PART TWO : 1967 – THE KNIVES ARE OUT
In January 1967 BMC received a jolt when it was revealed that its UK market share had dropped in December 1966 to 27 per cent. This was seized upon by the pundits as indicating that BMC was in deep trouble. An inability to supply the market because of the autumn disputes was the route cause of this apparent slump, not a lack of appeal by its products.
However, in January 1967, when the Mini Cooper S of Rauno Aaltonen and Henry Liddon won the Monte Carlo Rally, BMC’s UK market share rose again to a more normal 35.9 per cent. Unfortunately, that same month BMC lost an estimated 10,000 cars because of a three-week strike at an outside supplier.
By late February 1967 BMC was discussing with the unions the resumption of night shift working which was discontinued at the time of the redundancies in November 1966. It was intended to increase production of the ADO16 Austin and Morris 1100s and to transfer production of the ADO16 Princess and Riley 1100s from Longbridge to Cowley.
Meanwhile, over at Jaguar, the other partner in the British Motor Holdings organisation, Aerodynamicist Malcolm Sayer was working on a new small Jaguar to replace the ageing Mk2 saloon. This project had been instigated by Lofty England to utilise and exploit BMC’s resources in and area where the corporation was weak, the lucrative executive car market. Lofty England told Jaguar historian Paul Skilleter: ‘We should get started on a smaller car [and] use some of their production facilities to do so. What I had in mind was a car around the same size as an Alfa Romeo Guilia Sprint – a two-door four-seater with sporting Jaguar looks that looked, went and was priced like a Jaguar…’
‘My plan was to have the body manufactured, painted and trimmed by Pressed Steel at Castle Bromwich and use some suitable BMC running gear and a 1500 or 2-litre Coventry Climax engine (we then owned Climax), make around 50,000 per year and sell for around £1250.’
On 26 February 1967, Malcolm Sayer issued a memo ‘Jaguar Small Car’, accompanied by a coloured sketch of how it might appear. He also listed an interesting selection of power unit options for discussion: the Daimler 2.5-litre V8, Coventry Climax 2-litre V8, and Jaguar 3-litre XK six cylinder.
On 1 March 1967 Jaguar held a meeting to discuss the small car project.
The new car was provisionally referred to as the Jaguar (Junior) GT car, and the ‘Model Meeting’ agenda contained recommendations concerning its basic specification. Its overall dimensions would correspond to the standard (non-2+2) E-type’s in terms of wheelbase (8ft) and track (4ft 4ins) but, despite an overall length of just 12ft 7ins – over a foot shorter than the original E-type’s – ‘the redisposition of the body space and units in relation to the wheels has enabled an internal body space 2ins longer than the 2+2… to be obtained.’
Width at 5ft 5ins was the same as the E-type’s but again, more internal room would be obtained through the use of curved glass, ‘which also permits thinner and lighter doors to be used.’
For some reason the 2-litre Coventry Climax V8 was off the agenda, and the choice of engine was now between the 2.5 litre Daimler V8 and the 3-litre version of the inline six-cylinder XK engine.
Back over at BMC the situation was improving. BMC now had a 1967 weekly production target of 17,200, an increase of 1700 since January, when sales were 30 per cent higher than in the same month in 1966. To maintain output at this new level BMC was recruiting 3,000 men (only four months before 12,000 were sacked). This new weekly production total of 17,200 was 700 above the average needed to achieve the corporation’s target of 809,000 for the financial year ending 31 July 1967.
On the subject of the 3000 new recruits, BMC was quick to point out that they would be replacements for men who left voluntarily after the October 1966 redundancies to seek a more secure job elsewhere. No attempt would be made to attract back former employees, but, as a BMC spokesman put it: ‘If they apply to us we shall not turn them away. After all, they are experienced car workers.’
In spite of the need for increased production, there was no intention of recruiting more than the 3000 needed.
These were weekly production targets set by British Motor Corporation since August 1966:
- August – 22,600
- September – 20,200
- October – 16,000
- November – 14,000
- December – 12,200
- January – 15,500
- February – 16,300
- March – 17,200
Between September and December 1966 none of these production targets was achieved because of a series of strikes. However, in March 1967 BMC produced the millionth ADO16 1100 saloon – whatever the corporation’s critics may have had to say, BMC did produce products the public wanted to buy.
