WHY CITY SAID NO TO LEYLAND CASH
By John Roberts
Has the City let down British Leyland? Has it failed to give well – deserved financial support to the only big British-owned motor car manufacturer and exporter ? You can’t be in much doubt about the answer British Leyland’s globe trotting, radio pundit chairman Lord Stokes, would give. Time and again he has berated the City, attacking its sense of values in puttinga lower stock market value on the Austin, Morris, Rover, Triumph and Jaguar group, than on one large office block.
Relatlons between Lord Stokes and the City have been strained for the last few years. The last straw for the City was when he reacted to a carefully researched, and well argued, analysis of his company by stockbrokers James Capel. Lord Stokes demanded: “Less criticism and more encouragement from people who have never got their hands dirty in the whole of their working lives.”
The man he was attacking began his working life as an engineermg apprentice. The City’s disenchantment with Leyland and its handling of militant Left-wing trade unions, was slow to develop – a large part of the company’s commercial troubles is attributable to strikes. The City wasn’t reluctant to put up large funds for the company, until it became clear that, on normal commercial terms, the group could not justify more.
The company has only now gone to the Government for financial aid, after the clearing banks – all the Big Four lend it money – refused to increase, its overdrafts. In view of the political pressure the banks have been under from the Bank of England; overtly, and from other political factions covertly, they would have refused only if the group was totally unworthy of further credit. British Leyland is now in the classical situation; it can’t earn enough to cover the interest on what it has already borrowed. So each month the interest is added to the outstanding loan and, as it incurs the liability to pay interest on interest, the burden mounts.
All this is a rare cry from the days when the City backed an enthusiastic young Donald Stokes ,to steer the British motor industry back to prosperity. In asset terms the old British Motor Corporation was bigger than Leyland Motors. But Lord Stokes convinced the City and the financial punditsof the old Government backed Industrial Reorganisation Corporation, that if they mated his greyhound-fast Leyland with the lumbering mammoth British Motor Corporation the result would be a fast moving giant.
The big City institutions made a short-term sacrifice in swopping their British Motor shares for those in the enlarged group. And four years later, in 1972, they insured the success of British Leyland’s biggest and most ambitious cash raising operation when the group, with jam tomorrow promises, persuaded investors to put up more than £51 million in shares and loans which could be converted into shares.
British Leyland has steadfastly refused to face up to the facts of modern industrial life. If an industry becomes increasingly automated, it is unlikely to need the same number of men and will achieve increased output and efficiency by improved plant. Because British Leyland has failed to get this message foreign, car makers have been able to step up sales enough to maintain their labour force. All the redundancies in the industry will be made by British Leyland.
No Government can shield the group from the facts of an international market. A £50 million or £100 million loan is the biggest dole payment you’ve seen. You are paying the wages of men who aren’t really employed.