 1966, in the biggest cut-back on production since the winter of 1960-61, BMC told 30,600 employees – one in four of their total labour force – that they would begin short-time working in the next week. Of these, 18,500 were at factories in the Birmingham area, 6500 at Oxford, and 5600 in Coventry, Scotland, South Wales and London. Some of these men would work only two days a week. Others would be working up to four days, a management statement said.
At the time it was reported that BMC had more than 100,000 unsold cars in stock.
On 24 September 1966, 333 car delivery drivers employed by 10 of the 19 firms in the Longbridge group of delivery agents received dismissal notices because of the reduction in BMC production, which were to take effect on 4 October. The following day some 450 delivery drivers decided to strike in protest.
The strike meant that most cars would not be delivered to customers. Nor would they be driven from Longbridge to join the thousands of new vehicles parked on fields and airfields up and down the Midlands. The Longbridge works had cut back production of its Austin models from 10,000 a week to about 7000. But only 5000 to 6000 cars could be stocked at Longbridge, where 2000 were already parked.
The British Motor Corporation announced on 26 September 1966 that it was now going to dismiss more than 10,000 workers by 4 November, double the figure it had given earlier. Shop stewards were given details of the BMC redundancies in individual factories. The notices would go out on 10 October to expire on 4 November. Thirty-eight thousand BMC workers were already on short-time.
By 27 September, the delivery drivers strike was hurting BMC. Production lines closed down at Longbridge, Morris Commercial Cars and Pressed Steel at Washford Heath. All these works were clogged with vehicles.
At Longbridge about 1000 men worked the night shift because extra space had been found to store Minis. Mr George Brown, the Foreign Secretary, in his constituency at Belper, Derbyshire said: ‘In the West and East Midlands we have eight jobs for every person available. I am not competent to say BMC have too many people, but I have my suspicions.’
This was the first public comment by a senior Government minister to allude to perceived inefficiency in the British Motor Corporation. By 27 September BMC told 3500 men employed on engine assembly and machining at Longbridge not to report for work until Tuesday 4 October.
Longbridge now had 11,000 of its 25,000 employees without work.
It was announced that about 1300 at Morris Motors Cowley would be among 12,000 BMC workers sacked on 4 November – this was one-seventh of the manual force.
At Swindon, just over 800 at Pressed Steel would go at the same date and short time carried on for others. The following day the British Motor Corporation issued warning notices of impending dismissal to about 4000 of the 27,000 workers at its main factory at Longbridge in Birmingham. The notices of dismissal would go out in the next week.
All car production at Longbridge had now ceased. The influence of the Government’s deflationary measures could be seen in the fact that in September 1966 output from the British motor industry was 13 per cent lower than in August, after making allowance for seasonal factors.
The day that Prime Minister Harold Wilson met BMC shop stewards at the Labour Party conference was 3 October. The shop stewards met Mr Wilson after 600 BMC workers had besieged his hotel, carrying posters and shouting anti-Government slogans. Mr Wilson went out to face them and the shop stewards, led by Dick Etheridge, the convener of Longbridge, asked if a delegation of 12 men could meet the premier. Wilson proposed three and they settled on six. When the shop stewards walked in, the Prime Minister counted 12 men.
Harold Wilson: ‘that’s one of your troubles at BMC, isn’t it? You always have 12 men where six would do.’
The next day car production at the Austin factory at Longbridge, which had been at a standstill since Wednesday September 28th because of the delivery drivers’ strike, was resumed.
On 6 October, the British Motor Corporation Chairman, Sir George Harriman, met senior shop stewards at BMC’s staff college, Haseley Manor, near Warwick. The 28 men from a score of factories, were led by the Communist Longbridge convener Dick Etheridge. A four and a half hour meeting failed to produce a compromise.
Afterwards Sir George Harriman said: ‘Bearing in mind the money in exports the motor industry earns, the Government should be prepared to back the horse in form. I would not ask for subsidies but for easement on hire-purchase restrictions, repayment time and overdrafts for dealers who sell our cars, things like that.’
A one-way traffic system had been introduced on roads in the grounds of the Austin works at Longbridge to create more space for storing vehicles. Sir George Harriman, Chairman of the British Motor Corporation met Ray Gunter, the Minister of Labour on October 10th 1966 to discuss the firms redundancy programme.
Afterwards Sir George said: ‘It would be unwise for the men made redundant to regard this as being a purely temporary situation. Although I cannot look into a crystal ball, I cannot see that the men will be needed in the foreseeable future.’
Sir George said that, during his meeting with the Minister, he had urged that the Government should relax the hire-purchase restrictions which had cut sales at home. ‘But, we got no joy on that one,’ he said.
On 19 October 1966 the Daily Mirror newspaper printed a picture of over 16,000 unsold BMC cars being stored at Wythall airfield. There was more bad news for BMC on 20 October. About 200 workers at Morris Radiators, Oxford, walked out after the management had refused a union request that 28 workers listed as redundant should be absorbed by work-sharing. Morris Radiators supplied petrol tanks, exhaust systems, oil coolers and other components to BMC assembly factories.
By late October BMC was being hit by three strikes. Strike one was that of the delivery drivers; strike two was at Morris Radiators and strike three was a London dock strike. This had the following effects:
- They could not make cars at Cowley because of the radiator men’s strike. The production lines were shut down on 28 October.
