BMC>Rover: The Whole Story
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The full, unexpurgated story of the rise and fall of our beloved industry. Sit down, take time and read the heartbreaking story. Prepare to wipe away a tear...

Humble Beginnings: The Principal Players

The British Motor Industry may have only gained momentum ten years after that of our continental rivals, but by the time of the great depression in 1929, there were literally hundreds of car producers, big and small dotted across the country. It could be described as a cottage motor industry in many cases, but there were also the manufacturing giants to contend with.

The situation, of course, is never quite as simple as it would first appear because not only were there the large producers, such as Austin, Morris and Hillman, but there was also the presence of Ford, an American company, that decided early on, to use the United Kingdom as a centre of the European operations, opening up a mass-production site for the Model-T, in Trafford Park, Manchester. Then there was Vauxhall, which since December 1925 had fallen under the auspices of American ownership: along with Opel in Germany, the company had become centre of European operations for General Motors.

Some Industry analysts would say that the seeds of the collapse of the British car industry could be traced back as far as the 1930’s, where there were too many manufacturers, who remained in competition with each other for far too long. It is true to say that this made the British automotive manufacturing situation was somewhat unique in the Motor industry as a whole. In the USA, for instance, many of the volume producers had already been swallowed up to become General Motors, formed in 1913. This meant in the USA, there was not the same number of competing manufacturers as there was in the UK.

This situation in the UK was also distorted somewhat by the fact that the Two largest indigenous companies in the Country, Austin and Morris, were massively suspicious of each other. The rivalry between these two companies is, of course, legendary, but perhaps it was also rather destructive for the UK industry, with Herbert Austin and William Morris watching each other instead of the competition. As these were two major companies, both based in the Midlands, both fighting in the same market sectors and both chasing the same customers, it would make sense that they would become obsessed with defeating the other. However, this intense rivalry was further heightened in 1938, when Leonard Lord, William Morris’s number Two was poached by Herbert Austin to run his company when old age (he was 72 years old at the time) meant that he began to lose interest in running Longbridge himself.

Below is a list of principal players in this story – One cannot help but notice that out of all the companies that played a role in this story, only Two remained as survivors into the Twenty-first Century: Rover and MG.

Austin

In a neat irony, the story of Austin cars begins in Longbridge, South Birmingham, just as it continues at the turn of the 21st century, as the only remaining factory in British hands in what was once, a huge and sprawling empire. Herbert Austin had started out in the Motor Industry, working at Wolseley cars, where he quickly became the general manager. In 1905, he resigned from the company, so he could set-up on his own. Production of his first car, the chain-driven 25/30HP, started a year later – this particular car being noteworthy for being well-made, employing a side valve T-head engine and separately cast cylinders.

Production was expanded so that within Three years, Austin offered a full range of 15, 18/24 and 40HP four cylinder models and a 60HP Six. Four of the six cylinder models were entered in the 1908 French Grand Prix, but two of these were crash damaged in practice. Out of the two damaged cars, one good one was salvaged, but it fared badly in the race, suffering from a seizure. The two that were left did go on to finish, crossed the line in 18th and 19th position.

In 1909, a mini car, the single cylinder 7HP model appeared. It was effectively a re-badged Swift, but it was in no doubt the inspiration for the later Austin Seven of 1922. Austin was growing as a car producer, offering this full range of cars, starting at the 7HP, through the odd 15HP model with its cab-over-engine configuration, culminating with the 60HP model, which boasted an engine of almost six-litres.

Production was punctuated by the First World War in 1914, as was life itself. 1919 saw the next change in the Austin manufacturing philosophy where instead of previously, there had been a wide range of cars, catering for a wide range of tastes, he offered just one car – the 3.6 litre Austin 20. Unfortunately, this large, American inspired car failed to sell in any great numbers and along with mounting losses caused by the government decreed West Works Shell factory, led to Austin being placed under receivership in 1920.

In double quick time, Austin produced a smaller, more UK-friendly design, the 1.6-litre Austin Twelve, effectively a scaled down version of the Austin 20. This car did manage to sell and remained in production until 1936, seemingly beginning the love affair that UK Manufacturers seem to have with long production runs.

The car that saved Austin’s bacon, though, was the legendary Seven, launched a year after the Twelve, in 1922. Conceived as a response to the Motorcycle/side-car combinations that Herbert Austin despised so much, but which were proliferating on our roads. He and draftsman Stanley Edge planned the car using the billiard table he possessed at home in order to give it scale. The resulting car was a 696cc (later enlarged to 747cc) open topped four-seater which could most aptly be described as a scaled down replica of a full-sized car. Needless to say, the Seven was a huge success, helping put the working class on wheels, and it went on to sell 290,000 in a production that continued through to 1939. Ironically, the companies that would become BMW in Bavaria began car production building the Austin Seven under licence. Nissan’s version of the Austin Seven, however, was a clone of the car – not an agreed venture – and when Herbert Austin inspected one of Nissan’s cars, it was considered just different enough to avoid litigation…

Because of the success of the Seven, Austin re-embarked on his bid to build larger cars, developing and launching a replacement for the ill-fated Austin 20, this time using a 3.4 litre six-cylinder engine, as opposed to the four of its predecessor.

In the run-up to the Second World War, as well as the larger cars, Austin’s range comprised of the 2.3-litre Austin Sixteen, launched in 1928, the 1125cc Austin Ten, the 1525cc Austin Light 12/4 and the replacement for the Austin Seven, the unoriginally named 900cc Austin Eight.

After the Second World War, Austin initially built its pre-war models, but quickly produced, its first post-war model, the Austin Sixteen. This was not an entirely new car, comprising of a new-to-Austin overhead valve engine displacing 2199cc, which was fitted to the 1940-vintage Austin Twelve body and chassis.

The genuinely new cars soon began to arrive, though. In 1948, the Princess, the A125 Sheerline, the A70 Somerset and the 1.2-litre A40 all appeared in quick succession. The Austin A40 Devon, which boasted independent front suspension and a 1.2-lire engine which was considered to be the direct predecessor to the visually similar and long-lived B-Series engine.

1948 also saw the introduction of the Austin A90 Atlantic, a car pitched unashamedly at the US car market. “Export or Die” was the slogan of late Forties Britain and the A90 was built with just this in mind. It possessed what could be described as “Transatlantic” styling intended to appeal to the Americans. Needless to say, it did not – and of course, the British did not find it a whole lot appealing either, if only they could buy it anyway. The 2660cc did, however, outlive the car – ending up in the Austin Healey sports car as well as a few in the civilian version of the Austin Champ.

The last cars to be developed Austin, whilst still an independent company were the Metropolitan, Cambridge and the Westminster. Production of the Metropolitan was purely a contract job for Austin (winning out over Standard and FIAT), to assemble the Nash designed car for sale in the USA. Austin had no involvement in the US sales of this car when it was launched in 1954, although they did end up selling the car in Austin form in the UK. The Austin Cambridge and its larger brother, the upmarket Westminster variant that followed a year later were launched after the age-old adversaries of Austin and Morris merged to form the British Motor Corporation in 1952.

Morris

Car production for William Morris was an inevitable development for the Oxford based cycle and motor agent. Taking this step was a large one and although this part of England may have been the heartland of car industry, it took Morris until 1913 to start producing his own cars. The first car produced by Morris was the two-seater Oxford model, launched at a cost of £180 incorporating a power train supplied by White and Poppe, displacing 1017cc. This first car comprised of many bought-in parts, supplied by companies that resided in this fertile valley of automotive parts suppliers, but what set this first Morris product was just how well put together it was.

1915 brought the Morris Cowley, again using a bought-in engine, this time coming from the American producer, Continental Motors of Detroit. This was a shrewd move by Morris, who knew that British suppliers were suffering from the fact that they had to slow down car manufacture in order to make way for munitions production. After 1916, however, this loophole was closed when American imports were banned, other than those that were supplying parts for commercial vehicles.

After the First World War, Continental Motors stopped making their red seal engines, so Morris bought the manufacturing rights for the engine and then persuaded the Coventry branch of the French munitions manufacturers, Hotchkiss to build the engine for them.

The nickname “Bullnose” was inspired by the rounded radiator of the post-war Morris Oxford and Cowley models. These two models did lose popularity in 1920, in the slump that followed the post-war boom. This almost led Morris cars to bankruptcy, but in an act of impeccable timing, the company dropped their prices to follow Ford’s lead in 1921. This act boosted sales to such a degree that the Oxford and Cowley models became the best selling cars in the UK during the Twenties.

The Bullnose models remained in production until 1926, after a production run of over 55,000. Similar cars (still known as Oxford and Cowley) with a less characterful flat nosed design of radiator replaced them. At the same time Morris attempted to move into the export market with the ill-fated 2513cc Morris Empire Oxford, which featured – among other things – a wide track option which would allow the owner to fit flanged wheels to the car, in order to run it on a standard-gauge railway.

Morris also bought the Leon Bollee factory in Le Mans in order to produce Morris-badged cars in France. The cars were called the Morris Leon Bollee, but as a result of poor sales of this car, which bore no resemblance with the home market model, it was withdrawn and the factory closed, in 1931.

Next to come was the six-cylinder Morris in 1928, that drew inspiration from the Wartime Hispano-Suiza aero engines that Wolseley, freshly taken over by Morris the year before, had produced. This engine featured a single overhead camshaft arrangement, which at the time was very advanced, not seen on something as humble as a mass-produced British car before.

Like Austin over in Longbridge, Morris was expanding their range, although in the case of Morris it was downward to meet the challenge of producing a rival to the Austin Seven. This duly arrived in 1929. Named the Morris Minor, the car was powered by an 847cc OHC engine and was priced at the psychologically important price point of any car manufacturer at the time: £100. The engine only lasted a couple of seasons, to be replaced by a side-valve unit (variations of which lived on until at least 1971 when it was still being used as a tank generator unit), but the name of Minor certainly did. Surprisingly perhaps, this car did not sell, but its two rivals had already established themselves an enviable reputation in the baby-car market, so the chances of the Small Morris were damaged by its late entry into the arena (the Ford Model Y would be later however).

Just as Austin had endured a tough few years in the Twenties, so Morris had their hard times in the Thirties. They launched the 1.3-litre Morris 10/4 model in 1933, which like the original Minor of 1929 just did not sell at all well and it was not until 1935, with the launch of the popular 918cc Morris Eight, that the fortunes of the company looked good again. This car, subsequently known as the Series I Model Eight went on to sell over 250,000 copies and as with the Bullnose a decade before, the best selling car of the decade in the UK was a Morris.

Prior to the Second World War, Morris launched the Series E Model Eight, which built on the successes of its best selling predecessor. Along with this, Morris also offered four versions of the Series II models, ranging from the popular Series M Morris Ten, which boasted unitary construction, through to the 3.5-litre Morris 25.

But as with everyone in Europe, the events of 1939 would overtake car development.

Immediately after The Second World War, Morris re-started production of the pre-war Morris Eight and Ten models, but the world would only have to wait until 1948 for something new and exciting. Alec Issigonis is a name that will crop up a lot in this book, but for 1948, he engineered the Morris Minor, which was a radical step-forward for the car company and the first British car to sell more than a million units.

Initially the Minor was available with the Side-valve Series E Morris power unit, but following the formation of BMC in 1952, it was made available with an 803cc version of the OHV A-Series engine. The engines were really the least advanced part of the car, because the Issigonis designed car incorporated torsion-bar independent front suspension and rack and pinion steering. Advanced for a British car of its time, it also boasted a low centre of gravity, which was an advantage bestowed on it by its monocoque construction and 14-inch wheels, specifically developed for the car. After Issigonis had designed the Minor, he left Morris to pursue ambitious design projects at Alvis cars.

The consequences of this car were far reaching, because it vaulted Alec Issigonis to the (relative) status of superstardom and it meant that after the formation of BMC, he was encouraged back into the fold by Leonard Lord, to become the overall chief of car design in the Corporation. Certainly, thanks to the success of Issigonis and the fact his Minor was such a successful design, it meant that Morris management were not entirely swamped after the merger. However, with Herbert Austin long since dead it meant that William Morris would be at the head of BMC at the time of its formation, but he soon stepped down as Chairman to become a non-executive President of the company, thus leaving Leonard Lord to call the shots in the Corporation. So it was the Austin side of the partnership that would prove to be the driving force in the new Corporation.

Rover

The name of Rover is the oldest of these principal players in the story of the formation of British Leyland, the company having been formed by John Kemp Starley in the mid 1880s to sell cycles. In 1888, the Rover Company built their first safety cycle, but far more significantly, Starley also showed what he claimed to be the first motorised vehicle produced in Coventry, an electric tricycle powered by an Edwell Parker motor. Starley had to ship the cycle over to France in order to prove the cycle’s maximum speed, which he clocked at 8MPH, far in excess of the UK speed limit, of 4MPH.

Rover’s cycles soon earned an international reputation, but it was not until 1899, that they entered the realm of vehicle production with the construction of a DeDion engined motorised bath chair.

Starley died at young age of 46 in 1901 but the company branched into car production just two years later. Their first car was the 8HP model designed by Edmund Lewis, noteworthy for its use of aluminium in the car’s backbone chassis. The year after, Rover followed this up with the more conventional single-cylinder 6HP model. These Two cars sold so well that Rover soon expanded the range to include two four cylinder models, also designed by Lewis, the Rover 10/12 and Rover 16/20. The 3199cc 16/20 was significant for the company because it went on to win the 1907 Tourist Trophy race.

Bernard Wright designed the next pair of Rovers to appear in 1908, the Rover 12HP and Rover 15HP, which suffered unreliability problems with the engine, due to the deficiency of the lubrication system. Wright pressed on with the next models, to appear in 1911, the 1041cc 8HP and 1882cc 12HP. These two cars used Daimler parts in the construction of their Knight sleeve valve power units.

In the autumn of that year, Rover’s direction changed with the hiring of Owen Clegg as not only the designer of the new 2297cc Rover 12HP, but also as the production organiser at the factory. In no time at all, he had re-arranged production, abandoning the principle of many differing cars made over small production runs. It may have been a 1912 boast of Rover, that they produced an enormous range of vehicles from the cheapest cycle at £6 10s to their most expensive car, at a cool £600, but there were a lot of inefficiencies in offering such a wide choice of vehicles. Due to Clegg’s single-minded changes, Rover became a single vehicle producer in 1913, offering only the Clegg-designed Rover Twelve.

Rover’s first new car to appear after the War ended was the small Rover Eight, which boasted a 998cc flat-twin engine, designed by noted motorcycle designer J.Y. Sangster. The Rover was so diminutive, that it was almost considered to be a cycle-car, but it did go on to sell 17,000 in the four years that it was in production.

After the First World War, production of the Twelve had resumed and it would remain in production until 1924. Clegg’s successor updated the car, to produce the Rover Fourteen, which featured the novelty of a four-speed gearbox. At the same time, the more Car-like four cylinder Rover Nine replaced the compact Rover Eight.

Going into the 1930s, Rover were considered to be the producer of middle-class cars, so it would come as a surprise that Rover designed a sub-utility vehicle called the Scarab. This depression busting machine was priced at £85 was a car/motorcycle hybrid, and incorporated some very clever engineering solutions, most noteworthy being its rear-mounted vee-twin engine and clever suspension system, which at the rear incorporated Swing axles. The car was shown in 1931, but never made it into production, even though it won admirers in the industry.

Throughout the Thirties, the company centred on the production of larger cars, carving itself out an enviable image for solidly-engineered middle class cars, which was nurtured by the new manager S.W. Wilks and his protégée Frank Ward. The results of this conservative thinking arrived in 1937 with the launch of the highly successful Rover Ten, Twelve, Fourteen and Sixteen, which were collectively covered by the P1 (P for “Project”) label – a Rover naming system that would remain for many years to come. Following the War, Rover continued the production of the P1 cars, but in a thoroughly revised form (now known as the P2 cars) until 1948, when the Rover 60 and 75 models (Rover P3) superseded them to run until 1950.

The now rather conservative company finally blew away the post-war cobwebs with the new range of four and six-cylinder models, the P4 cars, known as the “Cyclops” Rover 60, the 75, 80, 90, 100 and 105. These cars defined Rover’s image throughout the Fifties and Sixties and it was the “Bank Manager” image of solidness that these cars seemed to possess that BMW called on in the late Nineties when they produced their modern incarnation of the Rover 75. These cars and their descendants proved to be very popular with Rover’s customers – a group of people that the company’s management must have know extremely well – and as a result, enjoyed a remarkably long production run, which finally stopped in 1964.

During the time Rover were producing their P4 range of cars, they made some advances in the field of Jet Engine application in motor cars, with the development of the Rover JET 1 of 1951, which was successfully tested up to 152 mph on Belgian roads. The company worked on this form of propulsion all the way through to the early Sixties, when they showed their last jet powered car, the front wheel drive Rover T4, which formed the basis of the David Bache designed Rover 2000. The P6 always intended to use a gas turbine power unit, if it could have been made suitable for production but, alas, it would prove to be a task beyond Rover – and just about everyone else. The concept may have been an evolutionary dead-end, but there were some benefits of the gas turbine project, not least the bringing to the fore of Spen King – a gifted engineer that we will hear about more throughout the course of this website.

Rover also launched the P5, an upmarket model, which expanded the P4’s image for solidness, employing the newly uprated inline 3-litre six cylinder engine. This engine was soon to be replaced by the remarkable ex-Buick aluminium V8 engine, to create the Rover P5B. Rover had bought the production rights for this engine off GM for a song, when aluminium fell out of favour in US Engine production.

The P6 actually incorporated some design compromises in order to accommodate the potential installation of a bulky gas turbine engine, notably in its front suspension design. Needless to say, this “innovation” never happened. The Rover 2000 also enjoyed a long production run, by now a Rover tradition, and was at the absolute height of its career when Leyland entered into merger talks with them in 1966.

Triumph

Triumph was a relatively late entry into the arena in 1923, but the company had been a successful producer of motorcycles since 1901. The entry into car production was facilitated by the purchase of the recently defunct Dawson factory in Coventry and soon, the first Triumph road car was launched, the 1.4-litre Triumph 10/20 which lasted two years before the 1.9-litre Triumph 13/30 replaced it, in 1925. This car was notable for being the first British production car that incorporated Lockheed external contracting hydraulic brakes.

The 832cc Triumph Super Seven was launched in 1928, which was a light and well-designed car, as was its replacement, the 1931 Scorpion, powered by an unusual 1.2-litre six-cylinder engine.

The following year, the first Triumph powered by a Coventry Climax engine was launched, the Triumph Super Nine. The power unit used in this car was interesting for being overhead-inlet-side-exhaust configuration. After that, the Triumph Ten joined the Super Nine.

In 1934, Donald Healey joined the company as chief experimental engineer and he pushed ahead with the two-litre, eight-cylinder, double overhead camshaft Dolomite sports car. It was noted by contemporaries that this car was an obvious plagiarism of the Alfa Romeo, but whatever, the specification of this car was exceptionally advanced for its day. Unfortunately, this car did not prove popular and was only produced in small numbers, but it did lead to a family of Triumph engines, which were made available alongside the Coventry Climax unit.

In 1937, the range had expanded to include the 1.5-litre Gloria and the four and six-cylinder variants of the Dolomite, which shared only their name with the Healey-designed straight eight of a couple of years previous.

On the eve of the War in 1939, Triumph was declared bankrupt and it was not until 1944 that the Standard Motor Company, to form Standard-Triumph, rescued it from obscurity.

When production resumed after the war, Triumph production had been moved to the Standard factory in Canley and the cars that Triumph produced there were the razor-edge 1800 saloon and roadster – the latter being infamous for being the last series production car to feature a dickey-seat. The final Triumph-designed engine, the 1.8-litre OHV unit that had been conceived with the intention of being used in a small Jaguar, powered both of these cars.

It was not long before the Standard Vanguard engine supplanted the Triumph units and in 1949, these wet-liner engines were standardised across the range. In 1953, a 2.1-litre version of this was used in the first of the long line of Triumph TR sports models, the TR2. Variants of this car remained in production until the Harris Mann penned Leyland devised TR7 took over the mantle in 1975. The 2.1-litre engine remained as part of the TR model until 1967, when the 2.5 litre six from the Triumph 2500 saloon replaced it.

Saloon car production faltered in 1955, when the Razor-edged Renown saloon was phased out and did not get back into serious volume production until the unconventional Triumph Herald was launched, to great acclaim in 1959.

Standard-Triumph was taken over by Leyland motors in 1961 as part of the Donald Stokes grand plan and as a result, the rapid expansion of the Triumph marque ensued, at the cost of The Standard name, which disappeared soon after.

MG

With thanks to David Jacobs for his invaluable contribution to this story

Cecil Kimber was the General Manager of the Morris Garages in Oxford and in this role, he commissioned six Raworth bodied, two seater convertibles based on the Morris Cowley chassis, of which the first was sold for the princely sum of £300.

It is unclear as to what would constitute the first MG car proper, but it certainly was not the FC-7900, or MG Number One as it was known, which was Cecil Kimber’s first attempt at building a car exclusively for competition use, in 1924. However, it is generally agreed that this car was the first MG sports car.

Kimber’s first car produced in any serious numbers was the 14/28 Super Sport, based on the Morris-Oxford chassis, of which approximately 400 were built. The 14/28 Super Sport was available with either two or four seats and open or closed “Salonette” coachwork. This model was developed into the 14/40 and lasted until 1928, when it was replaced by the 18/80, which was based around the 2.5-litre OHC engine that was found in the ill-fated Six-cylinder Morris model that never actually made it into production.

The car that brought MG into the big-time, however, was the MG Midget, based around the 847cc Morris Minor, launched in 1929. It was at this time that Kimber moved his operations into the former Pavlova Leather Works in Abingdon; in order to meet his expansion plans for the marque – and to meet demand for the well-received MG Midget.

This M-Type Midget was developed into the 746cc C-Type Racing Midget, capable of 90MPH in supercharged form. At the same time as the C-Type was coming into it's own, MG entered into a very fertile period of its history:

The D type (with longer chassis and either open four seat tourer or closed coupe bodies but still with M type Midget running gear)

No E type, (probably to avoid confusion with 'EX' model numbers)

In late 1931 came the F type Magna - with 6 cylinder 1271 Wolseley Hornet engine, again with a variety of bodywork, 'standard' 2 seat sports or 4 seat open or closed plus a variety of coachbuilt bodies.

In 1932 came the J type Midget which set the trend with the 'classic' MG shape of double humped scuttle, cutaway doors, 'slab' tank hung on the back. It came in open 2 seat (J2) or 4 seat (J1) and a closed 'Salonette' style. This model also came with a variety of engine specs as the supercharged racing J3 and later J4 models

The K type Magnette was also introduced around this time, again with a bewildering variety of engines, chassis lengths, and body types - the K1 was the long wheelbase version with either four seat open tourer or four door pillarless saloon and 1087cc six cyl. engine in either twin carb/crash box (KB) or triple carb/pre-selector box (KA) formats, then later with the afore-mentioned 1271cc Magna engine (KD).

The K2 was the shorter chassis variety with 2 seat sports bodywork and twin carb KB engine though a few were fitted with KD engines. At the time the K Magnettes were getting the old F Magna engines, the F type itself was being replaced by the L type Magna, fitted with the KB Magnette unit. The L type came with the additional option of an attractive 'Continental Coupe' body style

In 1933 the K3 Magnette made it's competition debut - these used supercharged 1100cc engines giving anything up to 124 BHP giving 0-75 times of around 14½ seconds and 125mph top speed depending on gearing and state of tune. This won almost everything in it's class for two years beating all sorts of exotic opposition such as twin OHC Maseratis.

The production car range was rationalised somewhat in '33 with the J2 being replaced by the P type Midget (same 847cc Minor engine but now with 3 main bearings) The Magna and Magnette ranges were effectively both replaced by the N type Magnette, but still with two chassis lengths and open or closed bodywork with 2 or 4 seats.

Back on the competition front the J4 was replaced by the Q type with an even bigger supercharger giving up to 146bhp at 7500rpm from 750cc. This gave way to the single seater R type with all independant suspension, to cope with the increasing performance available. However, it was never fully developed as around this time, William Morris gave up his personal stake and sold MG to Morris Motors Ltd. With the withdrawal from racing, the last of the OHC engined cars, the P type Midget and N type Magnette were both updated to PB and NB respectively, before ceasing production in 1936.

In 1933, the Magnette name appeared for the first time, when MG launched the 1100cc supercharged six-cylinder K3 Magnette. This car went on to win the Team prize in its first showing at the Mille Miglia and it the legendary hands of Tazio Nuvolari won the Ulster Tourist Trophy.

As a result of the Morris takeover of MG in 1935, all Works competition activity was ceased so that the company could concentrate on development and sales of the road-going MG range, which now was comprised of the 1935 MG TA Midget, the two-litre MG SA, its 2.6-litre derivative the MG WA and the 1.5-litre MG VA.

After the war, the MG TC (a wider cockpit version of the pre-war MG TA and TB Models) brought the company international success, thanks to the UK Government’s “Export or die” policy. This policy also brought us the export-only drophead version of the 1250cc MG Y-Type, which normally came in the saloon version in the UK. The Y-Type also came with the advancement of independent front suspension, which found its way on to the 1949 MG TD – another of the successful line of T models that’s roots lay in the pre-war years.

As part of the Nuffield Group (the group of companies that were owned by Morris), MG became part of BMC in 1952 and it was after the merger that MG found its greatest sales success with the 1962 MGB model.

Formation of an Empire: BMC is Created

In 1952, old rivalries and suspicions were allegedly slaked when The Nuffield Group and Austin joined forces to become the British Motor Corporation. The idea behind the formation of BMC was a good one; to form an enormous British car company in order to fight the very real threat posed from overseas manufacturers – and assure the future of the British Motor industry. Problems with the BMC organization very quickly manifested themselves, though – as they always do.

In terms of managing the new Corporation, the Nuffield Group had definitely lost out right from the beginning. Although Lord Nuffield had stepped down to become the President of BMC in 1952 – at the age of 75 – it was quite understandable that he had lost interest in running the daily affairs of the giant company. Austin chief, the forthright and opinionated Leonard Lord (pictured above) had, therefore, taken the reins and oversaw the day to day running of the company and as such, ensured that Austin men were installed in just about all of the key management positions.

As explained previously, Lord had forsaken Morris in order to take Herbert Austin’s job at Longbridge, which Morris obviously did not appreciate one little bit. This event meant that a new low was reached in the already terrible relationship between Austin and Morris, so when further executives followed Lord from Cowley to Longbridge, most notably his right hand men, George Harriman and Joe Edwards, the rivalry between the two companies intensified.

All this, supposedly came to an end in 1952 when BMC was created from the two sparring partners, but like all things in life, parties affected by the merger had their own vested interests and so, in this instance it seemed that the interests of Austin and Longbridge came before those of Morris and Cowley. High-ups from the Nuffield Group saw the merger as nothing more than an Austin takeover and therefore became defensive of their own roles within the corporation. When they saw Austin executives taking key roles within BMC, it would appear that they were perhaps right in thinking this.

Not only was this evident high up in the company, but at all levels; employees still felt part of the “them and us” culture within the company, which was being perpetrated by the management’s actions. The dealer principals remained trenchant in their insistence that a separate network of dealers was maintained, and just like the old days they would have separate and distinct model ranges to sell.

The Issigonis-designed Minor was an extremely advanced car when it was launched and became the first BMC car to sell more than a million. The problem with the Minor was that it was left in production for far too long and so became adored by millions around the world. By the Sixties, Issigonis considered it a product of a bygone era, gave it no further development and it was not until 1971 that it finally got the axe, being replaced by the Marina.

The dealers were right in their fears that cuts in their organization would need to be made in order to fully amalgamate Austin and Morris, but they wanted to maintain the status quo by not accepting a single loss in the range and they fought very hard to do so. Not only this, but they would not accept losses in their distribution network, either. They used their influence with Lord to ensure that there would not be a single compromise made. The dealer principals could do this because they had direct access to Leonard Lord and as such, had an exaggerated influence over direction of BMC. They ensured that not only that Lord maintained separate Nuffield Group and Austin model ranges, but also successfully persuaded him to accept that the corporation required autonomous dealer networks to sell them. If there had been a will within BMC to break this stranglehold, then the dealer groups could call on written contracts defining their positions, in some cases stretching back fifty years.

The idea of separate franchises and separate model ranges may have had outward appeal because it was a marketing model that worked well for General Motors in the USA, but the reality was somewhat different: BMC was now effectively controlled by Austin at Longbridge. The parallels did not run any further than that, because whereas General Motors in the USA operated a system that each company may have shared componentry, but they operated as separate companies with separate management, BMC did not. BMC had neither the resources, nor the overall production capacity to maintain a policy like GM’s.

Leonard Lord may have been browbeaten into acceding to the wishes of the people that sell the cars, but he knew that his plans for the future would involve much component sharing, first of which would be the sharing of engines between the Morris and Austin ranges. Furthermore, the process would not stop there; it would be a lot more widespread than the simple policy of sharing engines. For Leonard Lord and George Harriman would continue the widespread policy of “badge engineering” first started by Nuffield before World War II, and would become endemic within the company ten years hence.

So, the boom years of the mid-fifties were not the time when the ruthless rationalisation of the corporation was seriously considered, let alone entered into. The problem, of course, is that it should have been because as the company grew and grew, it was built on this foundation laid from the two companies instead of one strong one. As time went on and the factories became more numerous, the empire more widespread, it would prove to be increasingly difficult to administer from Longbridge.

The management and factory situation may have been riddled with problems as a result of the merger, but the range of cars that the newly merged company offered surprisingly little overlap and should have formed the basis of a homogenous and logical progression of models:

·   Morris Minor

·   Austin A40

·   Morris Oxford

·   Austin A70

·   Morris Six

·   Austin A125 Sheerline

As explained before, the Morris Minor was an amazing and advanced car, which re-wrote many of the small car rules of the day, but in the post-merger management environment, it was isolated amongst an Austin-dominated range. Morris design at Cowley was slowly wound-down piece by piece and the Austin Drawing Office at Longbridge would eventually handle all design work from the end of the 1950s when the Farina designed cars came on stream: all subsequent cars developed by BMC would have ADO (Austin Drawing Office) development tags.

After 1952, signs of the Austin domination soon began to manifest themselves. The first evidence of this was in the range of engines employed by BMC. The rationalisation that should have happened within the management and distribution system of the company did take place in the model range. Well, the seeds of rationalisation were sown, maybe. In short order, a range of mainly Austin-derived engines, named logically enough, the A, B and C-Series, would power the entire range (the C-Series was designed and built by Morris engines in Coventry, using Austin design philosophy!). Significantly, they would all enjoy a long life, the A and B-Series especially so.

In very little time, the Morris Minor was revised in order to use the 803cc Overhead valve Austin A-Series engine from the newly launched baby A30 model. In 1954 a new Morris Oxford emerged, which was powered by a version of the B-Series engine found in the Austin A40, this time enlarged to 1.5-litres. These changes made to the power unit were also carried over to the A40, which was re-named the Austin A50 Cambridge – no doubt named thus to signify the close relationship between Austin and Morris by this time. The large cars, the Austin Westminster and the Morris Isis were finally launched, both using the 2.6-litre six cylinder C-Series engine.

So the slimming down of Austin and Morris was beginning to take hold. The point had been made; a full range of cars could be maintained, using a smaller range of engines. Huge economies of scale could be maintained by this engine sharing and the dealers would still remain happy, as they all had their full ranges of cars to be sold. Customers did not care that the engine in their Morris Minor or Oxford was an Austin unit, so everyone was happy.

