As part of the series marking 50 years of British Leyland, Keith Adams picks through the numbers and recalls the views of the major players, to describe fully the merger between Leyland Motors and British Motor Corporation.
Fifty years ago, the deal was laced with optimism – here’s how it looked in January 1968.
After months of tough behind the scenes negotiations the biggest merger in Britain’s industrial history had been concluded successfully. The formation of the British Leyland Motor Corporation was announced on 17 January 1968, as a wave of speculative share buying began hitting the Stock Exchange.
The merger created the second largest motor manufacturing group outside the United States and Britain’s fifth biggest company by sales value. Both Sir George Harriman, Chairman elect of BLMC, and Sir Donald Stokes, nominated as Deputy Chairman, Managing Director and Chief Executive, declared that a combination of Leyland’s marketing and research skills and BMH’s huge production facilities would enable the wholly British-owned enterprise to storm world markets against the fierce competition of American, Continental and Japanese producers.
The new group’s HQ was in London, where Sir Donald masterminded the Leyland empire. Under the merger terms, the new corporation was set to acquire all the issued ordinary shares of BMH and Leyland – the joint market capitalisation at 1968 prices was £410m, on the basis of one new share for each ordinary share of the two companies. Market valuations at the time were: Leyland at around £217m, and £193m for BMH.
How the Government brokered the deal
The Industrial Reorganization Corporation (IRC), which played a crucial role as a facilitator in the negotiations, made £25m available as loan capital for future expansion. Sir Donald and Sir George were tasked with planning the economies and rationalisation made possible by the deal.
By and large, the aim was to establish a streamlined, tightly managed enterprise operating with a management policy akin to that of the American giants, such as General Motors and Ford. Distributors of cars and commercial vehicles in home and overseas markets were to find their trading records harshly scrutinised.
The combined enterprise, with around 200,000 employees and £500m a year sales, became Britain’s biggest single exporter. For the first time, a British motor manufacturer was to have a complete range of vehicles, from tractors and earthmoving equipment to cars, vans,and heavy commercial vehicles, including a monopoly of bus making. The products of the two companies were generally complementary, filling gaps in each other’s range.
The deal – and how it took shape
This was a deal that was truly shaped by the Government. The initial impetus for the idea came from Anthony Wedgwood Benn, the youthful Minister of Technology. He called the two companies together in the spring of 1967. Talks between the two companies got under way slowly, but as early as last August that year, an approach was made to the Board of Trade to discover whether such an outright merger would be referred to the Monopolies Commission.
Unofficial assurances were given that it would not be, presumably on the grounds that, though BMH-Leyland would be virtually the only British large-vehicle manufacturer, the activities of the American subsidiaries of General Motors, Ford and Chrysler in this country would ensure competition.
In September the Prime Minister intervened, summoning Sir George Harriman and Sir Donald Stokes to dinner at Chequers. Despite this encouragement, the chances of the merger coming off began to look ever dim. By the end of the year serious talks had all but stopped.
Leyland concerns and BMH division of responsibilities
There were two main stumbling blocks: Leyland wanted a tightly controlled group organisation modelled on the American pattern, with divisions for cars. trucks and the like while BMH wanted the individual companies of Austin, Jaguar, Morris and MG to maintain a considerable degree of autonomy.
The other stumbling block was personalities. A clear division of responsibility at the executive level was needed. And the BMH and Leyland men could not agree upon who should do what. The impasse was broken by the timely entry of two men, who interestingly enough were on opposite sides in the GEC-AEI takeover battle: Sir Frank Kearton, Chairman of the Industrial Reorganisation Corporation, and John Barber, Leyland’s Finance Director.
Late in December, Sir Frank was asked to take a personal hand in the negotiations. He was able to talk to Sir Donald and Sir George, backed by an offer of £25m of lRC money, and a keen understanding of the commercial profits of the merger. After Christmas, John Barber was able to play a leading role in the talks, and his standing as a patient negotiator was greatly enhanced. With ten years at Ford he had an intimate working knowledge of the American-style organisation which Leyland wished to establish.
The deal is finally struck – in Stokes’s penthouse
The scene was set, the deal was made. ‘It was just like ‘The Power Game’ – it started on Friday night and went on all over the weekend,’ said Lady Stokes afterwards. Sir Donald Stokes’ wife was talking about the weekend which led up to the £500 million merger of BMH and Leyland, and their St James’s penthouse was the background for the merger talks.
