In the first of our 2005-themed articles to mark the tenth anniversary of MG Rover’s demise, AROnline Contributor Ian Nicholls puts forward a well-constructed argument that the beginning of the end was 20 years sooner.
1985 – THE DEFEAT OF AUSTIN ROVER
It may have been the year of Live Aid, but 1985 was also the year that it finally became apparent that Austin-Rover, the latest name for the volume cars division of British Leyland, had no hope of competing in the big league. All the investment by the taxpayer since 1975 had failed to revive BL’s volume cars division, and Austin Rover had only themselves to blame, as will be revealed.
In January 1986, the ’85 UK car sales figures were published. They made grim reading for Austin-Rover. The fierce showroom price war pushed new car sales in Britain to an all time high that year. The every-street-corner Escort was the most popular car of the year, and Ford commanded an overall share of 26 per cent. Austin Rover trailed with 17 per cent, and Vauxhall was close behind with 16 per cent. The number of imported cars — including Ford and Vauxhall cars made abroad — sold in Britain rose to 58 per cent.
The ten top selling cars for 1985, were:
1: Ford Escort
2: Vauxhall Cavalier
3: Ford Fiesta
4: Austin Metro
5: Ford Sierra
6: Vauxhall Astra
7: Austin Montego
8: Ford Orion
9: Vauxhall Nova
10: Austin Maestro
New car sales in Britain totalled 1,832,408, 4.7 per cent up on 1984, and a further two per cent more than 1983, the previous peak. Analysis of the list reveals that the Maestro was even outsold by the Ford Orion, the booted derivative of the Ford Escort. Total Montego production for 1985 was 95,874, a similar figure to that of the Morris Marina in 1979, when that model was eight years old and overdue for replacement. Total Maestro production for 1985 was 88,849, a little more than the Allegro in 1978, when that model was five years old.
Austin Rover Production in 1985
Rover SD1 15,916
Austin/MG Montego 95,874
Austin/MG Maestro 88,849
Austin/MG Metro 174,666
Rover 200 65,844
Longbridge produced a creditable 275,484 cars, the best total since 1971/72. The Metro had its second best year, even though there were now better rivals on the market, the Honda-based Rover 200 continued to thrive and the veteran Mini still found some customers, even though Austin Rover Chairman Harold Musgrove thought it took volume away from the Metro.
Furthermore, 1985 was the first full year that all the cars funded by the state in the aftermath of the 1975 Ryder Report were on sale: the Metro, Maestro and Montego. They were all meant to be more competitive products than the Mini, Allegro, Marina/Ital and Princess.
The Maestro and Montego were built at Cowley, where the Rover SD1 was also now assembled, production having transferred from Solihull in 1981-82. Cowley built 200,639 vehicles. Austin Rover production had now slipped back to the kind of level last seen before the opening of Car Assembly Building 2 (CAB2) at Longbridge by BMC in 1963. Most of Austin Rover’s problems were focussed on the cars built at Cowley, once the most militant plant in the BL empire. But the world was moving on.
The changing industrial relations climate in Britain would mean that Austin Rover could no longer blame militants amongst its own workforce for its poor market share. The sun was rapidly setting on the era of trade union power. The long Miners’ Strike of 1984/85 was the last throw of the dice by the labour movement. Ostensibly a dispute over pit closures, the long-awaited confrontation between the shock troops of the labour movement, the miners, and the Thatcher Government, which had introduced hated new laws restricting union power, was a fight to the finish.
From a strategy point of view, the miners got it all wrong. The Thatcher Government had been re-elected only six months before the dispute began with a thumping 147 seat majority, and in expectation of a confrontation, had began stockpiling coal to see it through a dispute. The strike began in the new year of 1984 after the worst of the winter had passed. The police were organised on a national basis and, for all the talk of solidarity, the rest of the trade union movement failed to strike in support of the miners in order to paralyse the state.
Sympathy strikes had been illegal since 1980, but unlike the early 1970’s when the unions had openly defied the Heath Government’s Industrial Relations Act 1971, the will to take on the state was no longer there. One union did, however, try to defy the new employment laws. This was the Transport and General Workers Union, led by Moss Evans.
In November 1984 there was a pay strike at Austin Rover. The 1984 Trade Union Act demanded that for a strike to be legal, a secret ballot had to held. Alone among the Austin Rover unions, the TGWU refused, canvassing its members views by the time honoured way of a show of hands, in open defiance of the Thatcher Government.
Austin Rover took the TGWU to court and the strike collapsed after two and a half weeks and the loss of 86,000 cars. Unlike a decade before, the union movement decided to toe the line and obey the law of the land.
