Rover crisis: Byers pledges to save Longbridge
By Michael Harrison Business Editor
THE GOVERNMENT yesterday made it clear that BMW would be offered aid from the taxpayer to keep Rover’s giant Longbridge plant open. Stephen Byers, Secretary of State for Trade and Industry, said that it was no secret that ministers had been discussing possible support to keep the plant open and build a new model at Longbridge.
Nevertheless, ministers and unions agree that the survival of the plant has never been more uncertain than now. If the works does shut it would not just mean the disappearance of another piece of Britain’s industrial landscape. It would represent the end of an era: in motoring, industrial relations, and manufacturing.
A vast and sprawling complex concealing 12 miles of road, nine miles of railway and an immense subterranean network of tunnels, Longbridge has always been more than just a factory. It is a way of life, a small town in its own right providing a livelihood for 30,000 car workers at its peak.
It was a symbol of Britain’s post-war industrial prowess and it became the battleground on which left and right fought for the hearts and minds of the working man during the epic union struggles of the 1970s. Books have been devoted to the sociology of Longbridge – the birthplace of the affluent working class. It was Longbridge man who begat Mondeo man. Now BMW man looks ready to decree that there is no place in the modern car industry for Longbridge.
The end of car production there would blow a great big hole in the West Midlands economy. Some 50,000 jobs are dependent on the plant. Every day some 500 suppliers deliver components into the site with a total annual value of pounds 1.5bn.
But the end of Longbridge would also tear a huge piece out of the fabric of our motoring history. The Austin Seven, the Big Seven and the Cambridge models of the inter-war years, the Mini, and the Austin 1100, the car which became the UK’s best seller for most of the 1960s, were all produced there. Together with its sister plant at Cowley in Oxford, Longbridge once accounted for one in every three cars sold in Britain.
Car sales figures for last month, show that Rover’s share of the market shrank to less than 5 per cent. The plant’s origins date back to1905. Riding around Birmingham on his bicycle in search of somewhere to start making cars, Herbert Austin came across the disused White and Pike printing works. Situated next to the Midland Railway’s main Birmingham to Gloucester and Halesowen branch lines, it was an ideal location for bringing parts in and taking finished cars out.
He bought the site for pounds 7,750 and began production two years later. In its first year Longbridge produced just 23 cars. But by 1910 the workforce had reached 1,000 and Austin had added a night shift. The advent of war in 1914 turned Longbridge into an aircraft and munitions factory. By 1918 it had produced more than 2,000 aeroplanes, including the famous SE5a fighter, 8 million shells, 650 guns and 500 armoured cars.
The inter-war years saw the return to car production and the introduction of the Austin Seven and Cambridge models. By 1930 Longbridge was producing 1,000 cars a week. The outbreak of the Second World War saw a return to military production and by 1945 Longbridge had produced 3,000 aircraft including Hurricanes, Stirling and Lancaster bombers. A year after the war ended Longbridge celebrated the production of its millionth car, an Austin 16f.
In 1952, Austin merged with the Nuffield organisation and Longbridge became the headquarters of the British Motor Corporation. Under an agreement with Donald Healey, Longbridge began production of the Austin Healey 100 sports car in 1953 to be followed six years later by the Mini.
In 1964 production reached an all-time peak of 345,245 vehicles. Since then, however, it has been more or less downhill for Longbridge. It developed a reputation for industrial unrest. Sir Michael Edwardes came within an ace of closing the plant in the late 1970s after a succession of long and bruising encounters with trade union militants, led by Red Robbo – Derek Robinson. Mrs Thatcher would have engineered its closure a decade later had her attempt to sell Austin Rover to Ford succeeded.
Periodically, a new dawn would appear to break for Longbridge but they always turned out to be false. In 1980 Longbridge began production of the Metro at the new west works. The facility was bristling with so much new technology that it doubled Britain’s population of welding robots.
But the arrival of the Japanese transplant factories in the 1980s, starting with Nissan, showed the British motor industry what an efficient car plant really looked like. In 1997, Nissan’s Sunderland plant was the most productive in Europe with an output of 98 cars per man. Longbridge ranked twenty- fifth alongside Skoda with a production rate of 33 cars per man.
It is that one chilling statistic as much as anything that may well do for Longbridge.
