MAURICE CORINA and PHILIP JACOBSON
After months of tough behind the scenes negotiations – brought to a head in the past four days by Leyland Motors determination to bid, if necessary, for British Motor Holdings, the biggest merger in Britain’s industrial history has been concluded successfully.
The formation of the British Leyland Motor Corporation hurriedly announced yesterday as a wave of speculative share buying began hitting the Stock Exchange, creates the second largest motor manufacturing group outside the United States and Britain’s fifth biggest company by sales value.
Last night, both Sir George Harriman, chairman elect of the new corporation, and Sir Donald Stokes, nominated as deputy chair-man, managing director and chief executive, declared that a combination of Leyland’s marketing and research skills and BMH’s huge production facilities would enable the wholly British-owned enterprise to storm world markets against the fierce competition of American, Continental and Japanese producers.
Headquarters of the new group will be in London, where Sir Donald masterminds the Leyland empire. Under the merger terms, the new corporation will acquire all the issued ordinary shares of BMH and Leyland-the joint market capitalization at current prices is £410m, on the basis of one new share for each ordinary share of the two companies. Current market valuation of Levland’s is around £217m., and £193m. for BMH
The Industrial Reorganization Corporation, which has played a crucial role as arbitrator in the negotiations, is making £25m. available as loan capital for future expansion. Immediate intention is that Sir Donald and Sir George will get down to planning the economies and rationalization made possible by the deal. By and large, the aim is to establish a streamlined tightly managed enterprise operating with a management policy akin to that of the American giants, such as General Motors and Ford. Distributors of cars and commercial vehicles in home and overseas markets will find their trading records harshly scrutinized.
Last night, Sir Donald said those with good records had nothing to fear. The combined enterprise, with around 200,000 employees and £500m. a year sales. becomes Britain’s biggest single exporter. Sir Donald plans to be off next month to study some of the most important operations overseas. For the first time, a British motor manufacturer will have a complete range of vehicles, from tractors and earthmoving equipment to cars, vans, and heavy commercial vehicles, including a monopoly of bus making. The products of the two companies are generally complementary, filling gaps in each other’s range.
Last year the combined production was 913,000 vehicles, but the best previous production figure worked out at close on 1,100,000. The pitching of the merger terms surprised the City. On the basis of the group’s respective market ratings and share prices before the bid rumours intensified earlier this week, some weighting in Leyland shareholders’ favour could have been expected. But Sir Donald firmly rejected the suggestion that he has been over generous.
‘We would almost certainly have had to pay more with a take over bid ‘, he emphasized.
And forcing a bid through would have been’disastrous’for morale and relations in the new group. Leyland’s decision last October to alter their share capital was the first move to bring the two groups’ capital structure more into line. But Leyland was clearly prepared to buy BMH in the last resort. At a late stage in the final negotiations when deadlock was threatened, this alternative was openly stated before agreement was reached.
Dealings in BMH shares yesterday were the heaviest for years and the share price was already rising before the merger was announced. This prompted both groups’ advisers, Warburgs for Leyland and Cooper Brothers and Schroder Wagg for BMH-to issue the statement earlier than anticipated and well before the Stock Exchange closed. BMH shares immediately shot up 2s. to 16s. before slipping back to close at 15s. Leyland quickly dropped 2s. to 15s. but were 15s. 6d. when dealings finished.
Million vehicles a year target for BMH-Levland
Geoffrey Charles, Motoring Correspondent of The Times, explains the importance to the motorist of the BMH-Leyland merger, announced yesterday.
MG Midget, Morris 1300 Traveller. Austin Mlni, Wolseley, E-type Jaguar, 2-5 litre Daimler, 1300 saloon, up to their highly successful Triumph 2000, the Spitfire and TR5 sports cars, and Rover’s 2000, the newly engined 3.5-litre V8 saloons and the ubiquitous Land Rover.
Their commercial vehicle side accounts for three to four times the value in earnings of their main British competitors. With so extensive a range of models-small, medium and large saloons, sports cars, semi-luxury and high-performance cars, as well as engines of four, six and eight cylinders, ranging from 850c.c. to 4.3 litres – BMH-Leyland now cover virtually every section of the car market. Clearly there will emerge some rationalization of models and power units, as we saw after the formation of BMC But there is unlkely to be any rapid reduction of model ranges.
Both BMC and Jaguar have been investing heavily in future vehicles and BMC in expansion and modernization of production facilities as well, including a now fully automated engine plant costing £16m., with a capacity of 5,000 engines a week.
