Martin Halliwell worked for the Rover Group in Cowley during the 1990s, and saw some interesting changes at the company. Sparked by our recent look at Project Vinland, he shares his thoughts about the company during this vital period.
Roverised in the 1980s, and now in private ownership, what could possibly go wrong? The Rover Group was not your typical car company. As a young Engineering Manager at Rover, keen to do the right thing when assessing investment cost versus parts cost, I asked a Finance Manager a simple question: what is the cost of capital? (For example: what would it cost us to buy a £50,000 tool and use it for five years in terms of interest payments?).
The response? Blank looks and tumbleweed blows around the Cowley body engineering office – this was going to be a long discussion…
The Rover Group could not get capital investment in the normal business ways – banks, share issues, trading profit. In recent times, return on investment was non-existent and finance came from the Government and asset sales. This investment was effectively ‘written off’, so vehicle sales did not need to repay an investor for his risk.
This situation is good for cashflow – there is a lot of cash running round an automotive business to pay for the day-to-day costs – but it is not sustainable.
The automotive business consumes investment cash in huge amounts. It needs a lot of capital equipment to start out with, and every new product needs more. There is no way round this. For example, the body is made from pressed steel parts – this is the only way to make a high volume, high quality, low-cost car.
This method was devised in 1930s USA, and has been used ever since by all volume vehicle manufacturers. The key word here is ‘volume’. The press tooling for an automotive body will cost you £100m. This is the same if you make 20,000 or 200,000 vehicles per year – and you can easily spend another £100m in the bodyshop to put it together. The trim and interior is also usually new – another £100m!
This cost is the starting point for a vehicle project; all the other parts are hungry for investment, but you have more chance of reuse and carry-over with the non-styled parts.
The Rover reality
This was the reality of Rover Group in the 1980s and early-’90s. British Aerospace had a great deal of interest in the cashflow, but was less inclined to allocate any investment. Meanwhile, Rover sales volumes were plummeting, because some of the vehicles were not very appealing, and ageing fast. At the same time company overheads were not reducing.
In the years before BMW, the company’s answer was to sell cars to itself. British Aerospace was a new home for a huge fleet of Rover management cars. Also, employees were offered schemes to lease cars – lots of them. The predictable effect of this was to destroy the residual value of all Rover Group products, so the public which had bought cars in good faith lost out badly and fleet sales became difficult.
There were some possible opportunities in progress. The Rover 600 (above) was a high quality product with a sensible cost base, and a proven engineering basis. However, Honda made a huge amount in royalties on every car. Many of the high cost parts came from Japan in boxes, and Honda made a profit on these, too. Therefore, even with the investment written-off a year after launch with the BAe sale of the company, there was not enough profit to pay for future product development.
The problem with financing future products
Financing new products was impossible for Rover; the odd £10 million for a refresh was just about possible. The other issue was infrastructure: Cowley, Longbridge and Solihull all needed new paintshops. Essential and expensive…
The company did not have many assets left to sell, and any equipment that could be sold and leased back had already been put through the books. Many large assets had small metal plates on them indicating that they were owned by some finance company that you have never heard of – this was the background to Project Vinland.
Even with 30 years hindsight, it is difficult to think of a solution that the Rover business leaders could adopt. Rover’s Senior Managers were not naive or inexperienced: remember, the company had the cash to pay good people. The problem was that they had no cash to spend, and they needed a lot. Managers also had perceived and real political issues due to the company’s past – cutting overheads at Longbridge was not easy.
How to solve a problem like Rover?
Project Vinland combined two research activities into a strategy that addressed high investment cost and also improved the environmental footprint of the plant and the product.
The first of these was Granular Injected Paint Technology (GIPT). It was developed by Gordon Smith at Warwick University. Its aim was to deliver painted plastic body skin panels straight from the tool – thus the vehicle plant would not need a paint shop. Also the cost of an injection moulding tool is much less than its equivalent press tool and a moulding machine costs much less than a press line. Other company costs would be reduced – much less floor space, less scrap, less energy (a paint shop typically uses 50 per cent of the factory’s total energy).
The second of these technologies was the development of an aluminium spaceframe with simple node joints. This work was done at Gaydon and Cowley and LCV2/3, which is now in the British Motor Museum at Gaydon, is a lasting example of this – possibly the only surviving Rover remnant of Vinland. The aluminium spaceframe was a method of producing a lighter body structure: aluminium extrusions are a low-investment product and they do not need a paintshop to achieve corrosion protection. Moreover, they are unseen so do not need to be decorative or styled.
A strategy combining these two developments was perfect for Rover Group with its lower volumes. Project Vinland offered lower investment and lightweight products that could possibly command a premium. The complete environmental story was very positive and forward thinking. It was difficult to imagine this kind of revolution at Longbridge! A greenfield site was proposed for Vinland.
Sadly, Vinland did not happen. The other Rover strategy was to find a new automotive partner (owner) with lots of cash and economies of scale. Enter BMW.
What is the legacy of Project Vinland?
Work continued on GIPT and on the lightweight strategies, though BMW had its own developments ongoing in both of these areas. BMW did take away all Rover ideas, and probably gave them a lot more thought and consideration. Undoubtedly, Vinland would have been analysed in full.
Interestingly, the recent BMW electric vehicles have many similarities with Vinland – including the formation of a fairly autonomous company for their manufacture. Ironically, today finds a form of Vinland at Gaydon in both Aston Martin’s facility and products. The factory was built on a greenfield field site within the boundary of the old BL Technology site and next to the Jaguar Land Rover Design and Engineering Centre.
Some of the Vinland team members left Rover and joined Hydro Aluminium. Here they continued the development of the basic concept with the Lotus Elise, and this progressed to the basis for all the current Aston Martin products. These two groups of products have bonded aluminium extruded chassis/structure with plastic or composite skin panels, minimal paintshop requirements and really low investment.
That would have worked for Rover too…