Archive : Mini still sold at a loss. BLMC says

By Clifford Webb

British Leyland are selling the Mini at a loss despite the latest price increase and the fact that after 14 years it is still their top export model. Mr John Barber, BLMC’s deputy chairman and managing director said yesterday: “The Mini is a wonderful car though I think insufficient attention was paid during the design stage to the inherent problems of production costs. Even though we have increased the price it is still not a profitable model.”

He added that because of the profitable replacement parts business generated by Mini sales it was “more in the nature of a break-even operation.”

It also improved prospects for the group’s dealers by providing them with a more complete range of models. Since it was launched in 1959 Sir Alec Issigonis’s pioneering design has introduced standards of roadholding and passenger space for small cars which have been copied by motor manufacturers throughout the world. For the first 10 years of its life it was widely known that the Mini’s complicated and expensive engineering prevented it being sold at a profitable price.

Since then, however, a number of design changes to simplify suspension and transmission-together with substantial price increases, was generally thought to have given the Mini a small profit margin. A new Mini is known to be in course of development at Longbridge, the Austin-Morris headquarters. Reliable sources suggest it will appear in a little over two years time.

In an interview published by the trade journal Motor Indtustry yesterday, Mr Barber said: “We inherited an awful lot of overlapping models. We still have too many models, including a whole range of sports cars, but you cannot chop these off overnight. You have to have a rational replacement plan.”

This reference to the present proliferation of Triumph and MG sports cars lends credence to reports that BLMC are in the final stages of developing a completely rationalized range of sports cars. What is not clear, however, is the name they will carry. Both Triumph and MG have strong followings. Experience has shown that any attempt to resort to “badge engineering” (identical cars carrying different name plates) is a failure. Mr Barber also made it clear that the corporation are still a long way from making a decision on whether or not to go ahead with the construction of the much publicized new integrated car plant to be sited outside their traditional manufacturing areas.

He said: “This would be a very exciting project but no final decisions have yet been taken. We are still looking at all possibilities. This is several years hence. We have been looking at the whole country for possible sites.”

Commenting on the threat posed by the current 30 per cent foreign penetration of the British car market, he says it would be wrong to blame labour disputes entirely for BLMC’s failure to supply.

“There has for one thing been a history of under-investment in our constituent companies in the past. This was one of the reasons for the merger. The eight companies merged into British Leyland were individually unable to afford high investment so naturally they fell behind and when the corporation was formed five years ago we had a tremendous backlog of capital expansion to catch up. We have had to spend most of our money modernizing rather than increasing capacity.”

Keith Adams

8 Comments

  1. “The mini is a wonderful car but I think insufficient attention was paid during the design stage to production costs” – Fair enough, but why in the name of all that’s holy are they still stomaching the loss from this, not 3, or 5, or even 10 years later – but after 14 FOURTEEN years. BMC/BL/Whatever really deserved all they got, delusional, incompetent idiots.

  2. Your right.

    The reason was that Issigonis had very strong ideas about how the Mini should be so blocked any attempts address these design flaws. In part because of his legendary stubbornness but also I suspect in part because he wanted to build a new car to replace it.

    After Issigonis was pushed aside, the injection of “Ford DNA” into both BMH and then British Leyland led to a strategy of favoring new tightly costed designs over updating / reskinning the legacy products. (It would not have been such a bad idea if the products Allegro, Princess, TR7, SD1 had not been so badly flawed, many of those flaws resulting directly from the cars being engineered down to compete with Ford’s on price rather than engineered up to be world beaters like the Ado16.)

    This meant that the focus was put on developing the Ado74 and then when the declining finances made it unaffordable, they reverted to the “parts bin special” approach with the Ado 88, which would not have been such a bad idea, if they had done it quicker but had been left behind by the market when in 77 it was urgently reworked into the Metro (LC8) which again was adequate in October 1980 but soon left behind by the market.

  3. ….He added that because of the profitable replacement parts business generated by Mini sales it was “more in the nature of a break-even operation.”….

    So they knowingly sold cars that they acknowledged were unreliable/needed lots of replacement parts, and stiffed their customers for the cost of those parts in order to make a profit.

    Kinda explains why – in the words of one BMC dealer, “you could sell a car to someone once, they’d come back a couple of years later for a new car, but after that you’d never see them again”.