Although BMC’s long established policy of ‘badge engineering’ is criticized here and abroad, and may not be shared by Sir Donald
Stokes’s organisation, Longbridge consistently justify it. Dealers themselves are in favour of it, and there are few (in Britain at least) who would want a common ‘BMH’ or ‘B.M.L’ badge on their showroom product.
While in the long term we may see common power units going into some of the more popular BMC and Triumph cars, the new group are far more likely to concentrate on filling the gaps in each other’s markets, especially overseas,as is already happening with BMH and Jaguar in North America, and between Rootes, Simca and their Chrysler parent throughout the world. The real strength of the merger lies in its marketing possibilities, the creation of an organization with the size and power to meet and beat competition from their international rivals, principally those controlled from Detroit and gaining increasing strength in Europe.
BMC’s model range is now solidly complemented by Jaguar in the upper-price, high-performance bracket. It is here that Jaguar plan to concentrate their future development in competition with Mercedes-Benz in Europe and the growing of sports and GT challengers being produced by the United States car makers.
Leyland’s range of Triumph models dovetails conveniently into the Rover range, and there is still no suggestion that either the Rover or Triumph 2-litre saloons will be dropped, although we shall certainly see new variants before long. Sir Donald Stokes is delighted with the continuing upward trend of Herald and 1300 sales, neither of these groups really clashing with BMC’s 1100/1300 range, which has firmly cornered a different sector of the family car market.
Rover have long-term plans for extending the application of their Buick-based 3.5-litre V8 engine, now being built here. I foresee their future models will slot into the gap now filled by some of the Jaguars, as Jaguar prepare to bring in more powerful more advanced and completely restyled models.
The biggest cars now under the new group are the Daimlers, running from the V8-250 (which shares Jaguar’s styling) to the 4.5-litre Majestic Major Limousine, selling for £3,558. This is another luxury group which could now supplement Leyland’s range over the next few years.
Leyland will obviously retain the Land Rover and the Rover group’s Alvis military vehicles.
The BMH-Leyland merger puts the new £410m. corporation almost on equal terms with the Volkswagen – Mercedes – Auto – Union group of Germany and Fiat of Italy, or sixth in the world’s production ladder, at present led by the three American giants, General Motors, Ford and Chrysler. Before BMC and Jaguar were merged in July 1966, BMC was Britain’s biggest vehicle manufacturer, holding 42 per cent of the market, represented by an annual production of around 880,000, or 19,500 vehicles a week. In 1967, the big Austin-Morris- Jaguar group turned out about 697,000 which was well below their full capacity, while Leyland -incorporating Triumph, Rover and the Leyland commercial vehides accounted for about 195,000, aiming to reach 200,000 this year.
So the combined output of British Motors Leyland Corporation could approach the million mark in 1968-69, giving them the biggest range of cars and commercial vehicles outside the United States, besides the greatest export organization in Europe, which will be one of the major assets of this merger. BMH’s top selling cars are all in the front-wheel-drive series, the Mini leading last year with 190,000 built.
Second comes the 1100/1300 series, of which 155,000 were produced-after holding No. 1 place for three years on the sales charts.
Third place is still held by the B series models (A60, Morris Oxford, Austin Cambridge, Riley 4/72, Wolseley 16/60, and MG Magnette), accounting for 35,000.
Their fourth best-seller is the front-wheel-drive 1800 series (Austin, Morris and Wolseley), selling 34,500 in 1967.
MG and Austin-Healey sports cars accounted for 45,000 sales, the long-lived Morris Minor for another 38,000, with Mini vans and small commercial vehicles adding 92,000
On the Leyland front, the Triumph Herald range leads with 33,000 sales last year, almost equalled by the front-wheel-drive 1300 saloon, followed by the 2-litre 2000 (20,000), the Vitesse (7,000), Spitfire, GT6 and TR5 sports cars (28,500).
Rover produced nearly 35,000 cars (the Rover 2000 and 3-litre saloons), and about the same number of Land Rovers, while Leyland truck production added up to around 26,000 units.
BMC’s model range is at present based around three basic engines, all Austin-inspired and going back to pre-BMC days.
The ordinary Mini saloons start with a 4-cylinder 848cc unit and go up to the specialized Mini- Cooper S with its 1,275cc engine. Then there are estate car versions, the Riley Elf and Wolseley Hornet, with prices running from £509 to £849.
The Morris Minor range, powered by a 4-cylinder 1,098cc engine, cost between £550 and £648.