At this point, it could be argued that it was the best of a bad situation. OK, so the dealers could not, would not accept any slimming of BMC’s model range, but at least the management were ensuring that much in the way of resource sharing took place, so that if the Austin and Morris franchises wanted their own cars, they would make sure that they would produce both options as economically favourably as possible.

Of course, the logical solution should have been to drop the separate Austin and Morris badges at this point, encourage all the dealers to stay on board with generous incentives and to sell a single range of Austin-Morris cars, badged as BMCs. The obvious conclusion was not drawn though, because people throughout the company were paralysed rigid with the fear that a single loss would have led to sales surrendered to the opposition.

Luckily, throughout the Fifties and into the early Sixties, BMC sales were shored up so much by Harold Macmillan’s economic miracle throughout the country and the post-war boom overseas in general, that the obvious conclusions were not drawn. It was a seller’s market and because car ownership was growing rapidly, no longer the preserve of the middle and upper classes, BMC could sell cars as they pleased. The successes of the company financially and on the marketplace meant that any tough decisions that should have been made at the start could be deferred, not considered until it was absolutely necessary to do so.

One problem that began to manifest itself in a big way – and one that would sadly leave an indelible mark on the events in the company for the following thirty years – was that of strikes and union unrest. The problem of course was that following the Second World War, there was almost unlimited demand for cars – and in order to satisfy that demand, BMC were prepared to do whatever it took to build as many cars as they could. When Unions approached Leonard Lord for pay settlements, no matter how inappropriate, he would be forced to cave in because the cost of these wage settlements would be outweighed by the potential cost to BMC through lost cars built and therefore, lost sales. As time went on and the burden of these Union demands became increasingly severe, Leonard Lord began to lose patience: following a particularly disruptive strike in 1956, Joe Edwards was tasked by Lord to deal with the Unions, by taking on a role in Labour relations. Edwards refused to do this as he saw himself more as a production man, and as a result, a huge falling-out occurred between both men, which ultimately led to Joe Edwards resigning from BMC.

Edwards’ resignation did have lasting effects on the company not only because he was popular with the Longbridge workforce (hence Lord’s “offer” to deal with them), but also he was a man of great conviction – someone that would try very hard to maintain the success of BMC in the years that he was there.

So instead of rationalising the model range to offer a cohesive product line, what Leonard Lord did was, in fact, the opposite of this agreeable and logical policy. Resources were now shared and offering what was outwardly the same car in two different manufacturer’s guises could further make economies of scale. Sure enough, in 1958, with the launch of the Farina saloons, we saw the first example of major post-merger “badge engineering” would take place in the Austin and Morris ranges.

Of course, in retrospect, it was a ridiculous situation offering identical cars through differing dealer networks, but people did not seem to mind, as the situation back in the fifties was somewhat different to how it is now, when customers were loyal to a marque, or even the garage that was closest to them, and as such did not so much mind what the company or garage served up.

These cars that BMC offered at the time were thoroughly conventional, uninspiring and somewhat stolid cars and it was as a backlash to this thinking that Pininfarina were invited restyle the cars, giving them a corporate look. Lord and Harriman, however, were pleased with the success they were making of their badge engineering policy and it comes as no surprise that they would pursue this policy actively with their next wave of new models.

With great efficiency, Pininfarina produced their proposals for the new cars, the first of which they launched in 1958 to great acclaim. This car was the A-Series engined A40, a rebodied A35 incorporating smart Italianate styling and a novelty for the time, the Countryman version offered a split tailgate – a prelude to the hatchback design (despite a designation that hinted at Estate car status). The A40 was priced at a premium over the A35, but it proved popular nonetheless because it was smart-looking and more importantly, it hit the market at precisely the right time, just as effects of the 1956/57 Suez crisis had switched people on to buying more fuel efficient cars again. Because of these circumstances, the A35 was left in production, BMC figuring that it would do no harm at all to offer as many cars as possible in bottom end of the market.

Next to come were the B-Series engined cars, the Cambridge and Oxford replacements, launched right at the end of 1958. What Pininfarina served up here was regarded with mixed feelings by trade and the public, alike. The problem with the “Farina” models were that they were exclusively powered by the B-Series engine, a not-too energetic 1.5-litre engine and as the new bodywork, so similar in style to the Peugeot 404, managed to make the car both large and heavy. This saddled the car with less than spirited performance. The tail fins, large hooded headlights and the narrow track with wide body also conspired to make the car look somewhat over-bodied, which exacerbated the situation. This confused image that the car portrayed did not endear it to the motoring press and buying public alike, and although the car had its devotees, it was never the sales success that BMC had hoped it would be.

However negative the response to the initial Wolseley badged model may have been, the Farina models came thick and fast. Following on from the Wolseley 15/60, the inevitable flood of badge engineered models followed in quick succession: the Austin A55 Cambridge, the MG Magnette III, the Morris Oxford IV and the Riley 4/68.

The final model in the Pininfarina styled triumvirate was the pair of large C-Series engined cars, the Austin A99 Westminster and the Wolseley 6/99. The styling of these two cars was similar to the B models, but more in keeping with the engine capacity and market aspirations of this model.

The Pininfarina styled Austin A40 model was launched in 1958 as a replacement for the A35. Styling was smart, but underneath though it was tediously conventional.

By mid-1959, the range was complete. There were the A models represented by the new A40 (The 35 and Minor were throwbacks that would remain in production to satisfy fuel-crisis demand for small cars), the B Models, represented by the “Farina” cars and the C Models right at the top of the range, the large Wolseley and Austin Westminster. The range was homogenous, the cars were neat and contemporary looking and above all, they were a success.

The underlying worry, of course was that beneath that smart styling, they were painfully conventional in their engineering and BMC were beginning to receive a certain amount of criticism over their engineering timidity. The last thing they would do though, is tell the world that they were working on some advanced alternatives. In their quest for a more contemporary identity, BMC had investigated various different models, notably a rear engined saloon that would have offered nothing, except a whole load of awkward questions to the public. Apart from this, Alec Issigonis had been locked away working on something far more radical than people would give the conservative company credit for. As far as BMC as a producer of cars was concerned, this conservatism was to change in the most profound way on the 26th August 1959, when BMC launched the fresh new Mini.

The “Farina” bodied mid-sized car, the Morris Oxford. Not the most inspiring car on the road to drive, but it was reasonably stylish and went on to live a long production life.

As the fifties became the sixties, the whole complexion of the market began to change. Competition began to become a whole lot tougher and as merger mania began to take hold of the industry, BMC’s policy of badge engineering separate Nuffield and Austin ranges began to look like the foolish policy of a bygone age. In the wider arena, Jaguar swallowed Daimler in 1960 and in 1961, Leyland Trucks absorbed Standard-Triumph to become the Leyland Motor Corporation, the Lancashire based heavy vehicles company being headed by the ambitious Donald Stokes.

In 1960, British car production also broke new records when 1.36 million were built in total, but this would appear to be the absolute zenith for the British car industry, a culmination of the momentum gained in the “golden years” of the fifties. The following year, disastrously, production dropped back to just over a million, but worse than that, for the first time in the modern era, France had built more cars than Britain to line up second behind West Germany in the European car production league.

With the health of the company looking so good, George Harriman announced a huge expansion plan for the company, making the announcement that it was the intention of BMC to produce a million vehicles a year. The £49 million government assisted programme involved opening new factories in Llanelli, South Wales, Bathgate in southern Scotland and Ravenscraig – all areas of high unemployment and badly in need of government investment.

The results of this investment soon bore fruit, with the output of BMC increasing significantly, so that by 1964 the company produced a record 731,000 cars. The seeds of disaster however had been sown; investment had been made in manufacturing, but at the cost of a viable new models programme. The evidence of this is not hard to see: after the launch of the ADO16 in 1962 and the ADO17 in 1964, no new cars of any substance appeared until well after the Leyland takeover in 1968.

The new factories must have looked like a great idea at the time, but by moving away from their Midlands heartlands, BMC management were for the first time, being overstretched with the task of overseeing the this vast new empire. Human resources were stretched and industrial relations began to suffer accordingly. Profits began to drop on the sales of new cars as well, compounded by the double whammy of a poor pricing policy, which was defined right from the top, and high warranty costs on the troublesome Mini and 1100.

For an example of the Corporation’s slap dash pricing, one had to look no further than the new Mini. Leonard Lord’s famous quote that, “if you build bloody good cars, they’ll sell themselves.” was certainly the case with the Mini and the 1100, both being excellent products, but the downside of this was that they made a disastrous error in pricing the Mini too low. This marketing ineptitude resulted in the basic Mini costing £496, which not only was the same price as the Ford 100E Popular, but £100 cheaper than the new 105E Anglia. When Ford’s costing engineers stripped down the Mini in order to work out how on earth BMC could sell it so cheaply, they estimated that BMC were actually making a loss of £30 on each one built.

Leonard Lord dictated this pricing policy himself believing that BMCs cars would only sell if they were the cheapest in their class – the result was that BMC’s cars were horrendously under priced on the home market. Of course this philosophy of his dated back to when he was the head of Austin and would always deliberately price his cars below Nuffield’s cars, regardless of the profit implications.

The trouble, of course with the Mini and 1100, was that they were new concepts and as such, did not have direct rivals. BMC were worried about customer resistance to both cars and so, priced them in such a way that they cut their own throats. John Barber, who was the finance director at Ford at the time, but later went on to become the Managing Director at British Leyland, stated that, “We priced at what the market could stand. Then, almost as an afterthought, we would cost it and if it showed a loss, we would have to cost it again. BMC should have said: Where do we slot into the market? We’ve got the most sophisticated car in the world. We can afford to charge £100 more than the wretched Ford runabout. Then, having got the Mini into the wrong slot, they did the same with the 1100 successor.” It was not until Barber himself moved over to the company as finance director, that the price of the Mini would be jacked up to a sufficient level that at least it was not losing any money.

The financial performance of the Mini and 1100 were demonstrated potently by the fact that in 1960, BMC had made a £26 million profit on total sales of £347 million, but by 1967, when they were building and selling more cars, they made a loss of £3 million on total sales of £467 million. Turnover and sales were good for BMC during the sixties, with the Mini and the 1100 being the company’s best sellers, but as no profits of any significance were being made on them, no investment was being made for the future. The issue of the future, or more precisely, the lack of forward planning for it was becoming more and more pressing as the Sixties wore on.

By this time Leonard Lord had stepped down as the company chairman, to be replaced by George Harriman, who had been BMC’s managing director since 1956. Lord, who became Lord Lambury in 1962, would stay on at BMC as Vice-Chairman and would remain firmly in touch with the Corporation’s policy until his death in 1967. When Harriman took overall control of BMC, he ensured that Alec Issigonis was promoted to become the technical director of BMC, ensuring that these two men alone would dictate control of future model policy. Both men shared a close relationship, but in a way, this bond may have blinkered Harriman’s judgment with regards to future model development.

Fresh from the successes of the Issigonis-penned Mini and 1100, this same formula was used in the creation of the medium sized car, the ADO17, Austin/Morris 1800. It could be said that model policy took a disastrous turn for the worse with this car, because for reasons explained in the chapter dealing with the ADO17, the focus of the car was lost.

The ADO17 was designed as a replacement for the 1.5-litre “farina” models to buoy up the Corporation’s sales in the middle market, but when the B-Series engine was enlarged for the MGB to 1.8-litres, Issigonis allowed the width and weight of the ADO17 to increase in order to make the best use of this new power unit. Not only was the car widened, with the result that it was moved out of the market it was intended to compete in, but the styling of the car was an extremely unhappy mix; and perhaps it was this that allowed potential customers to perceive the ADO17 as being a larger car than the Farina saloon it was meant to replace – it was not. Whereas the Mini had not been styled as such – and that was essential to its charm, the ADO16 completely the opposite – being a highly styled car, the ADO17 was neither fish nor fowl.

Where the 1800 went wrong was that Issigonis styled (or more correctly, non-styled) the original car and then Sergio Farina re-jigged the design in order to put some style into it. Because the 1800 was awkwardly proportioned it a conceptual stage, it would prove difficult for the Italian designer to improve upon the design – and looking at the development pictures (see chapter four) it is evident that he merely tidied up the overall design as opposed to producing his own concept. What compounded this strategic error was that BMC seriously believed that they would be able to produce the ADO17 at the rate of 4000 a week! To put this into perspective, this was a higher rate of production than the ADO16 and that was Britain’s best selling car.

With Pininfarina’s record of producing successful cars for BMC, the company seriously evaluated the “Yellow Peril” as it was known internally – Harry Webster even drove it around for a while. However, there was a strong belief that any replacement for the ADO17 would require a new chassis – and as a result, the ADO71 was chosen as the way forward. Note that the styling pre-dated the Citroen CX and Rover SD1 by seven years. It is debatable whether the car would have gone on to sell more than the 1800, but it certainly would have been a more credible vehicle for Donald Stokes’ idea that Austin was the producer of advanced cars.

Of course, it was soon realised by all that not only was the car not right for the market it was intended for, but it was not even suitable to replace the aged and costly to produce farina saloons. The seeds of BMC’s downfall were now well and truly sown: at one end of the spectrum, there were the brilliant new Mini and 1100, which were selling in bucket-loads, but not making the company a bean. Then there was the hulking great ADO17 which was not selling at anywhere near the rate predicted for it. While at the other end of the spectrum were the elderly and labour intensive Morris Minor and Farina saloons that the corporation was unable to replace.

By 1965, the first full year of ADO17 production, BMC’s output began to fall, but Harriman did not feel yet that this was a cause for concern, because output from the industry as a whole was falling. What he was concerned about though, was the question of forward planning within the corporation, or more precisely the lack of it. This was a problem that had been endemic since the late Fifties, but was now becoming increasingly pressing as competition, most notably from Ford became more intense.

The question was finally answered, but it took the failure of the ADO17 to act as the catalyst. In response to these concerns, a director of planning, Geoffrey Rose was finally installed in 1965, whose responsibility it was to ensure that the company’s cars were priced correctly and future planning was directed in the correct way. His installation then led to the formation of a market research department, which for BMC was definitely a step in the right direction. Before this, there was no market research as such; mainly in the past, new cars were developed and launched in response to what the engineers wanted and management instinct. The result of this was the ADO17 appearing on the market in the form it did.

This department mainly comprised of inexperienced university graduates and certainly did not operate on the same scale as the Ford equivalent, but it was a step in the right direction and one of the first results of this was the formation of a product-planning department for commercial vehicles, which appeared late that year.

Alec Issigonis still had overall responsibility for cars, but with an eye on the failure of the ADO17, management would ensure that the marketing strategists would have a great deal more say on the direction of future model policy. Perhaps, it was already too late for the corporation, who’s management now must have seen the writing on the wall, especially when they could see that their only products in development were the Austin 3-Litre and the Maxi. It cannot have made good viewing.

But still, the matters of internal efficiencies were not addressed and yet the expansion of BMC continued afoot. With the purchase of Pressed Steel during 1965 (which was then merged with Fisher & Ludlow to become Pressed Steel Fisher), BMC had finally brought the manufacture of the company’s body shells in-house. Outwardly seen as a good move, the purchase was made using nothing more than company funds – no external funding was required - and it would provide a source of income from Pressed Steel’s other customers. Pressed Steel not only produced BMC’s body shells, but also those of the Rootes Group, Jaguar, Rover, Rolls Royce and Leyland’s cars and so, in one fell swoop BMC now had inside knowledge of what the opposition were planning to build in the future and more importantly, how much it was costing them to do so. This was a fantastic coup for BMC and yet, this unfair advantage was never really capitalised upon. The purchase also heralded the return to the fold of Joe Edwards.

Follow up to the Pininfarina 1800 proposal of 1967, this fully engineered prototype built on Austin 1100 running gear was commissioned by BLMC, who had been impressed by the original. This car represents an even bigger missed opportunity than the larger car and its relevance is thrown into great relief by the absolute ugliness of the 1100’s replacement, the Allegro – and it comes as a disappointment to report that not only was this car passed over by British Leyland, but they reported to Pininfarina that they were “disappointed” with the design for being “too close” to the BMC-Pininfarina 1800!

George Harriman immediately offered Edwards a joint assistant managing directorship of BMC alongside himself, but Edwards was not interested in this, making the counter-suggestion that he could become the managing director of the company if Harriman were to take up the post of executive chairman. Harriman accepted this without hesitation because he knew that Edwards had the wherewithal to make the cuts within the corporation that would be needed in order to keep them fit for the challenge of the Seventies.

When Edwards took his post on 9th June 1966, he returned to the office that Leonard Lord had used to fire him, a decade ago. Just like the last time, Lord was present, only this time he would be smiling when Edwards returned, “There is only one man in this office today whose hand I want to shake”, Lord said to Edwards, “I should never have done what I did and I am delighted to have you back”.

When Edwards took over the running of BMC, he would have seen a lot of changes in the Ten years since he left. Firstly, the company was a great deal larger, having opened up new factories, they were producing new and advanced cars, but at the same time viewing the company with a fresh pair of eyes, he could see that there was a great deal of excess capacity in the company and that the factories were seriously over-manned. Sadly, it was also apparent to Edwards that the factory at Longbridge had been neglected badly during the intervening years – and that the workforce there was under-motivated and less productive than they should have been.

He instigated a programme of cuts, in order to improve the health of BMC. Late in 1966, he cut 14,000 jobs across the company and then he started on a programme of factory closures, significantly the body plants at Coventry and Castle Bromwich. Significantly, Edwards was also to re-join BMC right in the middle of protracted negotiations with Donald Stokes that would eventually lead to the BMC-Leyland merger of 1968. Edwards made it clear to Harriman that he did not feel that this was the correct path for BMC to take – but went further by saying that he was not interested in merger and would play no part in it – instead he would try and address the problems endemic at BMC which had arisen through the years of neglect.

Maxi was vitally important for the company, but even before it was launched, Stokes and his management team knew that it was virtually unsaleable. The Morris Marina would be created as an antidote to the advanced, but ugly Austin. (Picture Supplied by Graham C. Arnold)

Edwards also tried to address the issue of lack of future model plans, finding it unbelievable that George Harriman and Alec Issigonis had perpetrated such a critical error of judgement. Upon viewing the upcoming 1.5-litre car (the ADO14 – Maxi), he ordered an immediate restyle of the front end styling – being far too late in the model’s development to do anything more radical. The body pressings for the Maxi had already been signed off and Pressed Steel was gearing up to produce bodies-in-white. He also commissioned newly recruited ex-Ford man, Roy Haynes to face-lift the Mini (resulting in the Mini Clubman), whist Issigonis himself worked on the more radical 9X.

By the summer of 1967, Edwards felt that times were becoming very worrying for BMH. Several issues that had been building over the past couple of years were now coming to a head:

·   Market share for BMH fell to a low of 28%.

·   BMH did not follow up the success of the Mini or ADO16 by producing replacement models.

·   Poor product planning led to the panic development of the Maxi.

·   The ADO17 was selling terribly, never bettering 1000 cars per week.

·   New cars were taking too long to reach the market.

·   Mini/ADO16 made no profit, other cars made very little money.

·   BMH inefficiency was rife; a perfect example of this, as Edwards observed, was that the 1100 was built at four factories and yet, the production volumes of this car did not justify this.

These cuts, especially those in the work force did not make Edwards a popular man, but it is true to say that he was only making cuts in the company that should have been made years before. Prime Minister, Harold Wilson was all too aware of these overmanning levels throughout the company and even if he did not want to see a single job loss, he knew that these cuts were necessary. At the 1966 Labour Party conference, as Wilson recalled later, a delegation of six BMC shop stewards were invited to address him in his hotel room. When the delegation arrived to say their piece, it comprised of twelve people!

Exasperated, Wilson said, “That’s what’s wrong with BMC, always needing 12 men to do what six should be doing”. Wilson still believed that the company was overmanned even after Edwards had made his cuts and he knew that he would in some way have to address this situation further in the future.

In the wider arena, Jaguar was now looking like rich pickings for both the acquisitive-feeling Leyland and BMC car companies. Donald Stokes approached Jaguar in 1965, offering a merger deal, where Sir William Lyons would take control of Standard-Triumph, as well as maintaining control of Jaguar. Lyons liked the deal, but at the last minute and on the golf course, he told Sir William Black (the then chairman of Leyland) that the deal was off and that the reason was that he feared that Jaguar would be engulfed and lose its identity in the new company. The response from Leyland management was swift – if they could not have Jaguar, they would pursue Rover. Within months, Stokes acquired Rover and now Leyland controlled an increasingly large slice of the UK market in the profitable “premium” end of the spectrum.

Sir William Lyons of Jaguar approached George Harriman the following year, due to his own fears for the long-term viability of his company and its vulnerability to a hostile takeover. Lyons also had private fears that his company could quite easily fall foul of BMC’s management and their acquisitive desires, using their ability to take away his supply of bodies (Pressed Steel supplied Jaguar).

However, sixty-six year old Sir William Lyons was a very canny negotiator and so, from what he may have considered was a weak bargaining position, he managed to ensure that he remained in complete control of the Browns Lane factory and also had a seat on the board of BMH.

As part of the deal, changes were made to the BMH range; the large and cumbersome Austin Princess was dropped, as was development of the new 4-litre Austin-Healey sports car (so not to queer the pitch of the Jaguar E-Type). Unfortunately, the Austin 3-Litre saloon was too far advanced in its development to be scrapped, but it never was to endure a glittering career. Finally, BMH agreed not to build any saloons larger than the ADO17/1800cc. Of course had Harriman had not been preoccupied with the matters of Leyland, he might have seen he was in a better position than Lyons made him believe that he was, but Lyons assuredly made the BMC Chairman aware that it was he who was responsible for the unprecedented growth of Jaguar in the previous 15 years (6647 produced in 1950, 25,963 produced in 1965). There been real growth in the past, but there was also the real prospect of further product-led growth in the future; backing up this feeling was the fact that they offered the world-beating E-Type sports car and they had the XJ-6 saloon in the offing. It was the single-mindedness of this trenchant negotiating position adopted by Sir William Lyons (and his chief of operations, Bob Knight) that undoubtedly assured Jaguar’s independence during the merger and throughout the turbulent Seventies.

British Leyland: A Tubulent Time

The creation of the British Leyland Motor Corporation, in 1968 may have been a long time coming, maybe it is also easy to describe it as an answer to a question that no one had yet posed, but there is a kind of convoluted logic as to why it happened. As we have seen, BMC was a most influential and respected manufacturer of motorcars. After BMC had been formed in 1952 to form the fourth largest car manufacturer in the world, the combined company had gone from strength to strength, exporting hundreds of thousands of cars to all four corners of the world. BMC had single-handedly re-written the rulebook for small cars, producing the Mini in 1959, and then following it up in quick succession with the ultra-successful ADO16. Before this point, their range of cars (as were those of their UK competitors) was a painfully conservative one, reflecting the tastes of UK car buyers at the time, comprising mainly of boring rear wheel drive saloons, such as the Morris Oxford and Austin Westminster. Piece-by-piece, however, the entire BMC range would be replaced by a new range of Issigonis-engineered front wheel drive cars.

Over on the other side of the car manufacturing fence, Triumph had also had a successful time in the Sixties, having launched the popular and well-liked Herald in 1959 and then the Harry Webster engineered and Michelotti-styled 1300 in 1965. Along with this range of small cars that had carved out a profitable niche slightly above the Austins and Morrises of the world, there was also the highly successful 2000 model that, along with Rover’s 2000 model, had the “executive” market practically to itself.

Rover had also had a good few years in the Sixties. First there was the P5, then the P6, both templates that for years to come, other manufacturers would use in the creation of their upper-middle management cars.

Merger mania was beginning to take hold of the UK car industry, however. During the 1960’s, management teams across the industry were seeing that the European and American car industries had grown at an extraordinary rate – post war consumerism had created a massive build up in the demand for luxury goods across the globe and people desperately needed cars. Japan, and Germany in particular rebuilt their car industries at an astonishing rate and were only too happy to meet this demand. Reasons for this change in fortunes are diverse and many, but Germany and France had used their Marshall-Aid money wisely, investing in infrastructure and industry whereas the British Government had not. The result of this was that the UK were not able to ramp up production at anywhere near the same level as the competition – and demand at home was artificially kept low by the Government’s tight squeeze on Hire Purchase regulations.

Where once, in the immediate post-war era, the UK had been the largest producer and exporter of cars in the World, by the Sixties we had fallen behind the USA, West Germany and Japan. Companies reasoned that in order to survive the next few years in the increasingly competitive world stage, they would have to be bigger than the next guy – and if that meant swallowing up his company, then so be it.

Super-salesman Donald Stokes had made his name as one of the outstanding salesmen of his generation when he had successfully managed the Leyland Truck company, turning it from a ragbag of UK manufacturers into one of the largest producers of trucks and buses in the world, earning a fortune for the company in exports, too. His masterminding of an audacious £9 million sale of Leyland Olympian buses to Cuba in 1964 had proved his abilities as a salesman beyond any doubt.

He had risen quickly through the company and once he had reformed it, this ambitious man had wanted a new challenge. Fresh from these successes in the Heavy vehicle market, he found his challenge when he turned his hand to the car industry, no doubt dreaming that he could perform the same magic. He had pushed forwards a plan to purchase the Standard-Triumph group, which he did in 1961 and then followed this up by purchasing Rover in 1967. Times were good and the new car company, Leyland, had a good few years in the Sixties on the back of the revitalised Triumph range and the success of the range of Rover cars already in place. Initially, there would have seemed little logic in this joining of Britain’s two middle management brands of cars, but Stokes saw a very healthy export market for Triumph’s sports cars and with Rover he had picked up the favoured transport of upper management; the Rover P5. Besides, as detailed in chapter three, Stokes bought Rover when it became clear that Leyland had lost in their battle with BMC to purchase Jaguar.

The competition between the Rover and Triumph 2000 models was not seen as a problem because both cars were such a huge success on the UK and European markets, almost having the “2-litre” class in the UK completely to themselves. If the Two cars held 90% of their given market and there was no competition, then how could that be a bad thing? The reality of that situation was somewhat different: Why have two cars competing against each other – and worse – using no shared parts? It was madness of course. So by 1967, Donald Stokes, through a couple of careful acquisitions, controlled 16% of the UK car market, but more importantly, Leyland were now a serious force in the car industry and Stokes himself now was a very influential voice. But what of BMC and more importantly, why did Stokes decide to take that final step into the realm of mass production?

During the 1960’s BMC were failing to make hay whilst the sun shone brightly for them. The Mini was making the company no money whatsoever, even though it was (along with the E-Type Jaguar) the trendiest car in which to be seen in around the West End of London and other fashionable European cities. The ADO16 was fighting an almighty battle with the Ford Cortina for sales supremacy in the middle ground of the market and was selling in huge numbers, but was also costing the corporation a packet in warranty costs.

As we have seen, Issigonis had used the same formula to produce the 1800 with disastrous consequences and the less said about the forthcoming Austin 3-Litre flagship car, the better. These were two cars that lacked in appeal and gave away market share in the upper-medium class. In the years between the launch of the 1800 in 1964 and the Leyland takeover in 1968, there were no new car launches of any relevance and although the business still outwardly looked in reasonably good shape with BMC holding over 30% of the new car market, the Corporation was losing money at an alarming rate.

This is where things seem to have gone even more than a little bit awry. BMC, no doubt looking over their shoulders at the successful Leyland Company, absorbed Jaguar in 1966 to form the short-lived British Motor Holdings (BMH). The cost to the Company’s finances had been considerable. Maybe the decision was made to go with Jaguar because BMC management knew that even before its launch, the 3-Litre was a lemon and so felt that the Jaguar/Daimler range of cars would represent the pinnacle of the BMC range in the face of the almost-certain failure of the 3-Litre. Whatever though, there was a huge chasm in the BMH range between the Austin Morris models in the family car sector of the market and the world class Jaguar range. Of course there might have been some logic in this takeover, had the cost to BMC not been so great.

After The Merger: A mess to be sorted out

The Government decided to “encourage” Donald Stokes of the Leyland Group to meet up with George Harriman of BMH and less than subtly push for a merger. This form of Political “intervention” was not unheard of back then and when the Harold Wilson Government invited Stokes to talk to BMH, the edict was for a “Big get together”. In order for the British Motor industry to survive on the worldwide stage, the Government reasoned, they needed to be as large as possible. It must have looked like manna from heaven to everyone when the Leyland Group and BMH decided to get into bed together – in one fell swoop here was created the British answer to General Motors, with the capability of producing a million cars a year.

Donald Stokes looked at this as a great opportunity, not only seeing this as a way of increasing Leyland’s volume massively, but also it was a wonderful opportunity for Stokes to become the “figurehead” of the British Motor Industry. Stokes, himself initially revelled in the role of “Captain of the British car industry”, using the media in a most effective way, something that made him quite unlike any other British Industrialist.

So what had Stokes inherited? Well, it must have seemed unbelievable to him that BMC had nothing to show in terms of future cars to produce, but this pretty much summed up the state of affairs in the company at the time: only the Maxi and the Mini Clubman were undergoing serious development and nearing completion. A revised ADO16 was in the early stages of development – and of course the wonderful little 9X, a replacement for the Mini, was also undergoing development, but were soon adjudged to be too expensive for the new organisation to produce. Stokes also found that the management of BMC was no way near as strong as it should have been, in fact it was a lot worse than he ever would have imagined. If there was a tiny glimmer of light though, it was the fact that the company’s finances were not quite as bad as he was expecting (even though he would subsequently say otherwise), but if anything it would lull Stokes into a false sense of security – in truth, BMH had been in deep, deep trouble.

Because the Mini and ADO16 had made the company very little money, there were no funds coming back into the Corporation with which any investment could be made for the future, so all through the “golden years” of the Sixties, BMC had been haemorrhaging money at an alarming rate. The over manning in practically every area of the company certainly exacerbated the situation and as he also pointed out, this was in no part down to the lack of direction in the company, “After Sir Leonard Lord departed, there was no line of succession and I doubt whether they had a policy”

When Stokes took overall control of the newly merged company, he saw how much of a state the company as a whole was really in and he immediately started to make some fairly far-reaching changes to the management structure of BLMC. Already the managing director of Leyland, Stokes took over the chairmanship of the company from George Harriman, who became the Corporation President at this point, having no further involvement in the day to day running of the company.

He appointed an “interesting” mixture of management to back himself up with, appointing as his deputy chairmen, Jaguar man William Lyons and Lewis Whyte, formerly a big wheel in the world of insurance, who had joined the board of Leyland in 1964. Beyond this, he had Leyland men take up all the senior positions in the company, most notably George Turnbull who was given the unenviable task of running Austin-Morris.

The other notable new appointment high up was John Barber, who with Ten years of Ford experience behind him, was perhaps better qualified than anyone else at this level to influence company policy. It was sadly obvious to all observers, that of all the appointments in the senior positions only John Barber had any experience of life in a large car company, a situation made worse by the fact that Joe Edwards had left as a direct consequence of the management shake-up, which happened as a result of the merger. OK, Leyland’s car companies had produced 166,000 cars the previous year, but BMC was an entirely different proposition, having the capacity to produce a million cars a year.

Stokes was the first to admit (in retrospect) that he and his company were out of their depth absorbing a company as large as BMC, having 190,000 employees at the time, but he defended himself by saying, “I was not and I have never pretended to be a manufacturing expert, ever. I have no pretensions as to that. I am an engineer by training but I think that my strength lies in selling and I think that it is worth recalling that we did sell, until the oil crisis, everything that BMC could make.”

