History : Declassified Government documents

Carole Nash Classic Insurance Specialists

We’ve got our hands on recently de-classified Government documents that shows what the newly-elected Conservative administration of 1979 thought of British Leyland and its future. We’re serialising the documents in three parts. This first one covers September-December 1979 and runs to 123 pages.

During the 1970s, British Leyland had been through the mill – first with bankruptcy in 1974, followed by the government bail-out in 1975, and then the eternal struggle to keep the company’s head afloat in tough times.

In May 1979 the Conservatives swept into power with Margaret Thatcher at the helm – and, thanks to the National Archives, we know that BL came very close to being closed just months into the administration change.


The Future of BL – Part One

After five years as effectively a nationalised industry (although the government only ever remained a majority shareholder), under a Labour Government, the future of BL was always going to to come under intense scrutiny following a government change. And so it proved. Margaret Thatcher was elected by a country that was sick of industrial turmoil – and her determination to stand firm against strikes and the all-powerful unions proved popular.

But the matter of BL and its future was one of some urgency. Since the Labour Government’s bail-out of the company in the closing months of 1974 and the subsequent Ryder Report on its future, the Government had pumped in around £1bn of taxpayer’s money – this was clearly incompatible with Margaret Thatcher’s ‘market forces’ ideal.

It could be argued that BL’s future prospects had looked a lot brighter since November 1977, when Sir Michael Edwardes had been appointed the Chairman and Chief Executive of the company. He immediately set about abandoning the Ryder Plan, retrenching a smaller, leaner BL, and returning it to profitability. And that meant savage rationalisation of factories, workers and model lines. He was instrumental in closing the Speke factory near Liverpool in 1978 after strikers had crippled the plant – but he knew many more would need to go in order to match the company’s lower build numbers.  Just to give you an idea – in 1974, British Leyland’s market share in the UK was 33%. By 1979, that number had reduced to just under 20% and export sales had collapsed in pretty much the same way.

However, Speke had just been the beginning. More factories would need to close; more jobs had to go. In September 1979, BL Chairman, Sir Michael Edwardes, warned Margaret Thatcher that there would be further factory closures, most notably MG at Abingdon. But it was all part of the plan to create that leaner, fitter BL – which would be ready for a further injection of Government cash at the turn of the 1980s. That’s because, although the Austin Metro was nearing introduction, there had been a dearth of new models since the arrival of the Rover SD1 in 1976 and, with weakening demand, there was little or no profit with which to invest in future model programmes. Sir Michael Edwardes would be asking for more.

The National Archives reveal that, back in September 1978, the then Secretary of State for Industry – Eric Varley – had approached Edwardes and his opposite number at Ford – Sam Toy – asking why the British car industry was in such a state and what could be done to turn things round. They responded that, in light of the sheer number of vehicles lost due to industrial action, the end of the ‘unofficial strike’ would be the first change they would recommend.

One year on, and with this ringing in his ears, the new Secretary of State for Industry, Sir Keith Joseph, reviewed Edwardes’ latest union pay claims for BL. Workers were asked to vote for the 1980 Corporate Plan, which incorporated these changes to union working practices, as well as agreeing to 13 full- or partial-factory closures and the loss of 25,000 jobs. In the lead up to the vote, Margaret Thatcher’s policy adviser, John Hoskyns said, ‘the result of the ballot will clearly be a material – but, by no means, the only – consideration, in considering whether to commit further sums of taxpayers’ money.’

Michael Edwardes, on the other hand, decided to play hardball, publicly stating that if there wasn’t a ‘yes’ to the ballot, he would not be approaching the Government for further funds for new model development – that would effectively mean the closure of BL.

However, in the run up to the vote, both Margaret Thatcher and Sir Keith Joseph made it clear that, even with a ‘yes’ vote, the Government’s funding was not guaranteed ‘as it might be misconstrued to imply that the Government is already pulling back from the prospect of tough decisions on British Leyland.’ On 1 November 1979, BL announced that the vote had been a resounding ‘yes’, with 87.2% of the workers agreeing with Michael Edwardes’ tough new plans for the company.