Then, on 13 April 1967, came the bombshell: British Motor Holdings lost £7.5m in the six months to January 1967. This represented an adverse swing of £13m in pre-tax profit.
BMH disclosed that its trading loss for the period was £430,000, compared with £12,463,000 profit in the previous half-year, while depreciation rose to £7,090,000 (£6,678,000); estimated loss before taxation was £7,520.000 (against £5,785,000 profit). The company had been expected to show a big drop.
BMH had been hit far worse than was feared by a seemingly continuous round of strikes and the strong measures of the July 1966 freeze and squeeze measures. The measures were introduced, the company pointed out, just nine days before the start of its financial year. Higher rate, tight hire purchase terms, increased purchase tax and a ceiling on bank loans combined to knock 15 per cent off car registrations between August 1966 and February 1967. In the first six months of its financial year to the end of January 1967 BMC produced 23 per cent fewer cars.
However, in August and September 1966 BMC increased its home market penetration to 39 per cent, against 35 per cent the previous year. This encouraging period came to a sudden halt when Longbridge delivery drivers struck, the dispute drifted on for three months and the company lost production of 25,750 units. At the same time an unofficial dispute at BMC’s Morris Radiator factory caused the loss of another 25,000 units.
Because of these losses BMC’s share of the dwindling home market fell, in the last three months of the year, from 39 per cent to 27 per cent. And to continue the pattern of industrial strife, maintenance men at Birmingham Aluminium Castings struck, costing BMC another 10,406 vehicles in January 1967. The company was expecting the year to be tough, but to add to the miseries imposed by fiscal measures it had the galling experience of missing production targets by 69,649 vehicles.
BMH blamed the Government for its woes – even industrial disputes. ‘The Government’s fiscal policies have produced violent fluctuations which are the underlying cause of the present unrest in the labour force. In his Budget, the Chancellor has seen fit to give relief to the motor cycle industry alone, but it is imperative that the Government should take the very first opportunity of permitting our industry to find its natural level, thus allowing it to stabilize production and generate the capital so urgently needed to keep abreast of its foreign competitors.’
The shock interim loss of £7.5m by BMH was pounced upon by the financial analysts, who seemed to be impatient for positive results and were unable to comprehend that Managing Director Joe Edwards’ remedial work would entail some pain in order to perform the required surgery on BMH.
Among them was Anthony Bambridge, Business Editor of The Observer newspaper. He wrote in the 16 April edition: ‘But BMH’s problems go far deeper than the squeeze and strikes. In both cars and commercial vehicles it seems to be losing ground to fast for comfort.’
‘Eighteen months ago BMH was number two in the truck market, hard on the heels of Vauxhall’s Bedford. Now it has crashed to fifth place behind Ford, Rootes/Dodge and Leyland. Its market share has almost been halved. At the end of 1965 it led the van market by a handsome margin, accounting for over one third of all sales.
‘Ford’s Transit – the best selling van in Europe – has knocked BMH off its pedestal and shaved sales drastically. Last month production of Ford’s Cortina overtook that of the Austin/Morris 1100. The assumption is that sales are ahead also. Mini sales are slipping. In 1963 they held 15 per cent of the home market. Last year this had slid to 10 per cent and is now under 7 per cent.’
It was true that the new Ford Transit had proved a great success, but the Ford Cortina’s reign as Britain’s best-selling car lasted just one year before the BMC ADO16 regained its crown in 1968. For some reason the market went crazy for the Ford Cortina, now in Mk2 guise, in 1967. Dagenham produced 249,861 of which 201,293 were sold in the UK. After this Cortina sales dropped back dramatically and did not approach the heights of 1967 until 1979.
As for the Mini, its biggest production year was still ahead, 1971 to be precise and it remained the best-selling small car in Britain right up to 1980.
Anthony Bambridge continued: ‘The 1800 has not lived up to expectations. Sales are actually below those of the long standing Austin Cambridge and Morris Oxford. It took the transverse engine concept too far,’ maintains an Italian car man.
‘Even its designer , Mr Alec Issigonis, has said it is ugly. The Viva ‘is going like a bomb,’ says Vauxhall, confident that sales will ‘comfortably exceed 10 per cent of the total market this year. We’re scheduling every single car we can make and still it’s insufficient.’