If Stokes had been surprised by the state of the management chain, the overmanning and dearth of new models in the pipeline, he was absolutely appalled by the state of the company’s two principal manufacturing plants, Cowley and Longbridge. Both factories were badly in need of refurbishment; Cowley was especially bad, Longbridge simply appeared “half finished” and it was with all these woes in mind, Stokes had approached the Industrial Reorganization Committee for a £25 million loan, with which to make improvements to the factories and to start restructuring the company.

Speaking in 1973, Donald Stokes stated that, “Although it had become apparent to us that BMH had financial problems, we could not have understood until we took over the management of the company just how serious and immediate they were. It was also not apparent just how heavily they were dependent on a range of models which were beginning to show their age, or what a paucity of new products there were to maintain a competitive position. We could not have foreseen how bad the industrial relations climate was to become or how vulnerable we were going to be to strikes at outside suppliers.”

The British Leyland situation was highly political and it was a rude awakening for Stokes and his team to see what kind of mess the company was really in. Immediately post-merger this empire amounted to no less than 48 factories, of which 23 were major BMH plants. It was all too plain to see to all observers that Leyland had absorbed a company that had not been party to a successful merger itself, not having been rationalised to any extent in the fifties, by management that were too concerned with building their cars to look at the potential problems of the future.

The other problem was one of management - and by that, I mean the management right at the top: Donald Stokes himself. Stokes had confided to Joe Edwards in 1968 that he was going to need assistance in running the company and after Edwards resigned, this left Stokes alone in running British Leyland. Had Edwards remained, things may have been very different – one can see a situation that involved Edwards being in charge of manufacturing and Stokes in charge of marketing actually working very well. As it was, Donald Stokes was noteworthy for being an adept manager of people – a great motivator – and he wanted to ensure that the company would be run his way – which meant initially at least, BLMC would be run like a one man show. Stokes was to run British Leyland in very much a hands on way, analysing all costs – and it was not until the first raft of management changes that September that he began to devolve some of this work to George Turnbull. Because Turnbull took these tasks on board, he justifiably felt that it was he that was now Stokes’ favoured right-hand-man. This personal judgment would prove to be disastrously incorrect: Stokes was actually nurturing two managerial whizzkids – Turnbull was one, John Barber was the other.

In 1969, the Industrial Reorganization Committee called Stokes to task, and in the first of two full-scale meetings raised serious concerns about the overmanning and low productivity within the company and its concerns with BLMC’s poor industrial relations. Tony Benn, who as Technology Minister, ran the IRC alluded to the troubles ahead following this meeting, “Had lunch with Donald Stokes and the Leyland board. The number of strikes now in the motor industry does indicate a complete breakdown of communication. When we began talking about this, they said that Barbara Castle’s speech last year – in which she had said that power was passing to the shop floor – had done more damage than anything else. I said that it seemed incredible that if this was true – and none of them denied it – there should be any difficulty about it being openly declared. But they took a very conservative view, and although they were conscious of their own managerial defects, they were still a long way from realising that relations with the work force required a great deal more time and effort, thought and participation than they were giving.” The only way to resolve the low productivity and bring the company into line with its competitors would be improve industrial relations, markedly but also at the same time, cut an estimated 47,000 jobs out of a total workforce of 190,000.

Stokes honestly believed that he could maintain this level of over-manning by selling more cars and therefore, upping production. At this time, Stokes found himself stuck between a rock and a hard place – on one hand he needed this level of manning to complete the company’s ambitious expansion plans, but on the other, in order to maintain the huge work force, he needed to get on terms with managing them correctly.

One example of the malaise that was prevalent within BMH at the time of the merger was the complete lack of direction for future products, which was perfectly epitomised by the Austin Maxi. Here was a car that had been conceived to sell directly in the middle range of the market and yet, it was the absolute antithesis of cars that sold well in this market such as the Cortina and the Hillman Hunter. This car was almost ready for launch, yet it had been the subject of a lengthy gestation, the accountants had corrupted its design and implementation, and the result was an unhappy mix of ideas. Stokes had looked at this car, immediately adjudging it to be unsuitable to sell, the styling left much to be desired and the interior was, “ridiculously stark – like a hen coop”. Both he and Barber knew this car was simply not good enough and it was only the fact that there had been such a huge investment made at the Cofton Hackett that saved the Maxi from being scrapped before it was launched. As a result of the Maxi’s inappropriateness, Austin’s design staff found themselves with a new leader: Harry Webster was promoted from his role as head of new car development at Triumph to oversee the entire group’s product strategy – and first port of call was Austin-Morris.

Upon arriving at Longbridge, Harry Webster was asked by Stokes to formulate a plan for the future of Austin-Morris. Stokes made it clear to Webster that some quick decisions would be necessary in order to plan for the future, but as it was the sense of urgency that Stokes felt was right and very necessary. The man, who was pushed aside unceremoniously for Webster, was none other than the great man himself, Sir Alec Issigonis. Leyland management felt that Issigonis had lost touch with the needs of car buyers and to a degree this may have been true, as the failure of the ADO17 had demonstrated. The problem was that Leyland’s perception was that Issigonis would not work alongside the new man, so without consultation with Sir Alec, Webster took his office – literally leaving him without a place to sit. This was a monstrous humiliation for the man responsible for Britain’s best selling car and its leading export – and as a result, it did not take long for Issigonis to lose heart and leave the company. Such was the absolute haste in devising future strategy, the future plans of British Leyland were modelled around the plans of their competitors, most notably Ford. Right down to the idea of new models being presented and evaluated, “on a red book basis” (just like Ford).

This meant that all projects at BMH were put under serious scrutiny; a revision of the suspension system of the ADO16 was scrapped, the 9X project was dropped and all spending at Longbridge was brought to a halt. These were trying times at BMH, while engineers and managers sat aside waiting to see what Leyland managers and planners would do next.

The plan that Webster devised in double-quick time involved the scrapping of badge engineering and having a separate range of front wheel drive Austins and Rear wheel drive Morris models. The idea was for Morris to produce a, “trend-type automobile”, or to use the layman’s term – a “rep-mobile”, something to win sales back from Ford and Vauxhall. Using this directive, he formulated plans for the product range: there would be two cars - the Morris Marina would need to come first because Stokes and Turnbull absolutely wanted to fight “the Americans”. Later would come the Austin Allegro, which would replace the ADO16 and would be (to quote Turnbull) “durable” in its styling and execution – in other words, the Marina was to be a sales-led, highly-styled car and the Allegro would be a timeless and utterly contemporary high technology small car – designed with a long production run in mind. That was the company’s immediate priority though, to replace the best selling ADO16 and introduce something resembling a cohesive vehicle range.

That left the Mini at the bottom of the range and the ADO17 at the top. Work on the 9X prototype was cancelled soon after the merger as a result of the fact that the emphasis was placed very definitely on getting the Marina into production in double quick time. The ADO17 replacement was, however, approved for production in 1970, which meant that in the order of priorities, the Mini replacement programme had yet again been deferred; this time to the larger car. Of course, this decision was outwardly correct: the ADO17 was selling in dribs and drabs, whereas the Mini was still selling as strongly as ever. The problem, of course, was that Stokes failed to recognise that the Mini did not need replacing so much as supplanting with a “supermini”, but it must have been terribly difficult for Stokes to prioritise these projects because all of them were an urgent requirement. This difficulty was exacerbated by the fact that as talented as the BLMC design department was, it was too small: there was no way that all these cars could be developed concurrently – and when this idea was tried, resources were spread too thinly.

Austin-Morris aside, the Specialist Division’s range of cars also needed addressing. A new sports car was required: the MGB was suffering terribly in the USA at the hands of the Datsun 240Z and because this was the company’s most important export market, this would also take precedence over Mini. Interestingly, even though the MGB was a success in the USA, Stokes decided early on that the new car should be badged a Triumph – old loyalties coming to the fore perhaps?

Next, there was the Triumph 2500/Rover P6 clash in the executive car class – a single model would need to be developed in order to replace both of these cars. Again, massive company resources were poured into the development of the SD1 project and by early 1971, Donald Stokes had given approval for the car to go into production, and a new “green field” factory to build it – long before Austin-Morris received any resources with which they could use to work on replacing the Mini.

Once development of the ADO71, SD1 and TR7 was well underway and the Allegro was all-but launched, the matter of how to replace the Mini was dusted off yet again, in 1972. Amazingly, all the work that Issigonis had completed with the 9X in 1967 went to waste and the company asked for completely new small-car strategy to be drawn-up. As a result of this, the ADO74 was created, but because of the cash crises of 1974, it was cancelled by John Barber – from the ashes of this project raised the Metro, launched in 1980, but as subsequent events have shown, it came perhaps five years too late.

All these new model programmes were admirable enough, but Stokes fell into the age-old trap of replacing like with like and not anticipating the way that the market would change: the range of cars that were on offer needed a wholesale rethink and not just model on model replacement. The dealers were still too powerful within the company and were prone to calling the shots – defining model strategies to suit their needs. Filmer Paradise, newly installed as the overall Austin-Morris Sales and Marketing Director did embark on a series of dealership closures, but it was handled badly and as a result, the importers - principally Datsun – picked up these sites and their customers. Finally, factories were not closed soon enough because the Unions held too much influence over the Management (and Government) to allow any bloodletting – and because of Stokes’ unstinting belief that he could sell every car that BLMC could build.

Industrial relations were a pressing matter that needed to be improved. It was as much through pressure from the IRC as it was from the sheer number of lost working days and, therefore, lost vehicle production. In 1970, British Leyland appointed Pat Lowry as director for industrial relations, the first time in the company’s history that such a role was felt to be necessary. It did not improve matters one bit. As a result of his appointment and John Barber’s recommendations, the corporation changed the terms and conditions of 134,000 workers over the period of three years. Historically, workers had been paid for “piece work” – their rate being determined by how many cars they built, this was changed to a flat daily rate. In fact, as one ex BLMC finance manager described it, the changeover had disastrous consequences: “Under piecework the worker chased his parts and was motivated to produce; his wage depended on it. The systems for Production Control and Quality were dreadful and were horribly exposed when the move to Daywork happened. The management had little idea of how to control things and as a result cost overruns were running at huge figures per car. In theory the standard costing system showed we were losing money on Minis. But that assumed cars were produced at standard cost. Scrap quality and sheer bloody mindedness meant each car's labour costs were some 30 to 80% higher than standard. Management basically refused to recognise the problem and got VERY upset if it was pointed out to them”. In principle, the system was much fairer, but industrial action was reaching epidemic proportions at the time: in 1969, the corporation lost 5 million man hours, which doubled to 10 million the following year. In 1971, this improved to 7.4 million man-hours, but returned to the high of a couple of years previous, 9.6 million.

In May 1973 to coincide with the launch of the Allegro, Donald Stokes announced that he would be carrying on as Chairman of BLMC for another six years, but decided that it would be a suitable time to make some far-reaching management changes. Firstly, he was to upset the apple cart somewhat, by promoting John Barber from his post as the Company finance director into the role of Deputy Chairman – into the finance role he vacated, slipped Alex Park.

It was to herald the start of an intended major expansion programme for BLMC and reflected the management’s confidence in the ability of the Allegro to match the sales success of the ADO16. The intention was to increase production to a million-and-a-half cars per year and because there were new models in the pipeline, new engines and a new factory, Donald Stokes believed that this was the beginning of a new phase of growth in the company’s history, “This is the beginning of a very exciting era for British Leyland, and I think our designers, engineers and production men are going to provide you with a British motor industry of which you will be very proud”, Stokes bullishly proclaimed.

The consequence of Barber’s promotion was that George Turnbull was overlooked in the promotion game and would remain in charge of Austin-Morris. Part of reasoning behind this promotion of Barber in favour of Turnbull was that previously, he had vociferously opposed Donald Stokes’ plan to reorganize the administrative structure of British Leyland so that all marketing and management would be centralized. This policy of centralization had not worked previously at BMC and George Turnbull reasoned that it would prove to be just as an ineffective policy at British Leyland; he was a hands-on man and knew that to run a company as large as British Leyland from an “ivory tower” would result in management losing touch with people “on the ground”. As it was Stokes pulled rank on Turnbull and set-up the fourteen storey “Leyland House” at Marylebone, central London as the company’s headquarters and administrative centre.

Turnbull eventually viewed this as a big enough difference in opinion to become a resignation issue and when he was finally passed-over in favour of Barber, it would prove to be the final straw for Turnbull, who was becoming increasingly disillusioned with his ongoing boardroom battle with John Barber. Certainly, the day-to-day running of Austin-Morris was not an enviable job – with its labour relations issues and poor, undesirable product range. Despite all this, he made quite a name for himself there. Turnbull achieved tangible results at Austin-Morris; in 1968, the first full year of his appointment, the volume arm lost £16million, but by 1973, Austin-Morris actually turned in a £17million profit, contributing almost 50 per cent to the entire group’s profits. He would not remain for the duration, however. As it transpired, the centralization plan devised by Stokes was not a terribly effective one and so, in the run up to the end of British Leyland as a private company; it would prove to be yet another failed Stokes policy.

The crisis was deepening and although, it was not uniquely one of management, (the existing product range had a great deal of responsibility in this as well) Stokes took no time at all in explaining that a great deal of delegation did actually go on within British Leyland – despite what all Leyland watchers may have believed. The fact that he was explaining his management to the wider audience would indicate that in his own mind he knew that his management team had not produced the desired results. He went on to say that because he was the company figurehead, he was blamed for a lot that went wrong within the company, but his managers would be the ones that would take the credit for anything good that happened. Of course, this is a usual situation in any company – there is a failure and the boss takes the rap, but Stokes was making it quite clear that perhaps he was a victim of circumstance and that the imminent collapse of British Leyland was not his own responsibility.

An escalating sense of panic evident in the corridors of power at British Leyland permeated all within, but it was no surprise that George Turnbull announced his retirement from the Company a mere five months after John Barber’s promotion. Turnbull had accepted an offer from the Koreans to establish Hyundai cars – an opportunity that Turnbull was all-too-keen to grab with both hands. He did, however, recognize that the task of managing Austin-Morris had been greatly more difficult than he had ever envisaged and he acknowledged that the only reason he had coped was because he had good people around him.

Difference of opinion between John Barber and George Turnbull had also played a part in the resignation and this had been identified by Turnbull’s replacement, ex-Ford man David Andrews. As Andrews put it in succinct terms, “One was a doer and one was a planner”, and being an ex-Ford man, Barber wanted British Leyland to play its greatest strengths by going upmarket: Barber knew that British Leyland in its then current form would have no hope in competing with Ford in the Escort and Cortina market. Turnbull, on the other hand, wanted British Leyland to remain in the volume business, thereby remaining a player on the world scene.

As a result of Turnbull’s departure, Barber was promoted yet again to become the Deputy Chairman and also the Managing Director. This announcement was made to coincide with the release of British Leyland’s 1973 financial results. The situation looked buoyant for the company, showing a profit £51 million, but the reality was that, in John Barber’s view, this was not nearly enough profit. Barber wanted to instigate a new model programme (involving replacing the Marina and the small Triumph range) and he also wanted to cut the excesses in the manning levels in the factories.

Actually, John Barber did manage to start slimming manning by initially employing a “no hiring” policy. As he subsequently stated, “I got rid of 30,000 people and I did it quietly too, without hitting the headlines”. Because of this small step in the right direction, the company’s finances began to improve, only to be thwarted by the Arab-Israeli war in October 1973. These international upheavals had huge implications for the company’s already fragile finances – the Mini became the company’s best selling car ahead of the Marina, which had serious effects on the company’s balance sheets. Where the firm had projected another profit for 1974, it actually made £16.6 million loss. At the same time, there was yet another high profile management resignation, in the form of Harry Webster – he was to be replaced by Spen King – the father of the Range Rover.

Time was now very much against Stokes and his team and although the Morris Marina sold in reasonable, if not sensational numbers, following its introduction in 1971, the Allegro and Maxi both failed dismally in their markets. On top of this, the market for new cars had changed in a most drastic way in the run-up to the October War, which had far-reaching consequences for the company, as a whole. Demand for new cars in the UK had gone through a spectacular boom in 1972 (the market increased from 1.3 million to 1.6 million) and just when BLMC could have done with being able to boost production to meet this increased demand, they were unable to.

At this time, British Leyland should have been in a wonderful position to clean up in the market, having two new small-medium cars to sell. Unfortunately, at the very time they needed to get cars built in order to satisfy demand, the management had been embroiled in a massive battle against the Unions to actually get the cars produced. Industrial relations were at an all-time low and at a time when Ford stuttered on the Market with their new Cortina, British Leyland were also incapacitated by strike action at Longbridge and Cowley and so, were unable to take advantage of this fact. This was most definitely a vital missed opportunity and it may be said that the cars that BLMC had for sale were unappealing, but customers were still not given the chance to actually buy their cars. Had the company been able to increase production and that choice offered, would the cars have sold, though? Donald Stokes seemed to think so, but in reality, that is one question that we will never be able to answer.

One thing we can be sure of though is that as a result of this failure to boost production, the more or less consistent 40% market share held by British Leyland from the time of the merger now dropped catastrophically to 33.1% in 1972. This was a disastrous fall in sales in the period of just twelve months, one that is unprecedented in the industry. Alarm bells should have rung loudly throughout Longbridge and Cowley, echoing through Management offices, but nothing tangible was done to ramp up production levels when they were needed. The Unions were calling the shots. BLMC could justifiably say that their sales were consistent with the previous year, not taking into account the fact that theirs was a smaller percentage of an expanded market.

1973 and 1974 however, were very telling. When the market contracted back to pre sales-boom levels of 1.3 million in 1973, (as a direct consequence of the October War) the market share of BLMC share then remained static at around 30%. In other words, the market share lost in 1972 due to their inability to step up production had seemingly been surrendered for good. Most notably, this had been to Ford, who improved as they got on top of the Cortina III’s teething troubles, but also to the importers, especially the Japanese, most notably Datsun. When this decline through loss of sales (the Allegro and Marina combined were performing disastrously compared with the ADO16) and mounting warranty costs (cars were being so badly built between strikes, they were gaining a reputation for biblical unreliability) continued through 1974 with mounting losses, British Leyland’s backers, the City Banks, were becoming very nervous indeed.

As a direct consequence of the woes that British Leyland were going through in the summer of 1974, the company scaled down their previously budgeted-for expansion plans. Quite simply, British Leyland were not in a position to pay for them and so, asked the City Banks to help them out with medium term finance – amounting to an overdraft facility £150 million. The company also instigated talks with the Department of Trade and Industry and told them that they would be able to continue with their expansion plans if they could find £100 million from external sources – or to put it more directly, the Government. In September, the emergency cash conservation plan was put in place, but in the end, British Leyland lost £23.9 million in the year-to-date – what made these poor figures look worse, where that British Leyland had an Overdraft of £148 million, as opposed to £105 million in bank deposits.

The banks that had extended British Leyland their medium term finance had now become quite concerned and so, in November of that year, they instructed the accountants Thomas McLintock and Company to examine the validity of the company’s cash projections. As a result of these concerns, tripartite talks were instigated between the Department of Trade and Industry, the Accountants and British Leyland on the 27th November. The position was grave and Donald Stokes knew this, as did John Barber and so, it was with complete candour that in these tripartite talks, British Leyland stated that they would reach the limit of their overdraft in January 1975. They also stated that it was also likely that they would not be given further facilities from the banks.

Tony Benn spoke to the House of Commons on the 6th December and stated that as a “leading exporter”, and a huge employer of people in the Midlands, it was of paramount importance that government money should be used in the assistance of the company. Plans were drawn up for the emergency assistance of British Leyland and Sir Don Ryder was appointed on the 18th December to prepare a report into the future of the company and how to run it under the auspices of government control. Government approval was also given for a further £50 million of bank lending.

At the time, Donald Stokes made a statement to the press concerning the immediate future of British Leyland and I repeat this in full, as published in Motor Magazine, 4th January 1975:

All major decisions now taken by BL are subject to government approval until at least next spring. Then the review board, headed by industrialist Sir Don Ryder and including Mr Stanley Gillen (former chairman and chief executive of Ford of Britain) is due to report – confidentially – on the affairs of British Leyland.

Stokes was very clear in where he thought the blame lay for the collapse of BLMC. It was a combination of woes:

·   Strikes – and it can be never over-emphasized enough that component suppliers shared their blame along with BLMC’s own Shop Stewards in this, causing the company to employ a “dual sourcing” policy that reduced purchasing efficiency.

·   The model range – BMC’s inability to develop a new range of cars in the mid-Sixties and that final crushing blow was dealt to the company when the effects of the oil-crisis began to bite.

Had one of these factors not been present, then maybe things would have been a great deal different, but the fact of the matter was that even though Stokes was not allowed enough time to see the fruition of his new model programme, a great deal of blame for the collapse of BLMC lay directly at his feet. The Marina was a success, but the Allegro was not – it was a disaster, in fact and even though Stokes thought that he could sell every one that was built in 1973/74, its subsequent sales performance would indicate that to be untrue.

In truth, the position of Donald Stokes was an impossible one to be in: He had to build an entirely new range of cars from the ground-up, he was hamstrung by the fact that Unions did not want to build the cars they already had but most sadly, Stokes had no time in which to sort out the mess. Harold Wilson was perhaps correct in believing that Stokes should not have been made the scapegoat for the collapse of the company – he was absolutely in a no-win situation, but in the Six years that he headed the company, its market share fell from 40.5 per cent in 1968 to 30.9 per cent in 1975. These figures will stand as the legacy that Donald Stokes left the company.

The Ryder Years: Ship Sinking Fast

Sir Don Ryder had been plunged in at the deep end by the government. He was given little time to make sense of a mess that had been building up since, arguably, before the merger of Austin and Morris in 1952. In a nutshell, he was faced with the following problems:

·   Appalling record across the factories for striking and industrial disputes

·   Poor build quality and even worse image of the cars that the factories did manage to build

·   Inter-factory competition – workers at Longbridge feeling that they were working for a different end to those at Cowley – “Them and Us” syndrome. This had been lessened when the “Common enemy” at Leyland took over BMH, ironically!

·   A range of cars that comprised of too many individual model ranges that often competed against each other.

·   Weak and ineffective factory management, dominated by the shop stewards.

Sir Don Ryder’s report when it appeared was called, “BL: The next Decade” and along with a team that included Bob Clark (Chairman of Hill Samuel), Fred MacWhirter (a senior partner of Peats) and Sam Gillen (the ex-head of Ford UK and Ford of Europe) Ryder managed to produce this document in double-quick time. Ryder actually passed it to Tony Benn on the 26th March, a mere 14 weeks after the original commission! Tony Benn approached the cabinet for approval and they backed the plan produced by Ryder wholeheartedly. Some Ministers saw the Ryder Plan as a gamble, because it would set a precedent and dictate government policy for the rest of its term – this would in effect, be the undoing of the 1974-1979 Labour government. The report immediately sparked off a round of high-profile resignations, which most notably headed by John Barber (to be replaced by Alex Park). Before Park joined British Leyland in 1973, he worked for Rank-Xerox and so was still new in the machinations of the company. So it was a great surprise to him when he was offered the job by Stokes – so much so, that his initial reaction upon receiving the offer was, “You must be joking!”

When The Ryder report, became public on the 23rd April 1975, it had appeared in record time – almost rushed to the point of recklessness and it pulled no punches.

In brief, the report made the following recommendations:

·   Donald Stokes should resign as Company Chairman

·   The “grotty” factory machinery should be replaced and as a matter of highest urgency.

·   A cohesive model strategy needed to be devised, cutting out the immense overlap in the company’s range.

·   The company build a new test and development centre in order to facilitate more efficient development of new cars.

·   Industrial relation problems should be eradicated.

In terms of finances, it would take an enormous amount of investment to return the company to health, making it a, “viable and fully competitive” company by 1981. The Ryder report proposed that capital expenditure of no less than £1,264 million would be required from the government, along with £260 million worth of working capital. These numbers must have made eye-watering reading for Tony Benn, but this paled into insignificance beside alternative – the notion that the government had allowed the UK’s leading car company to dissolve. No one wanted to imagine the consequences if the Ryder plan failed because there would be an estimated million people put out of work if British Leyland were closed.

Harold Wilson did not oppose the plan at all, in fact the Government gave the plan its full and unconditional blessing – and it went forward, full steam ahead. As a result, BLMC ceased to exist as an independent company and on the 27th June 1975, it became known as British Leyland Limited. This signified that the company was now fully under government control.

Against Ryder’s recommendations that Donald Stokes should resign, Harold Wilson stated that he was his personal friend and that his sacking (for events that were not entirely of his own doing) would hurt the man terribly – it was highly unfair that he was being made the scapegoat for the sins of his predecessors. The Prime Minister thought that Stokes would be far better employed as some kind of travelling export promoter for the company – an acknowledgement of the fact that Donald Stokes was undoubtedly a super-salesman and an audacious negotiator. Because of the direct involvement of the Prime Minister, Donald Stokes was made the Non-Executive Chairman of the Company – effectively a figurehead, just as Wilson had envisaged.

In the event, the Ryder report was certainly very optimistic about the future of the company, painting a rosy image of what shape it would be in by 1981. One controversial prediction that Ryder based a great deal of his forward projections on was that BL would maintain a 33 per cent share of the market in UK. In 1975, the year of the Ryder report, BL actually held 30 per cent of the market and its closest competitor, Ford, held 21 per cent. So, Ryder was basically saying that after his recommendations had been implemented, the company would regain lost market share on its way to prosperity. In the event, facts would sadly prove Ryder to be very wrong: in 1977, Ford actually overtook BL to become the UK’s best selling brand – even though BL built 650,000 cars compared with Ford’s figure of 406,000. Of course, Ford imported the deficit, into the UK from their European operation – a strategy that would serve them well during the strife-torn Seventies, and along with Vauxhall and Chrysler would mean that year-on-year the ratio of imported cars to domestically produced ones would continue to move in favour of the imports.

Amazingly, Ryder made no recommendations for plant closures, just sweeping organizational changes to the management structure. In line with Ryder’s recommendations, Sir Ronald Edwards replaced Donald Stokes as the Executive Chairman of British Leyland, but he would tragically only remain in the role until January 1976 - a mere four months - due to his untimely death.

As far as the output of British Leyland was concerned, Ryder recommended that the company remained a presence in both the volume and specialist manufacturing fields and that it should be split-up into four divisions: Cars, Trucks, International and Special Products. Although Ryder recognized that BL had to ensure that each of the company’s marques should retain their independent identities, he maintained that the BL had to pool its resources. The way to do this was to reorganize car production to reflect the fact that Austin-Morris and the Specialist division would, by this time, need to become a “Single integrated” car business meaning that all development and marketing would be shared. Derek Whittaker, the former Managing Director of British Leyland’s body and assembly division, was the man that was charged with the unenviable job of putting these recommendations into place, getting the job of running the car division. Unlike some of his predecessors, Whittaker was a quiet man and a no-nonsense manager – and it was because of these qualities that he was chosen for this role. His first task was to ensure the smooth transition from the separate Austin-Morris and Specialist Division franchises into this unified entity. Whittaker would find that in the two years that was to head-up the car division was a rough ride – especially with regards to the mounting union unrest and the resulting lost car production.

Within the media, a lot of speculation had centred on the role that the Chief Executive of Jaguar, Geoffrey Robinson would play in the company now that it was under the scrutiny of public sector ownership. Many industry observers had him tipped for Whittaker’s job at the head of Leyland Cars, so it came as a surprise when the 37-year-old high-flyer was passed over. As a “Stokes Whizzkid”, who had joined BLMC from the IRC, when the 1970 Conservative government had disbanded the organization, Robinson, nurtured by Stokes himself, soon picked up the role of running the newly purchased Innocenti division in Italy. Robinson would end up improving labour relations with the Communist controlled car workers as well as overseeing the eventual launch of the Bertone styled 1974 Innocenti Mini. When Robinson had seemingly completed his task of revitalizing the Italian offshoot, he returned to Britain, where he was quickly selected by Stokes to become the executive Chairman of Jaguar in Browns Lane.

A new face at the head of Jaguar in 1973, he may have been, but when he suggested that his ambition for Jaguar was to massively expand production following the onset of the 1973 energy crisis, his judgment was soon called into question. Also, rumours of financial “irregularities” at Innocenti and Jaguar soon reached the ears of John Barber and an internal investigation was launched to delve into these allegations. To cut a long story short, there was enough doubt surrounding Robinson’s practices that he was asked by Barber to resign from his plum job, which he subsequently did, citing the appointment of Derek Whittaker as the Chief Executive of Leyland Cars in favour of himself.

To confuse the issue somewhat, in the wake of the Ryder Plan, the government had also launched an investigation into the British car industry, which was to be handled by an all-party House of Commons Expenditure Committee. The results of this well-researched white paper into the costing and future of the industry was most interesting, especially with regards to the findings of the Ryder report.

The report was critical of Ryder’s costing for the implementation of his plans:

John Barber had stated that the Ryder report had been written from the perspective that BL would be in receipt of an unlimited supply of finances from the government. It also stated that the report was almost written as a “what if?” document and as such, it took Alex Parks and Donald Stokes a great deal of effort to keep Ryder’s feet planted firmly on the ground.

The white paper was also critical of Ryder’ s projection that BL would hold on to a 33 per cent share of the UK market and also, 3.9 per cent of the European market (by 1985)

The commission thought that Ryder had not carried out sufficient research into the future sales projections of BL and certainly did not plan a contingency against the event of a price war in Europe or increased car prices in relation to consumer incomes. The committee also disagreed with Ryder’s recommendations as to how the management structure would work in the newly-rationalised organisation and levelled the criticism that Ryder relied too much on management personalities and not enough on sound management structure. The White Paper may have been openly critical of the Ryder report and posed some serious questions of the validity of it, but in the end, the Ryder report had been accepted by the House of Commons three months before the publication of the White Paper, so its findings were entirely academic.

Ryder had recommended the expansion of the company – to build themselves out of their financial mess, but it still did not address one of the most pressing matters: the unpopularity of the company’s products.

As a result of all this uncertainty, and the fact that British Leyland’s market share had fallen so dramatically since its formation in 1968, morale was understandably low within the company. As a result of this, Ryder embarked on a whirlwind tour of the company’s factories in order to rally the employees. It was a brave plan, as these were dark times for the company, with Union militancy rampant in just about all of BL’s car plants and the belligerence of the production line workers running at unprecedented levels. As Sir Michael Edwardes subsequently noted, the effect on the morale of the company’s employees was actually the opposite of Ryder’s hopes: it devalued the company’s local management and made no impact whatsoever on the motivation of the work force.

The National Enterprise Board was given the task of overseeing the running of British Leyland, and report back to the government on its progress, whilst ensuring that Ryder’s plans for the company were being implemented. Sir Don Ryder was made the first chairman of the organization – and so ensured that he could see his plans through to their conclusion. A partial nationalisation of BL was proposed by Ryder, whereby the National Enterprise Board would allocate large sums of money over the next four years in order to guarantee the company’s survival. Existing shareholders would only be offered 10p per share for their holdings with a nominal value of 50p – this was down from a peak of 80p in the post-merger euphoria. The Government’s shareholding was increased with every succeeding year, but they never owned 100 per cent of BL.