With the chaotic industrial relations scene in Britain at last calming down and ‘continuous production’, to use a euphemism of the time, becoming the norm, all Austin Rover now had to do was produce its way to prosperity. 1985 was the first year anyone could remember where there had not been a strike in the Cowley assembly plant.
On 11 March, 1985 the Rover 216 Vitesse was announced followed by the MG Montego Turbo on 3 April – a promising start.
However, BL’s latest financial results revealed that Austin Rover was still struggling. The group’s total vehicle sales had fallen from 564,000 to 511,000. Austin Rover made an operating loss of £26 million in 1984 against a profit of £3 million in 1983.
A sign that perhaps engineering partner Honda was using Austin Rover as a Trojan horse in order to gain access to the lucrative European market was revealed on 12 April, when Honda opened its new distribution centre in Swindon. This gradually mutated into an engine plant then a full-blown car factory, as opposed to an alternative strategy of purchasing Austin Rover and turning that into its European division.
BL now came under pressure from the Government to reduce its financial demands from the state by £250 million and to co-operate more with Honda over a new engine to replace the A-Series.
Brian Fox of Austin Rover told The Times newspaper that, if the Government went ahead with plans to cut Austin Rover’s investment by £250 million, it would be “criminal in the extreme… Their attitude horrifies me. I think the Government are annoyed because Austin Rover’s recovery has embarrassed them. They wanted to sell Jaguar, and later Unipart, while Austin Rover lost more and more money until it became politically acceptable for them to close it down or sell if off to the Japanese.”
According to Mr. Fox, despite some temporary setbacks, Austin Rover had made a most remarkable recovery and was ready to “cash in” on the sacrifices of the past years. To leave it short of funds at this time would monstrous. Mr. Fox, who had responsibility for the plants at Longbridge and Cowley, said it was imperative that the company should retain the ability to design and manufacture its own engines.
“I am not against the kind of collaboration with Honda, which saw us producing the Triumph Acclaim and now the Rover 200 from Japanese designs under licence. They fill an obvious gap in the car range. But, when it appears that we shall have to buy complete engines from Japan at the expense of our own manufacturing capability and jobs, that makes me sick to the bottom of my stomach.”
Brian Fox resigned in protest.
Not long after, Austin Rover Chairman Harold Musgrove gave an interview to CAR magazine. He said: “I want the Musgrove era at Austin Rover to be remembered as the period in which the company becomes a viable, commercial concern.”
He added: “Many foreign companies, whose domestic markets are poor, are putting enormous effort into increasing their UK sales. And when certain other makers are increasing their volumes, yet showing worst profit positions (an obvious swipe at Vauxhall ) it is obvious what they are doing to increase sales. We can’t afford to do that. And they can’t afford to do it ad infinitum. But they do have certain advantages. They bring in most of their cars from overseas – despite being regarded as British manufacturers.
“We’ve made strong technical advances, our long-range product plan has been virtually delivered as promised, and we have improved our cost efficiency – to the point that we are one of the most efficient car makers in the world . Now we have to widen our marketing base. We want 19 per cent of the UK market and we have to concentrate more on export markets. We are already making progress in Europe and, thanks to the new XX Rover saloon, we should be making inroads soon into the USA and Japan. That car will give us a tremendous opportunity in Japan, because it will actually assembled there from CKD kits by Honda. ”
“And no serious car maker can afford to ignore the USA. In a couple of weeks I’m off to America to talk about the setting up there of our dealer network. At the moment we do have too much reliance on the UK market – and that’s bad. With a stronger export base there is more stability, because you can ride out individual market problems and particular currency fluctuations.”
The XX, or Rover 800, never quite met those Japanese or American expectations, despite being technologically advanced, and was hampered by early build quality issues.
On past mistakes in export markets, Musgrove said: “It was a mistake to try to sell British specification cars to overseas markets without adapting them properly to local conditions. We won’t do that again.”
On 18 June 1985, the Government approved BL’s corporate plan, which involved further collaboration between Austin Rover and Honda, the development of a new engine to replace the A-Series and the possibility of Honda building engines for BL at a new factory in Swindon. Norman Tebbitt, the Secretary of State for Trade and Industry, had been persuaded not to slash £250 million off BL’s latest cash injection.
However, only two months later, there was more bad news emanating from Austin Rover. Two hundred Austin Rover assembly workers were to lose their jobs and a further 740 were being transferred to enable production at the company’s Cowley and Longbridge factories to be reduced by 10 per cent.
In a series of factory meetings on 19 August the management told union leaders that the cutback had been forced on them. At Longbridge, Metro production was cut from 4,100 a week to 3,700. At Cowley output of Maestro and Montego models was be reduced from 2,200 to 2,025 and from 2,500 to 2,200 respectively.
Having persuaded a reluctant Government to stump up £250 million to fund what became the K-Series engine, Austin Rover were now admitting they could not sell their products in an expanding market.