In the wake of the vote and the Government’s decision not to automatically give BL a further tranche of cash, it was clear that the Government still wasn’t convinced about the future prospects of BL. The Chancellor, Geoffrey Howe, hypothesised about what would happen to BL in a letter to Sir Keith Joseph: ‘You said that they could be about 300,000 job losses in the unlikely event of a complete and permanent closure of BL and a net loss to the balance of trade of £2.2bn a year. This strikes me as a highly unrealistic hypothesis.

‘Parts of BL are profitable and there is no reason why they should not continue in business. Other parts could be run down over a period rather than closed immediately. To the extent that BL loses its previous market share, it must be the case that other British manufacturers will pick up at least some of their business.’

Going further, Sir Keith Joseph continued speculating over the possible ramifications of closing BL rather than agreeing to Michael Edwardes’ investment plan. ‘The main difficulty about closing BL now is a psychological one and related really to Edwardes’ personality and image. I assume that he is better known to the public than many cabinet ministers and very highly regarded. To reward Edwardes’ effort and his workforce’s backing with closure would seem to be a deliberate blow against everything the Government is trying to encourage. We can be virtually certain that BL won’t fly, yet it would be difficult to close it now in a way which promoted moderation against militancy. We’re still in a no-win situation.’

During this, Pat Lowry of BL confirmed that Communist Union convenor and chairman of the Leyland Combine Trade Union Committee, Derek Robinson, had been dismissed on 22 November 1979. This was a decision described as ‘encouraging’ by Keith Joseph, even if it failed to moderate his sceptical line towards BL and its chances of future survival.

triumph_acclaim__1__629x332

However, the tide of opinion within the Cabinet was clearly moving towards closure – or, at the very least, a break-up – of BL. The BL deal with Honda was in the offing after months of negotiations and was seen as a very positive step. But it was down to the Government to approve it – ‘Should BL be allowed to sign-up with Honda on 20 December? The arguments for this are quite strong: it is a way of keeping options open (the cancellation charges if BL pulls out at only £5.5m). But how definite an assurance is needed about Government approval for the plan before Honda will be prepared to sign?’

Sir Keith Joseph’s paper on BL was published in the closing days of 1979, with the Prime Minister’s office responding with tacit support for BL – despite the potential pitfalls. ‘The choice is stark. Either the Government cuts its losses now at a PSBR cost in 1980-’81 of some £1.4bn and 200,000 unemployed; or it finds an extra £130m in 1980-’81 in the hope that BL will struggle through to viability (with a less than 50/50 chance of survival). In his paper, Keith Joseph recommends the second course, in particular the approval of BL’s Corporate Plan for the next five years; and the precise limit of 1980 funding to be left to the Chancellor’.

There was another issue that encouraged the Government to support the Corporate Plan. ‘The need for urgency arises because other BL will lose the opportunity of signing the collaborative deal with Honda, for a new middle-sized car – the LC9 (above as the Triumph Acclaim), which BL plans to assemble from mainly Honda components.’

Part Two will cover December 1979-March 1980, a further 164 pages of documents. A key feature of these papers is the Governement discussing Ford’s green light for Bob Lutz – then head of Ford of Europe – to buy British Leyland. You can read that now on Honest John Classics.

Part One of the National Archives report on BL’s future prospects, from September-December 1979:

British Leyland: What The Prime Minister Thought.

Keith Adams

Keith Adams

Editor and creator AROnline at AROnline
Created www.austin-rover.co.uk in 2001 and built it up to become the world's foremost reference source for all things BMC, Leyland and Rover Group, before renaming it AROnline in 2007.

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.
Keith Adams

40 Comments

  1. Run down the non-profitable bits. In a roundabout way and over a much longer period of time thats exactly what happened. The rump of BL left – JLR and MINI are now very profitable – and between them building far more cars than the massive industrial combine of BL managed in its best year.

  2. Did anybody bother to “fix up” Red Robbo after he was dismissed?the temptation must have been very strong.

  3. In basic words, the “last Rites” were read over BL in 1979.

    Govt backed the Edwardes plan “to take advantage of the plan itself” the streamlining of BL towards profitabilty by Edwardes in the early stages being identical to an orderly rundown and disposal of BL.