Next up the scale come the Austin/Morris/Riley / Wolseley/ MG/Vanden Plas Princess front- wheel-drive saloons, now powered by a choice of 4-cylinder transversely-mounted 1.098cc or 1.275cc engines, with prices ranging from £647 to £1092, Still selling strongly to Nuffield adherents are the Pininfarina- styled A60-Morris Oxford, and their Wolseley, MG and Riley derivatives, with conventional front-engine, rear-drive layout, using the 1,622cc 4-cylinder unit, and priced from £768 to just under £1,000.
A completely new range of 1-5 litre front-wheel-drive models is due to be phased into BMC’s production, beginning this year and will gradually replace the 1.6- litre Farina-finned models.
Next up the scale come the front-wheel-drive 1800 saloons, which began with the Austin 1800 in 1964 and now incudes the Morris and Wolseley versions. They are powered by the B series 4-cylinder engine, of 1798cc, and priced from £883 to £1,195.
At the top of BMC’s saloon range are the 6-cylinder, 3-litre Austin A110 (£1,016-£1,200), the Vanden Plas Rolls-Royce engined 4-litre Princess R (£2,030) and 4- litre Limousine (£3,259).
Just coming on to the market is their new 3-litre, 6-cylinder Austin, at £1,418, destined to replace the Westminster saloon.
From BMC’s Abingdon stable comes a wide sports-car range of MGs and Austin-Healeys, which have been the corporation’s biggest overseas currency earners on world markets, helping them to maintain their position as Britain’s biggest producer and exporter of cars and commercial vehicles and the world’s largest maker of sports cars.
Jaguar, who came under the BMH wing 18 months ago, gave them an extra 2 per cent of the market, adding a range of high- performance cars almost as wide as that of any other major group, with prices now ranging from £1,365 to £2,577, and a complete new range of cars and engines planned for introduction over the next two years.
Leyland, whose massive resuscitation of the Standard-Triumph company, followed by their link- up a year ago with Rover, now have a model range running from the £627 Triumph Herald 1200, through the front-wheel-drive will strengthen BMC’s range at the more expensive end, for Longbridge’s main success has been primarily with small cars in the 850c.c. to 1-3 litre bracket.
Leyland development plans for gas turbine-powered lorries and buses could also benefit substantially from BMC, who have long experience in turbine engine development.
But unquestionably the most significant advances will flow from joint marketing, once the BMH- Leyland merger is completed. Leyland, already with a world-wide commercial network, are helping to push Land Rover sales to new records. BMH and Jaguar have well- established outlets in North America, Europe and the Far East, exporting to more than 190 world markets through 19 overseas subsidiary companies, 500 distributors and over 5,000 dealers. In 17 of these markets, BMC vehicles are being assembled or progressively manufactured, while trucks are assembled in a further 43 territories.
The merger is completely logical, long-foreseen and one of the finest moves to strengthen and rationalize the British motor industry. In the last financial year BMH suffered a loss of £5m., after making more than £20m. profits in the previous boom year. While Leyland have also endured a tough period, their last reported profit showing a fall of £4m, the group still had well over £16m. on the credit side.
Significantly, yesterday’s news from both groups was that they were now trading profitably, particularly in export markets since devaluation. Sir George Harriman recently said he expected B.M.H to achieve an extra 100,000 sales overseas in 1968.
Group’s Main Plants
The merger announced yesterday between the Leyland Motor Corporation and British Motor Holdings will create a group with more than 40 factories in England, Wales, and Scotland. The groups are composed as follows:
- 1. Leyland Motors, Leyland and Chorley. lorry and bus chassis, diesel engines (13,000 employees).
- 2. Standard-Triumph International, Coventry, cars (11,000).
- 3. AEC, Southall, buses, commercial vehicles, diesel engines (5,000).
- 4. Albion Motors, Glasgow, lorry and bus chassis (3,000).
- 5. Scammell Lorries, Watford, heavy duty commercial vehicles (1,200).
- 6. Standard-Triumph (Liverpool), Speke, car bodies and parts (1,500).
- 7. Transport Equipment (Thornycroft), Basingstoke, heavy commercial vehicles (1,300).
- 8. Beans Industries, Tipton, foundries (2,000).
- 9. West Yorkshire Foundries, Leeds, foundries (1,800).
- 10. Park Royal Vehicles, London, bus body builders (1,000).
- 11. Maudslay Motor Company, Alcester, axles (800).
- 12. Alford and Alder, Hemel Hempstead, axles, brake drums, etc. (850).
