AROnline‘s resident historian, Ian Nicholls, delves into his extensive archive and investigates the fall of BMC during the 1960s via its European sales…
The standard clichéd explanation for the alleged decline of the British Motor Corporation is that, devoid of exciting new models and effective cost controls, BMC’s market share and profits declined to the point at which the Government of the day was convinced that the whole edifice was about to come crashing down and that it had no option other than to broker a hasty merger with the Leyland Motor Corporation in order to save the situation.
In this site’s British Motor Holdings story, I have hopefully debunked some of these myths, and how some of the medicine was wrongly administered. Another cliché is that BMC did not invest as much as its continental rivals to remain competitive. In his excellent book, Export Drive, Chris Cowin has introduced a new theory about the ultimate decline of BMC, and it is one that makes perfect, logical sense, and is so obvious upon reading it.
It also explains why the BMC Mini and ADO16 sold in relatively small numbers in comparison with less advanced continental rivals. Chris Cowin’s basic theory is that the British motor industry banked everything on an early entry to the Common Market, or European Economic Community (EEC), heavily investing in a doubling of production capacity that was never utilised, due to Britain’s aborted attempts to join in both 1963 and 1967.
Britain’s slow entry into the European market
The original EEC consisted of six countries, France, West Germany, Italy, Belgium, the Netherlands and Luxembourg. From 1961 the member countries, comprising some 200 million people, began to reduce internal trade tariffs to enable free trade and easy access to each others markets. However, goods brought in from non-EEC countries were subject to tariffs that were, at first, set by the individual countries and then standardised at 17.5% in 1969.
Britain did become a member of the smaller European Free Trade Association (EFTA), formed in 1960. EFTA comprised the UK, Switzerland, Austria, Portugal, Sweden, Norway and Denmark, with Finland as an associate member. Excluding the UK, this was a market of 60 million, with only Sweden being a major vehicle producer.
The 1960s generation of British cars were perhaps the most competitive the UK ever produced: Mini, BMC 1100, Rover P6, Triumph 2000, Ford Cortina, Land Rover, Jaguar E-type, Jaguar XJ6, the list goes on. However, in continental terms, sales rates of these iconic cars were paltry.
The traditional answer is always to suggest that they were all badly built, badly designed and unsuitable for overseas road conditions. This is palpable nonsense and does not bear close scrutiny. The reality was that they were prevented from competing on price in the larger EEC market by trade tariffs – even Ford of Great Britain, with its impeccably-costed Cortina, calculated they were only just breaking even with exports to EEC countries.
The story starts in November 1959 when the British Motor Corporation announced a three-year plan for the expenditure of £49 million, which would raise the company’s production potential to one million vehicles a year.
In his statement circulated to shareholders with the annual report, Sir Leonard Lord, the BMC Chairman, said that the planned output of 4000 Minis per week had already become insufficient. They were taking steps immediately to double this output to 8000 a week, including an additional range of light commercial vehicles, which it was expected to announce in January 1960.
Building more vehicles – unequally
Austin commercials should have been key to export growth
‘Currently we are producing at the rate of 750,000 vehicles per annum,’ said Sir Leonard Lord. ‘When extra facilities become progressively available in 18 months to two years, the magical figure of one million units a year will be within our reach. This cannot be done in the existing factories and it will mean new sites, new buildings, and a fresh approach to the problems of production and automation.’
This resulted in an expansion of the Longbridge site and the construction of Car Assembly Building 2 (CAB2), which began producing its first cars in September 1962. The main beneficiary was the new Austin derivative of the best-selling BMC 1100.
However, Prime Minister Harold Macmillan’s (right) Conservative Government also expected the motor industry to solve social problems and BMC, like other UK manufacturers, was forced to expand in areas of high unemployment. In BMC’s case, it was forced to move tractor and truck production from the Midlands to Bathgate in Scotland, a plant that was always afflicted with chronic industrial relations.
Quite simply the Government refused to grant permission for manufacturers to build new factories in the vicinity of their existing plants. Ford was forced to go to Halewood, Vauxhall went to Ellesmere Port, and Standard-Triumph went to Speke, all on Merseyside. Rover managed to circumvent these strictures and cleared space on its Solihull site to build the P6 manufacturing block.
Quite clearly all these manufacturers expected an insatiable demand for their products. But who was going to buy all these cars?
Boom, not bust
In 1960 Britain produced 1,354,000 cars, but the domestic market only took 805,000 units. Of its major European competitors, only West Germany produced more cars –1,817,000 to be precise.
BMC alone produced 585,096 cars, although some of these were made overseas in its Commonwealth factories. Harold Macmillan’s ‘Wind of Change’ speech in February 1960 signalled the reality that the British Empire was now in decline, and Britain had to find a new role in the world. Harold Macmillan deduced that Britain now had to look to Europe. Macmillan was involved in the formation of EFTA, and belatedly applied for Britain to join the larger EEC.