    Also the confidential information, the BMW approach to Edwardes revealed in 1979, seeking to build a car at Solihull, what was that about?

    Such a dismal picture, makes me think we were fortunate that it lasted so long, 25 years before the coffin was delivered

  4. Many might disagree, but I think that Honda taking complete control of Rover should have happened.

    Toyota struggled to establish Lexus, Nissan are struggling to get Infiniti noticed in the UK, Honda could’ve used Rover as their European Acura brand. In fact, they wouldn’t have needed Acura, and could’ve sold cars in the states under the Rover marque.

    The K series development would’ve ended up with something resembling the VTec, properly quality controlled. Honda would push for QA to take priority on the assembly lines.

    Rover would’ve shown Honda what it takes to create a luxury ambience, as they did with the XX project.

    Type R equivalent Rovers would’ve proudly worn the MG badge, as would the S2000 and NSX.

    OR would it have been the case, where in the late 70s / early 70s, that Japanese ownership of a British firm would’ve been as unthinkable as the current backlash against Chinese ownership of MG?

  5. Nice thinking from Keith Joseph that if BL wound down non proftable areas of business, that other UK manufacturers would take a slice of that market. He obviously underestimated the in-roads that Japanese car manufacturers were already making in Britain!

    I agree with Will that Honda taking over Rover in 2000 would have been a good idea in retrospect.

  6. @Hilton D

    Thanks, but I was thinking more along the lines of Honda taking over Rover in 1980 >:)

    A 2000 takeover would’ve been nice too, but I suspect that Honda got their fingers burnt after the BMW takeover.

  7. It should be remembered that John Towers, now much reviled, fought very hard to persuade Honda to move beyond a 47% shareholding in Rover, in order to dissuade BAe from selling up to BMW. Towers knew that Rover, after a very tough period of failing to really benefit from Honda’s expertise, was finally beginning to cotton on, and the very ast thing it needed was a new owner with totally different (and in some ways conflicting) philosophies. He was proved absolutely right. BMW (or more specifically Pichetsreider and his co-romantics) failed to understand the situation at Rover, and neglected to carry out even the most basic due diligence – (Pichetsreider was allegedly shocked to find that the profitable Unipart operation wasn’t actually part of Rover, thanks to the utterly illogical Thatcherite pressure to hive off the bits that normally provide substantial profit to car makers!).
    Honda, quite understandably, were wary of taking on such a big political football, but I’m fairly sure that had they been willing to taking a controlling 51% of the Rover shareholding, backed perhaps by a substantial MBO element and a continuing BAe involvement, then Rover might have survived for rather more than 11 years. It wouldn’t have been easy for Rover people, it’s likely that Honda would have been hard taskmasters, but, that’s what it takes.

  8. British Leyland was in terminal decline in 1979 with market share down to 17 per cent and imports taking over half the market for the first time. Something had to give, unprofitable plants and people like Red Robbo had to go, so the coompany didn’t collapse totally with the loss of 180,000 jobs. Also signing the deal with Honda saved British Leyland in the eighties as at last they had a reliable and modern car to sell.

  9. Is it possible to download the first part of the Government document previewed above? And, if so, how do I do it, as I would like to read it at my own pace?

  10. The various minutes between Committes / Ministers PM etc, none of them refer to the parlous state of affairs existing in BLs competitors such as Ford etc, BL is presented as the “dunce” of the class, when in fact all had problems lurking beneath the surface. Could any one those have taken over BL and find the money to revive Longbridge and Cowley, probably not

    Honda as the “White Knight” for BL,again I do not think so, Nissan/toyota/Honda took the clean sheet approach, siting their plants far away from the traditional areas of car making, introducing their own culture to the British scene.

    One note concern the French, the French contempt for the Japanese car plants in the UK, Recall when Framce was trying to destroy Nissan Sunderland via the EEC?

    The fact that Sunderland had the highest productivity in europe, 100 cars per man year, relaible too, the Micra and Almera, all to save their wretched Renaults Citroens and Pugs.