- 13. Forward Radiator Company, Birmingham, radiators, petrol tanks, etc. (1,200).
- 14. Self – Changing Gears, Coventry, gearboxes (500).
- 15. Charles H. Roe, Leeds, bus body builders (400).
- 16. Power Jacks, Acton, hydraulic jacks and pumps (250).
- 17 Auto-Body Dies, Dunstable. body press dies (250).
- 18. British Gear Grinding and Manufacturing Company, London, gears and gearbox components (100).
- 19. The Rover Company, Solihull, cars, industrial gas turbines (14,600).
- 20. Rover Company factories at Cardiff (part of Rover Company).
- 21. Alvis Limited, Coventry, military vehicles (part of Rover Company).
- 22. Aveling-Barford, Grantham, (2,000–parent company only, excluding Aveling-Barford subsidiaries).
The Leyland Group also has interests in many Commonwealth and foreign countries, including India, South Africa, Australia, New Zealand. Israel, Belgium, Holland, Ireland, and Peru.
In Britain the major BMH plants (those employing more than 1,000) are:
BRITISH MOTOR CORPORATION
- 1. Austin, Longbrldge, cars, car bodies, and engines (27,000 employees).
- 2. Morris, Cowley, cars (10,700).
- 3. Morris. Llanelli, components (3,800).
- 4. Morris, Birmingham, components (4,800).
- 5. Morris, Coventry, engines (5,900).
- 6. SU Carburettors, Birmingham, carburettors (1,000).
- 7. MG, Abingdon, sports cars (1,200).
- 8. BMC, Bathgate, trucks and tractors (5,000).
- 9. Fisholow, Coseley, equipment (1,100).
- 10. Fisher-Bendix, Kirkby, domestic appliances (2,200).
PRESSED STEEL FISHER
- 1. Cowley and Swindon, car bodies and other units (11,100).
- 2. Birmingham (2 plants), car and commercial bodies (7,600).
- 3. Coventry, bodies and trim (3,300).
- 4. Llanelli, pressings (2,000).
- 1. Jaguar, Coventry, cars (3,500).
- 2. Daimler, Coventry, cars and buses (3,200).
- 3. Guy, Wolverhampton. cars and buses (1,000).
- 4. Meadows, Wolverhampton, marine gearboxes and other units (3,000).
- 5. Coventry Climax, Coventry, forklifts, fire pumps, and other units (1,000).
BMC have overseas factories for cars, commercial vehicles, and tractors in Australia (4,600 employees) and South Africa (1,600 employees).
BY THE FINANCIAL EDITOR
PREDICTABLY neither Sir George Harriman nor Sir Donald Stokes has gone out on a limb with profit projections for the long- heralded British Leyland Motor Corporation.
These are uncertain times for the motor industry and neither will go further than be cheerfully optimistic BMH backing their confidence with an unspecified profit for the first 20 weeks against a £5m. loss for the same period of last year.
The lack of projections will be grist to the mill of those who feel that Leyland is not getting its fair share of the new equity. But I believe that within two years the terms will be proved to have been right-might in fact look favourable to Leyland. There can be no denying that Leyland’s record is the steadier but against this is the way BMH has reaped fat profits from the boom years of the British economy. Moreover BMH has its new £16m. plant to bring to the altar. Both sides are agreed that this will be a winner when it comes into production. Additionally it is no secret that BMH is recovering swiftiy from last year’s £3,227,000 loss.
In any case the desirability of the merger far outweighs the admitted fact that this one has not been done on the normal merchant banking basis of immediate profit assessment. For this reason the one-for-one basis- which I suggested as a convenient formula last October is ideal. If the merger is to succeed the group must work as an entity from now on so there is little point in a refined formula that would leave each constituent feeling it had a specific target to meet. Forecasting profits when the leaders of the group eschew them can be hazardous. However, combined profits of close on £40m. are likely for the current year. The 10 per cent dividend is going to be ‘adequately covered’ so given Leyland’s history of high retentions this must mean a minimum of 1.4.
Working back from this and assuming a tax rate of 45 per cent leaves pre-tax profits of around £37m. Much the same figures can be arrived at on the assumption that a touch of Leyland’s dynamism at BMH could get profit margins up.
On sales of £800m. for the group a margin of 5 per cent (Leyland manages 6 per cent) pre-tax profits would run out at £40m. Remembering that there is still a dividend in the Leyland price it looks as if the market is going to quote the new group at around 15s. On the above estimates of profits this suggests a p/e ratio of 21f-a level which it should have no difficulty in sustaining.
