This day in history – from the daily news archives.
Clifford Webb on British Leyland’s break with unconventional engineering and why they did it.
Hard pressed British Leyland, the only surviving British owned motor group, today launches its long awaited new Morris Marina aimed directly at the important fleet market. British Leyland, with its past emphasis on expensively engineered front-wheel-drive models, has been without a suitable contender in this area for far too long.
So important is this sector of the market today that it accounts for up to 60 per cent of all medium car sales in the United Kingdom. It is dominated by Ford with its Cortina and Escort models. although the arrival last year of Chrysler U.K.’s Avenger and more recently the advent of Ford’s disastrous nine week strike have sorely dented this leadership. The emphasis in fleet sales has always been on reliability, cheap servicing, a full four-seater and a large boot.
To provide this at a competitive price it has been necessary to stick to a well proven formula engine at the front driving the rear wheels via a prop shaft and all wrapped up in a body designed as much for ease of manufacture as for looks. The last car British Leyland produced which fitted this formula was the Oxford/Cambridge and that was so long in the tooth that it hardly came into the reckoning.
Three years ago when British Leyland was formed the new management found to its amazement that the only new car in the Austin Morris development pipeline was the Maxi, and that continued the Longbridge family line of expensively engineered, front-wheel- drive cars. And this at a time when the already buoyant fleet market began to take off in earnest.
As one British Leyland executive told me recently: “If only B.M.C. had had a ‘ straight’ motor car coming along that would have given us an entree to fleet sales on the one hand and the ability to make a decent profit margin per unit on the other, we should have given the American owned firms a real run for their money.”
Within days of the merger a team headed by Lord Stokes, British Leyland’s chairman, sat down to thrash out a new model policy. Top priority went to a fleet car-code name ADO28, but the company claims that the Marina is much more than one car designed for a specific purpose. It insists that it is the start of a new family of cars. The need for a whole new range of cars , with which to supply the group’s 2,000 Morris dealers has been painfully obvious for a long time.
Rather than further reduce its 3,800-strong Austin Morris dealerships, by far the biggest in Britain, the newly merged group decided to split its franchises down the middle with the Austin network operating independently of Morris. In this way British Leyland retained its saturation coverage of the market but it also meant that Austin and Morris dealers were competing for the same customers with identical cars.
The arrival of the Marina family will go a long way towards rectifying this wasteful situation. The Marina will be handled exclusively by Morris dealers who will have to hand over their existing best selling range, 1100/1300 (with the exception of the MG, Wolseley and estate versions) to their Austin counterparts. The Morris network will thus be better placed to meet Ford head on.
Mr. Filmer Paradise, Austin Morris sales chief, says: “As a group we are uniquely placed to cover every conceivable customer requirement in the dominant ” C – class sector of the market. The ingenious way in which today’s car has been designed to complement rather than compete with the best selling 1100/1300 range will allow the two sales networks to work far better as a team.”
There are many today who still insist that British Leyland has too many dealers. Even with the addition of the new range the proliferation of outlets makes it extremely difficult for the company to give each dealer a territory big enough to generate the increasingly high level of sales necessary to stay in a business which is one of the most competitive in the High Street.
At a pre-launch pep talk to dealers, Mr. Paradise warned them “in the coming 12 months there willl be absolutely no place in the Austin Morris division or in your own organization for apologists. This car will move on plan to the head of the United Kingdom sales league “.
Success of this magnitude would give Austin Morris the two best selling ranges on the home market. Its 1100/1300 at present holds that distinction with around 12 per cent penetration. Together the two could give British Leyland an impregnable position in the medium- car market, which now accounts for nearly two-thirds of all cars sold in this country. Big cars are getting smaller and small cars are getting bigger. To identify a need in the market and develop a car to meet it is only half the task however. Where and how to produce it is the other half.
At Cowley, near Oxford, the integration of the former Pressed Steel Fisher company within the Austin Morris group meant that for the first time British Leyland had body manufacture and final assembly on the same site. Large tracts of the South Works at Cowley were rebuilt to take two new parallel assembly lines. So far only one line has been completed and this is at present producing around 1,000 Marinas a week.
The second line will be phased in shortly and by the end of the year Mr. George Turnbull, managing director of Austin Morris is looking for a weekly production of around 5,000. That would be similar to the present output of 1100/1300 models, although the latter will be inevitably reduced as the Marina cuts into some 1100/1300 sales. Of prime importance to the profitability of the new car is the fact that it is the first British Leyland model to be produced without using the outdated piece-work system its American-owned rivals have shed long since. Over 50 per cent of all Austin Morris disputes have been caused by piece-work rows.