Whilst these traumatic events were unfolding, work continued on the next wave of cars to replace the ageing Triumph Dolomite and the Morris Marina. To say that morale was falling at the Longbridge and Solihull design offices is a great understatement, but the need to continue with the new model programme as recommended by the Ryder Report was of paramount importance. Had the events of 1973/74 not taken place, by 1978, Austin-Morris would have by all rights had a supermini (ADO74) and the replacement for the Marina (ADO77) to sell and things might have not have looked quite so bad.

Logically enough, plans for the Marina replacement, or ADO77 as it was known internally, were initially drawn up in 1972, had been developed as a direct response to the Ford Cortina. The planned car was intended to match Uncle Henry’s mid-range car inch for inch, which made for an altogether larger car than its predecessor. It employed the yet-to-be-released O-Series engines in 1.7 and 2-Litre forms and used a version of the BLMC modular gearbox, dubbed the 66mm. By the summer of 1975, work on this car was well advanced when it was decided by management that there was a real risk of competition between this and Solihull’s next car, the SD2. Not only that, but the newly launched ADO71 also occupied a similar place on the marketplace, offering 1.8 and 2.2-litre versions. That the strategists had not identified the fact that these three cars were going to be in direct comparison with each shows just how the company still saw themselves as a multi-marque operation, even though dropping sales volumes would force them to rethink during the Edwardes era. Not only that, but this overlap of future models caused by poor planning proved to be a rather a costly exercise in terms of finances and human resources – and probably proved to be a reason why neither of the cars would actually survive into production.

In all probability, the ADO77’s chances on the market would have been limited anyway and not only because of the potential clash with the Princess – European rivals were moving, wholesale, over to front wheel drive and although BL were wrong to surrender the fleet market entirely, it would not have been a good long term strategy to launch a car as conservative as the ADO77 onto the market, by the late 1970’s.

One can see what the Austin-Morris styling studio were trying to achieve with the ADO77, but as a car mooted for a 1976 launch, the Marina 2 was already hopelessly outdated in terms of styling and engineering. Common sense and a clash with SD2 (as well as the Princess) sounded as a death-knell for this car.

The parallel project undergoing development at Solihull, the SD2, was also a conservative car by the standards of the class. It was a wholly logical downscaling of the SD1 concept; a Five-door hatchback with shovel nosed styling and side swage lines, like the Rover 3500, this time running on a modified version of the TR7’s running gear. Whereas the larger, David Bache designed car had been judged an unqualified success, the SD2 looked less than happy, being somewhat truncated in appearance. The surviving SD2 prototype at Gaydon is badged as a Triumph 1500 at the front and a Leyland along the flanks – one can imagine that the 1500cc version of this large bodied car would have been somewhat less fun to drive than the 2-Litre version that was also being planned for.

At this point in time, however, work was rightly stopped on these two competing mid-sized cars, especially when neither car shared any componentry; Austin-Morris and Triumph debating the relative merits of the O-Series versus TR7 slant four engine. It was an absolutely unjustified luxury for a Company in such dire straits to embark on parallel projects, so in September 1975, resources were pooled and co-development ensued at last. With this change in direction, the idea that Austin-Morris and the Specialist Division were separate entities in any greater depth than sales and marketing was destroyed forever – it was now Leyland or bust.

In this climate of austerity, work was begun on the TM-1 (Triumph-Morris) and as with the SD2 and ADO77 predecessors, it would be a conservative, rear-driven car. TM-1 never amounted to much more than a paper project (the plan was for basic models to wear the Morris badge and more expensive hatchback version to be sold as a Triumph), because events were already overtaking the concept: the Princess would represent the company in the 2-litre class - and to have a competing rear wheel drive car was a luxury that Leyland could no longer afford. Fortunately, common sense prevailed and the project was scrapped – and with it the idea that British Leyland would design uniquely engineered Austin and Morris models. By this time (1976) a more realistic plan was beginning to materialise of what was required in any future model range presented by the company. Spen King and David Bache began to work on a front wheel drive hatchback, referred to as the ADO99, but which would eventually become known as the LC10 – a car that would subsequently prove to be rather important in the future of British Leyland.

Sir Michael Edwardes joined the NEB in January 1976 and found that it was an initially bizarre situation that any suggestions he took to Ryder with regards to the running of BL were dismissed by him because he felt that Edwardes’ role of Industrial adviser was somewhat different to his role as consultant within the NEB.

By 1976, Leyland were suffering from crippling disruption through industrial action and the man that had hand-held the company through merger and now into government administration, Tony Benn, had now departed. He was to be replaced in the Trade and Industry role by Eric Varley and with this new Minister came a much tougher line on government spending. He made it plain to Ryder that the government were not prepared to continue writing British Leyland blank cheques and were now expecting very real and positive progress by the company.

The response was further strikes across the company and in 1976 alone, the following plants fell victim to serious stoppages: Llanelli, Canley, Solihull, Drews Lane, Browns Lane, Longbridge and Cowley. In the first five months of 1976, for instance, this inaction amounted to the loss in production of 60,000 cars. As events drew on, the industrial action became increasingly severe – the Union leaders that felt that they were representing the best interests of their membership were surely bringing the company to its knees. The situation was grim and looking back, these strikes were the worst the country had seen since the General Strike of the 1930’s.

In an interview with Autocar, Derek Whittaker made it quite clear where the company’s troubles lay: “The most important single thing is continuity of production. (Given industrial peace) I feel sure that we can turn the company round in two years. We are well into our ten year plan and I am confident that that the continuing targets year by year outlined in the Ryder report can be achieved and exceeded”. Because of the continuing industrial blight, however, the aims of these plans were moving further and further away from reality. For the first time since the formation of the NEB, the government began to seriously harbour the idea that British Leyland would have to close – still an unthinkable prospect – and knew that radical action was now the only way to cure the ills of the company.

What was also very obvious was that the recommendations brought forward by the Ryder plan were failing in the worst possible way. Varley took the opportunity to lay down the law to Ryder made it clear that the government would be freezing their financial aid to the failing company. The crunch time came when the company’s toolmakers went out on strike for four Months and because of this, the BL Board sensibly stated that they would not consider asking for further government aid until the strike was broken.

The toolmakers strike was possibly the most damaging of all the strikes that befell British Leyland because of the fact that it seriously interfered with the production of the new and promising Austin-Morris 18-22 Series and the Rover 3500. Solihull would inevitably lose the most because of the strike: When the Rover 3500 was launched, it was greeted with a rapturous reception from the World’s motoring press, receiving the European Car of the Year 1977 award - and as a result, interest in it from the buying public was immense. When it was launched in Europe in February 1977 – during the middle of the toolmakers strike – dealers across the EEC could only stand by and watch uselessly as customers interested in buying the SD1 came and went because they had no cars to sell.

Derek Whittaker appealed personally in a letter addressed to every single member of the company’s workforce, explaining that their inaction was costing the company lost sales and lost profits at this most sensitive time in the company’s history – he implored for them to come back to work. What the workers did not know, though, was their inaction was also damaging the future prospects of the company: In response to the question whether the ADO88 was still on-stream, Ryder stated that, “there was a doubt when we had the toolmakers’ strike….”. Reading between the lines, had the Toolmakers remained on strike, the programme would have been cancelled – and surely, that would have meant, in the medium term, that Austin-Morris would have ended up without the Metro in 1980 and as a result, would have probably not survived the early Eighties.

When the strike finally ended and the toolmakers did return work after some four months, the company actually enjoyed a strike-free three months and so (rather questionably) the NEB undertook yet another review of the company. Because of this review, the future of the ADO88 was assured and Ryder alluded to the fact that in order to stick to his plans for the future, there would have to be no more industrial action by the Unions. As a result of the ceasefire between the unions and the management, the BL Board felt confident enough to ask the government for a further £100 million of aid – the problem was of course, that the damage had already been done. New cars such as the TR7, Princess and Rover SD1 – all promising cars – soon lost their novelty on the market place because dealers could not supply cars and those that did get sold were subject to, shall we say, variable build quality.

Time was again running out – the government through the NEB was losing patience. The Post-Ryder regime at British Leyland may have been successful in getting the new (Stokes-era) cars on to the market place, but they were in no way dealing with the industrial problem. Strikes were the cause of collapse of the Ryder plan – and with it, the last realistic hope that the company could remain a volume player. A new broom was needed and it was needed desperately.

Michael Edwardes Arrives

In August 1977 the inevitable happened and Ryder resigned as Chairman of the NEB. Ryder did not leave on bad terms; in fact when he left he remained upbeat about the company’s chances of success in the future.

Ryder, however, always considered that debate about British Leyland was discouraged at the NEB and now that his deputy Leslie Murphy had replaced him and with the crisis ever deepening, the exchange of views needed to be great deal freer. Ryder felt that the plan was entering its second phase and if he were to see it through, he “…would then be there for another three years.” Ryder plainly also had suffered enough at not being able to push his plans through. His replacement, Murphy was no fool and he accepted that changes at the top of the company would absolutely have to happen. First things first, Murphy needed to know exactly what the state of play at British Leyland and arranged to meet Alex Park to discuss the company’s finances. The first thing he asked Park was the simple question of what models made money and what models did not. Murphy was exasperated to find that Park was unable to tell him and further more, he would not be able to tell him at all, as the “accounting system at BL is such as not to produce an answer”.

In October, Murphy telephoned Michael Edwardes and asked him whether he would like to take on the Chairmanship of British Leyland. Edwardes remembers that it took him at least thirty seconds utter a reply to Murphy, such was his shock, but once this had passed, he saw a certain logic in his appointment. Michael Edwards, therefore, deliberated the offer and told Murphy that he would get back to him. In reality, Edwardes knew he would take the job; in his own words, “Do you think one can refuse a task like that?”

When Edwardes accepted the post, it was as the company Chairman and the Managing Director. The government had sanctioned his appointment and they saw Edwardes as someone with the strength of character to carry through the tough decisions that would need to be made. Such was the strength of his position he even managed to persuade the government to accept his appointment to BL on the basis that it was on a three-year secondment from Chloride Batteries, his current employer. There would be no more management by committee; the company needed a figurehead and Edwardes was definitely that man. Michael Edwardes, the self-assured 47-year-old South African and member of the NEB board, had been previously awarded The Guardian Young Business Man of the Year in 1975 in acknowledgement of his previous pivotal role in turning around the fortunes of the Chloride Batteries Group.

There was also the advantage in his appointment as Company Chairman that he had already gained an inside track on the machinations of British Leyland, helping make decisions on running the company, as part of his job in the National Enterprise Board. The first change came almost immediately, when he renamed the company, BL Ltd., it would be the first step in a wide-ranging reform of the company. Now, however, he was given the sole responsibility for turning BL into a profit-making company, with full Government backing. Edwardes was given carte blanche: Make Leyland work or close it.

When Edwardes took office on November 1st 1977, the ramifications were massive – Alex Park resigned immediately, Derek Whittaker followed him within weeks. Shockwaves were sent through the corridors of power and by the end of December, it became clear through a series of controlled “leaks” that Edwardes was there to slim the company down – and the first such “leak” was one raising questions about the viability of the Speke factory. Edwardes also let it be known publicly that his first task would be to take on the Unions, something that he was unafraid in doing because he had full backing from the NEB.

He knew where the problems lay and he felt that in order to Save BL - he had to employ “Management’s right to Manage”. In other words, he was quite capable of doing what it took to make the factories produce cars again – if blood were spilt in order to get BL working again, he would be the man to do it. He had to radically change the company in Three ways in order for it to survive: Overhaul the model range and produce cars people actually wanted, overcome Union militancy in order to increase productivity and quality and he also knew that the very same Unions would not allow him to close factories without an almighty fight.

What Edwardes faced first though was an enormous cash crisis. BL may have been (to use the words of Edwardes), “one of the largest public sector lame ducks”, but on the very week of his appointment, it was about to run out of money again, just as it had done at the end of 1974. He had to approach the clearing banks in order to obtain funds, simply to stay in business. Once this land had been made, he then approached the Government through Industry secretary Tony Benn and made them very aware of the fact that they would be having to put their hands in their pockets to fund the development of the new generation of cars that would be needed to replace the Maxi, Allegro, Marina and Dolomite.

The Labour Government agreed to this proposal, as they had done previously with Ryder in 1975, but made sure that Edwardes was aware that he had a responsibility to each and every BL employee. When government got wind of the plans for Speke, they called Edwardes to task, requesting that he produced a full and frank account of why this closure was to take place. He actually met James Callaghan and explained that the TR7 was to remain in production, its production would be transferred, to which Callaghan replied that a sound business decision would have been to scrap the car, not move the assembly of it.

Obviously, the Unions took an intense dislike to the new management regime, which they felt was putting the financial interests of the company ahead of its workers. Undoubtedly, this was untrue. In February 1978 and in his first major speech in his capacity as BL chairman, Edwardes laid out his plans to save the company to a delegation of 720 Shop Stewards, Union and Employee representatives. He pulled no punches, his programme was going to be ruthless – he needed to cut out the excesses in the company in order to save it.

But he could save it. When balloted, this assembly backed him by a majority of 715 to 5. They had been won over by Edwardes’ strength and charisma and an unstinting belief that he could achieve what he was brought in to do. Edwardes himself was heartened by this response and told Edouard Seidler in an interview published in Autocar in November 1978, that, “the remarkable reception I got (made me happy) when I addressed the shop stewards and the national union officials. Also when I went around SU carburettors, I got a standing ovation from the work force, who shouted support for what we are doing”.

A depressingly familiar sight during the Seventies and early Eighties: car workers voting on whether to take industrial action or not. What Shop Stewards did not seem to appreciate or care about was that every strike led to the loss of production, which in turn, led to the loss of sales to the opposition (usually importers).

Yet, even armed with this knowledge, industrial relations between Edwardes and the Unions took an immediate nosedive. Too often, strike action became the first, rather than the last resort in dealing with industrial issues; Longbridge, Cowley, Solihull, Canley and Speke were bought out on Strike by militant shop stewards, defiant of the Management and unafraid to use their ultimate veto, the withdrawal of labour, against Edwardes, despite his own proclamations. As Edwardes himself said in response to a question put to him about how he felt about this, “What made me unhappy is that the 99 per cent of the work force who want to get on with the job have not yet found a way of neutralizing the one per cent who want to paralyse us”.

Edwardes knew that he needed to break these Shop Stewards and do it quickly because these strikes were an epidemic throughout the company. In 1977, for instance, the production of 250,000 cars was lost to industrial action. The shop stewards responsible for calling these strikes may not have known it, or even cared, but undoubtedly, they were destroying the company.

In the end, the most infamous meeting of minds took place in 1978, when the workers of the doomed Speke factory were brought out on strike again. Production line workers there knew pretty much from the day that Michael Edwardes took over the Chairmanship of BL, that their factory was living on borrowed time: Edwardes made it public that he wanted to downscale operations at the plant – and the first step of this plan was to move Triumph TR7 production over to Canley, near Coventry. So when the management requested Union assistance in getting the production line moved out of Speke, they were met with Shops Steward disapproval, which quite rightly feared for the jobs of the production line workers. The assembly line staff immediately staged a sit-in at the factory, which obstructed all work that needed to be done at Speke – not only that, but their counterparts in Canley came out in sympathy. On one side, we had Michael Edwardes who had made it quite clear that if they did not desist in this action, he would have no choice, but to close down the entire factory (the plan had always been to keep Speke open, abeit in a scaled-down form) and on the other, we had the workers, who believed that by fighting for their jobs, Edwardes would back down. As a consequence, Edwardes warned in quite plain terms, there would be a huge loss of jobs, not only at Speke itself, but also to the local economy as a whole.

Michael Edwardes delivered this ultimatum to the Unions – assist the management or lose the entire factory for good - and this was no bluff: as he had said before in February 1978, he had the Government behind him and he was prepared to “do what it takes”.

No one actually believed that Edwardes would deliver on this promise, after all not only was the fate of the new Triumph Lynx sports car at stake, the political climate in the company was surely against such confrontations: Surely a Labour Government would not allow such a confrontation between the head of a “nationalised” industry and the Unions that represented the company’s workers to go in favour of the management? The Union leaders would prove to be disastrously wrong in these beliefs. Unfortunately, after protracted union belligerence at the Merseyside plant, which involved not only sit-ins, but also acts of sabotage, Edwardes finally called time – and closed down the entire car producing facility at the factory – with the Government’s backing. The cost of this action had been huge: not only in terms of Jobs lost in the Merseyside area, but also in terms of future production cars: the promising V8-engined Triumph Lynx, nearing production at that time, was cancelled immediately. The tragedy of this is that the Unions had called a strike in order to gain better conditions for their workers and yet had gained absolutely nothing, losing everything. Edwardes, on the other hand, had gained everything – instead of a gradual closure of Speke (with its potential protracted problems), the operation was closed in one fell swoop.

After Speke, Unions were more circumspect in their approach to the Management and their attitude to the withdrawal of Labour was revised. Not entirely, though. At Longbridge, the man who had led workers to many, many strikes was Derek Robinson. In doing so, he was responsible for bringing to a halt the production line of the largest factory in BL, which by implication had brought him into direct conflict with Sir Michael Edwardes.

Robinson had been a worker at Longbridge for many years and had risen through the ranks to become the plant’s Communist Union Convenor. He was a believer that the British Motor Industry was worth saving and he felt that the right way to produce the right cars was to ensure that the car workers were given fair conditions to work in – an admirable stance, of course. Robinson has since gone on record saying that BL would have flourished had they produced more cars by following the Ryder plan and not succumbing to the plant closures that Edwardes was putting in place. But if this is so, how could BL produce more cars, if Longbridge was always at a standstill, due to Robinson-invoked car strikes?

Support for Robinson from the Longbridge production line staff, however, had been on the wane for some time. They had seen what had happened at Speke and could see with their own eyes what Edwardes was capable of in order to get the factories working again.

The National Press who had portrayed this man as something of an anti-hero had called Robinson’s methods into question. They systematically turned him into a figurehead for the Union and all the bad that the Union movement was supposed to stand for, even giving him a nickname, “Red Robbo”, truly a sign of infamy.

That Derek Robinson had been allowed to reach this level of control (his will alone could stop the production line) was as much the responsibility of previous weak management as it was Union Belligerence - and Edwardes knew this. But for Longbridge to return to a sensible level of productivity, Robinson had to go. The national media was calling for it, BL management wanted it and increasingly so, the Longbridge workforce wanted it.

When this man was finally relieved of his duties at Longbridge, in November 1979 (and the decision to do this had come right from the top) a marker had been laid – along with the closure of Speke; this had underlined in thick black lines that Edwardes would do what it took in order to turn BL into a profitable organization again. Something he had said right from the start of his tenure. Robinson’s departure was not without its problems, however – a partial walkout at Longbridge ensued and the dispute lasted until February 1980. This was because a vote of the assembly line workers was cast at Longbridge, calling for a strike in sympathy of Derek Robinson’s dismissal, and although the vote went 14,000 to 600 against a walkout, it was enough to cause disruption. This did indicate yet again that the man on the production line simply wanted to work, be given the opportunity to produce cars. Because of this continued unrest though, the new Conservative Government was already losing patience with the whole BL situation and during this strike it became increasingly obvious that the future of the company hung in the balance.

After the return to work, it took a further seven weeks of tough negotiation between management and shop stewards to finally agree on new working practices. Sanity was, however, beginning to be restored in the car plants. When a march was held in the Centre of Birmingham, culminating in a meeting of support for Robinson, the full extent of how politically motivated were the people that supported Robinson was sadly very obvious. There were a lot of people at the meeting and those present comprised a great number of people with very far-left political affiliations. Very few of the delegates at this activist meeting were actually the car workers of Longbridge – the people actually affected by all these stoppages.

As always, minorities with vested interests were proving to be more destructive than they ever thought possible.

Time after time, Edwardes and his handpicked management team would take on and beat the militant shop stewards, wrestling back control of the factories from them and handing it back to local managers. In doing so, the balance of power was moving away from the workers’ representatives to the Management.

Longbridge, viewed from the air: After a number of factory closures and along with Cowley in Oxford, all BL’s output would eventually be centred here. A lot of controversy has been centred on this factory, as the heart of Austin’s operation in Birmingham. The plant received a huge boost in terms of technology in anticipation for Metro production, in 1980. Unlike Cowley (now owned by BMW), the future of this factory still hangs in the balance after all these years.

So, that was the state of affairs with the Unions, but as market share for the actual products continued to decline, Edwardes knew that BL had far too many factories producing far too few cars that no one wanted. Speke had been closed in the most public way possible, but other factories needed to go the same way in order to control costs and match output with demand. Time was sadly called on MG at Abingdon in 1980 and later on, the car making facility at Canley went the same way. Amazingly, the next plant to come under review was the showcase factory Solihull (opened in 1975 at a cost of £31 million), which had its SD1 and TR7 production lines, halted. Eventually this plan of closures cost 90,000 jobs in the industry and maybe this rationalisation was necessary, but it cannot have been easy for anyone, even Sir Michael Edwardes, to stand up and say that he cost the county that many jobs.

This rolling series of closures left a core of factories: BL retreated to regroup at Longbridge and Cowley, traditionally their stronghold. Browns Lane, where Jaguars had been produced for years and years thankfully survived the Seventies pretty much untouched – even if that lack of investment would have implications of their own.

Whilst juggling industrial relations issues, and slimming down the number of factories, he also worked hard on the product itself, the intention being to give BL a logical model range. He also worked on how this range of models would be marketed, who would do that marketing and from where. His first marketing shuffle was to undo the “lump it all under Leyland” approach recommended by the Ryder report, finally burying the Leyland name for good. In a reversal of the Ryder plan, Edwardes restructured the company so that it was split up into four main divisions; Special Products, Trucks and Buses, International and the motor division – something that eerily resembled the structure that Donald Stokes had put in place. Although this may have looked to be the case, Edwardes denied this vehemently, “In no way are we going back to how Leyland used to be!”, he proclaimed, “On the outside, it might look as if we were going back to what the company was like before BL was founded. This is not so. It is true that we have done a lot of decentralizing. We have decentralized operations, but we are centralizing decisions.” Edwardes had correctly reasoned that the Leyland name had no place on cars and should from that point in time onwards, be reserved for trucks and buses only.

He also made sure that (pre-Ryder, what was known as) the Specialist Division were given the degree of autonomy in the company that had been lost to them, immediately post-Ryder. This had served up to heighten the distinction between Austin-Morris (the volume arm which also at this point in time, included MG) and Jaguar-Rover-Triumph (the upmarket arm) and rightly so. Ex-Ford man and Edwardes-trustee Ray Horrocks was placed in charge of Austin-Morris while William Pratt-Thompson, an American landed the plum JRT job. In the immediate aftermath of the Government buy out and all the bad press associated with this event, people still held the products of Rover and especially, Jaguar in high esteem. Why not try and distance these from Austin-Morris?

Now there was no distinction between Austin and Morris dealers any more, he had succeeded in completing the job that Stokes and his predecessors had never managed, nor fully understood: uniting the two brands of Austin and Morris. Dropping the Austin and Morris versions of the 18-22 series, to be renamed the “Princess” had been the first tangible step down this road. By 1978, this process was complete: You still had the choice of buying a Morris Marina or Austin Allegro, but you would have to go to the same dealer to buy one or the other.

So, by stealth and on the back of the Ryder reorganization, Edwardes had also fought the self-serving interests of the dealers and wrested power away from them and back to the company.

Like Stokes before him, Edwardes knew that the range of cars produced by Austin Morris was in need of replacement, but at the same time, knew that rushing this job as Stokes had done previously would be counter-productive. Time was taken, money forthcoming from the Government would need to be spent wisely (as there would only be strictly rationed amounts of cash from this moment onwards) and a definitive plan for the future was drawn-up.

Such was the sheer size and tremendous overlap of the BL range, that their diminishing market share could no longer sustain such a large number of unique models. Edwardes looked across at a company like Ford, for instance, and saw a logical progression through the range from Fiesta to Escort through the Cortina to Granada and saw minimal overlap and a logical choice to the buyer. He wanted to emulate this with BL, he wanted to put an end to the ragbag mixture of cars that the company currently offered – he wanted rationalisation.

Because work on the replacement for the Marina and the Dolomite had been cancelled long before Edwardes took up his post at BL, a future model programme would have to drawn up and built around what was already in development. It was the replacement for the SD2 and ADO77, the LC10, which would prove to be the centrepiece of the Edwardes plan.

Also under review was the ongoing saga of what to do about replacing the Mini - so much time and effort had already been thrown at this, but still there was nothing to show by the mid-Seventies. Management liked to dust off the idea of replacing the Mini, only to conclude that there were more pressing matters. This was habitual in the Company, a running theme that took until 1987 and Graham Day to finally conclude that the Mini was “cool” and that it should stay in production for as long as it were legal to make it. Sir Michael Edwardes had said that the Mini would remain as long as demand showed, “no sign of easing”, but that was hardly the same as Day’s ringing endorsement of the product. But during the “dark years” of the Seventies, no one drew this conclusion and so millions of Pounds were wasted on the search for a new Mini. First there was the Issigonis 9X prototype that by all rights, BL should have got into production before 1970. Then there was the costly ADO74 debacle, having resources thrown at it until John Barber put a stop to the development in 1974 as a result of his cost-cutting measures just at the point the car should have gone into production.

As detailed in the Austin Metro development story, it was cost that constrained BL and led to the development of the ADO88 as the company’s new small car. But still at this point, 1977, the car was destined to be a replacement for the Mini!

As Sir Michael Edwardes has subsequently observed, in the Seventies the average German Car Manager would spend 5% of his time dealing with industrial relations, whereas his UK counterpart would spent 60%. With this in the background, it took longer for Sir Michael Edwardes to finally be able to put some effort into making sense of the model range than perhaps it should have done. He identified the fact that the Mini could fend for itself with a small series of cosmetic improvements, as it continued to sell in reasonable numbers, especially in Europe. He knew that there was still a place in many people’s hearts for the Mini and as it was output for the factory, it was a known quantity; it should remain in production for the foreseeable future.

However as a result of direct intervention of Sir Michael Edwardes and new-appointment Ray Horrocks, the troubled small car project, the ADO88 was moved upmarket, (turning it into the LC8) boldly changing its intended role in life from a Mini replacement to a fully-fledged Supermini. Just why the ADO88 was not refined into a supermini, years before is anyone’s guess, but the fact is that the Supermini was always a BMC idea – after all, the ADO16 literally was a Super Mini. Sadly, the supermini concept was never allowed to be pursued, usually because of financial constraints, but more often because of a lack of vision in the company’s management. Because of this procrastination, just about every car manufacturer has a small hatchback on the market before the MiniMetro finally appeared in 1980. How tragic this is and it does not reflect the talent that worked within the organization.

In terms of larger, prestige cars, JRT had their new product, the World-beating Rover SD1, to sell and alongside that, the Austin-Morris Princess was still fresh and reasonably new. So it was the lower-medium car situation that would be in receipt of the first line of major attention from Edwardes. Plans were drawn-up to introduce a streamlined package of small-to-medium sized cars encompassing work already done on the LC10 which had been started in late 1975 – and expanding it to include a larger saloon-bodied version. As was the case in just about all of BL’s competitors, this model plan would involve the sharing of the LC10’s front wheel drive platform. In order to cut costs, the new cars would also use a slimmed-down range of engines, which would be carefully developed, versions of existing units.

The new cars would benefit from being created by the best engineering talent from right across BL and it went without saying that the cars would have to be excellent – and judged to be so by their customers. A lot of importance was laid at the feet of these cars because they would have to repair the damaged reputation of BL and if they were not good enough, there would be no more excuses. Simply put, the LC8 and LC10 had to be good enough to save BL. Edwardes used this fact to secure further finance for their development from the reluctant Conservative government, staking the future of BL on these cars.

The green shoots of recovery for the Company would start to appear from the nadir of the late 1970’s. The years 1977 through to 1980 were very tough years for BL, market share further falling (it was 24.3% in 1977), there were no new products to show and the less well-informed elements of the Media were still calling for the closure of Austin-Morris. Ray Horrocks, the chief of Austin-Morris and Edwardes trustee was busy telling anyone in the press that would listen to keep calm, be patient and wait for the new cars – he knew that just about the entire development effort of the company was now behind the LC10.

However, market share would begin to rise again and stage a modest recovery: 1979 had seen BL dip below the 20% mark for the first time in its history, dropping again to 17.9% in 1980, but thanks to the arrival of the Metro, market share did start to improve again for the battered company. Importantly, the Metro won sales from the opposition, as well as their own fading models like the Allegro and Mini – once production of the Metro was fully up to speed and the exports of the car started in 1981, the signs were beginning to look promising.

The major difficulty at the time, of course, was that between the launch of the Metro in 1980 and the LC10/11 (Maestro/Montego) in 1983/4, there would be three very tough years where the existing middle-rank cars would have to soldier-on against far more modern competition. The problem with this was that with the SD2 and Marina 2 long-since axed, the Marina and Allegro would have to live on far longer than their sell-by dates (the former would be Twelve and the latter would be Ten years old by 1983) and even with the cosmetic improvements they were continuously receiving, these two volume-selling cars would be seriously over the hill – they already were. What was needed was a stopgap in order to generate sales until the new cars came on stream, but also once the LC10 was in production, something would be needed to plug the (admittedly small) gap in the market between this and the MiniMetro.

Astute financial planning and some ruthless cuts to the business had enabled enough money to be saved in order to modestly revise the range piece by piece. Genuine improvements were made to the Allegro in 1979 and the Marina became the Ital in 1980. But Edwardes knew that this would not be enough Edwardes and the Leslie Murphy of the NEB both knew that there would need to be a collaborative venture with another company in order to quickly develop a new mid-range car that the company could launch to plug this three year gap. Edwardes had always made it known that he wanted BL to play a greater role in the world affairs – companies were all linked to form a “spider’s web” of collaboration and assistance and the company needed to be a part of this.

After much deliberation and a great deal of groundwork by Ray Horrocks and Mark Snowdon, Honda was chosen from a short shortlist of companies that were deemed suitable to do business with. Once it was determined that Honda were keen to collaborate with BL, both companies quickly established a favourable working relationship. What followed came quickly; the Honda Ballade was chosen as the basis of the new car in May 1979 – and the deal was signed to produce this car under licence in the UK that Christmas. The resulting car (called the LC9 internally and “Bounty” by everyone else) was the first to benefit from extensive development work done on the company’s newly opened test track at Gaydon, Warwickshire.

Initially, this co-operative deal was seen as a way of producing a stopgap car in double quick time, but Edwardes was far-sighted enough to see that this could be the start of something much bigger. He reasoned that the World was becoming a smaller place and car manufacturers would increasingly want to share costs and development – and saw that the Acclaim was a good starting point and would leave the possibility open for BL and Honda to co-develop cars in the future. How right he proved to be.

When Margaret Thatcher swept into power in 1979, she made it clear to Edwardes that she was extra-keen to return BL to the private sector as soon as possible. Her feeling was that the government should no longer continue to fund the car company: it had already cost the taxpayer £2 billion to this point in time and the economy could not realistically continue to fund the company at such a rate.

Edwardes possessed enough acumen to convince Thatcher that if Privatisation was the ultimate goal, then BL should not be carved-up piecemeal because he figured that without MG, Jaguar and Rover, the high image parts of the company, there would be the “Unsaleable rump” of Austin-Morris, as he called it, left over. Edwardes even managed to persuade Thatcher to release further Government funding of £990 million in order to increase the development budget of the LC10 in order to get both versions into production as painlessly as possible. The fact that he managed to persuade her not to carve up and privatise the profit making parts of BL would become a bone of contention between the Two.