Q.Will they keep all that range ?
Sir George Harriman said: ‘As far as we can see we will not drop any of the marques. We will reduce the number of models produced under any given name.’
Q.And if some clash – like, say-the Triumph Herald 1250 and the Morris 1300?
Sir Donald Stokes said: ‘If the models continue to make money we will leave them. But if one collars the market the other may suffer.’
Q.Who in the giant new setup, will be boss?
‘Both of us’ said Sir Donald. ‘We have hammered out a management policy. I shall give full support, and co-operation in working with Sir George.’
We have,’ said Sir Donald, ‘the best of both worlds’.
TOUGH BUT NOT VICIOUS
THIS MAN OF POWER IN THE NEW CAR EMPIRE
By Alix Palmer
‘Do you ever play with your cars?’ I asked the medium-sized man behind the medium sized desk surrounded by a collection of mini-model buses, lorries und cars. ‘Sometimes,’ said Sir Donald Stokes, with a grin that knew those shelves of Leyland vehicles would be swollen from today with the additional products of the British Motor Holdings.
For make no mistake; Sir George Harriman may be the chairman of the new company, but Sir Donald, swathed in success compared with Sir George’s Cinderella potential, will be the big man. Nicknamed ‘Mr Export’ by those who like and admire him, and something less flattering by those who have crossed his path and been kicked out of the way, the 53-year-old man who has consistently broken all export records is tough. Tough, but not vicious.
When Leyland took over Standard-Triumph, Sir William Black, then boss of Leyland, told Stokes to sack seven of eight directors. He did so-and hated it. He has no false modesty, but neither has he a bloated ego. He knows he is good, why he is good, and judges other people’s capabilities on the same basis. He demands complete loyalty from his staff, and gets it, because they know they will get the same in return.
He knows almost enough about the personal life of his top men as he does about their business life – and is ready to help smooth over difficulties in both. Moments of tension never crack his air of relaxation, but he knows when to blow his top to the best advantage. His staff fear his ability but not his presence. They question their future but seldom his direction of it. All of which is pretty remarkable for a man who started with Leyland as an apprentice at 16.
What is even more remarkable is his plan for Leyland at the tender age of 21. At that time he was waiting his demob from the Army, uncertain of his own future. In September 1945 he wrote a letter to Leyland, detailing what he thought the company, then still an infant in the export field, should do to become an adult. With minor exceptions, Leyland acted on his recommendations, and in world terms is now where he visualised it would be. His letter ends with hypnotic expertise:
‘I hope to hear from you again and presume you would like me to come and see you in November as soon as I get demobilised. My wife is anxious to know where we are going to live so that she can get a house organised.’
His deals have been spectacular. Like the £10 million order of buses to Cuba, against American furore. Like the buses-to-Sweden contract last year, when Leyland, while competitors still haggled over price, built a bus and shipped it over to Sweden to show the Swedes, who didn’t really want a British product what it was prepared to offer. It was all signed and sealed before the rest of the world had let out its breath. Why has the togetherness of Sir Donald Stokes and Leyland been so successful?
‘Mainly because from the very beginning we have looked upon the whole world as our market.’ he said
‘And we have intended to export profitably. You can’t do anything enthusiastically unless you make money out of it and to make sure you keep on making money you have to keep a close eye on things. There are always on my desk as many cables from Australia and New Zealand as there are telephone messages from Wigan and Brighton. I don’t think it particularly matters what the product is. Of course motor vehicles are a growth industry. If we had been selling gasometers we might have found it more difficult. I am a very obstinate person.
‘I was detrmined we were going to sell overseas. I did it it the wrong way round. Instead of finding the markets first I said after the war: I’ll take half of what we make and sell it overseas. That meant I was committed, and we were stuck if it didn’t work. Once you have it working, you must keep enthusiasm at the top and generate it throughout the firm. Bring everyone in. If there is a complaint from Persia that the packaging is no good, then I send the foreman of the packaging department to sort it out.’
Sir Donald is not merely an administrator. He spends three-quarters of his working life in the field, making sure he has employed the right men. that his company is providing people with what they want.
‘What’s the good of getting caught up in a web of telephones behind a desk ? Obviously my managers sort out the problems where there is only one course to take. Only the razor-edge decisions come to me, and I judge on instinct. It is lucky always to know the right thing to do – and I don’t like employing unlucky men’
His hobby horses are three:
- The time wasted by committees – ‘The ideal committee is a committee of one.’ -Which causes me to wonder how he and Sir George will make joint decisions in the shortest possible time.