Mr. Barry Mackie, the divisions personnel director, says: “This system has bedevilled every opportunitv to build up sound industrial relations because it created a climate of friction and envy by producing different levels of payment between sections arnd between plants and it has severely interfered with the introduction of new models to the point when our carefully calculated marketing launches have been so delayed that we have lost the peak of the marketing opportunity.”
Cowley in particular has a dreadful record. From January to October 1970, there were 347 disputes including some very lengthy stoppages. After the introduction of the flat rate system there was a sharp fail in disputes and those occurring were of a minor nature. But it was touch and go whether the work force at Cowley would (a) accept the change to a fat- rate system and (b) even if they accepted, do so in time to meet the deadline for the car’s launch.
It was not until January 18, only three months ago, that by using shock tactics including an announcement by Mr. Turnbull that the car would not be built under the old system, that the unions finally gave way. It was a costly deal for the company, the Cowley men received a little over £1 an hour, but in terms of increased flexibility and the disappearance of one of the major causes of strikes, it was probably the most significant step taken since the merger nearly three years ago.
Having broken through at Cowley it is now only a matter of time before similar methods are introduced throughout the group’s other car plants. The one thing, British Leyland cannot plan is the motorists reaction to the new car. But last night Morris dealers were jubilant.
One of the largest distributors told me: “No one will look at the Marina and turn a somersault in sheer excitement but as a value for money package it is exactly what we in the trade have been asking Lord Stokes to provide. If we cannot sell this we might as well pack it all in.”
Hoped-for profits early in 1971-72
Marina II: Andrew Goodrick-Clarke on what it cost and its Part in Levlands Finances
If the new Marina represents an important landmark for British Leyland, its significance to the overall financial position of the group should be kept in perspective. British Leyland’s present and well documented financial difficullties are such that the success or other-wise of a single model is not going to make or break the group, barring, of course, the highly unlikely chance of the Marina being a sales catastrophe.
So the Marina by itself is not crucial to the whole future of the company, in the same way as, say, the Avenger was to Chrysler U.K., which previously had no high volume model in the market. What is crucial, however, is that the range of new cars which British Leyland is now bringing forward, and of which the Marina is the first, should be able to re-establish the group’s long-term competitive position. To go first to the crux of British Leyland’s present financial worries The company is short of cash, and there is nothing sinister or complicated about that.
Simply, the group has been unable to produce profits at a time when its capital spending is running at around 60m. annually. Last year, for example, it generated cash of £42m. entirely by depreciation. So it spent and there is no arguement about the fact that it must spend on modernization, £14m. more than was available. and one of the reasons it was able to do so was by borrowing from the banks.
This, of course, is a short-term expedient, and does not alter the underlying difficulty. Thus, as both the company and City now fully recognize, the only way out of this predicament is for British Leyland to start earning real money. Happily, indications show that so far this year the position of the group has improved, helped by the Ford strike. But, if British Leyland’s profits for the current year should show a marked improvement after the bare £4m. profit of 1969/70, it will not be due to the impact of the Marina which will be selling for five months of the present financial year.
To see why, one must look at the total cost of creating the new car and, in the case of this project, of creating what amounts to an entirely new plant to build it in. It cost British Leyland around £45m. to modernize and re-equip Cowley. Part of this cost, perhaps Â£30m. was for basic modernization of the plant which should now be capable of producing cars efficiently for at least the next decade. If normal depreciation policies are applied that sum will be written off in British Leyland’s books over the next 16 to 15 years. So the cost directly attributable to the new car’s manufacture is about £14m.
The bulk of this relates to special dies and tools which will and can only be used for making the Marina. These days, in contrast to former British Motor Corporation policies, a new volume car such as the Marina is reckoned to have a life of, say, four years, though obviously this can vary dependent on its success. So British Leyland is likely to adopt a very conservative depreciation I policy in this case, and write off the preproduction costs of the car over about three years. On top of this, there is the £500,000 actual launching cost, including publicity.
So far, British Leyland should shave recouped some £4m. in payment for the 5,000 pre-launch cars it has sold to its dealers. But this is simply sales revenue, and, indeed, the Marina could ,yield a further £45m. or so in sales value during the remainder of the financial year. Before looking at the potential profit from sales of this sort. However, the company will have to shoulder the cost of about £1.5m. to £2m. involved in getting the plant and its operatives up to scheduled efficiency levels. In other words, British Leyland expects the car to start producing profit early in its 1971-72 financial period.