Clearly, British industry saw the UK’s application as a formality, hence the massive investment in increasing motor industry capacity. With a new generation of exciting cars coming on stream, how could Britain fail to sell, sell, sell.
However, on 29 January 1963, President Charles de Gaulle vetoed Britain’s application to join the EEC. For the British motor industry, this was a catastrophe. This is not the place to go into why de Gaulle vetoed Britain, but he was to do the French motor industry an enormous favour, by effectively locking out of EEC markets a generation of innovative British cars.
Mini was more expensive in Europe than its economy-car rivals
The pride of the British motor industry was the Mini, which doubled up as a budget car and rally winner – except that, in EEC markets, once the import tariffs had been added, it wasn’t a budget car at all. In West Germany, in 1967 a Mini 850 cost 4980DM, while a Volkswagen Beetle cost 4485DM.
In France a Mini 850 cost 7000FF, and an ADO16 cost 10,000FF – in comparison, a Renault 4 cost 5000FF. The Mini was fashionable in Paris, but as a form of mass transportation, it was a non-starter in EEC countries.
The Mini may have been the car of the decade in the view of many British pundits, but its 1960s UK success was not replicated in the EEC, because it was not priced competitively.
BMC manufactured 858,000 vehicles in the 1963-’64 financial year and made a pre-tax profit of £31,405,496 according to the yearly report which George Harriman, the Chairman and Managing Director sent to shareholders. This included 730,862 cars, which equated to a profit of £36.60 per vehicle.
Ford cashed in with the Cortina by concentrating on the home market
This was as good as it got for BMC, which was now dependent on the domestic market and EFTA for its sales. Both the Mini and 1100 have been criticised for being to complex and expensive to build in comparison with the Ford Cortina, particularly in the 1966-’68 period, with former Ford and British Leyland executive John Barber being convinced that the Mini did not make a profit for its first nine years.
However, Chris Cowin’s analysis of BMC’s accounts suggests that, when volume of these cars exceeded 200,000 annually, there was plenty of profit to be made. Mini production exceeded 200,000 between 1962-’77. ADO16 production exceeded 200,000 from 1964-’66 and 1968-’70.
Automotive analysts remain obsessed with the Ford Cortina’s performance in 1966-’68. However, what must be remembered is that BMC’s wobble in 1966-’67 occurred because of the July 1966 credit squeeze. The same politicians that were urging BMC to focus on export markets were also the same ones who held the key to gaining access to the lucrative EEC market.
Volumes that couldn’t be attained
The BMC front-wheel-drive range depended on high volume to be profitable, high volume that could only be attained by Britain gaining membership of the EEC. In a sense, by 1967 BMC and Ford focused on different markets. BMC, expecting entry to EEC markets, had focussed on high technology front-wheel-drive cars. Writers like Bill Boddy had criticised BMC for producing boring mechanical stodge in the 1950s, in comparison with its continental rivals. BMC had responded to the challenge.
Ford of Great Britain, on the other hand, had no option but to concentrate on the domestic market and EFTA countries. EEC entry in the 1960s would not have resulted in export opportunities for Dagenham and Halewood-built cars, as this was the domain of Ford’s other European subsidiaries and would be seen as trespassing.
The concentration on the UK market would result in the cost-controlled Ford Cortina of 1962, aimed at fleet buyers. Because Ford defined that market sector, it was always one step ahead of the opposition, but their dependence on the domestic market was revealed when they barely made a profit in 1967. However, because Ford made money out of selling lower technology cars to fleet buyers, its other UK-based rivals followed suit and developed their own Cortina clones – such as the Morris Marina and Hillman Avenger. This was where the profit was.
The Morris 1800 could have sold more overseas without European import tariffs
Even the BMC 1800 ‘Landcrab’ could have been more successful, had it been price-competitive in EEC countries. Once its glitches had been sorted out, it was the kind of car that could have appealed to Continental buyers – a sort of British Citroen DS, with its Hydrolastic suspension. Instead, it became dependent on EFTA and the UK market where it was seen as overpriced in comparison with the Cortina. The ADO17 is now seen as a mistake, but in 1965 it was voted ‘European Car of the Year.’
Again the Austin Maxi is another car that might have sold better had it been price-competitive in the EEC. Like the 1800, it was dependent on EFTA and the UK market, and was seen as an unreliable Cortina rival.
The immediate solution was to set up satellite plants in EEC countries to assemble BMC vehicles, using CKD kits or to make arrangements with local firms to assemble cars under licence. The best known satellite plant was Seneffe in Belgium, which produced Minis between 1965-’81. BMC gained access to the Italian market by doing a deal with Innocenti to build cars in Milan but, even so, CKD kits were subject to some duty.
Building cars at overseas factories, such as Seneffe, alleviated the imbalance
The effects of being locked out of the EEC car market could be seen by 1970. In a decade French car production had increased by 109%, West Germany by 94% and Italy by 189%. In contrast, Britain – dependent on a stagnant domestic market – saw only a 21% increase in production. Most of that extra capacity, installed at great cost earlier in the 1960s, was simply never utilised.