- Politics interfering in business – ‘It should never happen. I don’t agree with the embargo on Rhodesia, but while it is there we have to obey it.’
- Retirement of top people – ‘Retirement at 65 is fine for people in mediocre jobs. But in industries which should be active, virile, expanding, men at the top should retire in the early 60s, taper off and let the young people take over.’
It remains to be seen whether Sir George Harriman will get the message on his 60th birthday in March.
MERGER TALKS IN HER LIVING ROOM
By Danae Brook
It was just like ‘The Power Game’ – it started on Friday night and went on all over the weekend,’ said Lady Stokes yesterday. Sir Donald Stokes’s wife was talking about the traumatic weekend which led up to yesterday’s £500 million merger of BMH and Leyland Their St. James’s penthouse was the background for the merger talks.
‘They were at it all night. I had to find cheese and tomatoes and shortbread biscuits at midnight. We don’t usually carry big stores of food at the weekend. It was lucky I managed to scrape something up.’
The flat – a gilded one-level palace – is a long, lonely step from their first small house in Preston just before the war. Then Sir Donald was just plain Mr and working on the factory floor. She worries about the enormous burden has taken on. ‘I thought he would stop when he was knighted. He told me that he really would try to do less. That was in 1965. Now it’s 1968 and look where we are.’
ROBERT JONES, CHRISTOPHER MEAKIN and DAVID DAVIS analyse the new giant-how and why it was created, its worldwide operations-and tell why integrated structure will be the key to its success,
No one will be more satisfied with the amicable announcement of the Leyland-BMH merger-the biggest company merger in British history-than the Prime Minister.
Never before has a private enterprise merger been conceived with such close contact with Government, both officials and Ministers right up to Mr Wilson himself. And this at a time when Government-industry relations in many areas have been at a very low ebb. More over, the merger establishes a group with sales of £800m. a year. It is well placed to gain the economies of scale that come from size and to lead the kind of powerful export drive that the Government want.
The initial impetus for the idea came from the sheer bright-eyed enthusiasm of Anthony Wedgwood Benn, the youthful Minister of Technology. He called the two companies together last spring. Talks between the two companies got under way slowly. Following a story in Business News on June 1, the companies insisted that their talks were only concerned with possible cooperation in the export field. The denial was necessary to damp down the growing rumours, which could have played havoc with stock market prices. But in fact as early as last August, an approach was made to the Board of Trade to discover whether such an outright merger would be referred to the Monopolies Commission.
Unofficial assurances were given that it would not be, presumably on the grounds that though B BMH-Leyland would be virtually the only British large-vehicle manufacturer, the activities of the American subsidiaries of General Motors, Ford and Chrysler in this country would ensure competition.
In September the Prime Minister himself took a hand, summoning Sir George Harriman, head of BMH. and Sir Donald Stokes, Leyland’s chief, to dinner at Chequers. Despite this encouragement, as the autumn-and with it the devaluation crisis ran on, the chances of the merger coming off began to look ever dimmer. By the end of the year serious talks had all but stopped.
There were two main stumbling blocks: Leyland wanted a tightly controlled group organization modelled on the American pattern, with divisions for cars. trucks and the like: BMH was unwilling to abandon the federal arrangement, leaving individual companies like Morris, Austin, Jaguar and MG with a considerable degree of autonomy.
Federalism has been the pattern of the British motor industry, as common at Leyland, until quite recently, as in all the others.
The other stumbling block was personalities. A clear division of responsibility at the executive level was needed. And the BMH and Leyland men could not agree who should do what. That the impasse was broken at all owes much to the timely entry in to the fray of two men, who interestingly enough were on opposite sides in the G.E.C.-A.E.I. takeover battle: Sir Frank Kearton, chairman of the Industrial Reorganisation Corporation, and John Barber, Leyland’s recenty appointed finance director.
Earlier in the year, because of the minister of Technology, I.R.C. had not been deeply involved. Late in December, however, Sir Frank, still flushed with the success of G.E.C.- A.E.I. was asked to take a personal hand in the negotiations. He was able to talk to Sir Donald and Sir George, as one successful industrialist to another. Coming from him an appeal to the national interest, backed by an offer of £25m. of l.R.C. money and a keen understanding of the commercial profits of the merger carried far more weight than from any politician. After Christmas John Barber was able to play a leading role in the talks, though Barber was on the losing side in the G.E.C.-A.E.I. negotiations he emerged with his reputation for financial organization unscathed, and his standing as a patient negotiator greatly enhanced. More-over, before Joining A.E.I., he had 10 years at Ford, which gave him the intimate working knowledge of the American-style organization which Leyland wished to establish. Added to this he was able to devote virtually his whole time to the merger.