The Marina is planned to be a much more profitable car than any other volume model produced by the company at present. Unlike the over engineering that went into the B.M.C. models, the corporation’s policy, which is, of course, now in line with everyone else’s, is to design out cost.
A good example of this was the trouble-some Maxi gearbox which under the new Leyland regime was re-designed to work properly at a cost saving of 150p per gearbox. That yielded a saving of around £150,000 a year which came straight into profits. The Marina has been thought out from scratch, and should be relatively profitable as a result. The models that follow it should be even more profitable.
For obvious reasons British Leyand will not disclose how much profit it should make on each car, but the average volume car such as this should produce a profit of between £30 and £40. This is roughly the balance between the car sold to the more profitable domestic market and that sold for export which is probably only yielding a marginal return. But there is a proviso. To make this sort of money, the plant must be operated at full capacity.
In short, as British Leyland and the motor industry well know, labour disputes or a slack home market can turn all the figuring upside down. At capacity, the Cowley plant can produce 5000 Marinas weekly. In a near perfect situation, therefore, British Leyland could make well over £7.5m. profit annually from Marina.
Also in a near perfect situation, with a good market and some good products, British Leyland should be capable of making overall pre-interest profits of. say, £60m. That is a situation that could materialize as early as next year. If so, accepting that the company’s borrowings are likely to stay at a very high level for the next two or three years (last year they represented 31 per cent of capital employed).
British Leyland’s cash flow on depreciation of £50m. would be just over £60m. annually. This is the sort of situation British Leyland hopes to achieve. The Marina is the first step so far as the car buying public is concerned.
Austin Morris managing director George Turnbull commented, “To invest this sort of capital, there can be no gamble.”
HOW ONE MAN NURSED AN IDEA INTO REALITY
By David Benson
George Turnbull, the 44-year old managing director of Austin Morris, is now getting ready to face the biggest challenge of his life. Success with the new Morris Marina will make him the man most likely to take over British Leyland when Lord Stokes retires. If it’s a flop, his high-flyingcareer wil be floundering.
He said: “It’s been a very hard three years but I think we have produced a winner.”
Six months after the fanfares of the Leyland-B M C. merger Lord Stokes moved into the top job in the new company and brought George Turnbull over from his position as boss of Standard Triumph at Coventry. Stokes had demanded a completely new model family car in the shortest possible time. He set up a policy committee to lay down the outline for the new car. Then he moved Turnbull in to turn the vague ideas into a reality. George started mass production of the Marina just 27 months later.
He says: “When I moved to Longbridge and came face to face with the scale of the operation it took some absorbing. It took time to comprehend that I was in charge of 81,000 people with factories in Longbridge, Cowley, and in the North. The problems were immense; new system, modernisation, new management, and new pay structures had to be planned and negotiated. Lord Stokes said we must have a new car built quickly to feed the vast dealer organisation. So we went ahead to build a new car. First problem was where to build it , Cowley or Longbridge? It was going to have to be made in one place in a fully mechanised facility. So we opted for Cowley in the old Morris plant just across the way from the Pressed Steel body factory where the bodyshells would have to be made anyway.”
Meantime, Turnbull’s team had decided on the format of the new car. Gone were the engineering innovations of B.M.Cs Mini, 1100, Maxi, and 1800. Front wheel drive, transverseengine, and hydrolastic suspension were all by-passed in favour of an earlier Alec Issigonis concept , the straightforward, ultra reliable Morris Minor.
Says Turnbull: “We haven’t abandoned the Issigonis front wheel drive concept, but for the new car we gave simplicity, ease of maintenance and value for money, the top priority. The engines are the well proven and reliable ‘ A’ and ‘ B ‘ series B.M.C. products, the gearbox and rear axle are developments of the tough Triumph Vitesse units and the front suspension is the simple but effective torsion bar layout used so successfully on the Morris Minor and Morris 1000. We think the family man looking for value for money with simple servicing will buy the Marina as will the big fleet owners. I am aiming for 10 per cent of the total market and I think I am going to get it.”
If he does , and I for one wouldn’t argue that he won’t, then George Turnbull’s future will be firmly in orbit.
The man behind the Marina range is Mr George Turnbull, 44-year old managing director of the Austin-Morris Division of British Leyland. For the past two years he has worked a 12-hour day, six days a week, on the new car.
He admitted yesterday: “It has been a very stimulating period, but I would not like to go through it again.”