Firmly in the big league
A digest of a speech made by Lord Stokes at a lunch at the Savoy Hotel, London, to mark the fifth anniversary of British Leyland. During his speech, Lord Stokes announced the appointment of Mr John Barber as executive deputy director of the corporation, with Mr George Turnbull responsible to him as managing director. The corporation has taken over the 14-storey Burmah Castrol House in Marylebone Road, London, for its top management, and it will be known as Leyland Building.
‘In 1968 we stated that it would take a full five years to see the benefits of our merger, and we have worked fairly closely to a five year plan. Although it had become apparent to us that British Motor Holdings had financial problems we could not have understood until we took over the management of that 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 was beginning to show its age, or what a paucity of new products there was to maintain a competitive position during the ensuing five years. Furthermore, I do not think we could have foreseen just how bad the national industrial climate was to become or just how vulnerable we were to this. I believe, however, we can pick out six major achievements
- Within a month of taking over the management of the new corporation we had laid down a new product programme to cover the next five years, the first evidence of which was the Morris Marina which went from a gleam in the eye to showroom in the record period of three years. The new products and revised products laid down in that programme are still emerging – the latest of these will see the light of day this coming Thursday, and the will continue to emerge over the next few months and years to give us what we believe to be the most competitive, attractive, and comprehensive range of cars and commercial vehicles in Europe.
- We have taken drastic steps to rationalise both our range of products and our production facilities – we have reduced the number of plants we have in the UK from 74 to 59. while the number of car models has been rationalised gradually and sensibly – for example, the number of models produced by Austin Morris has been reduced from 24 to 12.
- We have established an industrial relations philosophy and policy to apply to our employees throughout the United Kingdom. This has resulted in a common negotiating procedure, approved and welcomed by the trade unions and workers representatives. It has also enabled us to reform our payment systems throughout the majority of but plants – a process which I think would by now be complete if the Government’s programme programme to combat inflation had not intervened.
- We have completely rationalised our overseas network of manufacturing plants as well as our marketing, service, and distribution outlets. Each major market now has an operating British Leyland company which controls all our interests there and has made much more efficient and profitable operation as well as higher sales.
- We have also I think fulfilled the requirements of the first clause of the principles of management and organisation which were laid down at the outset of British Leyland. This was that the company should operate as a single integrated company and not as a holding company with autonomous subsidiaries.
- With the current debate or whether the country is under going a boom or not, the topic of exports has latterly become a little unfashionable. It would be quite wrong of us however, to ignore the balance of payments and we must continually bear in mind that exports are still absolutely crucial to the prosperity of the country . For each of the five years of our existence we have been by far the country’s largest exporting company of any kind. Indeed during these five years British Leyland has sold overseas the massive total of over £2,500 millions worth of goods of which more than £1,700 millions were direct exports.
On the basis of the interim figures we announced a week or so ago we can now also justifiably claim that we are on our way to honest and respectable profitability .
On the car side of necessity we had hitherto to concentrate the majority of our investment at Austin Morris to modernise production facilities and introduce new models. During the second five years, although Austin Morris by dint of its size, will continue to expand and develop there will be a relatively major swing of our investment and expansion efforts into the highly profitable area of Jaguar and Rover Triumph as well as the truck and bus division.
For some time, our engineers and product planners have been working on a new range of advance engine – four new car power units will be emerging from British Leyland over the next few years – and as the tooling for new engines is always very expensive a great deal of our investment will be devoted to this work. I cannot give details of the engines or indeed the models which they will power, but they will all be of an exciting specification and will incorporate increased amounts of aluminium alloy which is a very valuable aid in meeting exhaust pollution laws.
We are going to spend large sums at Solihull on a major new manufacturing and final assembly facility – one and a half a million square feet – for a new Rover car. Rover’s role in the British Leyland product programme will be very much what it is at present – the medium sized quality saloon – but in a much bigger way.
Triumph, will eventually cease to compete directly with Rover and will concentrate its energies on smaller but refined four-seater saloons in the luxury high-performance category to compete with the types of cars which certain Continental companies have sold so successfully in recent years. These developments will also attract large investment funds to our Triumph plant at Canley.
Large sums of money will also be spent on an entirely new sports car programme covering both Triumph and MG.
Although Jaguar now benefits from the financial strength as well as the marketing and planning expertise of a large corporation, we are determined that this company shall retain its identity as a manufacturer of superbly engineered individually styled luxury saloon and sports cars. A significant proportion of our investment therefore is to be channelled into new Jaguar models as well as installing new plant to double our present capacity
We are also going to spend large sums on our truck and bus division, another high-profit area to maintain the worldwide Leyland reputation for advanced design and quality in this field. This involves a major modernisation and expansion of the product range with particular emphasis on new ranges of advanced engines, gearboxes, and axles as well as expansion in capacity.
The major part of the expenditure in our special products division will be concentrated on new foundry facilities. We have some first class foundries but we need to modernise and expand them and also establish new facilities such as an aluminium foundry which will be needed for the new engine programmes.
The effect of this expenditure will be to increase our output of vehicles to something like one and a half million units per annum. These are not the limits of our current ambitions, however. We are already actively investigating the possibility of building a major totally integrated car production facility in the UK located separately from our traditional areas of car manufacture. This would have a dramatic impact on our international standing and competitiveness and of course, will provide additional employment in the area we choose.
People will be wondering what this all adds up to in real money and how it is going to be financed. I have deliberately not put an exact figure on it because in these days of inflation, long delivery dates for plant and equipment and other extraneous factors I would be stupid to stick my neck out. I can say, however, that we are planning to contain this expenditure within the cash flow we anticipate generating and the cash and borrowing facilities we already have available.
Some idea of the magnitude of the plans I have outlined can be appreciated from the fact that our highest annual capital expenditure in the past five years was £6 millions and with the cash flow and profit forecasts we have in mind we see no reason why this annual rate should not be comfortably exceeded.’