Archive : Government to take over Leyland in £1.5bn investment plan

Sweeping changes ahead for giant motor group

The Government is to take over British Leyland, the giant motor manufacturing company. Speculation about the group’s future.was ended in the Commons yesterday by Mr Wilson, who announced that the Government . accepted the sweeping. changes recommended by a team headed by Sir Don Ryder, its chief industrial adviser, that was appointed last December to assess the prospects of British Leyland.

The team’s chief proposals, all accepted by the Government, are:

  1. That capital expenditure of £1,264m and working capital of £260m (both at constant prices) will have to be provided over the next eight years to make British Leyland viable and fully competitive.
  2. That £1,400m (based on assumptions of inflation) will be needed from outside sources to achieve a positive cash flow by 1982, and that there is an “overwhelmingly strong case ” for the Government to provide those funds, up to £900m of them by the end of 1978.
  3. That British Leyland’s operations should be divided into four separate businesses: cars, trucks and buses, special products, and international activities. Each would be a profit centre in its own right with its own managing director.
  4. That at corporate level there should be a non-executive chairman and a staff drastically reduced to the absolute minimum.
  5. That joint/management/bodies in which shop! stewards play a major role; should be set up. “Means must be found”, the report says, “‘to take advantage of the ideas. enthusiasm and energy of BL’s workers in’ planning the future of the business on which their livelihood depends.”
  6. That a massive programme to modernize plant and equipment must be started immediately. Much of the group’s plant and,machinery is “old, outdated and inefficient”.
  7. That there must be changes in top level management.

The published report does not include recommendations on the last point but after a board meeting yesterday it was announced that Mr Alexander Park, finance director, had been appointed acting managing director in place of Mr John Barber. Mr Wilson paid a glowing tribute in the Commons to Lord Stokes, chairman and chief executive, and said he hoped he would remain as honorary president.

The Prime Minister would not be drawn on changes in personnel. The Government proposes to take a majority shareholding while agreeing with the recommendation that it should offer to buy out existing shareholders at 10p a share and underwrite a new rights issue to provide fresh equity capital of £200m.

Sir Don’s team considers it likely that relatively few share holders will take up the rights, and that. the Government will therefore be left with most of the shares. The report repeatedly emphasizes the importance of good industrial relations and calls for more realistic manning levels and greater mobility and interchangeability of labour. It insists that the group will have to cut out competition between models in the same sector, and reduce the wide number of different parts. The team believes that the demand,for vehicles will start to grow again next year, and that , British Leyland must capitalize on that.

“Urgent action must be taken to remedy the weaknesses which at present prevent it from competing effectively in world markets”, it says.

Our Political Staff writes: Mr Wilson, accepting the Ryder report, said the Government acknowledged that it might be required to provide extra capital between 1976 and 1978 if none was available from other sources. The question of funds beyond that was a matter for later consideration. In the meantime, British Leyland would need further working capital.

Mr. Benn, Secretary of State for Industry, would lay a draft order before the houseseeking authority for an increase of up to £50m in the guarantees approved by parliament. Mr Benn would inform the House at the same time about the Governments proposals for providing the longer term financial support, a substantial part of which would come from the provision already made in the Industry Act, 1972, and in the industry Bill before the House. The Government would introduce any legislation necessary to implement the proposals.

Mr Wilson said: “I would like to make it clear from the outset that, following the initial injection of equity capital in 1975; the release of further stages of government funding will be determined in the light of the contribution being made to the improvements in the performance of British Leyland by better industrial relations and higher productivity. This is a condition to which the Government attach great importance.”

He said that before further funds were provided, the company would be required to put forward annual business plans covering improvement in industrial relations and productivity and putting forward precise investment and operating programmes for approval within the new system of planning agreements. The government owned majority shareholding would come under the National Enterprise Board, once it had been set up, and arrangements for scrutiny would be worked out with the board. The aim would be to satisfy the criteria for the provision of public funds on such a vast scale while allowing the company to operate on an effective commercial basis without daily government intervention.

“The House should be in no doubt about the significance of this company to the national economy and the importance of putting it on to a sound basis”,
Mr Wilson said.

“British Leyland is our biggest exporter; last year its direct exports from this country amounted to almost £500m. The company employs over 170,000 people directly in this country, and the livelihood of several hundred thousand more is dependent on it. I have to tell the House that in this decision a million jobs are at stake.”

The Prime Minister continued: “The choice before the Government was stark but unavoidable. If we had let course and allowed the company to slide inevitably into receivership, or if we had permitted savage reductions in its size with its production effectively confined to a specialized range of vehicles, then there would have been a major loss of confidence, at home and abroad; not only in British Leyland but in British industry as a whole.”

Mr Wilson found himself in broad agreement with a question from Mr Heath, whose government took control of Rolls-Royce. Mr Heath said the statement was one of the gravest affecting Britain’s international affairs ever made to the House, involving a vast sum of investment and a million jobs, and taking a substantial consumer manufacturing unit into public ownership. The problems of British Leyland, Mr Heath said, had been discussed for a long time and went much deeper even ,than the Prime Minister had indicated.

Mere public ownership through a majority shareholding was not going to produce the answer. A complete reappraisal of the attitudes of management and trade unions was required, not only in motor manufacturing but throughout the rest of British manufacturing.

“What we must bring home to the country is that priority has got to be given to investment as against claims on consumption and excessive wages”, Mr Heath said. Mr Wilson replied that, while he believed there was a strong case for extending public ownership in that area, it had been forced upon the Government for urgent consideration by the crisis last autumn.

Mr Wilson declared: “We have already started discussions with the board of British Leyland with the aim of putting the proposals into effect.”  Later Sir Don Ryder — the man behind the report — gave his own vote of confidence to the troubled car giant.  He declared: “Our report sets out an action programme to make British Levland fully competitive by the early 1980s.”

Our Labour Staff writes:
Mr Robert Wright, executive member of the Amalgamated Union of Engineering Workers, which has 60,000 members in British Leyland, said yesterday that he thought the amount of capital being injected into the company justified nationalization, as had been suggested by trade unions. He would seek a meeting within the next two weeks between the unions, Sir Don Ryder and Mr Benn to discuss the report.

On manning levels, Mr Wright said he was pleased that the report spelt out growth and not retraction. There would be no hiving off. In that context the better use of labour and increased efficiency could be planned, whereas there would be difficulties in a position of predetermined redundancy.

“We are not surprised that the report has been very critical of top management and equally critical of the failure to link the policies of the middle-management team, who seem to come out with sound judgment”, Mr Wright added.

Keith Adams

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