In 1970 imports had a 14.3% market share in Britain, which seemed horrifying enough, but imports in France were 19.8%, West Germany 22.5% and Italy 31.1%. It would be 1974/75 before imports reached Italian levels in Britain. Between 1960 and 1970 British car sales had increased 34%, French by 20%, West German by 117% and Italian by 158%.
Better late than never: Britain joins the EEC
In 1971 the Conservative Government of Edward Heath at last succeeded in gaining entry to the EEC, which came to pass in January 1973, and only after President de Gaulle had left office in 1969. For the British motor industry, EEC entry was a decade too late. A decade of inadequate profits, resulting in low re-investment in plant and machinery.
BMC had banked everything on early EEC entry to exploit the design genius of Alec Issigonis and had drawn a blank. A dependence on the home market had seen them fall into the hands of Leyland and Alec Issigonis was sidelined. Britain’s last year outside the EEC, 1972 saw UK car production peak at 1,921,000.
This was fuelled by and large by the ‘Barber Boom’, as the Heath Government desperately tried to boost the economy. Car sales in 1972 also revealed the effect of a decade of isolation from the EEC. While most of the big European manufacturers had high technology front-wheel-drive cars either on the market or in the pipeline, most of the best-selling British cars were conservatively engineered rear-wheel-drive vehicles aimed at the unique to Britain fleet market, because that was where the money was.
The Austin Allegro was too underdeveloped to compete in effectively in the 1970s
The first decade of EEC membership was a disaster for the British motor industry. British Leyland was cash strapped, so cars like the Austin Allegro and 18-22/Princess were hopelessly underdeveloped, and Britain already had a reputation for strikes and poor build quality. The Austin Allegro was billed as ‘British Leyland’s car for Europe’, launched as it was, five months after Britain’s EEC entry – except the Allegro catastrophically failed to sell in anything like the quantities of its illustrious ADO16 predecessor, even to its home market. It was the wrong car at the right time.
BMC had been unable to exploit the Mini and 1100 by selling at a competitive price in the EEC and that had given rival European manufacturers a breathing space to develop and improve on the Issigonis formula.
The Fiat 128 of 1969 was the first significant car out of the block, followed by the Fiat 127 in 1971, the Renault 5 in 1972 and the Volkswagen Golf of 1974. Alec Issigonis may have been one of the greatest car designers who ever lived, but others reaped the benefit of his innovation. ADO16 production had peaked in the sixties at 7000 a week. By 1975 Volkswagen were producing the Golf at 10,000 a week, while weekly Allegro production at Longbridge was down to 2000.
It wasn’t just BL that was struggling…
The situation for Ford of Great Britain and Vauxhall was equally dire. Many EFTA countries had joined the EEC at the same time as Britain and were soon supplied with new cars from Ford and General Motors’ European plants instead of their British factories. Ford and General Motors in Britain went from being exporters to importers as a way of exploiting growth in the UK market and circumventing industrial action in their British factories.
Their UK plants became superfluous and marginalized. By 1983 half of all Fords sold in Britain were continental imports. The situation was even worse with General Motors. Two thirds of all Vauxhalls sold in Britain were imports.
The divorce in design ethos between Britain and the Continent is emphasised by the fact that Ford of Great Britain wanted the Escort MkIII to be rear wheel drive to appeal to the conservative fleet buyers, who intrinsically believed that front wheel drive was unreliable. This was a luxury that even the mighty Ford could not budget for, and front wheel drive was foisted on Dagenham.
By now the design offices of Ford and Vauxhall had been merged with their Continental counterparts and Dagenham and Luton had become minor satellites in a pan-European operation. Being importers, Ford and Vauxhall in Britain were likely to become casualties of any rationalisation. Car assembly eventually ceased at Dagenham and Halewood became part of Jaguar Land Rover. Vauxhall ceased car production at Luton, leaving only Ellesmere Port as a reminder of the once substantial American investment in the British car industry.
The decline of British Leyland during this period is well documented on this site, but there was one piece of good news for the company during this time. EEC entry in 1973 at last enabled Austin-Morris to sell the Mini at a competitive price. During the 1970s, some 2,438,187 were manufactured, the little car’s best ever decade – of this total, 1,533,825 were built after Britain joined the EEC, many supplied from Seneffe and Innocenti.
The Mini may have been outmoded as a front rank small car by this point in time, but it enabled many European buyers to at last afford one, and create a legacy of goodwill that BMW have been able to exploit.
The period from 1963-’73 was for BMC and later British Leyland, a lost decade in which it was unable to exploit its lead in front-wheel-drive technology, due to its inability to sell to EEC countries at a competitive price. This isolation enabled France, Germany and Italy to surge ahead in an expanding European car market.
By the time the UK joined the EEC in 1973, the window of opportunity had closed, British cars were no longer competitive in technology terms, and as well as already enduring an automotive invasion from the Far East, Britain now had to face an invasion from the Continent.
By the time the Metro was launched in 1980, it was already over for BL in Europe
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