Archive : BLMC warning on political strikes

British Leyland is sending a message to its 200,000 workers warning of the dangers of political strikes following last week’s walkout at. the Birmingham SU Carburetter factory in protest against the Governments proposed industrial legislation. The message from the British Leyland board, headed by Lord Stokes, is being passed to the labour force through works magazines and in letters enclosed in pay packets.

The unsigned letter refers to the SU Carburetter stoppage and comments: ‘This sort of strike is really nothing to do with our operations and should never happen. Our job is to make and sell cars. trucks and vans and other engineering products profitably. We, as British Leyland, are not affiliated to any political party, so our plants should not be turned into a battleground for strikes about political questions.’

The letter adds: ‘This is cutting off our noses to spite our faces. It is giving away to Continental manufacturer who import into this country, and to Americans who manufacture here, the business that should be keeping us in our jobs. Every sale lost by us is a gain to them and we do not get a second chance.

‘British Leyland is producing far less vehicles and components than it can do because of problems of which you are all aware. Consequently even now, we are unable to meet all demands for our vehicles. As a result we are not making the profits we need to buy new plant and equipment to keep ourselves competitive. We must be competitive to survive.’

The letter urges those who want to make their political views known to do so by protesting to M.P.s, writing to newspapers, and voting at elections.

By John Coyne

British Leyland Motor corporation will not be coming to the market with either an equity or loan issue in the near future, nor is it looking to the Government to mount any financial support operation. In spite of a severe liquidity strain, which was well known even before the management’s warning to Austin Morris workers, the group has arranged with its bankers to provide extra facilities to fund a capital expenditure plan running in excess of £50 millions a year.

British Leyland has recently been the subject of considerable speculation on its financial position, and earlier this week one MP raised the possibility of a bankruptcy in Parliament. With the Rolls- Royce situation coming to a head, speculation on BLMC has intensified, but company sources make it clear that the reports are not accurate.

The group’s cash problems have been accentuated by the recent changes in investment grants. In the year just ended, for instance, the group expected grants of £8.3 millions on expenditure of £52 millions

The group is continuing its rolling four-year capital expenditure plans for £200 millions , suggesting that this year spending wall be on a par with last year’s. This time around ,however, the group will have no grants to aid its cash flow. Of course the 60 per cent free depreciation allowed in its place could be just as valuable short term, but only if the profits are available to take advantage of the tax benefits.

Present indicators are that British Leyland should indeed have the profits available to take advantage of the changes. There is no reason, say company sources, why the group should not have a ‘respectable profit ‘ for the present year. In any event with a depreciation charge of £40 millions there is only a small gap to find between planned annual capital, expenditure of around £50 millions. The group’s bankers have apparently indicated their willingness to accommodate the group until permanent finance can be arranged in a year or two when capital markets are stronger.

As to the year just ended on September 30, City expectations are of a figure £500,000 either side of break even. Anywhere within this range must in fact be considered a praiseworthy achievement in a year which has seen more than 230 internal stoppages, and lost production of 180,000 vehicles valued at around £100 millions.

Apart from the labour troubles, BLMC has had a serious problem with its Austin Morris divisions, where sharply increased costs have been experienced over the past 18 months. This is the loss making part of the group. Other divisions of the company are working below capacity but are profitable.

Even the Austin Morris losses could be left behind if the company can increase its capacity working rate. At present, the group is thought to be working at only 75 per cent capacity.

Hopes are high that the group as a whole can advance towards full capacity working in 1971. This is when profitability would really show through It will certainly need to keep the bankers happy

Assuming a break even for the year just ended, BLMC appears to have been £20 millions short in its cash flow to provide self financing for last year’s expansion. In addition short-term liquidity was squeezed by higher inventory financing, mainly of components. The year end balance sheet is thus going to show large bank overdrafts. Much of the spending, £45 millions, has been on new plant at the Austin Morris division at Cowley to combat internal component disruption as well as put it back in the black.

Keith Adams

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