The financial and organizational foundations of the new state-owned British Leyland motor company were called in question yesterday in a report by the Commons trade and industry sub-committee. Members of the committee said the Ryder plan, on which the company is based, contained fundamental weaknesses and was inherently dangerous.
By Edward Townsend Business News Staff
The basis on which the new state-owned British Leyland car company has been founded was called into question yesterday by a Commons subcommittee report which strongly censured the Ryder plan, saying it contained fundamental mistakes and weaknesses. The report, which comes after seven months of inquiry into the motor industry by the trade and industry sub-committee of the Commons Expenditure Committee, accuses the Government of committing cash on a huge scale to British Leyland without a close enough look at the aims, mechanics and desirability of such a step.
At a press conference to launch the report, members of the committee spoke of the Ryder plan as “inherent!y dangerous” and “hazardous” and Mr Patrick Duffy, Labour MP for Sheffield, Attercliffe, the chairman, said: “We were left with the feeling that Ryder and his team have thought of money rather as confetti”.
The report expressed strong reservations about the amount of money to be spent (£1,400m in the next eight years plus a similar sum to be generated internally) and the effectiveness of the way it would be spent. A Department of Industry assertion that, once the company had been put on a sound footing after the initial injection of equity, part of the funds required from external sources could be raised commercially, the report said, was “only a hope”.
“The call upon public funds will clearly be enormous. There is the strongest possible case for ensuring that the taxpayer gets a fair return on his involuntary investment.”
The committee said it was clear that Lord Ryder of Eaton Hastings’s team relied to a considerable extent on the old British Leyland’s own view of the future and accepted too readily a company study as part of a detailed plan of action. One of the assumptions in the study was “a fairly free availbility of cash and as a result it was unlikely to have rigid economy as its central theme; and it is rigid economy and high cost effectiveness which should be two of the criteria for the expenditure of public money, not to mention commercial survival”.
Members of the committee spoke of their sympathy for Mr John Barber, the deposed British Leyland managing director, who disagreed with the Ryder report on the fundamental issue of forming a decentralized structure as opposed to Mr Barber’s preference for a strongly centralized organization. The report sees no organizational way in which potential conflict between the chief executive of the holding company and the managing director of the powerful new car division would be resolved and finds Lord Ryder’s reliance on ensuring that ” the chemistry is right” not good enough.
“We are of the opinion that Ryder has put too much of the onus on the compatibility of personalities rather than on the correctness of the structure This is inherently dangerous”, the report says. A battle for power between the two executives might cause untold damage, the report says. It adds later that the decision not to retain Mr Barber came after the Ryder structure, “to the shortcomings of which we draw attention” had been adopted.
Lord Ryder talked again in terms of chemistry and morale when giving evidence about the company’s international division. These may be laudable sentiments, the report says, but with the new structure inter- divisional conflicts might arise, which would weaken the whole corporation. Other criticisms from the MPs were that the number of basic models envisaged by the Ryder report would not allow the company to compete effectively and that the report’s predictions and hypotheses were based on assumptions subject to huge margins of error. The MPs said it was not practical to withhold the next tranche of money for British Leyland as a means of government pressure. To carry out such a threat could well ensure the squandering of the sums already spent.
The report also said “Unless the corporation achieves a very much higher level of output and related sales than Ryder forecasts it must shed labour.”
Mr Duffy said at the press conference: “The Ryder team rushed their fences. They were dealing in marked cards; they indulged in questionable assumptions, and we do not accept their conclusions. They put forward recommendations on the basis of assumptions that just could not stand serious scrutiny.”
MPs said they would be exerting pressure for the earliest possible Commons debate. “We believe that in the light of our findings the public must be told it is a bad bet.” In a statement later British Leyland responded to some of the criticism.
- Overmanning:”Leyland have been progressively reducing its workforce since September 1973 by voluntary redundancy and natural wastage.”