‘They were at it all night. I had to find cheese and tomatoes and shortbread biscuits at midnight. We don’t usually carry big stores of food at the weekend. It was lucky I managed to scrape something up,’ she said.
In terms of size, British Leyland Motor Corporation would dominate Britain. Although BMH’s car production was being chased hard in the last year or two by Ford of Britain, BMH’s predecessor, BMC, had held the number one position since 1952 when it was formed. However, Leyland’s contribution of Rover and Triumph set the combined group well clear of the field once again.
Leyland to rule the world markets?
BLMC was set to become Britain’s biggest exporter and a formidable competitor in the fight for world markets. Leyland had sales to 140 different overseas territories, with turnover reaching £305m, of which 50 per cent went to overseas markets.
For example, BMH had a £21m investment in Australia with production facilities for 50,000 vehicles a year and employing about 4000 people. Leyland, too, had a large manufacturing output in Australia – Triumph Heralds were produced at Port Melbourne and another plant in Victoria had rapidly enlarged its capacity to produce more than 5000 units a year.
In South Africa, BMH had a £2m factory with an annual capacity of 20,000 vehicles while Leyland had a £1,500,000 plant producing fibre glass bodies for the Standard-Triumph range. Leyland Indian’s plant in Madras, the group’s largest and one of its earliest overseas manufacturing facilities, was geared for an annual output of 9000 heavy-duty vehicles, while Hindustan Motors had been making Morris cars for many years at a plant in Calcutta.
And in Europe? Would BMLC succeed there?
Since 1960 BMH quadrupled sales to the Common Market and the EFTA countries, and nearly trebled them within Europe as a whole.
A total of 35 per cent of production were export shipments and 1967 foreign earnings were valued at £147m. With plants in Belgium, France and Holland the newly-combined company would be particularly strongly placed to launch a major sales attack on the Common Market.
One of BMH’s most successful overseas operations had been the manufacturing link-up in Italy with Innocenti where there was an annual capacity of 55,000 vehicles a year. Leyland was not represented in Italy and extension of the Innocenti arrangement was a distinct possibility.
How big was the combined organisation?
In 1967, the combined production of Leyland Motors and British Motor Corporation was 913,000 vehicles, but the best previous production figure worked out at close on 1,100,000. The pitching of the merger terms surprised the City. On the basis of the group’s respective market ratings and share prices before the bid, there were rumours that suggested weighting in Leyland shareholders.
Stokes firmly rejected the suggestion that he had been over generous in what he paid for BMC shares. ‘We would almost certainly have had to pay more with a takeover bid, ‘ he said.
Forcing a bid through would have been ’disastrous’ for morale and relations in the new group. Leyland’s decision in October 1967 to alter its share capital was the first move to bring the two groups’ capital structure more into line. But Leyland was clearly prepared to buy BMH in the last resort.
How did the new British Leyland range shape up?
The merger certainly created a large and chaotically overlapping range in places. In 1968, it looked like this: Mini, MG Midget, BMC 1100/1300, Wolseley, Jaguar E-type, Daimler 2.5 litre, Triumph 1300 to the 2000, the Spitfire and TR5 sports cars, and Rover’s 2000, the newly-engined 3.5-litre V8 saloons and the Land Rover.
British Leyland’s commercial vehicle operation accounted for three to four times the value in earnings of its main British competitors. With so extensive a range of models – small, medium and large saloons, sports cars, semi-luxury and high-performance cars, as well as engines of four, six and eight cylinders, ranging from 850cc to 4.3 litres – BLMC would cover virtually every section of the car market.
The real strength of the merger lay in its marketing possibilities, the creation of an organisation with the size and power to meet and beat competition from its international rivals, principally those controlled from Detroit and gaining increasing strength in Europe.
What was the state of play in the combined BLMC range?
BMH’s top-selling cars in the UK were all in the front-wheel-drive series, the Mini leading in 1967 with 190,000 built. Second came the 1100/1300 series, of which 155,000 were produced – after holding number one place for three years in the UK sales charts. Third place was still held by the BMC Farina models (Austin A60/Cambridge, MG Magnette, Morris Oxford, Riley 4/72 and Wolseley 16/60), accounting for 35,000.