Once this extra money had been agreed, Edwardes would undertake his last internal re-organisation of the company. Now that the new Triumph Acclaim was nearing introduction and the TR7 and Dolomite were to be killed, the traditional Austin-Morris/JRT divide was re-evaluated. As it was, when Pratt-Thompson resigned his post of JRT supremo in 1979, having run it from an office at the Jaguar factory in Browns Lane, the premium car division was disbanded. Edwardes described JRT as, “really only a holding company with Rover and Triumph still separate identities in the minds of many managers and employees, and with Jaguar quite rightly, looking for greater independence.” The result was that the car division was remodelled into two component parts: Light Medium Cars and Jaguar. Harold Musgrove was chosen head-up the LM division alongside his opposite number, John Egan at Jaguar. Musgrove was no doubt chosen because of the fact that in his previous incarnation as the head of Austin, he had been geeing along the team developing the Metro and had produced real results. Ray Horrocks was promoted to the post as Managing Director of BL, leaving Edwardes to concentrate on the Chairmanship. The upcoming cars in development had their development names changed to reflect this and at this point in time, only the LM10 and LM11 were heading for certain production.

During his tenure as Chairman of BL, Edwardes and his team of hard working executives had successfully broken the Union stranglehold on the car factories, streamlined the array of factories and, most vitally, had put in place plans, for a logical range of cars: Metro, Maestro and Montego. He had trimmed production volumes to realistic levels and improved productivity at both Longbridge and Cowley.

When his contract came up for renewal though in 1982, the eve of the launch of the Maestro, Margaret Thatcher did not renew it. Thatcher felt that Edwardes had stood in the way of rapid privatisation of the firm and she never forgave him for this. So much so, that by keeping BL together as a group, he had increased the burden the company was already placing on the economy. Edwardes had been smart enough to choose the man to replace him as Chairman, 67-year-old Sir Austin Bide, before the event, knowing that as a “strong businessman”, he would continue to run the company the way that Edwardes would have wanted.

The legacy that Edwardes had left was a leaner, fitter car producing company, one with an image that was improving – and one that was a player on the world stage again, having forged a lasting partnership with Honda. It is fair to say that quoting an oft-paraphrased statement of the time, that Edwardes had brought the Company “back from the brink” and allowed it to fight another day. Unfortunately for Edwardes, his grand plan of a “product-led” recovery, relying on the massive success of the Maestro and Montego models, failed fundamentally.

The two cars had both emerged as worthy, but rather dull cars, not selling nearly well enough, not making a big enough return on their development costs, or enough to cover the £147million investment in the modernisation of Cowley. This meant that the products that he had conceived in order save BL from closure in the 1980’s sold only adequately and merely maintained the question mark that was hovering above the whole operation.

Thankfully, in the Honda tie-up Edwardes had engineered, he had left BL with a resource to call upon in the development of future cars.

The 1980s: A Decade of Lost Opportunities

Sir Michael Edwardes had left BL a much better position in 1982 than it had been in 1977 – this is an unarguable fact and despite the opinion of some of his detractors, he had produced tangible results. Whereas at the time of his arrival it looked as though the company was on the verge of closure (“a 50-50 chance of survival”, in Edwardes’ own words), some five years later it was beginning to look as though BL had a future beyond government ownership. The problem of course though, was that in the course of his sweeping reforms of the company, Edwardes had had made some tough decisions, which would prove to be not only controversial, but also set the company on an irreversible course towards lower volumes.

In closing the factories at Solihull, Speke and Canley, Edwardes had ensured that BL were now tied to an upper production limit from Cowley and Longbridge of perhaps 700,000 per year. All of which meant that once returned to profitability, BL were never going to be in a position to return to their former levels of output experienced at the start of the previous decade. It also meant that the future for BL was very much tied with their profitability – if things were going badly, it would seem likely that the Government would finally call time – and if things started to go well, a small (in Global terms) producer like BL would be vulnerable to the advances of a predatory rival. This may have sounded bad, but it was precisely the plan that the Government wanted to follow because it would mean that the finances of the national car producer would no longer be their concern.

But in September 1982, it was time for BL and the Government to say goodbye to Sir Michael Edwards (also referred to in the press as “Little Moe” and “The Electric Mouse”). There had been rumours in the press that George Turnbull and Filmer Paradise, who were at Talbot UK at the time, were in the running to replace Edwardes, but when it came to it, Edwardes had already ensured that his chosen management team would take over the reins. Edwardes ensured that he obtained Government approval for his new structure – and this was duly signed off by the then Industry Secretary Patrick Jenkin.

Sir Austin Bide would become the new Part-Time Chairman of BL, the responsibility for which, he would share with the Pharmaceuticals group Glaxo – for which he would pick a tidy salary of £65,000 per year – in addition to the £63,000 he was already earning for his role in his other company. Unlike his predecessor, Bide was not a public figure and it was because of his financial sector credentials that he was chosen for the job – not for his ability to stir up the media. Edwardes chose Bide back in 1977 as one of the financial figures that he wanted to sit on the BL Board – changing the flavour of upper management at BL so that it would appeal more to the City than it may have done in previous years, when the emphasis was more on a motor industry boardroom.

Ray Horrocks would find himself in the BL Chief Executive role, formerly that of Edwardes (who was Chairman and Managing Director) and would find himself with sole responsibility for the cars operations and as before, Harold Musgrove and John Egan would report to him. Jaguar and the Light Medium Cars division were both turned into autonomous fully rounded organisations complete with their own independent sales and marketing departments – it was at this time Austin Rover were formed. If this management structure seemed needlessly complex, this was evidently so to observers and industry-watchers, who found the entire set-up pretty unworkable, to say the least. What complicated matters even further, was that David Andrews with given equal status, to Horrocks, but his responsibility was to oversee the Bus and Trucks organisation.

The formation of Austin Rover marked the end of the process of reorganisation of BL’s divisions into separate units. Now the company was now split into autonomous, independent divisions – this process being epitomised by the independent sprit at Jaguar, following the appointment of John Egan in 1981. The worry for the Unions (correct as events turned out) was that this process had been put in place in order to facilitate the easy privatisation of the company in a piecemeal fashion. Edwardes, however, put a different spin on things by stating that this separation was to isolate the viable parts of the company, should one of the unprofitable parts need closing down – which was still a very real fear at among BL managers. It would not take long for this painstaking process to bear fruit, with Jaguar being the first and most public component of BL to be floated on the Stock Exchange in 1984. At this time, however, there were no parts of BL that looked remotely saleable – but that would all change within the period of four years.

In his last press conference as Chairman of BL held by Edwardes, he had been asked whether there was anything from his five years in charge that he regretted – what he considered was his biggest mistake. It was inevitable that it would be difficult to prise an answer to this question out of him, but surprisingly, he admitted that the company would have been in better shape financially by the time he left, had they pressed ahead with the launch of the (then-yet-to-be-released) Maestro and Montego rather than the Metro. It was a tough choice (see Chapter ten and twelve), but the BL board “bit the bullet” and chose to re-evaluate the ADO88 programme and heavily face-lift it to become the Metro. This course of action was chosen because the development programme of the smaller car was far more advanced than the ADO99. Edwardes then qualified this further by saying, “If there was a decision that I wish we could have made another way it was that one.” However, he also said that had BL thrown their development resources entirely behind the LC10, the company might not have survived 1980 without an entirely new product. LC10 was originally scheduled for a launch in 1981 – and with the Conservative government baying for blood, they may have been tempted to pull the plug.

Whichever direction the Edwardes plan would have gone – Metro or Maestro first – it was going to have pitfalls because of the limited development resources the company possessed at the time.

Sir Michael Edwardes, however, had made some mistakes along the way during his grand rationalisation plan and these became ever more evident near the end of his tenure at BL. In 1978 when he first got his teeth into Labour relations, the majority of BL’s work force welcomed their tough new Chairman with open arms because they knew that although there would be some painful losses, the feeling was that unlike previous management, he would have the wherewithal to finally get on terms with the all-powerful Shop Stewards. As discussed at length in Chapter Nine, Edwardes did just this but the protracted series of factory closures did take their toll on the Employee-Employer relationship.

Sir Michael had possibly scored a home goal the previous November, when before the employees had a chance to vote on the proposed new pay award, he sent out a letter to the company’s employees threatening to sack anyone that went out on strike. Such an industrial faux pas was not what the Government expected from the chairman of a company so lodged in the public eye – and after the outpouring of public grief upon the closure of MG at Abingdon, it was one public relations disaster too many. The end result was the Government wanted him to go – and Edwardes himself was very aware of the fact. The pay dispute of 1981 was certainly a significant moment in BL history and one where had the work force not eventually accepted unconditionally the 3.8 per cent pay offer on the table, the results of any prolonged strike may have been too traumatic to contemplate. As it was, there was sporadic industrial unrest – and the Government were becoming increasingly intent on ridding themselves of BL – as it was, had the workers not seen sense and returned to work when they did, BL could have at best, lost its next wave of inward investment (which had not yet been committed) and at worse, could have been dismantled and sold, or closed. It was that bad!

However, it never came to that, because a period of industrial calm was to follow this pay award and the future model plans could be evaluated and planned in greater detail. The Maestro and Montego were nearing production, so it was the replacement for the Rover SD1 that now occupied the minds of the planners. One thing was for sure, under the new management, Honda was to play a more significant role than first anticipated when the Triumph Acclaim hit the market in October 1981. As early as autumn 1981, discussions with Honda centred on the replacement for the Acclaim because this model was tied into a Honda model life cycle of five years, somewhat shorter than the norm at BL, and a deal needed to be struck quite quickly. Because the Honda derived Triumph Acclaim would form a significant part of the 1983/84 Corporate plan, it was evident that if Honda were looking to replace their own Ballade model in early 1984, BL would have to bite the bullet and follow suit, by continuing the deal and carrying on marketing their own version of the Honda Ballade.

So with the Ballade plan settled, Austin Rover then agreed terms with Honda on a collaborative project to replace the SD1, both companies gaining something vital from this pooling of resources: Honda would be able to upwardly expand their range and Rover would benefit from tapping into Honda’s undoubted technical expertise. The project was agreed in November 1981 and was called the “XX” (Honda’s version was called the “HX” so as to emphasize the close links between the two cars. Harold Musgrove stated in an interview with Car magazine in 1985 that working with Honda increased his respect for the Japanese. “They take longer to make a decision than we do, but once they’ve made it, they move with incredible speed. The Japanese are very, very clever – but they are not unbeatable”. The spirit of competition was still very much alive at Austin Rover’s HQ at Canley and would figure substantially in the development of the XX.

Trouble was brewing though. Continental rivals expressed concerns that the XX would give the Japanese companies a back door into European markets that had so far erected trade barriers against the Japanese. The Italians and the French in particular had agreements similar to that in the UK where the amount of Japanese cars imported into these countries was subject to a pre-agreement on numbers. In Italy, this took the shape of a pre-EEC treaty, which limited the Japanese to 2,000 sales, whereas the French, like the UK, did not have anything so formal, merely a “gentlemen’s agreement” which ensured the Japanese would gain no more than 3.0 per cent of the market. This whole system, though, was being thrown into confusion by the BL-Honda deal – the pan European Status Quo was about to be shaken in a big way. One such critic at the time was the President of Government-owned Renault, Bernard Hanon, who at the 1983 Geneva Motor show stated, “European manufacturers should not become ‘Trojan Horses’ to allow the Japanese into Europe”.

He went further than this because he felt that unlike the Acclaim, which was very obviously a Japanese car to its core, the Austin Rover styled XX would be something else entirely. The problem also lay with “local content” because the outwardly British car would contain much hardware sourced from outside the (as it was then known) EEC. Hanon stated, “If the local content is less than 75 to 80 per cent, those cars will be Japanese and should be treated as such.”

Renault criticism of BL went further and one can only assume that there was more to this carping than simply an issue of nationalism, as BL were a company that Renault had serious ambitions of collaborating with in the past. Pierre Tiberghein, the company’s car division boss stated that, “We have not made a fuss about the Triumph Acclaim, but that would not be the case with the XX”. His concerns lay with the fact that as the Acclaim was built under licence from Honda, it was in fact 65 per cent Japanese – and therefore a Japanese car. As explained in Chapter Eleven, Sir Michael Edwardes had stoutly defended the case of the Acclaim by stating that the company had safeguarded jobs at Cowley and the British component industry, citing figures by BL that claimed that the car was more than 70 per cent British. This figure came about by measuring the ex-factory value, allowing for overheads and even manufacturing profit to be taken into account.

Harold Musgrove was acutely aware of political opinion and when he negotiated the XX agreement with Honda, he set his team a target of 90 per cent load content – but accepted that due to the fact that Honda were defining many parameters of the joint venture, 80 per cent would be acceptable as a lower limit figure. British component manufacturers were, however, rather sceptical because of the fact that the 2.5-litre version of the car would use a Honda V6 engine and gearbox. The engine was supplied by Honda, not built in the UK – and the gearbox and much of the ancillary componentry would also be sourced from Japan, so immediately with this car, there was little doubt that there was more than 20 per cent “non-local” content. By this time, it was evident that “local content” referred not to British, but EEC sourced parts and because of this, Austin Rover would have to approach the European commission in order to ascertain just how European the entire XX would actually end up being.

After differences of opinion, Harold Musgrove decided that enough was enough with regards to the design team at Austin Rover. Having literally sweated blood during the design-to-production process of the LC8 during 1978 and 1979, the Austin Rover chairman decided that David Bache was not pulling his weight during the LM10 and LM11 programmes. It was not so much the neat and tidy LM10 that caused the problem (even though, during its gestation, had not changed in external appearance since 1976), but it was the LM11. The problem was that in trying to imbibe the identity of a larger car into the saloon design, the car (which was the work of two different designers) simply was not attractive enough. David Bache, as Director of design was responsible for the overall look of the car – and when he presented the board with his latest idea on the car’s styling (the rear “opera” windows) the mercurial Musgrove blew a fuse. The LM11 was ugly enough already – and this latest addition simply tipped the balance: Bache had blundered big time with this car and in the eyes of his boss, he lacked commitment to the programme – Musgrove fired him on the spot.

This treatment was scant reward for the man that had penned the Range Rover and the Rover SD1 – probably the company’s two finest cars of the ‘seventies, but Musgrove was adamant; Bache had to go and whether the decision was justified or not, it happened – and now Austin Rover were without a Director of Design.

Thankfully, this decision was rectified quickly, when the company poached Roy Axe from Chrysler (UK), just at the point where he was about to be transferred to work for the parent company in the USA for a second time, after successful work on the Voyager model. Axe was not that keen on the idea of moving back to the USA and when Harold Musgrove heard about this through the grapevine, he was immediately on the telephone to the disaffected Chrysler designer. Roy Axe himself put it in these terms; “I had been approached by BL during the previous year about joining the company but had not felt this was a move I wanted to jump at. At Chrysler, where I was Director of Automotive Design, I had been through the worst of the upheavals and working for Lee Iaccoca, the future looked rosier than for some considerable time. During a vacation in UK in 1981, however, I did agree to meet with Harold Musgrove to discuss the matter. I was not expecting to be impressed but I was. Harold was a man on a mission, which was to put BL back into the international automotive business and he felt he knew what was needed to do that. I have had a career setting up styling operations and handing over the results to others and, in fact, I had gone over to Detroit on just such an assignment there to re-establish the interior design studios. This was another challenge of the same kind and it seemed to be my greatest one yet. A great understatement! Harold explained to me in quite a long conversation that he felt that Styling was his primary problem. He felt that the manufacturing operations at the company were capable of anything given a good style, well engineered. CAD/CAM was very much on the horizon and a colleague from my previous life at Chrysler Europe was already in place as the director of Engineering. After more talks, a deal was stuck and I agreed to revitalise the Styling operations at the company. The occupant of the position at the time was David Bache who I knew but it had been explained that he would be leaving and obviously relationships there were strained and it was a no-no to try to talk to David. I knew that the situation was bad and that radical changes would be required quickly but I trusted my opinion of Harold Musgrove as a man of his word when he said I could totally rely on his backing to support what needed to be done including the establishment of a new studio at the Canley location in Coventry. I knew that things were likely to be basic at the company as regards working facilities but I was not prepared for how basic it was. On arrival I was shown to my office, introduced to my new secretary and to two old colleagues from earlier days at Chrysler Europe. These were Rex Fleming, who had been someone I had worked with since my Rootes days and Gordon Sked who I had hired at Chrysler but who had moved on to Leyland some time earlier. These two were to people who gave me my introduction to the BL styling operation. They were very supportive and were to prove to be reliable and loyal throughout. What a shock! The studio at Canley was a long narrow room in the old Triumph office block. Equipment was rudimentary and the facility was without a showroom. The showroom, in fact, was in the second facility at Longbridge in a place called the Elephant House. This was a circular building with space for designers and modellers on the perimeter and a central area that could be used for display and presentations. It was all in poor shape and quite awful. I was stunned and really wondered what I had got myself into! I began to wonder what might happen if Harold did not prove to be a man of his word, but this fear proved groundless. In fact the planning of the new facilities was put into effect almost immediately with special urgency required as the partnership with Honda was reaching a stage where a joint development programme with Hondas design department was just about to begin and the situation looked very difficult in light of the inadequate facilities at the company. In the event, as much work as could be incorporated at Canley was done there including most of the design work on the Rover/Honda project, while Longbridge was used to service the other already existing projects. The new facility was planned and the cost thought to be excessive. I did remind Harold of his commitment to me and he honoured it as with everything else he promised. There was also strong support from the Finance Director, which is always a pleasant surprise! There followed over a year of very high-level activity. A new studio complex was designed adjacent to and incorporating the smaller original Canley facility. The new premises were inside the existing Triumph assembly building, which reduced costs. The studios were of good proportion and included storage and display facilities. At the same time the relationship between Honda Design and our operation was in full swing with the early work of the Rover 800 project being done in the middle of this mess! In addition to all this, the current products required attention. An excellent relationship between Mr Wakura and myself the Honda design chief developed in these early days leading to a friendship lasting right through to today. As a result the atmosphere between the two design groups was positive and worked well throughout the period we worked together.” As related in Chapter twelve, Axe arrived on the scene too late to have any influence on the LM11 design, but he had come in at an auspicious time: right at the start of the XX programme – a top-of-the-range car, and one that if styled right, would act as a mobile showcase for this man’s abilities for years to come.

As it was, he was unimpressed, to say the least, with the LM10 and LM11, but horrified at the state of the design offices – which had effectively remained unchanged since the 1970s. There were still three design studios, an office remained operating at Solihull, there were the remains of one at Canley, and finally, the Longbridge “Elephant House”, which remained as it was since being set-up in favour of the Pressed Steel Office in Cowley way back in 1970. Axe had been given carte blanche by Harold Musgrove to not only steer the design of future Austin Rover models in a more favourable direction, but also update the company’s design facilities. “I found things very difficult. Premises, equipment and everything was in a very, very poor state. But Harold was as good as his word providing the money to build our new design centre, a building within a building. It made a very interesting project. Cost us about £5.2million, if I remember”, Axe stated about the situation. Not only were the new Canley design offices (called the “Roy Axe” studio) a vast improvement over what came before, but Axe managed to encourage a raft of new designers into the company – something of a coup, but also indicative of the improving image that the company outwardly possessed at the time.

Roy Axe, pictured in 1986 – he would be responsible for the change in the company’s design direction, and the eventual family identity that the company’s products shared. The appointment of Axe, replacing David Bache as the Director of design also acted as a spur for the company to upgrade their design facilities which were up to that point, rather past their sell-by date.

Meanwhile, at the top of the company hierarchy, Sir Austin Bide was keeping a low profile, ensuring that the majority of the company’s car news was being fielded by the ever hard-working Ray Horrocks. However on reporting the company’s performance to the Commons Select committee in 1983, he stated in reference to the car division’s improving industrial relations, “I believe that commercial realism among BL’s workforce and their representatives will prevail”. BL’s management continued to insist that the company would reach a break-even point in their trading profits by the time that the Maestro was on stream at Cowley. The finances would not actually get near to this point until 1987 because the company would continue to suffer at the hands of he ongoing price war being waged between Ford and Vauxhall, who were both in the fortunate position of being able to “buy” their market share. Sir Austin also informed the Select Committee that in his view, a part of the company would be in such good shape by the end of 1984 that it would be in the position to be sold off. He was, of course, referring to Jaguar, which as a company had been undergoing a quite miraculous transformation under the leadership of John Egan – it was especially strong performances in the USA that was enabling the luxury car division to turn in some exceptional performances.

Portions of the company were becoming saleable propositions, but the reality was that Austin Rover was not one of them – and what BL needed more than anything else at the time was a period of political and industrial peace. If nothing more, this was needed so that the plans of the company could be given chance to be followed through without undue distraction. If the company were not given this opportunity and market failure followed then there were no more chances to rationalise the company further by making cuts – as these had already been finished by Sir Michael Edwardes. The situation was that Sir Michael had trimmed all he fat from the organization and there would nothing left to close without seriously harming the company’s future prospects.

The company’s future now lay in the hands of the Maestro and Montego.

In March 1983, the LM10 finally made its debut to the public and press and was greeted with mixed reactions. The problem, of course was that the new car, although a huge improvement over the Maxi and Allegro, it was obviously a product of the 1970s school of design, with its folded paper styling – and as a result, the car did not prove to be an instant sales hit. In its first full year of production, the Maestro racked up 101,000 units, but from that point onwards, the production levels followed a depressing year-on-year downward spiral. The Montego that followed onto the market the following April also mirrored this trend; its best year being its first full year of production, 1985, with 95,000 being built.

A matter of weeks after the Montego reached the market; the second BL-Honda collaborative model hit the market, to replace the Triumph Acclaim. In a change in marketing strategy, the 1.3-litre saloon was to be marketed as a Rover instead of a Triumph – bringing to a close the famous Coventry marque and producing the smallest Rover since the 10HP, some thirty-six years previous. Like the Triumph that preceded it, the Rover 213 was basically a Honda Ballade with minor cosmetic alterations, centring mainly on the headlamp/grille arrangement and interior trim. Unlike with its predecessor, Austin Rover announced at the time of the launch of the Rover 200, that it would be the first of a range of cars – and they would not be uniquely Honda engined. By the time of the launch of the Rover 200, the existence of the XX was well known and the expectation by the press was the smaller car would be developed in a much more comprehensive way – the new Rover was very much a model in its own right and it would prove to be central to Austin Rover’s plans for the mid-to-late Eighties.

Because of the public’s relative apathy when faced with the Montego and Maestro, the optimism that BL managers spoke of in 1982 and 1983 was replaced by a more pragmatic attitude by 1985. In 1983, Austin Rover managers spoke in terms of regaining and maintaining 20 per cent of the UK market, but the reality was somewhat different – when the year end figures came in early in 1984, it showed that the company had managed to achieve 18.57 per cent of the market – bad news considering that the Metro was fully up to speed a Longbridge and the Maestro had been launched to replace the dead-in-the-water Allegro. It was understandable that the forthright Harold Musgrove would try very hard to gag his executives, but it was still possible, even in 1984, to hear of Austin Rover high-ups speaking in terms of twenty per cent being an achievable target. At the start of 1985, however, the SMMT results would indicate a further drop in market share for 1984 – 17.84 per cent.

These were not the results that the Government were expecting to see after the huge injection of cash into BL during 1982 and when the company’s corporate plan was revealed to government; it resulted in a further falling out between both parties. In 1984, the BL Board had their plans for the privatisation of Jaguar thrown back in their face – because they wanted to keep a 20 per cent stake in the company – and in 1985, it was the question of the company’s continued funding by the Government. Austin Rover had requested a further £1.5 billion injection of cash from the Government, but they had suggested that the car company should re-consider this amount by reducing it by at least £200 million – otherwise it was an unrealistic request.

Margaret Thatcher had viewed the company with a measure of distaste since sweeping into power in 1979, but it was not until she was well into her second term that she began to impose her will on the company’s spending plans. Sir Michael Edwardes was one of a very select band of people that bested her in matters of finance and commerce, but it was over the initial £990 million spending plan that he had managed to persuade Mrs. T that it was essential to release the further money. By 1985, however, the situation had changed for the worse because BL had not been making acceptable progress towards the promised profitability. In 1984, the prediction had been made and laid out to the government, that the company would be making strides towards breaking-even – in fact, they actually made a taxable loss of £73.3 million, which to make matters worse, was an increase over the 1983 figure of £67.1 million. The board stated that, “a major contributing factor was the loss of production in 1984 in Austin Rover of 60,000 cars and vans due to damaging industrial disputes at Longbridge and Cowley”.

Significantly, thanks to some intelligent “massaging” of the books, the BL division of Unipart reported a profit of £14 million. Importantly, any potential loss-making manufacturing companies previously within Unipart were now transferred to the Austin Rover division: Unipart was being readied for privatisation.

For sure, the position of the company would have improved without this industrial blight, which did affect production of the Maestro and Montego at the start of their lives, but this was not the only cause of the disappointing figures. At the same time, the company were continuing to suffer badly at the hands of their larger rivals, who were looking more secure in the price war that was continuing in the UK and Europe. The company’s output was running at 423,000 per year at the time and now some serious questions were being raised over the plans for the future. The company’s capacity for output was still someway short of being acceptable for an independent manufacturer, but if this made the company desirable to a predatory rival, this can hardly have been bad news for the Government, who were becoming increasingly desperate to sell off the Austin Rover Group.

The other question that the politicians were now asking – and which was a totally relevant one – was how do the company expand their output from the 435,000 per year break even point to the desired 600,000 per year, which would bring the company a healthy profit? The answer was of course, that they could not – European sales potentially could improve once the supply of Maestros and Montegos was uninterrupted and there were some ambitious targets for the XX to meet in the USA, but the sums did not add up.

The request from the Government to chop £250 million from their spending plans, could have been met quite easily had Austin Rover cancelled development of their K-Series engine, but Harold Musgrove quite correctly insisted that the radical small engine should remain on course – and he fought hard to ensure that this happened. His reasoning for this was quite easy to see because there was no way that Austin Rover would be seen as an important car producer and retain their “Corporate Identity”, if in the future, their engine range comprised entirely of Honda units. This must Honda option must have appeared to be an agreeable economy for some within Austin Rover and others in government circles, but Musgrove was absolutely trenchant. “It’s imperative that we don’t rely on another maker to do something for us, and then lose the ability to make that part.” It was for this reason that the Metro did not receive a Honda engine – even as a stopgap – because the intention was for the car to be replaced with a version that used the K-Series engine. Also, the intended launch date for the Metro replacement and its K-Series engine was 1987, but the programme was dropped in favour of the Rover 200-replacing car, known internally as the “YY” which was due for launch in 1989.

However, due to several announcements in 1986, events took a significant turn for BL.

David Andrews, the opposite number to Ray Horrocks in the Trucks and Buses division – which significantly also included Land Rover – had found himself embroiled in government sponsored talks with General Motors with regards to a takeover of the entire division.

GM had genuine reason for interest in this part of BL because for some years, Bedford Trucks had been subject to a significant drop-off in sales – and the purchase of Leyland Trucks would provide a useful fillip for the company. New Leyland trucks were in the offing but because BL did not have the financial muscle, marketing this new range of HGVs would be an area where GM could only add to the deal. The problem of course was that there would be inevitable losses in jobs at either the Leyland or the Bedford factory.

Of course in reality, this was only a side issue. The real reason for the talks was the purchase of Land Rover, perhaps the jewel in the crown that comprised of BL’s portfolios of marques – and GM had big plans for Land Rover – and they were prepared to pay handsomely for Land Rover. Talks were going well between both parties and had reached the point where a price of £275 million had been agreed for the Trucks and Buses division, when the Government made a most sudden and uncharacteristic U-Turn.

GM had been ready to sign. On the day the deal was to be finalised, talks between GM Executives and Trade and Industry Secretary, Paul Channon broke for lunch – and also to give the chance for the contract writers to undertake some last minute re-typing. The Trade and Industry secretary took this opportunity to call Thatcher at Number 10 and inform her that the sale was about to go ahead. Unfortunately, after the Westland affair, which had not only cost her Two of her most Senior Ministers, but also untold amounts of bad publicity, this was not good news for Mrs. T. The Prime Minister had resultantly been suffering a torrent of attacks from her own MPs and the Media – calling for her blood following what appeared to be a whole scale sell-out of this country’s finest companies to the Americans. With this very much on her mind, Thatcher instructed Channon that Land Rover must not be included in the deal at all costs.

When the meeting re-assembled, Channon told GM Executives this news. Understandably, they were distraught and rapidly, the talks broke up – the deal would make no sense to GM without Land Rover.

BL’s talks with the Americans did not end there, however.

The fact that Margaret Thatcher’s Government had lost patience with Austin Rover’s inability to turn in a profit led to talks between an unwilling Ray Horrocks and Sam Toy of Ford UK with a view to the American owned giant taking control of the company. Ford’s motives for the takeover were not purely down to market share in the UK and Europe, but this played a major part in the decision making process. In terms of product, the Mini aside, the ranges offered by the two companies overlapped at just about all levels: the Metro and Fiesta, the Maestro and Escort, the Montego and Sierra and the Rover SD1 and Granada. There were appealing reasons for taking on Austin Rover, not least their M16 engine, soon to appear in the upcoming Rover 800 and, further down the line, the highly advanced K-Series engine. There was also the strength of the brands – Rover and Mini were still highly regarded prizes and Ford had harboured plans for MG and Triumph, especially – and finally, there was the potential for an extra 500,000 units per year in UK manufacturing capacity that Longbridge and Cowley amounted to, even though there were dark rumblings in the industry over their concerns about over supply in the future.

In terms of market share, Ford held 27 per cent of the UK market and 11.9 per cent of the European market in 1985, and added to the 17.9 and 3 per cent shares of Austin Rover, that would put the Ford/Austin-Rover company comfortably ahead of the then largest player on the European market, the Volkswagen-Audi Group.

Following immediately after his traumatic meeting with GM, Channon was scheduled to address the Commons regarding the failure of the GM-Land Rover talks, but was also told that news of the secret Ford/Austin-Rover talks had been made public.

In fact, news of the Ford/Austin-Rover talks did not become public knowledge for several days, but when it did, Channon was ready. Because news of the Ford/Austin-Rover talks had been leaked to the Labour party, Channon was forced to announce the news of negotiations between the two companies on the 5th February 1986. Unfortunately, he made his announcement too soon. In the House of Commons, he reiterated the Government’s desire to return Austin Rover to the private sector by saying, “We have to ask ourselves how much longer we can support the company with taxpayers’ money, whether we can continue to have these liabilities indefinitely, and whether there are not other options that should be seriously considered.” MPs in the Midlands were outraged by these plans and the idea of selling Austin Rover to the Americans was simply not palatable following the debacle of the GM talks, let alone the controversy that surrounded the sale of Westland.

The following day, Ford GB chairman had called Channon to confirm that the deal was still on – the fact that the rug had been pulled from under GM was enough to make him think that the same could happen to Ford. The Minister reassured him that the deal was still very much on - but within 24 hours of Channon’s original statement to the House, (and only hours after Toy’s reassurances from Paul Channon) the Government bowed to media and political pressure and was yet again forced into an uncharacteristic U-turn (the Lady was for turning, after all). This was as a result of the realisation that they had misread the Political climate in a most profound way. The Government had also realised that the uncertainty created by the original statement would undermine the company at all levels – be it management, employees, product or the suppliers. The deal was off. But the damage had already been done: Ford had been given full access to ARG data for due diligence, as part of the lead-up to the buy-out – they gained a huge amount of commercially valuable information that helped them considerably during the rest of the 1980s.