On 18 September, Longbridge produced its 10 millionth car. By December Ford had approached the Government about buying Austin Rover, but all that was not revealed until the following year, along with the dire overall sales performance for 1985.
For a long time the Austin Rover publicity machine had managed to convince many observers that the company’s problems in 1985 and indeed 1986 were caused by over-capacity in the industry, discounting by its American owned rivals and the obvious unsympathetic attitude of the Thatcher Government, who found it hard to disguise their contempt for a national asset or what they saw as a national liability.
All these factors may have had an effect to varying degrees in preventing an Austin Rover revival, but with the passage of time we can now see that the main cause of the company’s problems was a self-inflicted one – quality.
Senior BL executives liked to tell the media how efficient Cowley and Longbridge now were, and indeed they may well have been top of the productivity stakes, but it is now quite clear from anecdotal evidence both here on this website and elsewhere, that at plant level Austin Rover quality control was next to non-existent, particularly at Cowley, painful as it is to say so.
Cars were sent to dealerships in appalling condition to be rectified into a more saleable condition by hard-pressed mechanics. One can only surmise that cars were passed by inspectors, under pressure from above, to take advantage of the booming sales conditions then pertaining. Austin Rover appears to have been one of those organisations where managers told their immediate superiors what they wanted to hear, whether it was true or not, in order not to rock the boat. If anyone did raise concerns about Austin Rover quality control, nothing was done about it. Maybe Harold Musgrove and his boss Ray Horrocks genuinely believed Austin Rover had matured into a supplier of quality vehicles, but many of their customers found ownership of a 1985 Maestro or Montego little different from a 1975 18-22 Princess.
Many private buyers were now turning to Volkswagen. VAG UK, now fronted by Michael Heelas, a one time disciple of Filmer Paradise at Austin Morris, introduced the advertising slogan: “If only everything was as reliable as a Volkswagen.”
Whether it was true or not, it worked and VAG UK never looked back. The fleet buyers were burning their fingers with Austin Rover’s products and repeat orders dried up. The surge of optimism that occurred in 1983-4 with the launch of the Maestro and Montego dissipated in 1985 as the customer experience turned sour.
Austin Rover appeared to have learnt nothing from the Rover SD1 debacle at Solihull, where the emphasis on quantity over quality had caused enormous damage to the Rover brand.
At the newly-privatised Jaguar, Chairman John Egan was in the habit of taking a car off the production line home, in order to carry out a spot check on quality control, emulating the company’s founder Sir William Lyons, who died in early 1985.
However, Jaguar was a much smaller operation than Austin Rover, and John Egan was based at Browns Lane, the Jaguar assembly plant. Senior Austin Rover management were based in offices at the former Triumph assembly plant at Canley, so the option of driving a Longbridge or Cowley-built car home was not available to them.
When the overall UK sales figures were published in January 1986, the controversy was not how poorly Austin Rover had performed, but that the Government had the temerity to try and offload the firm to rivals Ford. Ford had a shareholding in Mazda, who were developing the MX-5, and may have had ideas about reviving the MG brand as a global player. The Thatcher Government was forced to back down, amid accusations of trying to sell off a national asset. The viewpoint that Austin Rover was a national asset was probably not shared by many of its customers at the time!
All the Government could do was to try and salvage something from the mess and Graham Day was parachuted in to take over as BL Chairman from Sir Austin Bide. In July 1986 the Rover 800 was launched. Austin Rover Chairman Harold Musgrove told Graham Day that quality was assured from day one. Somehow Graham Day got wind that early Rover 800s were less than perfect and Harold Musgrove found himself looking for a new job in September 1986.
Graham Day then set about tightening up the quality issues at Austin Rover, soon to be re-branded as plain old Rover. Sadly, it was at least two decades too late. BMC/Austin Morris was Rover-ised, and co-operation with an increasingly reluctant Honda stepped up. The AR6 supermini project, intended to replace both the Metro and Mini, was canned. Austin Rover had burned its bridges with the Thatcher Government, which with a large majority and having seen off the miners, were in no mood for pussyfooting.
Maybe the Maestro and Montego were stylistically challenged, as related in the development story, but had they been screwed together properly in the first place, then Austin Rover might have stood a chance. With a strike free run in 1985, Austin Rover’s poor performance could not be blamed on the workforce, it was a failure of management to exercise proper quality control.
The extra £250 million that BL had extracted from Norman Tebbitt resulted in the K-Series engine of 1989. However, on later versions of the engine, head gasket failure seemed to come as standard, thus alienating a new generation of customers. What would have happened if the Government had refused to finance a new engine and Austin Rover had bought off-the-shelf Honda units?
Could it be argued that the road to April 2005 began in 1985?
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