The numbers rapidly dropped from this point, showing clearly how dependent BMC had been on low-profit vehicles. Its fourth best-seller was the BMC 1800 (Austin, Morris and Wolseley), selling 34,500 in 1967. Austin-Healey and MG sports cars accounted for 45,000 sales, the long-lived Morris Minor for another 38,000, with Mini vans and small commercial vehicles adding 92,000
On the Leyland front, the Triumph Herald range led with 33,000 sales in 1967, almost equalled by the front-wheel-drive 1300 saloon, followed by the 2000 (20,000), the Vitesse (7,000), Spitfire, GT6 and TR5 sports cars (28,500). Rover produced nearly 35,000 cars (the Rover 2000 and 3-litre saloons), and about the same number of Land Rovers, while Leyland truck production added up to around 26,000 units.
Sir George Harriman said: ‘As far as we can see we will not drop any of the marques. We will reduce the number of models produced under any given name.’ Sir Donald Stokes added: ‘If the models continue to make money we will leave them. But if one collars the market, the other may suffer.’
How did the group look on the ground?
The merger created a group with more than 40 factories in England, Wales, and Scotland. The groups were composed as follows:
- 1. Leyland Motors, Leyland and Chorley, lorry and bus chassis, diesel engines (13,000 employees).
- 2. Standard-Triumph International, Coventry, cars (11,000).
- 3. AEC, Southall, buses, commercial vehicles, diesel engines (5000).
- 4. Albion Motors, Glasgow, lorry and bus chassis (3000).
- 5. Scammell Lorries, Watford, heavy duty commercial vehicles (1200).
- 6. Standard-Triumph (Liverpool), Speke, car bodies and parts (1500).
- 7. Transport Equipment (Thornycroft), Basingstoke, heavy commercial vehicles (1300).
- 8. Beans Industries, Tipton, foundries (2000).
- 9. West Yorkshire Foundries, Leeds, foundries (1800).
- 10. Park Royal Vehicles, London, bus body builders (1000).
- 11. Maudslay Motor Company, Alcester, axles (800).
- 12. Alford and Alder, Hemel Hempstead, axles, brake drums, etc. (850).
- 13. Forward Radiator Company, Birmingham, radiators, petrol tanks, etc. (1200).
- 14. Self-Changing Gears, Coventry, gearboxes (500).
- 15. Charles H. Roe, Leeds, bus body builders (400).
- 16. Power Jacks, Acton, hydraulic jacks and pumps (250).
- 17 Auto-Body Dies, Dunstable. body press dies (250).
- 18. British Gear Grinding and Manufacturing Company, London, gears and gearbox components (100).
- 19. The Rover Company, Solihull, cars, industrial gas turbines (14,600).
- 20. Rover Company factories at Cardiff (part of Rover Company).
- 21. Alvis Limited, Coventry, military vehicles (part of Rover Company).
- 22. Aveling-Barford, Grantham, (2000–parent company only, excluding Aveling-Barford subsidiaries).
The Leyland Group also has interests in many Commonwealth and foreign countries, including India, South Africa, Australia, New Zealand. Israel, Belgium, Holland, Ireland, and Peru.
British Motor Holdings Group
In Britain the major BMH plants (those employing more than 1000) are:
BRITISH MOTOR CORPORATION
- 1. Austin, Longbrldge, cars, car bodies, and engines (27,000 employees).
- 2. Morris, Cowley, cars (10,700).
- 3. Morris, Llanelli, components (3800).
- 4. Morris, Birmingham, components (4800).
- 5. Morris, Coventry, engines (5900).
- 6. SU Carburettors, Birmingham, carburettors (1000).
- 7. MG, Abingdon, sports cars (1200).
- 8. BMC, Bathgate, trucks and tractors (5000).
- 9. Fisholow, Coseley, equipment (1100).
- 10. Fisher-Bendix, Kirkby, domestic appliances (2200).
PRESSED STEEL FISHER
- 1. Cowley and Swindon, car bodies and other units (11,100).
- 2. Birmingham (2 plants), car and commercial bodies (7600).
- 3. Coventry, bodies and trim (3300).
- 4. Llanelli, pressings (2000).
- 1. Jaguar, Coventry, cars (3500).
- 2. Daimler, Coventry, cars and buses (3200).
- 3. Guy, Wolverhampton. buses (1000).
- 4. Meadows, Wolverhampton, marine gearboxes and other units (3000).
- 5. Coventry Climax, Coventry, forklifts, fire pumps, and other units (1000).
BMC had overseas factories for cars, commercial vehicles and tractors in Australia (4600 employees) and South Africa (1600 employees).
Was Sir Donald Stokes up to the job?