    And the vast operation at Cofton Hackett/Longbridge shoving-out Gold/Silver-seal ‘reconditioned’ A-series engines/transmissions, whereas the likes of Ford would sell you an Anglia/Escort/Cortina that would go to its grave still with its original engine.

    • In that context one should mention the infamous rear sub-frame which invariably needed replacing in the UK climate. By the mid ’70s BL was buying more rear sub-frames from GKN as replacements than they were buying to put into new Minis on the production line.

  4. The Mini was a loss-maker? It depends how you look at it (and crucially, how you allocate overheads). Michael Edwardes (see below) disagreed with Barber five years later.
    As I’ve argued (in this article on AROnline https://www.aronline.co.uk/opinion/essay-did-mini-cars-mean-mini-profits/ ) the company made more profit at the end of the day with the Mini than without it (except very early on) … The only profit figure that matters is the company bottom line and the Mini made a positive contribution to that in ways not accounted for in a narrow analysis of ‘carline profitability’.
    For example by cross-subsidizing other models (Mini volumes improved the economies of scale in producing the A series engine, therefore the 1100/1300, Allegro etc. were cheaper to build aka more profitable) … There are many other examples of such phenonomena when you look at the big picture, and in fact the interview with Barber in the post does acknowledge some of them (and even Barber concludes the Mini was more a breakeven car than a loss-maker, all things considered).

    Those issues stand alongside the important point about overheads.
    Mini accounted for around a third of British Leyland’s output measured in ‘units’ at times. So do you allocate one third of total overheads to it? Or a different fraction based on its share of revenues? Or nothing at all to reflect the simple relationship of input costs to sales revenue? Or some other methodology? All will give a different picture of apparent Mini profitability.
    Long after writing the article referred to above I came across a August 1979 Autocar magazine interview with Sir Michael Edwardes which addresses this issue and (happily) largely agrees.
    At the time Edwardes (not a man to flinch from cutting loss-making products) had been Chairman & Chief Executive of BL for two years and (one can assume) had a pretty firm grip on the numbers. The Mini was still a mainstream model representing the company in the small car field rather than the niche product it would later become after the launch of Metro a year later.
    It’s worth reproducing the relevant section in full:
    Autocar: Is it true, as has been suggested, the Mini still does not make a profit?

    Edwardes: “Working out model line profitability is not a straightforward question. It depends how you allocate a proportion of the company’s overheads to that model. If you just look at the direct cost of producing a vehicle compared to its selling price then the Mini is substantially profitable, making several hundreds of pounds per unit…. By any normal commercial way of working it out the Mini is profitable, but if you penalize it with a proportion of overheads related to its volume (still big in 1978) then the profitability is very low.

    If you work out what the profitability of the company would be with and without the Mini, allowing for the facilities you could get rid of by not having it, then on that basis the Mini is profitable.”.

    ….. Another point regarding those words of John Barber in 1973 (if a slightly cynical one) is that in 1973 British Leyland was ‘softening people up’ for the Mini to be dropped in the near future as was then the plan. That would be a lot easier if that much-loved car was identified as a big loss-maker. A little earlier Donald Stokes, and in 1968 Graham Turner (in the ‘Leyland Papers’) both identified the Mini as profitable – as they looked at it.

  5. One of the books on the Mini reckons it was a loss leader because it kept the cost of the components shared with other models down, so at least they could be sold at a profit.

    • What a stupid comment the book made! Sharing parts is how you keep costs down. It’s how the US giants were so successful for many years. The Mini probably did make some money per car, probably very little. But that was probably based upon the cost to make it = Material + Energy + Staff on line. They probably did not build in all the other costs, i.e. management staff, admin staff, marketing,
      warranty costs etc. This was probably what Ford did to come to their figure. Though we probably have to take the comments with a small pinch of salt. That’s because who was leading Ford’s finance team at the time – John Barber, and he did not force the dropping of the Mini after the merger of BMH and Leyland.

      • I think point the book was trying to make was the more expensive models could be sold at a profit because the components shared to the Mini could be bought in bulk, even if the Mini itself was braking even at best.

        It gives the example of the Allegro, & I presume it was true of the ADO16 & Metro as well.

        Certainly the American manufacturers usually share parts between models sold under different brands, often some models being highly badged engineered designs.

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