NEW YORK TIMES
INTERNATIONAL BUSINESS; Chief of BMW Leaving Post In a Shake-Up
By EDMUND L. ANDREWS
After a board room battle that lasted more than seven hours, the top executive of BMW A.G. resigned today and the board announced a broad overhaul of top management. The apparent ouster of the executive, Bernd Pischetsrieder, came after huge losses at Rover, the British manufacturer of cars and sport utility vehicles that BMW bought in 1994 and has since shored up with more than $3 billion in investment.
Mr. Pischetsrieder’s departure sent shudders through Britain, because it raised grave new doubts about BMW’s willingness to bankroll further expansion at Rover. The shake-up could also undermine BMW’s steadfast insistence on remaining independent. The Minister of Industry, Stephen Byers, announced that he would fly to Munich to meet with BMW’s new chairman about Rover’s big factory at Longbridge, near Birmingham.
BMW said both Mr. Pischetsrieder and the company’s director of new-model development, Walter Reitzle, had resigned. Mr. Pischetsrieder, 55, will be replaced as chairman by the company’s current chief of production, Joachim Milberg, 50. BMW also said it would install new executives in charge of development, marketing and production.
Industry executives and analysts say it is clear that Mr. Pischetsrieder was forced out because he was too closely committed to the existing Rover strategy to make any big changes.
”This is about much more than a change in management,” said Klaus-Jurgen Meltzner, automobile analyst at Deutsche Bank in Frankfurt. ”This is about a change in strategy.”
But analysts said today’s actions could also shake BMW’s commitment to remain independent, because the company will have a difficult time steering Rover back to profitability unless BMW teams up with a high-volume car maker. Mr. Pischetsrieder orchestrated the purchase of Rover for $1.2 billion in 1994, just one year after he took over as chairman. Dismissing concerns from other BMW executives, he insisted on expanding Rover’s product range with a view toward raising production to 500,000 cars from 300,000 in the next few years.
Despite some advances, Rover is believed to have lost more than $500 million in 1998. To stop those losses, BMW replaced its top executive at Rover in December and negotiated a deal with unions to trim 2,500 jobs. In exchange, the company promised to invest heavily in modernization.
Part of Rover’s problem reflects the high value of the British pound, which has made Rover cars expensive in other markets and caused a surge of cheap imports into Britain. But investors and board members also said many of the problems came from Mr. Pischetsrieder’s strategy of having Rover make a full range of cars in almost every price category.
Rumors that Mr. Pischetsrieder would be leaving have been rampant in German newspapers and magazines for days. What was more surprising was the simultaneous dismissal of Mr. Pischetsrieder’s chief rival and critic, Mr. Reitzle. Most analysts had assumed that Mr. Reitzle would become chairman if Mr. Pischetsrieder lost the top job.
The company board is dominated by members of BMW’s founding Quandt family, who collectively own 46.5 percent of the shares. According to German press reports, family members blamed Mr. Pischetsrieder for Rover’s poor performance and wanted a basic change in strategy.
British political leaders were on full alert as the BMW board met throughout the day today. Mr. Byers, the Minister for Industry, reiterated the Government’s willingness to provide financial help to save Rover’s big factory in Longbridge. British television carried live reports on the meeting.
BMW’s own line of high-priced sedans and sports cars continues to enjoy strong sales and healthy profits, and company executives have repeatedly insisted that they want BMW to remain independent. But since Daimler-Benz’s merger with Chrysler and Ford’s recent agreement to buy Volvo’s car business, BMW has come under growing pressure to find a big partner to achieve the economies of scale needed to compete.
That is particularly true with Rover, because many of its cars are midprice or inexpensive mass-market vehicles. In contrast to BMW’s luxury sedans, which enjoy higher profit margins, Rover’s prices have been squeezed by ever-tougher competition. Mr. Meltzner of Deutsche Bank said BMW faced a tough choice: either scale back Rover’s product line and shut down factories, or put Rover under the roof of a much bigger partner. Volkswagen A.G. has indicated it might have an interest, but BMW has thus far spurned all of VW’s overtures.
”Their plans to increase production are very ambitious, and I have my doubts they can achieve them,” Mr. Meltzner said. ”If they don’t achieve their numbers, then they won’t derive the economies of scale they have been expecting either.”