Make no mistake; Sir George Harriman may have be the Chairman of the new company, but Sir Donald, swathed in success compared with Sir George’s Cinderella potential, was to be the big man. Nicknamed ‘Mr Export’ by those who liked and admired him, and something less flattering by those who have crossed his path and been kicked out of the way, the 53-year-old consistently broke all export records and was tough. Tough, but not vicious.
Sir Donald was not merely an administrator. He spent three-quarters of his working life in the field, making sure he employed the right men and that his company was providing people with what they want. ‘What’s the good of getting caught up in a web of telephones behind a desk?
‘Obviously my managers sort out the problems where there is only one course to take. Only the razor-edge decisions come to me, and I judge on instinct. It is lucky always to know the right thing to do – and I don’t like employing unlucky men,’ he said.
Sir Donald Stokes had three particular hobby horses which were:
- The time wasted by committees – ‘The ideal committee is a committee of one.’
- Politics interfering in business – ‘It should never happen. I don’t agree with the embargo on Rhodesia, but while it is there we have to obey it.’
- Retirement of top people – ‘Retirement at 65 is fine for people in mediocre jobs. But in industries which should be active, virile, expanding, men at the top should retire in the early 60s, taper off and let the young people take over.’
Who was the real boss in the company – Stokes or Harriman? ‘Both of us’ said Sir Donald. ‘We have hammered out a management policy. I shall give full support and co-operation in working with Sir George. We have the best of both worlds’.
The union view of BLMC: mostly positive
The engineering unions welcomed the merger. Mr George Barrett, General Secretary of the Confederation of Shipbuilding and Engineering Unions, said: ‘My immediate reaction is that it can do nothing but good, especially with Sir Donald Stokes bringing his ‘pep’ and export know-how into the new organisation.’
The three largest unions in the car plants were the Amalgamated Engineering Union, the National Union of Vehicle Builders and the Transport and General Workers’ Union. Leslie Kealey, the T&GWU’s chief negotiator in the industry, said: ‘The merger is wonderful news. It will be the saving of the British sector of the industry. Leyland have the know-how on the heavy vehicle side and BMH on the car side. Between them, they should be able to build up the British sector and make it safe for all time.’
A note of warning was struck by Mr Hugh Scanlon, President of the AEU. While he believed that the merger could lead to a strengthening of the British car industry, he hoped it would not result, as other industrial mergers had done, in a contraction of the labour force of the two companies. Mr. Leslie Cannon, President of the Electrical Trades Union, believed the merger would lead to the emergence of ‘one of the most powerful motor corporations in the world and one of the biggest single production units in Britain.’
What for the future? Could BLMC make it work?
Despite all the economies of scale, financial strength and reinforced marketing power, the advantages of the merger would not be realised automatically. There were two areas of concern – management and models. An American-style organisation is a boon if there are the quality men to run it. Without them it would be an almighty flop.
The Leyland men had been used to running a much smaller group; the BMH men a different type of organisation. Whether they would be able to produce or hire enough high quality men with John Barber’s kind of experience to run the new group was still very much an unknown. The other doubt hung over the car range.
At the time of the merger, the Mini was eight years old and the 1100 was five years old. The much-vaunted BMH 1500, was already shaping up to be a commercial flop. Building up a new range of models would take at least five years. Integrating the companies was likely to take a long time as well. The merger pointed the British vehicle industry in the right direction on what was probably the only road to survival against the American and European giants.
But it was no easy road. And it was likely to be some years before the country, in terms of vastly larger exports, and the shareholders, in terms of consistently bigger profits, reaped the rewards. In other words, even on the day of the creation of BLMC, the new company’s future looked far from certain…
With reference to original work by Maurice Corina, Philip Jacobson (The Times), The Guardian, Alix Palmer (The Daily Express), Danae Brook, Robert Jones, Christopher Meakin, David Davis, and RW Shakespeare.
Is the Editor of the Parkers website and price guide, formerly editor of Classic Car Weekly, and launch editor/creator of Modern Classics magazine. Has contributed to various motoring titles including Octane, Practical Classics, Evo, Honest John, CAR magazine, Autocar, Pistonheads, Diesel Car, Practical Performance Car, Performance French Car, Car Mechanics, Jaguar World Monthly, MG Enthusiast, Modern MINI, Practical Classics, Fifth Gear Website, Radio 4, and the the Motoring Independent...
Likes 'conditionally challenged' motors and taking them on unfeasible adventures all across Europe.