  11. The various minutes between Committes / Ministers PM etc, none of them refer to the parlous state of affairs existing in BLs competitors such as Ford etc, BL is presented as the “dunce” of the class, when in fact all had problems lurking beneath the surface. Could any one those have taken over BL and find the money to revive Longbridge and Cowley, probably not

    Honda as the “White Knight” for BL,again I do not think so, Nissan/toyota/Honda took the clean sheet approach, siting their plants far away from the traditional areas of car making, introducing their own culture to the British scene.

    One note concern the French, the French contempt for the Japanese car plants in the UK, Recall when Framce was trying to destroy Nissan Sunderland via the EEC?

    The fact that Sunderland had the highest productivity in europe, 100 cars per man year, relaible too, the Micra and Almera, all to save skins of their wretched CitRenPugs.

  12. What was required in the 80’s was the reset button. Forget the mistakes of the past, trying to get stalled projects off the drawing board to make money. Take a logical look at what kind of car company this country could have and then have a long term plan to achieve that.

    What the Tory government did in the 80’s was criminally stupid and not just in reguard to the car industry. We had well known car brands, brands with history, that could have been used to build an industry ro rival the Germans.

    In terms of luxury, super cars, sports car, we had marques other countries would have killed for and we threw it all away. For a future built on estate agents and bankers, that turned out to be no future at all.

  13. Of course the privatisation philosophy of Thatcher and Majors governments seriously damaged BLs commercial vehicle arm and indirectly the conpany as a whole. Marina/Ital, Meteo, Marstro and Sherpa vans all provided a constant supply of income from 1979 to around 1985/86 when privatised companies started buying other firms products in bulk.
    We all moan about why BL>Bust is dead and the French still going, well just look no further than French state companies buying French vehicles for years and very little else.

    Charity starts at home and all that!

  14. @7 Will – I know what you mean now. I thought you meant a takeover of Rover in year 2000, rather than a takeover of BL in 1980.

    If Honda had control of Austin Rover in the late 20th century then perhaps MGRover would still exist now… sadly we’ll never know.

  15. Politicians lack courage. Triumph was destroyed by Michael Edwards. If Triumph had been hived off in 1978 it may have survived with limited help especially if SD2 had been allowed to proceed with Lynx and TR7 Sprint. Rover could also have been privitised by 1985 with SD1, Land Rover and Range Rover and XX produced with Honda all built at Solihull.
    Jaguar was of course sold and was very successful enabling a Ford takeover. Austin Morris truly had no future in 1978. The models were crap, fleet sales minimal and the new Metro just about competitive for 3 years. A new Mini and completely redesigned Maestro to replace ADO16 and compete with Golf was the answer but the Gov would have to have stumped up £1 billion to have a hope. Maybe that was the time to sell Austin Morris to VW Group?

  16. Simon W@ 16, the Triumph name should have been used on the original Rover 200, as this was closer to the Dolomite than the Acclaim as it had sporting models like the Vitesse. The Triumph brand still had plenty of kudos in 1984 and should have been allowed to live on as the reliability of the Acclaim had been a selling point.
    Austin Morris was definitely a tainted brand by the eighties, though. The death of Morris in 1984 was barely noticed, as it meant Marina to most people, and the end of Austin in 1988 was little mourned due to the awful products associated with the name since the Allegro.

  17. @11 – In the late 70s Ford may have had industrial relation problems in its UK plants, but it could make up for lost production by bringing in cars from Germany, Belgium or Spain. In 1979 Fords market share in the UK hit 30% and the top 10 list read like a Ford brochure. In no way could you compare Ford to BL. Chrysler would be the best comparison – It off loaded its European operations to PSA that year.

  18. Back in 1978 the MD of Ford of Britain was Sir Terence Beckett. Sam Toy followed in 1980/81 and was not knighted for his trouble. He swore a lot!!