- They could make some cars at Longbridge despite the credit squeeze, but they could not get them to dealers showrooms.
- And if they succeeded in getting cars to the docks they could not hand them to overseas customers because of the London dock strike.
The British Motor Corporation had failed to meet its planned output of 983,000 vehicles in the year ended July 1966 by 137,000. The company laid the blame for this on industrial disputes and gas shortages. It was estimated that labour troubles in BMC’s factories and in those of its suppliers prevented the corporation from building 93,000 vehicles, while the disruption of gas supplies in the Midlands stopped another 23,000 from being produced.
Profits before United Kingdom taxation of BMC (including the Pressed Steel Company) were £19,191,000 for 1965-66, compared with £20,959,000 (without Pressed Steel) in the previous financial year. It was on November 4th 1966 that BMC officially made 12,000 men redundant.
The final pay day for the Longbridge men was 11 November. The following list shows the approximate number of workers who had been laid off at 14 motor plants up to 10 November 1966. The dates indicate when the plants began laying off workers.
British Motor Corporation
Number laid off
Morris Radiators, Oxford (31 Oct): 330
Morris Motors (cars), Cowley, Oxford (24 Oct): 6000
MG sports cars, Abingdon (24 Oct): 450
Tractors and Transmissions, Birmingham (1 Nov): 640
Morris Radiators, Llanelli (2 Nov): 400
Austin Motors, Longbridge (2 Nov): 13,000
BMC Scotland (Bathgate) (1 Nov): 120
Morris Engines, Coventry (2 Nov): 100
Pressed Steel-Fisher (31 Oct)
Oxford: 4000 (Only 600 were laid off up to 9 November, when over 3000 more were laid off.)
Common Lane, Birmingham 1050
Castle Bromwich: 7500
The Morris Radiators strike was eventually resolved and there was a return to work on 14 November. Meanwhile, the delivery driver’s strike rumbled on. On 22 November, BMC produced its annual report. High on the list of priorities for the British Motor Corporation was the equipping of an engine factory costing more than £10m at Cofton Hacket, about half a mile from BMC’s huge Longbridge works.
The 300,000sq ft building was now ready for its machinery. At least £8million was being spent to provide the most automated engine production plant in the world. In spite of the enforced cutbacks and gloomy predictions that it would be 1968 before BMC was back on its feet, the company was pressing ahead with its original plans to start production at the new plant towards the middle of 1967. Engine production was still the biggest bottle-neck at the height of the sales season.
Cofton Hacket would manufacture an entire new range of engines, the E-series, and a 1485 cc version would be the first to appear.
BMC was more than ever determined to increase its share of the home market. In August 1966 its share was 38.5 per cent (34.7 per cent in 1965) and, in September, 39 per cent (35.7 per cent in 1965). This was still a long way from the 50 per cent target set by Sir George Harriman, BMC Chairman, who refused to lower his long-range sights.
‘As far as BMC is concerned we are maintaining our investment programmes in anticipation of the future demands of motorists in Britain and world markets in general since our view has always been that the key to business prosperity lies in progressive investment whatever the prevailing economic climate.’
BMC’s target for the financial year ending 31 July 1967 was 1,100,000 units. This was reduced to 809,000 (a 21 per cent cut) and it was based on this production figure that the labour force was trimmed by 12,000. One company official said: ‘We had a labour force geared to our immediate target of 1,100,000. It would be a counsel of despair to set such a target and then believe we could never achieve it. Now we have re-trimmed our labour force for a new target and the signs are that we shall not want any of the 12,000 back in the forseeable future, certainly not less than a year. We shall use this time for a great deal of inward looking.’
On 24 November, BMC broke the strike by the Longbridge car delivery drivers by sending in two other firms to move cars from its compounds. The strike collapsed and by 29 November the drivers were back at work moving cars. Their strike had lasted a damaging nine weeks.
On 14 December 1966, British Motor Holdings officially came into being, the product of the merger between Jaguar and BMC. Sir George Harriman spoke of the difficult year BMC had just endured: ‘It would have been very easy to let things drift, but I believe that a leaner and streamlined BMC will achieve by greater efficiency a more competitive position among the world’s major motor manufacturers.’
‘We feel this period of re-adjustment is now behind us, and the organisation has recovered sufficiently to be ready for the next step, forward. We are hopeful that, having weathered the storm, there is a brighter future for us to look forward to.’
Besides Sir George Harriman, the BMH board comprised of Joe Edwards, BMC’s Managing Director; Sir William Lyons, Chairman of Jaguar; Ron Lucas, BMC’s Deputy Managing Director together with his fellow BMC Directors Michael Belllouse, Alec Layborn and Robin Stormonth-Darling.
The following day the British Motor Corporation announced that some of the employees on short time working would be able to resume a five day week in January 1967. However, a BMC spokesman said: ‘This cannot be taken as meaning that BMC’s troubles are over.’
So ended 1966. Joe Edwards and Sir George Harriman had bitten the bullet and responded to the credit squeeze and reduced over-manning, but in doing so they had damaged industrial relations in their plants. The delivery drivers and Morris Radiators strikes had prevented BMC from selling their excess stock to bring revenue in, something that was conveniently forgotten in later years.
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