Austin Rover were yet to launch the Rover 800 and yet, through media speculation and the undoubted impressiveness of the Honda version, previewed in December 1985, the assumption was that this was going to be a highly effective car. The fact that Harold Musgrove had done his best to talk this car up as being a “World beater”, must have helped MPs pressure the Government enough for them to re-think their plans. No-one in a position of power was naïve enough to think that Austin Rover were strong enough to survive on their own, but most elements of the media were suggesting that the way forward for the company was to form stronger links with Honda – to form an alliance with the Japanese company. Hindsight would suggest that Ford could have been an understanding owner given their subsequent experience in running Jaguar, Aston Martin and Land Rover, but the prevailing climate at the time was for independence – and the feeling within the company was that as Ford and ARG were bitter rivals, and as such, would have contracted the company as quickly as was politically prudent. Hal Miller MP (the joint chairman of the all-party Motor Industry Group) summed up the situation perfectly, “collaborative ventures, yes – they’re commercial commonsense and necessary in today’s world, but control must stay here”.

Of course, there were no winners in this most public debate over the future of Austin Rover – if anything there was only losers, the main one being Austin Rover itself. Ray Horrocks stated that morale at Austin Rover was the lowest that he could recall in the eight years that he was a manager within the company – and worse and somewhat more profound than this was the effect it had on the company’s market share: during February, when the public debate was at its height, it cost them between two and three per cent of the market – or in real terms, some 20,000 sales.

The end result of these events were that Thatcher suffered a further humiliating blow to her leadership, this time because of her bad timing – and misjudging Political opinion. This now meant that twice now, matters BL had dealt her a bloody nose and the end result would mean the departure of Sir Austin Bide – and ultimately, both Harold Musgrove and Ray Horrocks.

Graham Day was chosen by Margaret Thatcher to run BL following the collapse of Ford and GM takeover talks. He would prove to be an uncompromising leader, who would finally lead the company back into the private sector. His appointment also led to the death of the Austin name.

Within weeks, Margaret Thatcher acted decisively in re-creating the former Sir Michael Edwardes role of Chairman and Chief Executive – and the man that she personally chose to fill it was none other than Graham Day, formerly the Chairman of British Shipbuilders. The 52-year old and athletically built Canadian was chosen by Thatcher to signify the Government’s growing unrest with the way things were going in Austin Rover – and if nothing else, it signified in crystal clear terms that the Prime Minister wanted BL privatised as quickly as humanly possible. Like it was back in 1977, a new broom swept its way through the company and within weeks, both BL Directors, Roy Horrocks and David Andrews announced that they had decided to resign, leaving Graham Day in total control of the entire operation. Horrocks was an unfortunate casualty of the appointment of Graham Day, because as the then current Chief executive of BL, he had effectively been put out of a job. Horrocks himself was pragmatic enough to realise that he plan to take the full-time Chairmanship of BL now lay in tatters and more than anything else, it was as a result of fact that he very publicly led the internal BL opposition to the talks with Ford – something that Mrs. Thatcher herself was very keen on. This led to Horrocks being “disciplined” by Paul Channon and the appointment of Graham Day to replace Sir Austin Bide at the head of BL.

In his final speech to the House of Commons select committee, Horrocks used the opportunity to air his views on the situation, “I have been assured from all quarters that the recent appointment was absolutely no reflection on my performance as a manager. So I conclude that other factors or influences are at work and all I can say is that I have stood up for what I believed to be the best interests of the business and this has brought me into conflict with the major shareholder (the Government).”

“….and any manager who does that knows the risk he is taking”

He did not leave it at that. Horrocks maintained that the current Government was crucifying BL for short-term political gain, “Currently, we face a political not commercial problem and the politics of ownership appear to be outweighing responsibilities of ownership to the detriment of the business and a large part of the UK motor industry.” Horrocks was not against privatisation per se, but he made it very clear that in his opinion, the methods being used by the Government were all wrong.

Day made it very clear that he would be taking a close and personal interest in the promotion of Austin Rover cars and see what he and his marketing gurus could come up with in order to wring every last drop of market share for the company – this would subsequently prove to be something that the new organisation was rather adept at. He set up operations for the upper management of the Company in the City of London and the rest of management’s decision making processes would conducted in Uxbridge, “it is very sensible to have certain things conducted from Uxbridge – it is less expensive. But the reality is that a whole range of things, like the Government and the banks, are in London. The third parties with whom one has to deal are not necessarily thronging around Uxbridge.”

It was at this time that the BL name was finally laid to rest. After Edwardes contracted the name British Leyland to read, “BL” in 1977, the company’s events seemed to continue on their traumatic way. When Day renamed the entire organisation, “The Rover Group”, the Leyland name and any remaining component of it was finally buried for good. Edwardes had good reason for naming the organisation BL: the intention was for this company to act merely as a holding company for the various component companies contained within it. The trouble with this plan though, was that the seemingly anonymous holding company was constantly in the public eye – and therefore probably more well known than the companies it held. BL was also responsible for the relationship between Government and the small band of private shareholders who remain on the register, so as to keep the BL Stock Exchange quotation alive – even after Edwardes renamed the company in 1978, pundits and the public alike continued to call the company “British Leyland” or “Leyland” – few ever used the new title – and what that meant was that Edwardes was always going to be up against the negative connotations that came as baggage with the name, “Leyland”.

Shortly after Day’s appointment, the Rover 800 was finally launched to an expectant public. Unlike the previous new cars, the Maestro and Montego, the new big Rover was the product entirely created alongside Honda – and which was styled pretty much entirely by the new Post-Bache/Mann/Longbridge generation of Austin Rover designers. The car was compromised by its need to sit on the same floorpan and underpinnings as the Honda Legend – and by the fact that the styling was such that it needed to continue the “look” pioneered by the Rover SD1, but on the whole it was met with enthusiasm from the UK and European press. The public seemed to like the car too, but like the SD1 before it in 1976, the new Rover was plagued by supply problems from the start. The Rover 800 was launched in July 1986, but the emphasis was placed on the Honda V6 powered 825 model because supplies of the new M16 engine were not sufficient to meet expected demand for the 2-litre models.

From this hesitant start, however, sales of the new Rover picked up well and it soon became a well-regarded member of the “executive set”, more often than not outselling the Ford Granada – a car long since regarded as a perennial favourite in the UK.

The company that Day had inherited was certainly in better shape than that same company when Sir Michael Edwardes took the reins back in 1977: now that the Rover 800 was launched, Austin Rover had renewed its entire model range in only six years (Mini excluded). In reality, the Austin Rover situation, although highly political, was somewhat less desperate than that of British Shipbuilders when Day took it over – and he managed to turn that around in readiness for privatisation.

Day’s plan of attack was, in reality, the only one left to take. As discussed before, it would be impossible to further rationalise the company – there was really no fat left to trim from the company. The company was seemingly stuck at a production level of 500,000 per year, so Day decided that the survival of Austin Rover lay in taking the company further upmarket – where the profits were higher. Day insisted that the Government had given him no directives when he joined BL, only to develop a corporate plan that would ultimately lead the company into privatisation. He also knew that some parts of the Rover Group could be offloaded rather quicker than others, “I am concerned that any deals must make commercial sense. Some units clearly can stand alone, others cannot.” The first fruits of this statement would soon follow. In an opposite sentiment to that of Sir Michael Edwardes, Day stated in response to the old “Unsaleable rump” argument, “Does it make sense to cross-subsidise something that might be a perpetual loss-maker?”

Deep down, one senses that Edwardes wanted to make a success of BL and all its component forms, whereas Day tended to look at things in a more dispassionate way. These two approaches may have been very different, but both achieved results in their own way.

Day believed that the new Rover 800 would play an important role in this new chapter of the company’s history, “If that model is well-received through 1987 and 1988, it will take Austin Rover down a more encouraging path. Two or three years back, or even longer, there was, I believe, customer dissatisfaction with the quality and reliability of Austin Rover’s cars. It takes a long time to get people back to a brand with which they once had difficulty – that is true for toothpaste, let alone high price cars. If the Rover 800 is as successful as we think it will be – that message will get out to the UK market. It will have a halo effect. The public will feel the other cars in the range could be just as good.”

The departure of the hard working but unloved Harold Musgrove followed within weeks of the launch of the Rover 800. It was probably an appropriate time for him to go, anyway – one could not see him getting on with Graham Day – and as he did play a big role in the development of the Metro, Maestro, Montego and Rover 800 it seems in hindsight that he chose a point to call it a day where a chapter ended in the company’s history. Musgrove was truly a product of a past era and this was never more apparent than when asked at the press conference to mark the announcement of the Rover 800 why it did not come with ABS as standard across the range, like its main rival the Ford Granada, “We didn’t fit ABS as standard on the 800 because it isn’t as necessary with transverse engine (sic) front wheel drive cars as it is with rear wheel drive”. There is no doubt that Musgrove played a part in the development of this car, but at the end of the day, this attitude of, “we know best” certainly would not wash in the new regime, where Day admitted that he would fit day-glo paint to his cars, if that was what his customers demanded. Day also felt that Musgrove had misled him over the company’s newest product – and that did no help the situation one bit: an insider put it like this, “The key cause of falling out was that Day felt he had been misled by ARG senior managers as to the readiness for launch of the 800. It should ideally have had a few more months of problem-sorting, but then again, an even later launch would have caused other kinds of problems - a no-win situation.”

1986 truly had been an annus horribilis in the company’s history – and as the year drew to a close, the uncertainty over the Rover Group in the minds of the buying public was confirmed when their UK market share fell to an all-time low of 15.9 per cent. This follows on from the more or less consistent 18 per cent that BL were achieving following the launch of the Metro in 1980, but if it looked like a disastrous drop off in sales, Graham Day was again, pragmatic about the situation. Whenever the company was in the news, market share would inevitably drop – Day wanted to put a stop to this situation, by attempting to run the company in a level-headed way. The intention was now very much to stay out of the news.

Within months of his appointment, he drew up a realistic business plan that centred on the “Rover-isation” of the entire range – and that in the future, all new Rover (or MG) badged cars would be priced at a premium over their mass-market rivals. This marked a significant about turn in the company’s strategy and certainly made a change from the previous management’s insistence that they were chasing a twenty per cent share of the UK market. Day stated the opposite, by saying that it was not market share that mattered, so much a profit – indeed, Day was not concerned in the slightest at the contraction of the company’s market share. He said that he would be quite happy with a ten per cent slice of the UK market, as long as he could choose what ten per cent. The reasons for this downfall were down the fact that Austin Rover made a conscious decision to stop competing with Ford and GM by buying into their market share (this practice had been widespread since the early ‘Eighties).

Certainly, the strategy of going upmarket looked risky in light of the fact that the Metro, Maestro and Montego could not comfortably wear a Rover badge – and that market research now showed that the Austin name carried all kinds of unfortunate connotations with the past – in the buyers’ minds. Also, the marketing of the brand needed to be given “more punch” because the company was losing sales due to lack of product awareness in the most basic sense, in some cases. Day put this down to the engineers taking control of the company’s marketing – strange until one recalls that Austin Rover’s chief executive, Harold Musgrove, took a leading role in the development of the company’s cars since the Metro. This position that Musgrove occupied himself in certainly was strange, as it is received wisdom that the Chairman should let his staff get on with the day to day development of any new product. Be that as it may, Day was quick to point out that the “Edwardes era” as he liked to refer to the days before he arrived on the scene had produced new facilities, a modern range of cars and stable industrial relations. What it had done however was to, “ignore the fact that the company was selling consumer goods and needed to satisfy the consumer”.

The marketing side of Austin Rover occupied Day more than perhaps it should have done if the product had been promoted correctly. Speaking in Car magazine in 1987, he summed up the situation, thus, “I don’t believe we were presenting and positioning our products as they deserved to be. I wouldn’t say those that were doing the job then were negligent in that they didn’t do anything about the situation. But they were excessively driven by their heritage in engineering or manufacturing”. Day wanted a clear and well-planned marketing strategy and this was something that he, through Austin Rover’s marketing department and advertising agency Dorlands, achieved remarkably quickly. The strategy was devised on the back of a hugely detailed market research programme (instigated by Director of marketing, Kevin Morley on behalf of Harold Musgrove before he left) that surveyed the desires of the company’s present customers and potential buyers. The results made fascinating reading and because of this, the company focussed laser-like on the areas where the company was seen as unjustifiably weak.

Day stated that the strategy of the previous management had simply produced confusion about the company’s products,

“’Now we’re Motoring’, remember that? We got rid of it.” – a campaign which, ironically had been Dorlands’ idea!

“So far the new strategy has been applied to three models – Rover 200, Mini and the Montego.” Day claimed that the strategy delivered impressive results – the Mini especially so – certainly this awareness of the Mini resulted in the car remaining in production, when it was looking increasingly likely to suffer a quiet death at the hands of Harold Musgrove. Business reasoning went completely against the Mini as well, meaning that there should have been no rational reason for continuing its production. One insider put Austin Rover’s dilemma in context: “it should be realised that there were lots of reasons why Engineers and Manufacturing people wanted to axe it – it was a 1950s design, lots of difficulties with modern legislation, a pig to manufacture – it was responsible for dragging down the productivity figures of Longbridge, and so on. Musgrove always took the view that it was taking volume away from Metro, too”.

However, the resultant renaissance of the car (especially in Japan!) led ultimately to the eventual re-appearance of the legendary Mini Cooper in 1990 – the rest is Mini history.

Not that Graham Day was solely responsible for this marketing renaissance – far from it, in fact. Much of the credit of this must be laid at the feet of ex-Ford marketing guru, Kevin Morley, who was a new recruit to the company, joining just weeks before the arrival of Day himself. Where Day was extremely clever was I his insistence on changing the emphasis in Austin Rover – to the point where Morley would have as much influence on the direction of the company as, say, the Director of design, Roy Axe. Much of Rover’s new direction can be summed up in the statement by Morley that, “Seat of the pants decisions are dead. I could quote you examples of cars, which have researched badly, but somebody said, ‘let’s do it anyway’. They’ve bombed”.

The renaming of the company also served to heighten the brand, “I admit there was a danger of adding to the confusion”, when asked to his motives for doing this, “but Rover was the oldest name we had, and it applied directly to the products we make – Rover cars, Freight Rover, Land Rover, Range Rover. I hoped it would not so much confuse as remind.” This of course, left the Austin marque out in the cold – and the first decision made was to de-badge the Austin range so that the only identification on the Metro, Maestro and Montego was the model name – Austin was now effectively dead. Day added, “Our research indicates, particularly in the 17 to 34 age group, that people do not wish to drive an Austin.” And that was it – the Austin name would be consigned to history by the new incumbent, just as the Riley, Wolseley and Morris name had at previous changes of management.

Benefits of the new regime were soon felt – and although the company’s market share failed to improve, the profit situation did begin to. If there was a price to be paid, it was the Maestro and the Montego that began to fall by the wayside, to be replaced in the public’s affections by the more “exclusive” Rover 200. Work continued on the next new Rover, the “YY”, which would be now known for a short period of time within Austin Rover as the AR8, before it became the R8 in 1987 – and like the Rover 800 before it, the new car was conceived as much more of a joint effort than the existing small Rover. Unlike the existing car, which was all-but a re-badged Honda Ballade, the new car would be co-developed with Honda – and would be an entirely new design to them, too. The Rover-Honda deal was beginning to pay dividends for Honda too – who thanks to this joint venture, were having a new market opened up to them, and one that was right at the heart of European market, the mid-sized family hatchback market.

Company planners ensured that the Rover version new hatchback would offer an advanced specification – and as a result, the car was planned from the outset to use the twin cam 16-valve version of the new K-Series engine. Production and development build up meant that the K-Series would initially only be offered in 1.1-Litre 8 valve (in the upcoming R6 project Metro replacement) and the 1.4-Litre 16 valve version. There was further upward expansion potential in the new engine, but 1.6-Litre versions of the AR8 would initially be Honda-powered – not that this had proved to be even remotely off-putting to the company’s clientele. It was also an operational requirement and a stipulation of the Rover Honda collaborative deal that at least one model in the Rover range would be mechanically identical to its Honda counterpart – the idea being that there would be common ground on where to judge each others’ performance, a “datum point”, as it was referred to internally.

Now that a rational forward plan had been drawn-up for Rover, it was looking to be an increasingly tempting bet for takeover. It may have been a totally different company to Austin Rover, a mere two years previously, but in March 1988, a shock announcement was to the media that Rover was now under the ownership of a new suitor – one that was from the most unlikely of sources: The aerospace industry.

In fact, the speed in which the deal between British Aerospace and Rover was constructed and then finalised was quite simply, astonishing. The whole arrangement must have been a welcome relief for the government, still smarting from the GM/Ford debacle, which was desperate to rid themselves of the car company in the most politically expedient way.

The announcement that British Aerospace (BAe) had intended to buy the Rover Group was made in a joint press conference chaired by Lord Young, with Graham Day and BAe chairman, Professor Sir Roland Smith briefing those attending with the finer details of the takeover. The cost to BAe for Rover would be £150million, but this bargain price was only part of the deal – the company’s bank debts, which amounted to some £400million would be written off and not only this, but the Government would throw in a further £547million into the deal, as working capital. Not bad, when you think that BL had swallowed a total of £2.6billion in taxpayer’s money between 1975 and 1988. These were the costs and benefits to BAe, but what guarantees did the Government demand? In short, the Government initially made no stipulations to BAe that they should keep plants open, maintain a minimum workforce, guarantee R&D spending – or even continue to offer a full model range, in fact the only condition of the deal was that BAe were required to keep hold of Austin Rover for a minimum of five years.

This was certainly a sweet, if not irresistible deal for BAe, but how did it come about in the first place? Well, it seems that the idea came about because of a chance meeting between Day and Professor Smith at a cocktail party. One can imagine that there would have been a certain amount of encouragement from government representatives present, who for sure could see the benefits of these two parties getting together.

Negotiations were swiftly conducted and once the deal became public knowledge, Ford thought long and hard about re-entering negotiations for the Rover Group – and Volkswagen, too, seriously considered buying Rover. The Government made it quite clear that rival bidders would be unwelcome, even though a company like Ford or VW would certainly push up the price enough to scare off BAe, especially if they started bidding against each other. That is exactly what the government did not want – BAe were British, they were from an unconnected industry and this deal is what they did want, because it could be in no way seen as selling out to the opposition – or the Americans…

In the lead-up to the EC enquiry into the Rover sale, Professor Smith made the commitment to invest the sum of £1 billion into the Rover Group in the following five years. The offer was made at a House of Commons Trade and Industry Committee hearing that Professor Smith himself attended. He told the committee that, “we think Rover group is a good business and will be better as part of BAe’s portfolio. We’re not wishing to buy a business to destroy it or sell it, or cut it about.” These were interesting words and hindsight reveals that Smith’s pronouncement was less than correct – they did not asset strip Rover as much as some people feared they would during the terms of their tenancy as Rover’s owners, but they did close two thirds of Cowley and closed Canley completely – and that rather flew in the face of Smith’s “…cut it about” comment.

Would BAe sell Rover for profit after their five years were up? – now, that was a different matter.

There were questions raised about the finer points of the deal involving government intervention of a “nationalised” industry – certainly the more than generous amount of working capital that BAe had been promised. Thankfully for BAe, when the European Commission reviewed the sale of Rover and the £800 million handout given to BAe was realistically referred to as a, “state subsidy”. Certainly the EC did impose a couple of conditions in order to make the company resemble a “normal” commercial company; such as Rover were required to maintain £100million of its debts and use its own money to finance car stocks, instead of the government’s. Other than these “adjustments”, it was hardly likely that Brussels would veto the deal, but all the same, the book was finally closed on any uncertainty over Rover’s ownership when they finally did give the deal their blessing.

Professor Smith made it clear that he was unimpressed by what he saw as the overtly close monitoring of the deal by the EC – and as a result, he held off signing the agreed deal by some 24 hours. This may have looked like last minute posturing from the bluff BAe chairman, but he had also been genuinely wrong footed by the EC’s assertion that if the company ditched the Rover corporate plan, then all government aid could be clawed back. Smith also signalled that although the Government had no doubt aided his company in a huge way, he was going to run Rover as he saw fit and would not be dictated to in his dealing with Rover. This delay may have cost his company some goodwill from the powers-that-be, but it also showed his determination.

As a result of the EC agreement, on the 13th July 1988, The Rover Group officially became a subsidiary of British Aerospace – and the book was now closed on an era of public ownership that had lasted thirteen traumatic and costly years.

Miraculously for Rover, from the announcement of the deal in March 1988, the company’s image and financial performance took an immediate and upward turn: Rover’s executives quickly began to talk of a “halo effect” from BAe that engulfed the company. Not only this, but the evidence of Rover’s viability as a going concern were there for all to see; the 1987 financial figures published a fortnight after the initial announcement, showed that Rover managed to produce a £27.9million profit before tax. If City analysts were sceptical about the deal, this profit – and the prospect of increasing financial stability in the future, talked up by Professor Smith soon had the financial sector eating out of his hands. Professor Smith also made it clear that he knew Rover was no “lame duck” and that he had bought the company purely for its potential for profit – this, after all was the bottom line. Indeed, it is far to say that there was little opposition or resistance to the deal in the City – and certainly Westminster loved the deal, for the reasons discussed above. So, what could go wrong?

Well, certainly the takeover looked like manna from heaven, but apart from the “Britishness” of the deal, it was hard to see what BAe could offer the Rover. Certainly rival car chiefs found the whole situation illogical because BAe was a cash-hungry company, as was Rover – and any talk of “synergy” between the companies was certainly fanciful because any benefit that Rover may gain from BAe in terms of technology were marginal – and this would take years to filter through. The more pressing concern was how to generate a business plan that would bring in profits of £300 million per year in order to fund the replacement programmes for some of the rapidly ageing models in the range.

Come Fly With Me: Life Under British Aerospace

Life must have seemed very quiet for any Rover manager, following the sale of the company to British Aerospace in 1988 – gone were the days of constant media scrutiny, public haranguing and trade apathy. Arguably, for the first time since 1968, the company could get on with their new model programme, and follow it with a sense of direction and purpose. Much of Rover’s structure had been licked into shape in the post-Edwardes era by Harold Musgrove and Ray Horrocks; Longbridge and Cowley had received extensive refurbishment for Metro and Maestro/Montego production, and this had been added to in anticipation of production of the Honda Ballade and Legend models, under the watchful eye of Honda production managers.

Rover was beginning to turn around, and although the Maestro and Montego had both received a lukewarm reception from the buyers, a continual programme of development had ensured that the cars remained at least competitive in their sectors. The company’s image of unreliability would prove hard to shake off, and certainly the Maestro and Montego had not been helped by early model gremlins – this being exacerbated by the wobbles that the Rover 800 also encountered early on in its life. However, the product was fundamentally good, and thanks to Rover’s own efforts, and those of Honda, undoubtedly by the time of the BAe takeover the company’s product and its image were both a million miles from where they had been a mere decade previously.

So now the company was turning the corner, what was needed was an investment programme, which would lead to the replacement of the volume models: the Metro, likeable and well-built it may have been, was by 1988 saddled by its four speed gearbox, aged (although still very capable) A-Series engine, and smaller-than-average package. The vitally important Maestro and Montego were also struggling, and this was caused by their reputation of unreliability (unfounded by 1988) and their aged styling. Where the company was doing well, were in the sectors that they were represented by “Rover” models. The question of replacing the Maestro had been answered by this time: the collaborative Rover R8/Honda HY would prove to be the perfect Maestro replacement, and being designed as a Rover from the outset, meant that it had every chance to continue the success of the then current “SD3” Rover 200. The Metro though, had been subject to much soul searching: the AR6 had been dropped in the lead-up to the sale of the company to BAe because it would have absorbed huge development costs at a time that the government were trying to keep spending under control. The Montego was still a very capable car, let down by a poor exterior design, and there were two different programmes investigated, in order to produce its replacement.

What Rover needed, therefore, was a large financial commitment from BAe – releasing enough cash to produce an all-new replacement for the Metro and Montego. What they got was something a little less than that. The replacement for AR6 had been devised as a facelifted version of the existing car, which incorporated its K-Series engine and a revised version of the existing car’s Hydragas suspension (this being known as the R6). At the time of the BAe takeover, it would have seemed logical for the company to lobby for a return to a car more advanced than the R6, but because BAe wished to keep investment under control, any plan for an advanced 1990s supermini was quashed in favour of the budgetary R6.

The same would be the case for the utterly important Montego replacement: AR9 was conceived as a rebodied and “Roverised” Montego, and would have played on that car’s strengths – that plan was dropped. The same was the case for the AR16 and AR17, which were based on a shortened version of the Rover 800 platform. The R9 project also had legs: this was based on the R8, but shared only its front door skins – importantly, it was somewhat larger than the car it was based upon, being aimed directly at the heart of the Sierra/Cavalier class – where the lion’s share of company cars sales took place. In the end, budgetary constraints placed by BAe ensured that the Montego was never truly replaced: the R8 spawned a saloon (which was based entirely on the Honda Concerto saloon), which would eventually appear as the Rover 400 – and this car was somewhat smaller than the class centre of gravity, even if it was an impressive car.

What was clear by this time was that where a cost saving could be effected by relying on Honda, BAe would ensure that it happened. This was not an entirely bad thing given the strength of Honda’s design and the quality of its production, but at the same time, it would lead to an unhealthy reliance on the Japanese company.

In June 1989, this situation was exemplified by the signing of the agreement that would lead to the production of the Rover 600. The car would be based upon the upcoming 1992 Honda Accord, and because the Japanese company were designing the car for themselves, there were some very strict design stipulations (laid out in more detail in chapter seventeen). Essentially these compromises meant that Rover would have to adopt Honda’s engines, suspension, and interior with no technical input. It was a matter of good fortune that Rover was given enough leeway on the exterior for Richard Woolley to produce the good-looking car that he did.

By 1989, Graham Day had devolved most of his Rover duties to George Simpson. The ex-Land Rover manager was given the task of continuing the task of continuing Rover’s march upmarket – and as a result continued the Graham Day
inspired policy of attaching little significance to the company’s falling UK market share. As long as the profits on the cars they did sell in the UK were healthy, then Rover were a success. Certainly, at the time of the introduction of the R8 in October 1989, much play was made of the quality of the product and the fact that they were priced to reflect this quality. The plan, therefore, was for Rover not to go head to head with the volume producers such as Ford and GM, but to produce technically more advanced cars that would occupy the top price point of each market sector they occupied. In 1989, this policy had yet to bear fruit, but the seeds were sown when the Rover 200 was launched with a hefty price premium over Ford and Vauxhall.

However, at this time, Rover kept the Maestro in production (in order to keep Cowley in action, and to appeal to the cheaper end of its sector) even though it was by then, a spent force on the market, and it sat rather uncomfortably in the Rover range, isolated as it was. When the booted R8 appeared in April 1990, the same decision was made to keep the Montego in production – the matter of its replacement was not really to produce a replacement at all, but cover the market with two cars: the 400 at the bottom and the 600 at the top. It was not always to be the case, as the existence of the AR9, AR15/16 and R9 proposals would prove – given a freer hand, Rover would have liked to produce a direct replacement for the Montego, aimed at the heart of the Sierra/Cavalier market, but instead were led down the “premium” route thanks to BAe and Honda.

In the summer of 1990, the EU launched an enquiry into the terms of the Rover sale to BAe – the commission were less than happy at the £150million purchase price, which they considered was far less than the company’s true worth. The commission also raised concerns about the fact that other prospective purchasers were ruled out of the bidding process, as this constituted unfair competition. Ford was called in to produce what was considered a true market value for Rover at the time – and they came up with a figure of £800million. This was somewhat adrift of the £150million that BAe paid, which was bad enough by itself, but tied in with the £800million injection of working capital that the government placed on the table, and the £2.6billion debt write-off for the previous thirteen years under public ownership, it looked as though the government had seriously undervalued the company. In fact, this merely backed-up what Parliament’s own financial watchdog, the National Audit Office (NAO) had concluded back in December 1989. Their findings on the sell-off of Rover to BAe had been even more damning: according to the NAO, the actual amount of taxpayers’ money swallowed up by BL during their period of public ownership was £3457million, as opposed to the £2.6billion previously published. The fact that all of Rover’s debts had been written off by the government meant that Rover’s true worth was indeed much greater than £150million – the NAO even claimed that Rover possessed something in the order of £250million of surplus assets (unsold cars, etc.) at the time it was sold to BAe.

During the sell-off negotiations in 1988, Barings Asset Management advised the Department of Trade and Industry that Rover, shorn of all debts would be worth £950million, a similar figure that reached by the EU Commission. The NAO report also noted that by the end of 1989, BAe had already recovered £126million of the original purchase price by selling off company subsidiaries:

·   40 per cent of the DAF truck company, which was worth somewhere between £40 and £50 million. When DAF was floated, Rover’s stake raised £87million for BAe.

·   Rover sold its holding of their computer services company, Istel, for £39.1million

The NAO concluded that the most conservative estimate of Rover’s worth should have been £206.5million: “The sale price of £150million fell significantly short of the real value of the company.”

But thanks to a general upturn in the world’s car markets and an improving product line, Rover began to make modest profits during its time under the control of BAe. And it was a time that BAe could have taken the opportunity to invest serious sums of money in their car company. Instead the company continued along the path of relying on Honda for the major technical input on future models.

The replacement for the R8 Rover 200/400 came up for discussion in 1991 and right from the beginning, it was clear that BAe would not allow Rover enough money to build their own car, and capitalise on the position of strength that the R8 had been establishing for itself and the company on the marketplace. Basically management issued an ultimatum that the new car would be heavily based on a Honda model, as had been the Rover 600, and if that could not be made to work, management threatened, the company would be closed! So under these conditions, the Rover design team set about working on a replacement for the R8. As detailed in the next chapter, Honda also ensured that the new Rover (codenamed HHR) would be so heavily based on the Honda version of the car (HHH) that there would be little room to make the cars stand apart from each other.

The belief within Rover was that Rover had made a success of differentiating their 600 model from the upcoming Honda Accord, and the same process should work for the smaller car. It soon became apparent that Honda would not allow Rover any real leeway in which to modify the car, and as a result, the 600-formula of intelligent redesigning of certain body panels to achieve a different look was just not going to work again. This apparent crushing of their design independence, and an increasing Dominance by Honda increasingly disillusioned many elements within the design team. If that was to imply that the general working relationship between Rover and Honda was poor, that was certainly not the case, but certainly, the design departments of both companies, constrained as they were by management, enjoyed a less congenial relationship as time passed.

Be that as it may, work with Honda continued into the early 1990s, but Rover themselves also did work on some of their own projects listed below:

·   R17/R18 (launched 1991): This was the replacement for the 1986 Rover 800, but instead of a new car that the company needed, cost constraints meant that it would end up being a fairly comprehensive facelift of the original car. This proved to be a short sighted policy, given the way it was outclassed towards the end of its life in 1998.

·   R3 (launched 1995): The small car that was intended to replace the Metro/100 but was taken upmarket in search of higher profit margins. A low cost project based on R8 underpinnings that resulted in a very good small car.