- Taxpayers Money:”We are under no illusion about our accountability for the enormous amount of money the Government is injecting into the company.”
- The Future: “We know we must perform like any other viable commercial operation.”
- “under no illusion as to the measure of responsibility which must accompany major public investments of this nature “.
In its report, the committee strongly criticized Mr Reginald Birch, who represented the engineering union’s executive council instead of Mr Hugh Scanlon, the president, at a committee hearing. Mr Birch, who was reprimanded for discourtesy at the hearing in May, was supported by the union later.
Committee chairman Mr Patrick Duffy said: “They rushed their fences. They have been much too carefree in recommending the spending of large sums of public money.”
His all-party committee felt that the team “thought of money rather as confetti.”
He said: “There have been too many fundamental mistakes. We cannot accept their conclusions. How can we?” Mr Duffy, Labour M P for Sheffield Attercliffe, also claimed that the Ryder report was a put up job, although Lord Ryder had denied this. The MPs believed that the decision to pump millions into Leyland had been taken by the Government before Lord Ryder’s team had started work.
Mr Duffy said: “We were struck by evidence from the Department of Industry which suggested they were not unprepared for the Ryder report and its recommendations.”
But the MP’s report was lashed by a top member of the Ryder team. Accountant Fred McWhirter said that it was the MPs who did not
know what they were talking about. He said: “We spent a lot of time on our report and we know more about it than the MPs.”
Ryder’s Plan Gets A Rocket
By John Desborough
A watchdog committee of MP’s yesterday savaged the Ryder report on the future of British Leyland. It also slammed the government, criticised premier Harold Wilson and rapped Lord Ryder personally. The committee’s report says that Lord Ryder’s team were prejudiced from the start because they knew that the government would not let Leyland go to the wall.
And it adds: “It must have been clear to them that their recommendations would not have been implemented if they had not matched the known views of the government.”
The report says that Lord Ryder’s team had assumed that vast amounts of public money would have to be made available to bail out Leyland. But it claims , the Treasury had never given the team reason to think that they would provide this cash. The MP’s criticized the Prime Minister for saying in the House of Commons that the flow of government money might be stopped if Leyland’s industrial relations did not improve .
The government came in for a hammering from the chairman of the MP’s committee, Labour MP Patrick Duffy. He said that the decision on Leyland’s future had been arrived at by the government before Lord Ryder’s team had even started work.
The committee slams Lord Ryder for being ‘too optimistic’ about jobs and car sales. But there is praise for the Ryder plan to harness the ideas, enthusiasm and energy of the workers in the new look Leyland. The MP’s end their report with the warning that if the Leyland plan fails , the government will have to decide whether to let the company fold or give it special treatment which will damage the rest of the British car industry.
A Mistake To Sack The Boss
By Roger Todd
The MP’s vindicated John Barber, the ‘sacked’ boss of British Leyland, describing him as an able manager. And they backed his wife who said at the time that he had been made a scapegoat for the company’s financial crisis. Rapping Lord Ryder for refusing to give Mr Barber a job with the new nationalized company, the committee said: “We do not think the British motor industry can afford to lose the able managers it possesses.”
Mr Barber , the deputy chairman and managing director of British Leyland , was still at his office yesterday – “winding down,” as he put it. He said: “I have read the MP’s report . I agree with a lot of it .”
Criticizing the way Lord Ryder conducted his probe into British Leyland, he said: “One could argue with Ryder , the way the committee has done. One point was the way he went about his investigations without ever consulting top management here .“
“He investigated down the line . It’s his right . He can decide how to do it himself . He spoke to hundreds of people . But he never spoke to me or any other executives . He never spoke to people who make decisions and who can explain why.”
Mr Barber , who had been in his top job for only eight months when Lord Ryder toppled him went on: “I haven’t actually been dismissed yet. I have only been told there is no place for me in the new company. No one has asked me to resign. I suppose the Government will have to tell me to go if anyone does.”