On 25 February 1967, it looked as if the super-successful Leyland manufacturing group was homing-in on its next purchase – the Rover Car Company. This was the mood of the time: expand or merge to survive, and Donald Stokes’ Leyland was certainly confident that it would prosper in the coming years.
Here’s how the media reported the lead up to the merger back then.
Leyland’s £16 million expansion for 1967
The Leyland Motor Corporation is pressing ahead with its £60m five-year expansion plan, first announced in July 1965. In spite of difficulties in several markets the group intends to spend £16m on expansion this year.
Describing the expenditure plans as ‘an act of faith’, Sir William Black, the Chairman, told the annual meeting yesterday: ‘An upsurge in demand must come. and we are determined to be equipped to take advantage of it.’
Sir William underlined the importance of keeping down production costs if the group was not to be priced out of world markets. Of the proposed merger with Rover, the Chairman announced that proxy votes totalling eight million for and only 5000 against the merger had been received from Leyland shareholders, and he expected 99% of Rover shareholders to vote for it.
Leyland-Rover merger ‘a certainty’
The £25 million takeover of the Rover Motor Company by Leyland Motor Corporation now seems certain to be completed within the next month. Leyland shareholders , at their Annual General Meeting yesterday, approved the offer for the Rover shares, which involves a share transfer putting a value of 13s 9d on each 5s ordinary Rover share.
Sir William said: ‘It is a very logical development , and one that will be of dear advantage to both organisations.’
Submitting his report to shareholders, which showed that, for the year which ended on 30 September, Leyland made a profit, after tax, of almost £9.5m. Sir William said that the year had been an exceptionally difficult one in overseas markets, and that most of these difficulties persisted.
USA difficulties mean strength in numbers needed
He added: ‘In the USA, where Triumph cars are our main product, new safety regulations are being imposed, together with severe air pollution restrictions. The market for sports cars is being affected by so many of our potential customers being called up for the fighting services.’
Sir William also told the meeting that, in spite of the economic difficulties, Leyland intends to press ahead with expansion and modernisation programmes, which involve capital expenditure of some £60m during the next five years. Of this, £16m will be spent this year, including £5m at the Leyland plants in Lancashire.
He said: ‘International competition in the automobile field has always been very keen, and today , is no exception. On the car side, in particular, it would seem that production capacity of the world has – temporarily at least – outstripped, the demand. Fortunately, this is not yet clear to the same degree in the heavy commercial vehicle field, which is of course , our main operation.’
Bank rate reduction a help
Sir William said at home the recent reduction in the bank rate would help, as Leyland operated largely on borrowed money. In common with the rest of British industry, they were also looking for the time when the freeze would end, or, at least, be relaxed. In particular, he would like to see investment allowances granted on trucks, which were surely ‘tools of Industry’ .
He added: ‘I would emphasise the vital necessity of keeping our production costs down , or we shall be priced out of world markets.’
Sir William also told shareholders that, subject to any change in circumstances beyond the corporation’s control, it was intended to pay the same dividend this year as last year (a final dividend for last year of 5 per cent, payable on 7 March, was approved by the meeting, and there was an interim payment of 2.5% last April.
A push to cut production costs needed
He added: ‘It has not been usual for us to show in advance what our dividend policy was likely to be, but our financial advisers suggested I should make that reference in view of our offer to the Rover shareholders.’
Sir Donald Stokes (above), Deputy Chairman and Managing Director, also emphasised yesterday the need to cut production costs. He said the industry was now meeting severe competition from the Japanese in all foreign markets for small cars.
He said: ‘They are not making better cars than we are, but they are making them more cheaply. We are, therefore, having to cut our margins to meet this competition and, if this goes on, we will not have enough money available to finance new business. It is, therefore, vital to cut production costs in every possible way.’
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