·   Pathfinder: An innovative car that was conceived to bridge the gap between the Rover range of passenger cars and the Land Rover models. Initially conceived as a two wheel drive Sport Utility Vehicle, rugged in looks and commodious, but was canned on cost grounds by BAe management. The bones of this project are alleged to have formed a basis for the later Freelander.

·   MGF (launched 1995): Designed by Rover Special Products and only given the go ahead, when project supporters lobbied management, citing the fact that they could develop it on a shoestring budget. This they did, by enlisting outside suppliers to perform much of the initial design/development work. A clever collaborative deal with Mayflower also ensured that the start-up production costs would be cut in return for a share of the profits on each car.

As can be seen, all of these projects were dictated by cost – and although thanks to the ingenuity of Rover’s designers and engineers, they turned out to be very capable cars, the truth is that they were always going to have a limited lifespan compared to more thoroughly developed cars.

BAe also made a considerable amount of money by closing two-thirds of the Cowley factory (all Rovers built at the site now were actually products of the old Pressed Steel Fisher site) and selling it to land developers, whilst also doing the same at Canley. This policy also flew in the face of Professor Sir Roland Smith’s proclamation back in 1988 that Rover was safe in the company’s hands. It had, of course, become perfectly clear by this time that BAe were merely acting as stewards for Rover – and any long term ambitions of ownership had been washed away when Professor Smith had been replaced at the top of BAe and the company ceased making the large profits they had enjoyed during the 1980s.

By 1993, and with the “Portfolio” range of models nearing production, BAe started looking for an exit route from Rover. Little was in place for beyond the 1995 influx of models, but at that moment in time, a snapshot in history, the sale of Rover looked very tempting for BAe. Arguably for the first time in the company’s history, Rover actually consisted of a logical and progressive model range: Metro, 200, 400, 600 and 800 at the top (Maestro and Montego were by then low-volume specialist cars and right on the fringe of the range). The timing of their sale was perfect, and even though a cynic would say that BAe were selling exactly five years after they got hold of Rover, they were merely looking after the interests of their shareholders.

The BAe years were quiet ones at Rover: summed up as years of under-investment, closures and a gradual move further up the price scales for their car ranges. British Aerospace did not do nearly enough for Rover, but the consequences of this would not be felt by them (who reaped serious financial rewards, come sale time), but by the company they sold Rover to in 1994: BMW.

Night of The Long Knives: Auf Wiedersehen Honda-San

Many within the media and the British Government saw Honda as being the saviours of Rover; a logical conclusion to draw when one considers the amount of collaborative work that they and Rover had undertaken, but sadly, this to prove not to be the case. British Aerospace as stewards of the Rover car company had been going through financial woes of their own during the early 1990s – many of which had been caused by the expansionist policies that the Chairman of BAe himself, Professor Sir Roland Smith had pursued during his tenancy at the helm of the company.

Returning back to basics was obviously the ambition of his successor, and primary in achieving that goal would be the removal of all non-core businesses, the biggest of which was Rover. So during 1993, and by then, headed by new a chairman, John Cahill, the company began to decide upon a strategy that involved the disposal of Rover, but at the same time making sure that it did not look like they were keen to sell – for the obvious reason that it could devalue the company’s worth in the minds of potential suitors.

Luckily for BAe bigwigs, the issue of how to put the company up for sale did not arise, because over in Munich, BMW were deliberating on how to survive in the long term given that at the time, they were producing somewhat less than a million cars a year – which meant that they were a minnow on the world’s stage. Headed by the new company’s new CEO, Bernd Pischetsrieder, it was clear that BMW would need to expand in order to survive. Being what was considered to be a small player in the international arena left the company under threat of being engulfed by an acquisitive rival – and at the time, there was a general direction towards mergers and takeovers in order to survive. BMW’s position was something of a unique one, however: the company possessed a formidable reputation for producing executive cars, but it left the company with something of a dilemma – how to increase volume significantly without diluting the brand’s strong image?

The answer was obvious: buy or collaborate with a volume producer! Of course, it was not as simple as that: BMW were an ambitious company and given this, the corporate ideal would be to possess a portfolio of premium brands in which to cover all sectors of the market. The options at the pinnacle of the market were obvious: Rolls Royce and Porsche. Below that, was more difficult – Land Rover possessed a world beating image, and would be an ideal addition to the “dream ticket” that BMW so desired – on the volume front, it was not so clear cut. Most suitable volume producers were already tied in with collaborative partners – and so, the choice of available independents was somewhat limited. BMW reached a similar conclusion to Sir Michael Edwardes some fifteen years previously, by targeting Honda, but this time their advances were firmly rebuffed by the Japanese – Honda had a suitable European presence already and they did not wish to enter into partnership with anyone.

Following Honda’s rebuttal, the only real choice left to BMW was Rover. Still controlled by BAe, it seemed that there would be an opportunity for BMW to gain access to the volume market by buying up Rover – assuming that their masters would sell, of course. In June 1993, Pischetsrieder approached George Simpson and sounded him out about the possibility of BAe selling Rover. The response was positive, but only if the German company were to buy the entire organization – which of course was exactly what Pischetsrieder wanted: a volume production marque to slot in beneath BMW.

So, in what seemed an ideal match, BMW approached BAe with a view to buying Rover. With Rover, not only would they acquire the volume arm of the company, represented by the products of Longbridge and Cowley, but they would also gain Land Rover, the prestigious marque MG, and the unique retail opportunity of Mini. Needless to say, given BAe’s desire to sell and BMW’s desire to buy, it seemed that there would be little to stop the partnership being formed.

As it became clear within the company, that BAe were gearing up to sell Rover, concerns were raised by management that an outside company could cause a loss of stability – and jobs could be lost, and factories could be closed. It was obvious to management, particularly John Towers, that the preferred partner for Rover would be Honda – and given the fact that they already possessed a twenty per cent stake in Rover, it was hoped that Honda might want to take up a further, controlling interest. In the closing months of 1993, Rover tried to persuade Honda to do just that – but the Japanese company were not interested in taking up the ownership of Rover, but they did offer to increase their stake in the company to 47.5 per cent. Honda’s CEO, Nobuhiko Kawamoto explained Honda’s stance by stating, “After Honda was offered the opportunity to increase its share in Rover, we made a proposal. Part of the proposal was to acquire less than half the total shares in Rover, based on our desire that Rover continues as an independent British company… one which would then be able to offer shares publicly. We believed this proposed arrangement would strengthen our long term relationship with Rover, as well as strengthening Rover itself.”

When it became clear that Honda did not wish to take ownership of Rover, and BAe had an offer on the table from BMW, it became clear to Rover’s management that the parent company would not be able to resist the £800 million tabled personally by BMW’s director of corporate planning, Dr Hagen Luderitz. That did not stop the management from lobbying Honda hard – and right until the last moment, they tried to get Honda to match BMW’s offer – on the eve of the BMW purchase, George Simpson himself flew out to Tokyo and tried to get Honda to change their mind. Much to his chagrin, Kawamoto, did not even meet him personally; it was left to their finance director to re-iterate Honda’s offer to take a minority stake in Rover. At this point, the dye was cast – and on the 31st January 1994, the Rover Group was sold to BMW: The UK’s only remaining indigenous volume producer of cars was now in foreign hands.

Industry watchers were surprised by the move, to say the least – it had always been assumed that Rover and Honda would move closer together, and given time, for better or worse, this may have been the case. But given the fact that BAe wanted to disentangle themselves from Rover and look after the interests of their own shareholders, the cash offer of £800 million from BMW looked a great deal more appealing than joint ownership of Rover with Honda.

On the 1st February 1994, Bernd Pischetsrieder announced his company’s purchase of Rover to the press – and immediately began to make overtures that Rover were safe in BMW’s hands – and that much inward investment would be heading towards Longbridge, Cowley and the rest of the company. Indeed Pischetsrieder had already made it quite clear to the Department of Trade and Industry that there would be no closures – even though BMW’s previous management had favoured a closure of Longbridge. As far as BMW were concerned, this decision made by Pischetsrieder himself, would come back to haunt them.

BMW Takes The Helm

If management at Rover had expected rapid and swift changes within the company after BMW took control, they were in for what was seemingly a pleasant surprise. From the beginning, Bernd Pischetsrieder made it quite clear that his would be a “hands off” regime, and this was soon backed up by BMW’s attitude to the new model programme. Pischetsrieder described this process in a letter to the then Trade and Industry secretary, Michael Heseltine shortly after the takeover: “We want to protect (the distinctiveness of products and brands) and therefore intend to maintain BMW and Rover as separate enterprises each with their own manufacturing plants and their own design and development capabilities." This policy was described as "Rover leads Rover. BMW leads BMW."

The day after the purchase had been formalized, both Wolfgang Reitzle and Bernd Pischetsrieder visited the Gaydon facility to see what products Rover were working on. The Portfolio range (Rover 200, 400 and MGF) was well advanced, just about ready for production, and there was little that the Germans could do to influence these products. However, both men were reported to be very pleased with what they saw and gave the three cars their blessing for production. Other projects in the pipeline, however, were closely evaluated, and Pischetsrieder ensured that the replacement Mini project was given priority, with a view to production as soon as possible. For him, this was the most important of all the products that Rover had in the pipeline, and he understood fully just how important the Mini brand was to the company.

Not only was the MINI brand important for the company, but also it would ultimately ensure continued volume production at Longbridge. The Rover Metro/100 was beginning to fade in sales terms, and although there was to be a lightly face-lifted version, planned for launch in January 1995, it could be nothing more than a stopgap until the Mini’s replacement came on stream. Rover had been working on this car before the BMW takeover, but following Pischetsrieder’s ringing endorsement of the project – and the promise of much extra finance in order to get the car into production, it was pretty clear that the future of Longbridge would be safe at the hands of the new company.

So, the Mini replacement project received an all-important shot in the arm. Next on the agenda was the less straightforward matter of replacing the 600 and 800 – and whether, indeed, it was actually prudent to do so, given the fact that they occupied the same market sector as the BMW 3 and 5-Series, respectively. Rover had also been working on this matter as well – and after some interesting concepts had been vetoed on cost grounds by BAe, they had settled on a proposal called, “Isis”, which would eventually metamorphose into the Rover 75. The BMW board also liked what Rover at Gaydon had achieved in their early work on the new executive car, so much so they gave “Isis” the go ahead without the need for any change – and they even briefly revived one of the car’s sister proposals, until it became clear that building it (on a shared BMW platform) would cost the company time and money – and potentially delay the launch of the vitally important 600/800 replacement.

On the Land Rover front, the CB40 project – what would become the Freelander – was also agreed, but with changes to the production arrangement that Rover were putting into place for it. Rather like the company’s agreement with Mayflower to produce MGF bodies, Rover had arranged a collaborative deal with the Finnish company, Valmet, in order to share the production costs of the new small Land Rover. This might have meant an agreeable cost saving for BAe, when the deal was conceived, but it was also at the cost of profit – and once BMW were on the scene, there was no real need for such budgetary measures.

So far from being the harbingers of a new Germanic way, BMW seemed to offer Rover everything they needed in order to return to their glory days: freedom in management, and a very healthy development budget with which to produce their next generation of cars. Change, it seems, was the last thing on Pischetsrieder’s mind – and he went as far as making some very unsubtle hints that he would like to resurrect some of the company’s long lost marques – most notably, that of Riley and perhaps, Austin-Healey. Certainly, the atmosphere at Rover was upbeat, given BMW’s laissez-faire attitude to the company, and within months, some of Rover’s long-standing (and Honda influenced) practices started to disappear: management were soon to be found back in suits, instead of the same corporate overalls that the rest of the workforce wore, in an attempt to break down the generational divide between management and employees.

A confidence started to return to the company’s employees – not least assisted by the fact the Group Managing Director, John Towers, was not replaced by a BMW appointed executive, but was in fact, promoted to the company’s Chief Executive. Towers himself was more than a little surprised by this, and has been quoted as saying that had he been in Pischetsrieder’s shoes then, perhaps, he would have appointed someone straight away to replace the incumbent. Be that, as it may, Pischetsrieder actively wanted a British CEO to run Rover – and given Towers’ excellent record, he seemed the most suitable candidate for the job. Pischetsrieder was also feeling generous when it came to Towers’ pay – not only was the man surprised by his new post, but the fact that his wages almost doubled overnight, and that certainly must have made him feel wanted. Having Towers in charge during the transition period was certainly a popular decision with the company’s workforce – the continuity made them feel good, even if ultimately, John Towers would not last the distance, as he was always and very publicly a proponent of the company remaining in partnership with Honda.

So, by the time the last of the Portfolio models had been launched at the start of 1996, Rover was still pretty much the same company that it had been when BMW took over some two years previously. Pischetsrieder had been wise enough to realise that any radical changes made to the working practices and management structure of the company would be met with resistance, and so, his thoughts were to leave Rover well alone. This was an admirable stance to take, but given the fact that Rover were still in a position to offer only Honda based products in the volume sector (which were still in their infancy, and years away from being replaced), it was also a risky one. Many of BMW’s senior executives began to question why Rover was consuming so much of the company’s resources, with what appeared to be little return. By 1996, the R40 (Rover 75) and R50 (MINI) projects were still in their infancy, and yet, the need to get them into production as quickly as possible was not met by what BMW saw as any sense real of urgency at Gaydon.

In retrospect, the period between BMW’s takeover in 1994 and the early months of 1996 were the honeymoon period in the relationship; Rover certainly felt the benefit of the extra cash coming in, and BMW were still on course to develop their multi-brand strategy. However, piece-by-piece, this honeymoon slowly melted away, and the first real sign of this was when the company had its first high-profile resignation.

It was John Towers, that decided to leave the company for pastures new – being seen as a “transition man”, it seemed fitting, almost, that he would leave in April 1996, shortly after the launch of the last Honda-based Rover. A BBC documentary crew, who were working on their, “When Rover met BMW” programme – caught his resignation on camera and it was memorable for that, at the very least. Towers’ departure was no doubt eased by his £500,000 pay-off, but it did now clearly mark a turning point in the BMW/Rover relationship. The new era had now been well and truly ushered in, and the matter of replacing Towers was an issue that Pischetsrieder could no longer avoid. The problem was that suitable British executives were hard to find, and it took BMW quite a long time before they could fill Towers’ shoes.

That vacuum was filled, initially by Wolfgang Reitzle, a curious choice for the new chairman given the fact that his ideas for Rover’s future were at a variance to those of Bernd Pischetsrieder. But Reitzle’s appointment was temporary, as Pischetsrieder still wanted Rover to be controlled by a British CEO. Finding someone prepared to take the job, and who was also suitable to do it would take longer than imagined! In the end, the man chosen for the job was Walter Hasselkus, a BMW manager with a proven track record within the company. Although German, he was a renowned Anglophile – and was judged to be the ideal man to close the cultural divide between BMW and Rover, at a time when necessity drew the companies closer together.

It was during this time that the marketing strategists began to formulate their plan on how to treat the Rover brand. Pischetsrieder was also well known for being an Anglophile – and he wanted Rovers to be uniquely “British”, in their execution. BMW’s market research had shown clearly that although they were very successful in their own market sectors, they offered such a focused package, that they had little opportunity for poaching sales from rivals such as Jaguar and BMW. Rover would perhaps be able to offer a package to do just this, but at the same time – it was evident that Rover’s brand values were not really strong enough to do this, being lodged as they were in the volume sector. Despite the moderate success of the good-looking Rover 600, there was also a (misguided) customer perception that Rover’s products were little more than re-badged Hondas – and although that added value and reliability, it did not add class.

The Rover R8 had slowly begun to change people’s ideas about Rover, but thanks to Honda’s insistence on its replacement being tightly based on their own Domani-based Civic five-door, Rover’s impetus in the middle-sector had been somewhat forestalled. There was also a level of customer misunderstanding over which Rover model occupied what market slot: and why they generally offered (technically superior, but) smaller engines and packages to their rivals such as Ford and Vauxhall. Against this background, the company’s most expensive and therefore prestigious car, the 800, was ageing at an alarming rate – so the conclusion to be drawn from all of this was the BMW would need to rebuild the entire range before they could even think about seriously marketing Rover in an upmarket way. So, the strongest cars in the range were most obviously Honda based, and they were in the volume sector; hardly a good starting point to build the company into one that were going to produce (in Pischetsrieder’s words) “Cheap Jaguars”.

The marketing strategy chosen by BMW was one that emphasized this “Britishness”, whilst distancing Rover from BMW. How was this achieved? By trying to emphasize just how relaxing and cosseting Rover’s cars were… Whereas in 1989, the then new Rover 200 was sold around an aspirational marketing campaign, the direction was swiftly changed to reflect the new way of thinking. “Relax it’s a Rover”, became the much maligned new hook line, and the idea that Rovers were designed for young and ambitious people was swept quickly under the carpet. Whether this ideology was the right way to go is questionable, but it certainly succeeded in distancing the two companies. However, it also seemed to have a discernable effect on the company’s sales, and although this is hard to quantify because of the fact that the Rover 800 and 100 were losing appeal quickly in the face of new rivals, whilst the 200/400 were both appreciably different to their predecessor. However, the more youthful Rover 600, which perhaps appealed to the younger end of the spectrum, did suffer because of what appeared to be the decision to pull all advertising of the car.

The other problem, of course, was that BMW bought Rover for their volume potential, and the ability to produce and sell a smaller car without the risk of diluting their own brand. BMW wanted a “2-Series” car in order to increase production volumes, and Rover would allow them to do so. So, the grand plan was taking shape: Mini at the bottom, Rover in the volume sector, BMW in the executive class – and at the very top: Rolls Royce. Where there seemed to be a serious overlap was in the upper-medium class, where the Rover 600 and 800 competed against the BMW 3 and 5-Series

By 1996, the matter of replacing the 200/400 models was addressed by a new project, codenamed the R30. It was around this car that the entire future of Rover would hinge, because this was to be pitched at the very heart of the market, and whereas the 200/400 were both selling unspectacularly, the R30 was conceived to increase volume and, therefore, alongside the Mini, establish Rover as a premier player in the small/medium class. It was also the car that would guarantee the survival of Longbridge, because at an anticipated production rate of 250,000 cars per annum, it would begin to use up some of the spare capacity at the huge factory.

The R30 itself soon took shape as a contemporary, yet retro, 5-door hatchback. The design process was project managed by Richard Woolley, and like the R40 project, the intention was to produce a very “British” car that offered an alternative within the sector. The car that was formulated at Gaydon was beginning to take shape as a highly interesting and technically interesting package, and because the designers were unconstrained, as they had been in the past, they were really able to exercise creative freedom. At the same time as this, the R40 and R50 nearing completion in design terms, but in both cases, because of the fact that BMW felt that progress was not quick enough, the German company began to involve itself increasingly in the day to day running of Gaydon.

Certainly, it was into 1997 that tensions between the two companies really began to mount, and the wisdom of Pischetsrieder’s “hands off” approach was questioned increasingly within Munich. Pischetsrieder’s number two and BMW’s Director of Engineering, Wolfgang Reitzle was against this approach, and he was quite vocal in this opposition. His own feelings were that Rover was already irreparably damaged – and had been for some time, not helped by British Aerospace’s under-investment – and that the only course of action should involve closing one of the two UK factories (most likely Longbridge) and concentrate on building a business plan based around the MINI and a BMW “2-Series” (possibly based on the R30) at Cowley (now known as Rover Oxford). This idea did have many proponents within Munich, but whilst Pischetsrieder was in charge of BMW, neither Longbridge nor Cowley would close. He had every intention of standing by the promise that he had made to the UK government back in 1994.

Reitzle’s advocates would need only point to the continuing outward cash flow towards the UK in order to bolster their arguments. Rover continued to post losses year-on-year, and although this picture was rendered less than straightforward, given the fact that much of this expenditure amounted to investment in new models and facilities, it still did not make good reading on the balance sheet. Sales in UK also looked bad for Rover – and in 1996, the company posted a total market share figure of a disappointing 10.94 per cent – this may have been offset to a degree by increased exports to Europe, thanks to improved client confidence in the brand, it did not amount to a significant upward turn in the total amount of vehicles sold. Lifting the export numbers did improve the company’s standing in Europe, but eventually, this would have lasting implications for the company.

So Pischetsrieder was under pressure from elements with his own company, who were criticising his multi-brand strategy – and Rover’s less than sparkling performance was giving them the stick to beat him with. His growing impatience with Rover began to show, and he increasingly sent BMW executives from Germany to serve time on secondment in Gaydon. This increasing influx of BMW men meant that by 1997, Rover had lost its own independence within the company, ceasing to be an autonomous subsidiary, but effectively becoming a division of the parent company. It also meant that the prevailing feeling of confidence within the company had been replaced by something approaching nervousness.

To counteract the huge amount of money that Rover was by now swallowing, the company needed to contain costs – and a programme of cost saving was rapidly introduced across the company. Whether this would impact upon the £800million per year that BMW were ploughing into the company by this time was debatable, but it certainly made a stark contrast to the attitude at Rover, a mere two years previously! This comprised of such things as reducing non-essential travel, and even ensuring that all office lights were extinguished when the last person left! It also heralded the beginning of re-negotiating the employment conditions of all the company’s workers, as the deals put in place during the early 1990s were not in line with the rest of BMW’s factories.

But why did BMW need to plough so much money into Rover? British Aerospace under-invested in Rover, and although, it made a nice headline figure back in 1988, £1 billion investment, spread over five years did not actually go very far. This lack of funding explained to an extent, the fact that the ’95 Rover 200 had been designed on a shoestring, and why the 400 was almost pure Honda (Rover were in no position by this time to go it alone), and the 800 received a facelift instead of being replaced by an all-new model in 1991. It also meant that Longbridge and Cowley had both been under-developed, despite the fact that two thirds of the Oxford plant had been razed by BAe and sold to land developers. BAe sold at a shrewd time (for them); Rover were still seen as an effective force on the market place, their models were still respected, and the ravages of BAe under-investment had yet to manifest itself too badly. The trouble was, that BMW were the ones who were paying the price, and although its cash flow was healthy, it did not possess a bottomless corporate pocket.

Outwardly, the BMW Board still backed Pischetsrieder’s plan for Rover, but the vultures led by Wolfgang Reitzle were beginning to circle.

Although 1997 had seen Rover’s production top 500,000, it still proved to be a traumatic time for its German parents. The combined costs of developing the R30, Rover 75, MINI, Freelander and new Range Rover, the creation of the new engine factory at Hamms Hall, as well as the refurbishment of Gaydon, Longbridge and Rover Oxford were really beginning to put a strain on BMW. Pischetsrieder, no doubt looking over his shoulder at Wolfgang Reitzle, soon began to realize that in order to complete his revitalization plans for Rover, there might be the need for an outside partner. Certainly, the likelihood of Rover turning over an operating profit did not look good until 2000 at the very earliest, and even then, that forecast relied on the Rover 75 and MINI being successes when they were launched, and there being no outside factors, such as an economic downturn.

To ease the burden of Rover, thoughts turned to collaboration with Chrysler in the USA – and, certainly, the announcement in 1997 of a joint engine plant to be built in Brazil indicated that both companies felt the same way. Wolfgang Reitzle and Chrysler’s second in command, Bob Lutz, forged the joint BMW/Chrysler deal, which amounted to 500,000 1.4 and 1.6-litre engines for use in the MINI and Neon cars respectively. There was a feeling at Gaydon that the K-Series engine was going to be overlooked for the MINI, but it still came as a disappointment when the announcement was made – especially given the rather uninspiring technical specification the Chrysler/BMW engine possessed. Of course, the bigger picture was that the new engine was the entrée: both companies shared a mutual desire to join up and work on further projects… ultimately, the Longbridge plant would make an ideal European assembly operation for Chrysler, who, at the time, were eyeing up expanding their market share of the European market.

If BMW and Chrysler had ultimately joined forces, then it would have placed the Hamms Hall operation in deep jeopardy. With Brazil being extended to produce the 1.8 and 2-litre “NG” (for “New Generation”) engines, alongside the 1.4 and 1.6-litre MINI/Neon engines, there would be little call for the new plant in Birmingham.

BMW certainly wished for it to happen – the opportunity to platform share with Chrysler was open to them, as was UK production of the Neon. In simplistic terms, sharing the Rover “burden” with the US Company would have given BMW much in the way of breathing space until the expected 2000-2002 financial breakeven point for Rover.

However, it was not to be for BMW and Chrysler: close links were severed when in May 1998, Mercedes-Benz swooped in to buy Chrysler from underneath its rival’s nose. Mercedes-Benz became very worried by the concept of a BMW-Chrysler partnership, fearing that they would become the German Minnow – and so, went on the offensive, to form the giant $55billion DaimlerChrysler combine.

The net result of all this was that, there were no alternatives left for BMW: Rover needed to become profitable, and BMW were on their own.

As it was, the corporate plan that revolved around the MINI, R30 and Rover 75 still looked fundamentally sound – BMW management had a great deal of confidence in the ability for these products to perform well once they made it on to the marketplace. What BMW needed, therefore, were an easy couple of years, without mishap… It was not to get them, however.

Unfortunately, the MINI was delayed in the wake of the project being passed from pillar to post – and the 1999 release date was moved back to 2000 at first, before dropping back further, to 2001. This could not have come at a worse time for the company, as the Rover 100 had all-but died on the market in the wake of its disastrous showing in the EuroNCAP crash test. The intention was for this car to hang on until the MINI was released, but once it became clear the MINI would not be appearing in time for the fortieth anniversary of the birth of the original, Rover pulled the plug on the 100. At a stroke, the output of Longbridge was cut, and even though there was a downward adjustment of Rover 200 pricing, the entry level Rover was never effectively replaced.

Rover’s plight was becoming more uncomfortable, and because BMW’s shareholders, led most vocally by the Quandt family, wanted results that just did not seem to be coming, Pischetsrieder, was becoming increasingly defensive about his multi-brand strategy. Certainly, it is fair to say that at this point, BMW was now operating Rover without any form of safety net. In reality, it would take only one more upset for the company, and its position would cease being uncomfortable – it would become untenable.

As 1997 drew to a close, that upset occurred – and it came not from within, but from that most unpredictable of mistresses, the European currency market.

The darkest hour

Ever since the UK dropped out of the exchange rate mechanism in 1992, Sterling had lacked stability compared to the Deutschmark – and although it had been steadily declining, there was no need to panic. However, as in all things that depend on the vagaries of the financial market, there was no guarantee that this relative calm would remain so.

In 1995, however, the tide would turn and the gentle decline would turn into a rapid rise – and as a result, all of BMW’s financial calculations were thrown into disarray. In 1996, The Pound equalled DM2.35, by the summer of 1997 that had risen sharply to DM3. BMW Management could see the impending crisis coming their way, but could do nothing to stop it - their idea of a worse case scenario had been for The Pound to equal around DM2.6, so when this figure had been smashed, their profits would suffer terribly.

In case the reader is in any doubt of the significance of all this, what it basically meant was that imports could be sold in the UK at a very advantageous price, as the currency exchange benefited them (a strong Pound meant that their cars could either be sold for less, but profits back in the homeland would remain the same, or prices could remain static, but profits increased). It also had implications on Rover’s exports to Europe – because their cars would need to sell at higher prices in the export market in order to maintain margins (which were already slim). If there was but a single silver lining to this unremitting cloud for BMW-Rover, it was that BMW increased their market share in the UK, and because the brand was still perceived as being strong, they could maintain their (high) prices, and therefore increase their profits, accordingly.

In fact, it was worse that that – In order to maintain sales of any sort in Europe, Rover were forced to discount and up-spec their cars, which meant that they were being sold at a loss. The effect in the UK was horrific: in the summer of 1998, sales “fell off a cliff”, as one senior executive described it, whilst the importers had a bonanza. Rover’s 1998 market share in the UK was down to a mere 8.63 per cent of the market, compared with the already low 10.95 per cent of 1996. So, because of the currency fluctuations and the ageing volume models, sales were falling and profits on those sales had vanished – and in tandem with the continuing investment of upgrading of the Rover Oxford factory and, Longbridge, as well as the continuing development programmes of the Rover 75, MINI, R30 and Range Rover, BMW’s continuing investment in the British company was attracting the wrong kind of attention back in Germany.

Fuelled by the German media, Rover became known as, “The English Patient” – and the drain on Rover’s resources was becoming too much to bear for the company’s shareholders. Walter Hasselkus, ever mindful of the continuing strength of the Pound throughout 1998, and pressure from Munich, was left with little choice but to start cutting the staff complement. During July, the announcement was made that some 1,500 jobs would need to be shed, as well as the widespread adoption of the four-day week for many others. He made no secret of where the blame for this lay: “The current value of the Pound means our revenue from vehicles sold is reduced, while cheap imports are sucked into our home market.” This was a warning shot to the government – and should have been seen as the first sign of BMW’s continuing disillusionment with their situation in the UK. Certainly, the company was one of many large exporters who would have benefited from re-joining the Exchange Rate Mechanism, and the eventual adoption of the Euro.

As it was, the Rover R30 programme also suffered at the hands of the uncertainty over currencies: because of the huge investment needed to bring the remaining portion of Longbridge up to date in order to accommodate the assembly of the R30, BMW needed to re-evaluate their business plans for the car and its factory.

Certainly, new working practices would need to be adopted at Longbridge, at the very least, but beyond that, productivity would need to be improved (from Rover’s already very impressive baseline), and jobs would need to be shed. With these measures, a future for Longbridge could be hoped for, but the company would need to feel much pain in order for the plan to come off. As it was, Bernd Pischetsrieder called to a halt all development of the R30 and MINI, as well as funding for the improvements at Longbridge. However, the government certainly did not appreciate being held accountable for Rover’s woes (even though, quite plainly, they largely were) and rejected the protestations of Hasselkus. This failure to see the seriousness of BMW would cost the government dear in the near future…

It was now a common belief within BMW, as well as the German media, that the Rover 75 was now the final shot in the Pischetsrieder plan for BMW-Rover’s lasting alliance. The general consensus was that the new car would need to deliver on the marketplace if the company was to regain credibility, and therefore survive the long-term. The signs were good – the car was elegantly designed, and Hasselkus himself described it as a “beautiful British car”. It also stood more of a chance of delivering a profit for the company, even during times of a strong Pound, thanks to its higher than normal level of imported content. The factory in which it was to be built had been re-developed, and was considered one of the finest in Europe. The signs were indeed, good…

As explained more fully in the Rover 75 development story, BMW needed to show the Rover 75 off to the world at the earliest opportunity – and that would be in the closing months of 1998. Bringing forward the launch was a calculated gamble, given that sales of the Rover 800 and 600 had all-but dried up as production was wound down. The intention was that the boost to the company’s image would be such that many potential customers would choose to wait for the new car, rather than going for a rival’s product. Also, the British Motor Show at Birmingham conveniently fell into this timescale; so the new and vitally important British car would have its unveiling in its homeland.

Of course, the almost desperate situation that BMW felt they were falling into played as a constant tune in the backs of senior company executives’ minds. Although the Rover 75 was indeed a promising package, there was a now almost undisguised feeling of despair at the continuing currency imbalance amongst the Germans. Bernd Pischetsrieder’s position within BMW as the company’s CEO rested on the new model, now dubbed, “The Last Chance Saloon”, in the German press – and if it failed, it was likely that the pro-Wolfgang Reitzle faction in BMW’s boardroom, would call for his resignation. Without Pischetsrieder, Longbridge would undoubtedly close, and the R30, which was still on hiatus, would not go ahead – certainly not in the UK, anyway.