Clear of the field
The fact that Leyland and BMH finally reached agreement without a fight must owe much to the courtesy and flexibility of Sir George Harriman. The new group will mean the overthrow of many traditions at BMH (and none at Leyland) and it is bound to lead to hurt feelings on the part of some top executives. Sir George, and his heir apparent, Joe Edwards may not have been eager, but they have shown themselves big enough in the last resort to put the need of the country and the shareholders before personal loyalties.
In terms of size, British Leyland Motor Corporation, the merged group will dominate Britain. Although BMH’s car production was being chased hard in the last year or two by British Ford, BMH has held the number one position since 1952. when it was formed. Leyland’s contribution of Triumph and Rover, however, will set the combined group well clear of the field once again.
In commercial vehicles the combine is even more strongly placed. Overall its dominance in Britain now goes without question in all fields, and the interest must focus on its world ranking. British Leyland now joins the top flight of the European motor vehicle industry, which falls into place behind the three giants of the United States. But of all these. British Leyland can now justifiably claim a more comprehensive range of vehicles on the road than anyone else, from the Mini to the Daimler limousines in cars, and from the lightest BMC vans to giant trucks and dumpers from A.E.C. and Scammell in commercial vehicles. Mere output masks the true ranking of the group in Europe.
An unusually large proportion of its production of both cars and commercial vehicles falls into the top quality ranges, where simple figures of unit sales are misleading. The combination of Rover, Triumph, Princess, Jaguar and Daimler in one group, now that Rootes has discontinued the large Humber range, gives British Leyland a monopoly in this field, apart from the Rolls-Royce-Bentley group.
In sports cars a near monopoly is created with MG, Austin Healey, Jaguar and Triumph now coming under one roof.
Although there will be economies enough to be made in overseas marketing-in Australia alone they are reckoned to be worth £200,000 a year-the real challenge in future years as existing models are replaced will be the extent to which the multiplicity of models can, or indeed needs, to be simplified. In the opinion of some of its competitors. BMC has already been saddled with this problem-and its attendant problems of separated assembly- for several years. It remains to be seen whether the proposed American-type organization for the group means the end of the tradition of’badge engineering’which has provided British motorists with nominally distinct Morris and Austin vehicles for years.
In commercial vehicles the combine’s position in Europe will be paramount and possibly a frightening prospect to E.E.C. producers should Britain eventually gain membership. Its range runs from the mass produced BMC vans and trucks, production of which is being rationalized at Bathgate in Scotland, right through to the expensive top quality products of the Leyland group. In the past Leyland has not allowed its periodic acquisitions of commercial vehicle manufacturers to restrict competition-its two largest components. Leyland and A.E.C., are still each other’s chief competitors in the home market.
Some standardization has been made-particularly in a single truck cab for the whole group. Britain’s bus manufacturers are now ranged together under single management against the state- owned Bristol Commercial vehicles. Leyland already controlled A.E.C., to which is now added Daimler and the smaller operation of Guy. Until now, Leyland’s rear engine Atlantean, and Daimler’s similar Fleetline have been the major competitors outside the London area (whose buses are all built by the group’s A.E.C.). The combined overseas sales of cars and commercial vehicles by BMH and Leyland amounted to nearly £300m. last year with each taking a more or less equal share.
With such a volume the new company is by far Britain’s biggest exporter and becomes a formidable competitor in the fight for world markets. Since its first export deal in 1901 -the sale of a steam powered van to Ceylon, Leyland now has sales to 140 different overseas territories. In the year ended last September turnover reached £305m. with 50 per cent going to overseas markets. In the past seven years BMH has quadrupled sales to the Common Market and the E.F.T.A. countries and nearly trebled them within Europe as a whole. A total of 35 per cent of production were export shipments and last year foreign earnings were valued at £147m.
The merger provides considerable scope for widespread rationalization of overseas manufacturing and assembly facilities.
For example. BMH has a £21m. investment in Australia with production facilities for 50,000 vehicles a year and employing about 4,000 people.
Leyland, too, has a large manufacturing output in Australia- Triumph Heralds are produced at Port Melbourne and another plant in Victoria has rapidly enlarged its capacity to produce more than 5,000 units a year. Australia has, in fact, been earmarked for further Leyland expansion.