  19. I have only read a few pages of this really interesting material,and it dont take two minutes to deduce that the whole BL combine was a complete and utter disaster the moment the merger took place,Don Ryder and Tony Benn should take a huge amount of blame for this never mind Red Robbo ,whom regardless of the ifs and buts did strongly believe in workers rights,he was not rsponsible for all stoppages,a lot of bolshie out of control pisstakers were.

  20. What pertinance was Prestcold a fridge cabinet maker to the manufacture of cars? Because leyland owned it,why retail fridge cabinets?

  21. @21

    In the same way, BMC used to own Bendix washing machines?

    Never politically acceptable but perhaps BL should have sold off its car making activities and concentrated on commercial vehicles…

  22. BL also made bicycles at Kirby Merseyside 1964 -65, for Alex Moulton, the quality of the frames were poor compared to Bradford-on Avon products.

    The idea and approach came personally from the Bl chairman, it shows BL in a confident mood, having shocked the Industry with the Mini, they wouldf do the same with the bicycle

  23. I remember Prestcold cabinets in the seventies, shops used them to store ice cream. However, they had as much in common with cars as apple pies, and I wasn’t surprised they were one of the first parts of British Leyland to go.

  24. @25, And outlasted the BL outfit too, still in existance to this day,part of the Copeland group!

  25. @17 Glenn
    I see your reasoning about Austin and Morris but but let’s not forget that producing unpopular cars that people make jokes about (then and now) need not guarantee demise or the loss of that name and manufacturer – witness Skoda and to a lesser extent Kia. Although I loved the rear engined Skodas in their day – they were SUCH fun to drive – they were finished like a kids toy. Yet – where is Skoda today? Just scooped the VW Golf to the tow-car of the year award amongst all the other accolades.
    With the right marketing they say you can achieve anything you like. That’s got to be true – just look at the one-upmanship and oh’ so superior marketing of certain German manufacturers – they’ve made snobbery into an art form that millions of people subscribe to.
    Austin and Morris could have been rescued by simply dividing the technology – Austin stick with FWD and anything trendy and Morris with RWD and aiming for the company car market. That philosophy alone would could have worked – Morris’s Marina/Ital could have been developed better and Austin’s Allegro killed whilst still on the drawing board leaving the field free to use some really good designs that most of us have seen on these pages.
    Thank you ARONLINE for bringing us such good stuff to chew over and rant about!

  26. @27,The Harris Mann designed Allegro was both sleek and svelte on the drawing board, only product development engineers and bean counters turned it into what it was,a shame.

  27. Austin Morris was dead in the water after the 1977 toolmakers strike.
    Triumph was dead after the Speke closure. The quality of the TR7’s built there terminally damaged the brand.
    Pressing the reset button was not an option. It was throwing good money after bad. British manufactured goods had a zero credibility rating. Everybody wanted government handouts but nobody wanted to buy the product.

  28. Ian @29, another product we had a near monopoly on in the early seventies was colour televisions. Sony burst on the scene in 1971 with a set that was fully transistorised, had a fantastic picture, and was about £ 60 cheaper than the British versions, which were hefty pieces of furniture powered by valves with poor reliability and far poorer picture quality. Yes there were some advances in the late seventies like the Ferguson TX, but it was too late and the Japanese models were what people wanted. Ironically as our producers closed down, the Japanese took advantage of government grants to set up factories in depressed areas and Sony became our biggest manufacturer of televisions. Sounds familiar, doesn’t it?

  29. what killed the TR7 (& 8) was the horrendous £ to $ value by 1980…. Sales dropped like a stone as quality control (hmm) improved at Canley & Solihull… MG should have been sold off (to Ford?) as Abingdon had a good work ethic & its products although antiquated by 1979 were also still in demand Stateside.

    The TR7 Sprint / Lynx should have been given their opportunity & there was even talk in 1978 of re-introducing the Stag (with the Rover 3.5 engine) but then they realised the production tooling had all been binned it was a pointless exercise… Triumph was given the raw end of the stick when just a decade before it had a range of cars that stood up well to competitors.

  30. Although a very decent car,the acclaim was the last insult to the Triumph name with Ford Cortina seat frames as well,thats not me being high handed,but it does seem a desecration to what a Triumph should be.