So it seems all the more incredulous that Pischetsrieder torpedoed the Rover 75 at its launch in front of the world’s media. But that he did. He used the occasion to criticise the government’s anti-Euro policy, but much more significantly, he questioned whether Longbridge had a future at all. His shock speech cast long shadows over the entire West Midlands – and if it had meant to put the fear of god into Rover’s workforce, it had the desired effect. However, as a PR exercise, it was an absolute disaster because his unplanned outburst also undoubtedly harmed the entire company’s image, not to mention that of its newest product. In fact because of the speech, seeds of doubt were placed in the minds of many commentators at the time, Rover was now as good as dead in the water – what a way to shatter the image of a “make or break” product! It certainly put some of Sir Michael Edwardes’ more unsavoury announcements into perspective.

In fact, the reasoning behind the ill-advised speech was to get the unions and work force to unconditionally accept job losses – and Pischetsrieder still stood by the plan to re-develop Longbridge, and get the R30 into production there. The main casualty at the time was Walter Hasselkus, who resigned as the Chairman and Chief Executive of Rover on the 2nd December 1998. He simply stated that he was going because of Rover’s spiralling losses and, although it looked like he was deserting a sinking ship, he did oversee a BMW/Union agreement, which at the time looked as though it would help save the company.

Pischetsrieder certainly did not give up either – and although Rover was expected to cost BMW some £500 million in 1998, he knew that the freeze on R30 and MINI development needed to be lifted as soon as possible. Convincing the BMW Supervisory board to keep the faith would be difficult without an austerity plan in order to lessen the financial burden on BMW. The first port of call was to push for the savings that could be made by adjusting the company’s complement, as well as changing their terms and conditions. Thanks to the efforts of the unions, headed by Tony Woodley in the UK and Manfred Schoch in Germany, as well as Walter Hasselkus, Pischetsrieder was able to table a plan to save the company some £450 million over the next three years. Unsurprisingly, the Unions delivered this to BMW but only after a fight that cost Rover a few members of their own management team. The unions were realistic enough to accept losses in order to guarantee the future of Longbridge, and Woodley employed a great deal of “finesse” in order to reach a mutually acceptable deal.

The sum total of the R30 development programme would be £1.7 billion, of which £1.2 billion was to cover the cost of the Longbridge renovation. Pischetsrieder knew that the BMW would be nervous about spending such a vast sum of money, and although the £450 million wage related cuts went some way towards appeasing them, there would need to be further concessions. Pischetsrieder therefore decided to approach the British government for aid – a £200 million state subsidy to ease the burden of the company’s massive investment in the UK. If he could get this aid in place, he believed that the BMW board would be convinced enough to allow the project to continue.

So, with this in mind, Pischetsrieder was alarmed by the response of the then secretary of state for trade and industry, Peter Mandelson. The government response to the request was that BMW were responsible for the funding of Rover, and it was not a government matter. It was a shocking attitude to take, given the possible consequences of BMW not receiving state subsidy, but it a probably consequence of Peter Mandelson underestimating the earnestness of the BMW boss. For BMW, this amounted to an insult, especially given the fact that as a company, they invested huge sums of money into the country’s economy – and receiving the grant would ensure the continuance of that. Because they were so chagrined by Mandelson’s rebuff, BMW went public over the situation, Pischetsrieder stating that, “If they didn’t care, then why should we?”

As it was, the matter was not quite so cut and dried – The Prime Minister, Tony Blair, was acutely aware of the political implications of a Longbridge closure, and ensured that the matter was not left at that. Because they were still then quite new to government, they needed to know that BMW were deadly serious in their request, and that it was not simply a ruse to obtain funding from a new administration keen to make an impression. The truth was that BMW were deadly serious; it was a case that if aid was not forthcoming, then the BMW Board would in all likelihood not back the R30/Longbridge plan – leaving closure as the only option.

As it was, Peter Mandelson resigned (over another issue) at the end of 1998, and so BMW found itself dealing with a new trade secretary, Stephen Byers. This could be seen as a second chance, and Rover management wasted no time in inviting Byers up to Longbridge so that he could see for himself the plans that the company had for the Birmingham factory. Impressed by what he saw, Byers made no secret of his support for the factory and the R30 – and the tide had appeared to be turning in Pischetsrieder’s favour. The possibility of the aid was still on…

However, Reitzle’s supporters had all but declared war on the CEO, so much so that the Quandts, and Von Kuenheim viewed the very public affair with complete distaste. They could see that BMW’s much cherished image was being brought down by this management power struggle – as it was, the whole matter eventually came to a head at one of the most extraordinary company board meetings of all time.

The Knives Are Out

(Note: No definitive account of this extraordinary event has yet to surface, but it has been pieced together from articles in Car and Autocar magazines, as well as the book, “The End Of The Road”, by Chris Brady and Andrew Lorenz)

R30 had been on hold since the summer of 1998 because of questions over funding this huge project. The government were approached for a financial contribution towards the new model programme – initially, they were less than forthcoming. In reality, however, R30 died on the 5th February 1999, when Bernd Pischetsrieder resigned as BMW’s CEO (picture supplied by Autocar magazine).

February 5th 1999 is surely a date that will never be forgotten within the corridors of power at BMW’s headquarters in Munich (nicknamed the “four cylinder”). It was on this cold Bavarian day that the Supervisory Board (the hands off board with executive power over the main operating board) met to discuss the future of the company, but in more stark terms, the meeting’s chairman, Eberhard von Kuenheim wanted to stop the in-fighting between Pischetsrieder and Reitzle.

In 1993 Von Kuenheim had stood down as BMW’s long serving CEO, choosing Pischetsrieder to replace him. Von Kuenheim had backed Pischetsrieder’s plan to purchase Rover, seeing the potential benefits, but had seen this plan slowly crumble away. This must have been very painful for the ex-main board chairman, as he knew the company inside out, and was largely responsible for building it into the forceful company it by now was, back in the ‘sixties. As he remained very close to the Quandts, the major shareholders in BMW, he needed to address Pischetsrieder directly at the Supervisory Board meeting in order to ascertain the viability of Rover’s future – and the effect it was having on BMW’s finances. He also needed to be very aware of the wishes of the Quandts. Either way, it was going to be a very unpleasant Board meeting.

The meeting commenced at 7:00AM, and within five minutes, Pischetsrieder was asked to present his recovery plan for the company. He did just this, detailing the new model plan, which in six years, and at a cost of £1.4 billion, would deliver two new model platforms: the R30 and its coupé/cabriolet offshoots would sit on the UKL1 platform, whilst the Rover 75 replacement and Riley badged coupé version would be based on the UKL2. Pischetsrieder also tabled the distant replacements for the MINI, Discovery and Freelander as well, which would ensure the growth of the UK operation. BMW’s Chief shop steward, Manfred Schoch, backed the plan, and as representative of the company’s workforce, it was an acknowledgement within BMW that the plan certainly had legs. However, Von Kuenheim, ever mindful of the Quandts’ unrest, rejected the plan as too costly and too time-consuming. Given the pressure that BMW were under on the financial markets, and the fact that Volkswagen were making no secret of their desire to take-over BMW, time was a luxury that BMW no longer possessed.

Rover’s future as a builder of a range of cars as BMW’s partner was now effectively dead. Pischetsrieder had lost his five-year battle to restore the British company to its former glory, and now that his plan lay in tatters, he had no other choice other than to resign from BMW. He did so, “half an hour later”.

With Pischetsrieder now departed, the way was now clear for Wolfgang Reitzle to take over Pischetsrieder’s job, and it was Von Kuenheim that proposed him as the company’s new leader. Many factions within BMW’s management chain had wanted this to happen, and viewed it as an opportunity to rid the company of “The English Patient”, whilst retaining the lucrative parts of the British company: Land Rover, MG and MINI. However, in the ballot to approve Reitzle’s appointment, all six of the workers’ delegates, led by Manfred Schoch, vetoed him as Pischetsrieder’s replacement. The remaining six delegates, who represented the banks and the shareholders voted in favour of Reitzle, so appointment of the new CEO hanged in the balance – a stalemate of six votes to six. Von Kuenheim held the casting vote, and according to one source, he absolutely could not support Reitzle.

With the situation as it was Reitzle stood up to be counted – and resigned. His reasoning was simple – he felt that he was unable to become the leader of the company given the compromise of a 50/50 split of the supervisory board. Also, it cannot be stressed enough that his appointment would have antagonized the workforce and the unions. If Reitzle’s decision to resign had surprised Von Kuenheim, then perhaps it should not have because of all the instability this man’s supporters had caused when disparaging Pischetsrieder’s plans for BMW. Reitzle had rocked the boat for the past four years, it seemed, and now he was paying the price.

Now the situation was bleak: BMW’s two senior executives had resigned and BMW had no one who was suitable or available to take the top post. According to Car magazine, Von Kuenheim asked Pischetsrieder to remain in office for a few months until his replacement could be found, but, “smiling wryly, Pischetsrieder shook his head and left the boardroom for good”.

The meeting continued and things became more desperate – allegedly, executives from Porsche and Mercedes-Benz were cold-called, with the offer of becoming the new top man at BMW. Surprisingly, all turned down the job – their unwillingness to move, no doubt, being fuelled by the takeover rumours in the press, and BMW’s falling share value. Between 7 and 8:00PM that evening BMW’s production chief, Joachim Milberg was mentioned as a suitable candidate, and within half an hour of being called with the promise of the biggest promotion of his life, he accepted the offer.

One thing was for sure: by February 1999, Rover’s future looked bleaker than at any time in its long and turbulent history.

Like a Phoenix from the Flames

In January 1999 BMW announced that Walter Hasselkus’ replacement as chief executive of Rover was Professor Werner Sämann, a man regarded within the industry as a bit of a “tough guy”. He could not have joined Rover at a worse time – its future was far from certain, and it was an inevitability that there would be heavy job losses within the UK, in order to go some way towards guaranteeing that it had a future. In fact, he attacked this brief in an uncompromising way, describing the task ahead to Autocar magazine: “My task in the next two years is straightforward. We must significantly reduce our cost basis and we must become faster on our feet, more flexible. We have to do all the right things more quickly and more efficiently.”

Certainly he made his presence felt very quickly indeed – within days of his appointment, it was reported that dozens of executives were flown over to Gaydon from Munich in order to stamp the German company’s modus operandi upon their UK division. These teams were referred as “purge teams” internally, and their brief was described perfectly by their job title. Needless to say, there was soon an exodus of British executives from Rover, as their German counterparts also made their presence felt. It was an unpleasant time for all, and any vestigial trace of autonomy that the British arm of BMW may have remained at the time was well and truly swept away.

The continuing strength of the Pound also continued to hurt BMW-Rover, and Sämann made it very clear that he mirrored the views of his predecessor, and his boss in Munich: “Early entry of the UK into the Euro would benefit all exporters”.

Back in Munich and following the “Night of the long knives”, Joachim Millburn soon put together a strategy for Rover’s future. In many ways, it continued Pischetsrieder’s thinking, but perhaps on a slightly less grand scale. Informed speculation by Car magazine at the time indicated that Millburn’s plan centred on the R30 sharing its front wheel drive platform with a new front-wheel-drive BMW 2-series, both of which would be built at Longbridge. The R30, however, would not be badged as a Rover (although an insider close to the project admitted that the car was referred to as the Rover 55 pretty late on in the project), but would come in three forms, one badged as a Land Rover, one as a MINI-Maxi (how ironic) and one as an MG or Mini-Sprite. All three would be sold as niche models, and would hopefully be able to command a high enough premium to enable production volumes of 400,000 per annum to be profitable.

So on that basis, the R30 would go ahead at Longbridge, but it hinged on the British government approving the £200 million aid package that BMW had requested from them. This £200 million may only have represented a drop in the ocean of the £1.7 billion investment that BMW had committed to Rover, but its political significance to BMW could never have been underestimated.

Further improvements in efficiency at Longbridge also were vital if the R30 was to go ahead – and Sämann would be the man to deliver these.

When, a month after his appointment, Milberg approached Stephen Byers at the department of trade and industry, he re-affirmed his wish to see the government support his plan for the R30. If the government were less than forthcoming, BMW stated that they would be able to set-up in Hungary at a green field site, without much of the baggage that Longbridge was saddled with. He was also quite clear that without R30, Longbridge would close – and that would have devastating consequences for the West Midlands. Byers had already been well briefed by Rover executives and had seen what the company’s investment would mean for Longbridge, so agreed in principle to sanctioning the aid, but he would need to run it by the treasury. This is where Byers came unstuck: the treasury led by Gordon Brown did not want to release such a large amount of money (for fear of being accused of going back the profligate ways of “old Labour”). And so, when Milberg came away from his discussion with Byers, he assumed he had an agreement in principle – how wrong he was.

Milberg was preparing himself to attend the next meeting of the supervisory board on the 18th March, to discuss the implications of a c. £180 million package of Regional State Aid. When the Byers offer became known to BMW, the disappointment was palpable, and when Joachim Milberg sat down in front of the Supervisory Board, it was to discuss the reality of a £118 million offer. That was bad enough, but the fact that Rover actually posted a £647 million loss during 1998 was beginning to break the resolve of the major shareholders – there was now a real risk that Rover would bring down BMW with it. One thing was for sure – BMW were now making very public noises about being disappointed with the British Government’s attitude to the RSA it had agreed to give to BMW.

Again, the company made it quite clear that the future of Longbridge was far from secure, and if necessary, the company could move the operation to Hungary. Neither Byers nor BMW truly believed this was the case, especially given the fact that BMW were still hoping to get the R30 onto the market by the end of 2002, but it was still a card that BMW felt that they had to play in order to get Downing Street to sit up and notice. It was at this point in the proceedings that Downing Street did get involved, and the original offer was upped to £129 million, which would then be topped up by the Birmingham chamber of commerce to total £152 million. It was not enough; and even though outwardly, BMW were still very committed to their plan to introduce the R30, the feeling at the very top of the company was that an exit plan would shortly be required.

In August of 1999, the company’s wishes would be granted, and the source of the exit was a most unlikely one.

Jon Moulton and Eric Walters of the Venture capital company known as Alchemy were discussing what future projects they could turn their attentions to. As a venture capital company, Alchemy’s raison d’etre was to take control of failing companies, and get them into a suitable shape to either be floated as a going concern, or was more often the case, carved into pieces and the components sold off to interested parties. They had enjoyed a great deal of success in the past, most notably turning around the FADS chain of DIY stores – but being a bright, young and ambitious company (Alchemy Partners LLP were formed in 1997), the desire of the management was to top this achievement. Scouting round for ideas, both men settled on the notion that given Rover’s continuing troubles and BMW’s share price wobbles, perhaps the British car company could be prised from BMW’s hands at a favourable rate.

Moulton and Eric Walters both agreed that it was a most audacious idea – especially as they had no current ties with the motor industry, and did not have the financial muscle behind them to run a car company. However, the thought did not go away, and in September, Moulton put out a speculative approach to BMW – the idea being a meeting to discuss what plans the company had for Rover and how Alchemy could possibly ease the troubled waters BMW were currently negotiating. Both Moulton and Walters felt that it was unlikely that they would get a response, so when it did come from BMW, stating that they would like to meet; both men were delighted and not a little surprised.

When the met with Hagen Luderitz of BMW, Moulton and pointed out that BMW no longer needed Rover at all; the brand was strong enough to survive a smaller model being added to the range. Not only that, but now BMW had the X5 to sell, it could be argued that they also no longer needed Land Rover. BMW, they pointed out, had already invested billions in Rover, and the company seemed as far from recovery as it had in the darkest days of 1997/1998. In fact, Alchemy’s own estimates were that Rover would probably make a comparable loss to the disastrous one made in 1998 – and that being the case, there could be the very real danger that Rover’s woes would also bring down BMW. Moulton pulled no punches: BMW should shed Rover as quickly as possible.

This initial meeting was completed and Moulton walked away from it with a real sense that they could just pull off a coup…

Days later, an invite to further discussion was forthcoming from BMW, and it soon became very clear that although the company was still making very public noises about supporting Rover and bringing the R30 into production, there was conviction within BMW that they dearly wished that someone would take Rover away. Certainly, there was no chance that any major player would relieve BMW of Rover without the quid pro quo arrangement of receiving BMW stock as well. So as the autumn months of 1999 passed, it was beginning to look like BMW’s only option of a clean break without closure was Alchemy.

Moving towards Christmas, the BMW/Alchemy talks gathered pace, and a business plan was beginning to take shape: Alchemy would purchase the Longbridge factory and the rights to the old Mini, Rover 25, 45, 75 and MGF. Production of the existing cars would remain in place until new model plans could be brought into fruition. BMW would keep Cowley and the new MINI and the Hams Hall factory – and as suggested by Alchemy, Land Rover should be sold in order to recover some of the investment ploughed into Longbridge and Cowley over the preceding six years. There was still the question of where the Rover 75 would be produced, because although the new MINI could be moved from Longbridge, as construction of its assembly line was not yet completed, the Rover 75 was well and truly underway at Cowley. Plans were still quite fluid at this time, and much of Rover’s financial performance was masked by BMW’s reluctance to release figures. This made accurate planning by Alchemy almost impossible, but it did provide just enough information for a firm plan to be laid out by the venture capitalists.

Alchemy would instigate a round of redundancies at Longbridge, trimming down the complement in readiness for their new model plans. Initially, Alchemy’s plans were to drop the “Rover” brand altogether, and as quickly as prudent, trim production volumes, whilst new sports cars could be developed. Alchemy’s plans for MG were as a 50,000 per annum manufacturer of specialist cars, comprising of sports cars such as the MGF and sporting saloons, possibly an MG-badged Rover 75. Either way it spelled serious cutbacks at Longbridge, in order to get the company into a fit state for either floatation on the stock exchange, or sale to a competitor.

BMW would gain much from the deal – the fate of Longbridge would no longer be their direct concern, in effect, Alchemy were being paid to take Rover away.

As late as the Detroit Motor show in 2000, BMW executives outwardly remained resolute that Rover was safe with them. As it was, news of the proposed Alchemy buy-out stayed exclusively within the highest echelons of BMW – the risk of a leak was to be avoided at all costs.

However, the implications of any poor financial figures produced by Rover would become apparent in March, when they were due to be published, and so, BMW’s determination to construct a workable deal with Alchemy increased. In dealings with Stephen Byers at the Department of trade and Industry, no direct hint was given of Rover’s impending fate – although Sämann subsequently stated that he had not pulled any punches regarding the dire straits that Rover were in by that time. Negotiations regarding the RSA continued, and as far as the British Government were concerned it was still business as usual in Munich and Warwickshire. In truth, BMW must have been hedging their bets against the collapse of the Alchemy plan – but in the minds of the Germans, the allegiance with Alchemy was now BMW’s only hope of a relatively painless solution to the Rover “problem”. And it was a pressing problem for BMW: the next meeting of the company’s supervisory board was due for the end of March, and as there was no real hope of an upturn in Rover’s fortunes, the shareholders would be baying for blood.

With this in mind, BMW met up with Alchemy to rapidly establish their plans, and by the 15th March, Both companies had hammered out a deal – and after much blood, sweat and tears was expended by BMW and Alchemy, a position of intent had been reached by both. Although the partnership was not sealed yet, Alchemy were given a period of “due diligence” – some six weeks where they would have exclusive access to Rover’s accounts in order to lay-out the final details of the deal. In reality, Alchemy now had to assemble the details of the Rover deal – and package it so that BMW would be completely happy that it would be obtaining complete severance from Rover.

BMW were the first to go public on the 16th March – and the World’s media were literally stunned at the announcement the company were intending to sell Rover to the Alchemy Partnership. Moulton then faced the press the following morning, and issued a statement over Alchemy’s intended role in Rover’s future: BMW would be pulling out of Longbridge, selling Land Rover (probably to Ford) and Alchemy Partners would retain the rights to Rover’s existing range of cars. From Rover, BMW would retain the Oxford factory and the new MINI – current production of the Rover 75 would be moved to Longbridge, thereby ensuring that Alchemy’s entire operation would be centred in Longbridge. In a brief statement to the press, Alchemy laid out their plans for Longbridge: “The new company will focus on developing a state of the art British built product range worthy of the sporting heritage of the MG name. The product will use the latest developments in composites and aluminium body technology and will appeal to the motoring enthusiast well versed in the history of the marque going back to the former Morris Garages which started modifying standard Morris Cowleys in 1922.”

In short, Alchemy would ensure that MG would be brought to the fore – and sports cars would be the order of the day.

The effect on the morale of Rover’s workers, their families and those of the company’s suppliers who had already been through so much uncertainty in recent years, was to be expected: it went through the floor. Obviously the plan involved redundancies – as Alchemy made it quite clear that production volume would be drastically cut. The comment made by the Venture Capitalists that, “it is expected that the MG Car Company will employ a significant workforce and will rapidly develop into a selfstanding highly viable British car manufacturer”, offered little comfort to those who had been plunged into uncertainty yet again.

The immediate reaction of the government was to set-up a task force to investigate what options were left to Rover – Byers and the department of trade and industry were apparently completely surprised – shocked more like – by the announcement. BMW would later claim that they had kept Whitehall abreast of the Rover situation, but it was obvious that the Munich-London relationship had been cool for some time. The result was that the British Government were thrown into panic by the announcement, and the task force visited Longbridge the next day, to see what assistance the government could offer Rover. In truth, there was little they could do by this stage – the damage had already been done.

More significantly, in the Midlands, the beginnings of a counter bid to Alchemy began to take place on that very day: one of the members of the government appointed task force was John Towers, who at the time was a member of the Training and Enterprise Council, but was chosen because of his extensive past experience within Rover. Like most observers, Towers had been appalled by BMW’s announcement on the 16th March and soon began to make his own enquiries as to whether anything could be done to counter Alchemy. ‘Phone calls were made, contacts re-established, and by the following weekend, Towers had drawn up a tentative plan of action – an alternative to the Alchemy plan. He faxed the proposal, titled “Project Phoenix” to Richard Burden, the MP for Longbridge – and the Phoenix plan was born.

The following Monday, Towers’ plan was accepted by the DTI as having potential, and he was therefore chosen to head the task force, whose role was to try and put the plan into action. Where Towers and Alchemy fundamentally disagreed was that Towers held the belief that Rover as a marque still had value, and that the company should remain in “volume” production. In fact, the Towers plan was initially greeted with much enthusiasm within the DTI, because Byers could see that apart from anything else, the plan would result in fewer redundancies at Longbridge. Towers’ cause was helped somewhat by the news that a group of twenty Rover dealers, headed by dealer Principal John Edwards, was assembling finances to assist in any potential management buy-out.

The dealer Principals’ plan had been to sue BMW for damages; caused by the financial investment that they had to plough into their dealerships in anticipation of the increased sales that the new MINI promised to bring. With the collapse of the BMW-Rover partnership, this investment had gone to waste and they wanted compensation. Towers could see that this situation could be used to their advantage, using it as a lever, with which to prise the MINI from BMW’s clutches. Towers met with the dealers, and invited them into the DTI fold. With this toe-hold on BMW and the finances that the dealers had managed to put together, the foundations of the plan had been laid. It was a long shot, but at the time, the Phoenix plan was a long shot – and Towers himself judged his chances to be marginal to say the least.

The next person that Towers met with was Nick Stephenson, an ex-Perkins man like himself, that had managerial and then directorial experience within Rover and its antecedents since 1979. As a non-executive director of Lola, Stephenson, was basically, another interested party in Rover (or at least components of it) – so it made sense for Towers to try and set up a dialogue between Stephenson and the dealers, in order to add manufacturing expertise into the ranks of the Phoenix consortium. Nick Stephenson’s involvement in the story actually went back to the previous year, when mindful of the fact that BMW and Rover appeared to be heading for the rocks, he proposed that Lola and a Mayflower team up to try buy MG from BMW. At the time, he received a dusty response from Munich, but did not give up on the idea – so, when BMW announced that they were selling Rover to Alchemy, they once again made tentative enquiries. However, the DTI asked Stephenson to back off, so as not to jeopardise the Alchemy deal – and in the interests of Rover’s well being, he did just that.

However, when it became clear that the Phoenix plan would cost Rover less jobs than that of Alchemy, the DTI warmed to Nick Stephenson and encouraged him to throw his towel back into the ring, by backing the dealers. Stephenson accepted the offer, and the Phoenix consortium started to look more serious…

On the 6th April, Towers met up with Milberg and Sämann of BMW in order to lay out the Phoenix counter bid to Alchemy’s. The terms of the deal would include handing over MINI to Phoenix, but also the rights to the Triumph and Austin-Healey marques, as well as MG and Rover. Like Alchemy, Phoenix would take Longbridge off BMW’s hands – and they could offer a future model plan based on “volume” production with help from Mayflower and Lola (beyond that, Towers was confident that there were “many opportunities” for future collaborative projects out there). He also urged the company to open their accounts to them, so they knew exactly what state Rover’s finances were actually in. On all three counts, BMW rejected Towers – they would not hand over the MINI under any circumstance, nor would they hand over any British marques. They were also tied to the exclusive six week “due diligence” period with Alchemy, so basically if Towers wanted to assemble a rival bid, he would have to do it without inside financial information.

That evening Towers moved from the DTI to officially head-up the Phoenix Consortium. The members of Phoenix continued to work on their battle plan, but did find difficulty in producing accurate financial forecasts, due to the lack of information from BMW. Again, Towers asked BMW to assist, but was turned down flat. Another stumbling block for Towers was the matter of financial backing for the bid – and all the UK banks that they approached turned Phoenix down, yet without this funding, BMW would refuse to take them seriously. Following all the hard work in putting the plan together, it seemed that lack of financial backing would scupper Phoenix. Time was against Phoenix and by this point, Towers was close to conceding defeat.

However, whilst all this had been going on, Alchemy financial experts had been picking over every minute detail of Rover’s finances, and they did not particularly like what they saw: there were contractual matters with the suppliers, dealers and workforce that were really quite complex. Without serious financial backing from BMW, the deal could leave Alchemy open to the risk of legal or industrial action, or possibly worse. Their period of “due diligence” with BMW was up on the 28th April, and as that deadline got closer, the magnitude of Alchemy’s task became more evident.

On the 27th, Moulton and Walters met up with BMW’s team of solicitors in order to discuss their misgivings: these were basically tied to the possibilities of industrial and legal action, as a consequence of BMW’s failure to give the Unions an acceptable advanced warning of their impending plans to dispose of Rover. Also, there was the fact that BMW would only guarantee to pay the statutory minimum redundancy payments to the 4,000 employees that Alchemy planned to lay-off, whereas Moulton knew that in order to avert serious industrial action, the offer would need to be rather higher. Because of this, Moulton stated that Alchemy would need an extra £100million or so on top of the original £500million payment tabled to BMW in order to take Rover off their hands. In itself, this was not enough to scupper the Alchemy-BMW deal, but when BMW then tabled that Alchemy would have to guarantee £1billion of loans to the Rover distribution network; the potential financial burden of Rover would prove too much for Alchemy.

Why had BMW asked for this condition? As negotiations between Alchemy and BMW progressed, the spectre of a huge legal action against the German company was too painful to bear. Therefore, if Alchemy guaranteed such a sum, they could be responsible for issuing settlement against any potential compensation claims; the matter would have ceased to be BMW’s problem. Moulton could not accept this condition – Alchemy simply could not afford to do so – and after trying and failing to persuade Hagen Luderitz directly to drop this condition, Moulton and Alchemy walked away. The deal was off. Such was the animosity of the Longbridge workforce towards Alchemy, that when the news became public, they were cheered considerably. They knew what the consequences of an Alchemy pullout could be.

The way was now clear for the financially strapped Phoenix and BMW to have another go at trying to make the deal work. BMW certainly preferred the idea of selling Rover to Phoenix than the only other remaining option of closure, and so, re-entered negotiations quickly. As Stephen Byers at the DTI still openly supported the Phoenix Consortium’s bid – and had done so, during the Alchemy negotiations, BMW played on the fact that Phoenix and BMW could accept help from Byers. John Towers and Nick Stephenson of the Consortium met up with BMW’s solicitors on the 2nd May, and as before with Alchemy, BMW offered Phoenix £500 million to take over the running of Rover and Longbridge – BMW remained concerned at the lack of a financial backer for Phoenix, and asked Towers how he could build over 200,000 cars per year without such a backer.

At this point in time, the government enlisted City analysts with knowledge of the motor industry to evaluate the deal in order to gauge whether Phoenix could pull it off. The general consensus was that while producing 200,000 cars per year, Phoenix could not possibly have a future in the industry. This prognosis scared the DTI – simply because if Towers and Rover failed, there could be the very real possibility of him coming to the government, cap in hand, a couple of years down the line. As a result, the previous public backing of Phoenix was tempered – in fact, in the space of a couple of weeks, the DTI appeared to move through 180 degrees and refused to back the deal. Byers’ reasoning was simple: without proper backing, Phoenix would never make the Rover work.

Exasperated at this, BMW were now seeing their worst nightmare coming true: being held responsible by the media and the public for the closure of Rover. Throughout the Alchemy negotiations, they were acutely aware that the British media viewed Alchemy as nothing more than asset strippers, who did not care about MG and Rover. Everyone, it seemed, supported Towers and Phoenix. The public very much held BMW responsible for the mess – which as far as the Germans were concerned, came as a big surprise. Their own feelings were that they had not mismanaged Rover (untrue in many instances), and it was actually the government’s fault for the collapse of Rover because of the strength of Sterling. In fact, there were many reasons for the collapse, but in the end, it looked like it would be BMW would responsible for Rover when the music stopped.

In fact, it was the First Union Bank of North Carolina, who rescued the Phoenix plan on The 7th May, when agreed to back the consortium by offering £200million of working capital. How much of a co-incidence it was that BMW’s flagship US factory at Spartanburg was in North Carolina is open to debate…

With the finance in place, Phoenix and BMW were back in business – and on the 8th May, Towers and BMW’s lawyers met to agree the deal. The final hurdle had been cleared, thanks to the Americans, and as a result, the agreement was signed that night. Rover was handed over to Phoenix for the nominal sum of £10, and in return, the company would receive £500million from BMW, which would cover the costs of redundancies and company re-structuring. Because of their vitally important roles in the formation of the Phoenix consortium, John Towers made Nick Stephenson, John Edwards, and his finance director, Peter Beale directors of Phoenix, by the Chairman John Towers. The deal settled upon was the one that Jon Moulton had pretty much devised himself all those months previously: the only difference between Alchemy and Phoenix was in the amount of cars that Phoenix promised to build.

The following afternoon, John Towers returned to Longbridge. He was mobbed by the press and declared a hero by the workforce – it must have been a very sweet moment for him. Towers told the assembled media, “It's a very satisfactory outcome for us. It's an emotional day. We have a huge amount of work to do to get the cash flow into a positive balance. We are determined to do that." Even during the honeymoon period, Byers sounded a note of caution, "There are still difficult decisions. The proposals will involve a number of jobs being lost". This was ironic, given the fact that the successful sale of Rover to Phoenix had probably meant that his job was saved.

For sure, the task ahead for Phoenix Venture Holdings Limited looked difficult, but the feeling of optimism that Towers managed to generate was infectious. Within weeks, the inventive new management at Longbridge began to embark on a series of announcements that slowly began to restore UK buyer confidence in the company.

Could Rover make it? Certainly their prospects looked much better after the sale to Phoenix on May 9th 2000, than they did following BMW’s fateful announcement on March 16th… for Rover, the change in their outlook in 54 hard fought days had been very much a positive one.

Copyright © 2003 Keith Adams