South Africa is another area where an overlap of manufacturing facilities exists. BMH has a £2m. factorv with an annual capacity of 20,000 vehicles while Leyland has a £1,500,000 plant producing fibre glass bodies for the Standard-Triumph range.
Leyland Indian’s plant in Madras, the group’s largest and one of its earliest overseas manufacturing facilities, is geared for an annual output of 9,000 heavy-duty vehicles, while Hindustan Motors has been producing Morris cars for many years at a plant in Calcutta.
With plant in Belgium, France and Holland the new company will be particularly strongly placed to launch a major sales attack on the Common Market.
One of BMH’s most successful overseas operations has been the manufacturing link-up in Italy with Innocenti where there is an annual capacity of 55,000 vehicles a year. Leyland is not represented in Italy and extension of the Innocenti arrangement is a distinct possibility.
Despite all the economies of scale, financial strength, and reinforced marketing power, the advantages of the merger will not be realized automatically.
There are two areas of concern-management and models. An American-style organization is a boon if there are the quality men to run it. Without them it would be an almighty flop. The Leyland men have been used to running a much smaller group; the BMC men a different type of organization. Whether they will be able to produce or hire enough high quality men with the John Barber kind of experience to run the new group is something only time will prove. The other doubt must hang over the car range.
Currently the BMC Mini is eight years old and the 1100 is five years old. According to rumours in the trade, the much vaunted BMH 1500, due to be introduced next autumn, does not look like being a world beating volume seller.
Building up a new range of models would take at least five years. Integrating the companies is likely to take a long time as well. The merger has pointed the British vehicle industry in the right direction on what was probably the only road to survival against the American and European giants. But it is no easy road. And it is likely to be some years before the country, in terms of vastly larger exports, and the shareholders, in terms of consistently bigger profits, reap the rewards.
Unions see nothing but good in move
By R. W. SHAKESPEARE
The engineering unions, which for some time have been extremely worried about the degree of American penetration in the British car industry, welcomed the merger. They believe it will significantly strengthen the British owned section. Both BMH and Leyland, unlike the American owned Ford and Vauxhall plants in Britain, are members of the Engineering Employers’ Federation and therefore parties to agreements negotiated by the Confederation of Shipbuilding and Engineering Unions.
Mr George Barrett, general secretary of the confederation, said: ‘My immediate reaction is that it can do nothing but good. especially with Sir Donald Stokes bringing his ‘pep’ and export know-how into the new organization.’
The three largest unions in the car plants are the Amalgamated Engineering Union, the National Union of Vehicle Builders and the Transport and General Workers’ Union.
Leslie Kealey, the T. & G.W.U.’s chief negotiator in the industry, said: ‘The merger is wonderful news. It will be the saving of the British sector of the industry. Leyland have the know-how on the heavy vehicle side and BMH on the car side. Between them they should be able to build up the British sector and make it safe for all time.’
John Orford, assistant general secretary of the 70,000-strong N.U.V.B., about 60,000 of them in the car industry-said: ‘The merger should put the British owned end of the industry in a much healthier position and that must be a good thing for everyone.’
A note of warning was struck by Mr Hugh Scanlon, president of the A.E.U. While he believed that the merger could lead to a strengthening of the British car industry, he hoped it would not result,as other industrial mergers had done,in contraction of the labour force of the two companies. Mr. Leslie Cannon, president of the Electrical Trades Union, believed the merger would lead to the emergence of ‘one of the most powerful motor corporations in the world and one of the biggest single production units in Britain’.
Delivery drivers at the Pressed Steel Fisher car body plant at Castle Bromwich last night returned to work after a strike which made more than nine thousand idle at the plant and at the Austin factory at Longbridge.
Is the Editor of the Parkers website and price guide, formerly editor of Classic Car Weekly, and launch editor/creator of Modern Classics magazine. Has contributed to various motoring titles including Octane, Practical Classics, Evo, Honest John, CAR magazine, Autocar, Pistonheads, Diesel Car, Practical Performance Car, Performance French Car, Car Mechanics, Jaguar World Monthly, MG Enthusiast, Modern MINI, Practical Classics, Fifth Gear Website, Radio 4, and the the Motoring Independent...
Likes 'conditionally challenged' motors and taking them on unfeasible adventures all across Europe.
Latest posts by Keith Adams (see all)
- Concepts and prototypes : Austin Allegro (1968-1972) - 15 February 2019
- Opinion : Austin 3 Litre – all a matter of order - 12 February 2019
- People : Interview with Donald Stokes - 11 February 2019