  31. Triumph sowed the seeds of its own destruction, the Triumph dominated post 1968 BLMC board had failed to make the company work, showed too much protectionism to its products and failed to understand how to get the best from the seperate areas of the company.
    Michael Edwards plan, though perfectly logical, cut too deep. In 1977 BL had the capacity to be in the worlds top ten of vehicle manufactuers relative to potential vehicle production volume, by the time the Maestro appeared that capacity had been lost.
    However I’d argue that the real death nail came with the company shutting almost all it’s overseas operations post Ryder Report in 1974/75. All successful mass production vehicle companies have overseas plants to supplement demand or produce locally specific vehicles, BL had an empire that gave it important market share and helped bring in profits, it also allowed exports to flood out of the UK.
    At one stage BLMC accounted for around a 6-8% of UK GDP, a huge amount of income to both the company and the treasury, let’s not forget too that had the company gone bust in the late 1970s the UK unemployment figures would have jumped by a fith, that would have bankrupted GB PLC overnight.

  32. Bl as a volume manufacturer was finished by the early 80s. It ended up horribly stuck in the middle, most of the money went into propping too the volume businessm but after the closures and loss of market share it was too small to be a volume manufacturer against rivals who had factories around the world. By contrast the potentially profitable specialist products were allowed to wither and die unreplaced (Abingdon, Dolomite, TR7 etc) or chronically underinvested (Range Rover).

    It is noteworthy that the surviving bits in the UK are successfully producing upmarket, aspirational vehicles, whereas the French manufacturers are struggling to compete in the volume market, where the all powerful VW group is squeezing them out. If BL had concentrated in the JRT side of the business, maybe we’d have a British owned BMW or Mercedes.

  33. Re comment 21 Prestcold was a brand name of The Pressed Steel Company, the once independant company which eventually come under the umbrella of BMC. That this organisation was to come under the ownership of a car company was far from unique. Frigidaire was long owned by General Motors.

    Pressed Steel also built trains, ironically at Linwood outside Glasgow, one of the reasons for siting the Rootes factory, such that body supplies were local.

  34. Maestrowoff @ 34, Renault is in quite a lot of trouble. They’ve closed half their dealerships down and withdrawn four models from Britain due to falling sales and surveys continually blast them for poor reliability, customer care and shoddy. The only cars that seem to be doing well are the Dacia budget brand models that seem to be far more reliable and better value than French Renaults.

  35. The Lynx was destroyed by internal politics. There just was so little effective leadership and the pitch on which to perform was strewn with obstacles. Any sane external organisation that looked at BL for a merger/link up/purchase did exactly the right thing in walking away. Un-fixable. Lots of talent and lots of history and very sad to see it go, but the pygmies had got hold of the levers of power and there was no getting it back.

    Edwardes arrived and attempted to do two very basic things. Firstly he asked how much it cost to build each car and thus determine the profitable ones. Secondly, he looked at the managers Corporate grade and above and decided that 100% of them needed a basic HR capability test to determine the calibre of the leadership team.

    Over 1 year into his tenure and he still had not been provided reliable and realistic data on vehicle production costs. The maze of plants, transport, and multi-site operations on single components, along with random overhead allocations, rendered the task impossible. We only ever heard rumour about the results of the testing and Edwardes is too polite in his autobiography to do anything other than skate gently past it. Rumour was the external HR trouble shooters were appalled by the results. There just wasn’t enough talent in house to run the show. Some guys were good, but there was just too few of them to manage their way out of outmoded and inefficient sites with a significant, belligerent, minority in the workforce, surrounded by complacent or incompetent dead-wood, waiting for redundancy.

    Edwardes did a stunning job doing as much as he did. Best decision was delaying the launch of LC8 and more particularly LC10. At least they had a fighting chance.

    This is what he was working with:http://www.youtube.com/watch?v=Mr2Wa4i1vVw

  36. In hindsight the questions the government were asking at the time are spot on. The game was over in the mass market as early as 1980, either shut it down or keep it going just long enough to interest buyers.

    I also like the fact that all of this was written down and subject to detailed bureaucratic scrutiny.

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