To other car makers BMH has made two mistakes. It has failed to rationalise its product range and failed to invest enough in new products. “You must keep your product range fresh,” says Ford.’
Certainly BMC had failed to rationalise its product range, but dealing with that was on the cards. As for investment in new models, BMC had invested heavily in front wheel drive technology compared to its rivals who invested in facelifts of older rear wheel drive technology.
What was conveniently forgotten by the pundits was that the Mini and ADO16 were two of Britain’s best-selling cars both at home and in export markets and that BMC had got their specification right – the sales figures proved that. It is doubtful BMC would have produced some 12,000 a week of these Issigonis cars had they been conventional rear-wheel-drive models. They enabled BMC to punch above its weight and raise expectations that were ultimately dashed.
Bambridge concluded: ‘The company has no intention of reducing its marques, says Harriman. Equally, he intends to maintain the present dealership pattern. The more outlets you have the more you sell.’
There was a great deal of truth in what George Harriman said. When later British Leyland axed many dealerships, these garages simply defected to the Japanese importers and took their customers with them. Many of BMC’s critics seemed to want the company to become a clone of Ford of Britain and this mindset would influence future events.
British Motor Holdings was so worried by the possibility of further desertions from its below strength labour force and the general effect on morale of the news of the group’s £7.5m loss that it was circulating a major policy statement on its future to all employees.
Since the massive redundancies of autumn 1966 a further 3000 employees had left of their own accord. This had caused serious production imbalance – worse in some factories than in others – and had led to production switches between plants assembling similar vehicles. A recruiting campaign was now attempting to fill the gaps. The man chosen to restore confidence was Bill Davis, Deputy Managing Director in charge of production.
In his statement he made no attempt to play down the events of the previous eight months, describing it as one of the most disturbing periods for management and employees in the history of the company. From a position of great strength, due to a combination of model acceptability and high potential output, the sales projection into 1967 was most dramatically arrested. The effects were still being felt.
Bill Davis reported on negotiations with the trade unions for ‘judicious use’ of overtime to reach an 18,000 vehicles a week target set for the next two months. Sales forecasts were now being interpreted into production programmes in the factories and were showing considerable improvement and, according to Davis, only a concerted effort on the part of everyone would enable BMH to match production to demand. However, he did concede that the demand for some models had not yet reached plant potential.
Despite the one in ten cut in the labour force and subsequent desertions he believed that the group was set fair to produce over 20,000 a week. This would boost output for the next year to well over the 809,000 target set in November 1966 for the depleted labour force.
Shortly after this the Leyland Motor Corporation, which now included Rover and Triumph, was announcing good results in the face of adverse economic conditions.
Sir Donald Stokes succeeded Sir William Black as Chairman at the same time. His group released figures showing that 37.5 per cent of all heavy trucks (more than five tons unladen weight) registered in March 1967 were products of Leyland, Albion, AEC and Scammel. Since September 1966 Leyland’s market share had risen progressively each month from 28.1 per cent.
In March 1967 Standard-Triumph’s share of the home market jumped to 8 per cent, the highest for six years. This meant that, together with Rover (2.6 per cent), the Leyland Motor Corporation held 10.6 per cent of the UK car market.
What was overlooked, of course, was that Leyland’s products had a higher profit margin than BMC’s and the Rover and Triumph 2000 saloons competed in an area where the American-owned companies were weak. On 12 May 1967 the Industrial Reorganisation Corporation (IRC) asked both Leyland and BMC to supply them with detailed information about their operations. Both firms agreed to consent to give the IRC information on the condition that it was of the kind available to any shareholder.
The Industrial Reorganisation Corporation was a Government body established in 1966 to encourage mergers and reorganisation to create more efficient British industrial base.
The Industrial Reorganisation Corporation (IRC) then asked two merchant banks, Lazards and Warburgs, to help them in their investigation into Leyland and BMH’s finances. The IRC told Sir Donald Stokes of the Leyland Motor Corporation that his company would have profits that were 10-15 percent lower in 1967. They predicted BMH would break even, which would require a substantial recovery in the second half of their financial year.
The IRC suggested that one of the two companies would have to initiate merger moves and it was clear from the outset that Sir Donald Stokes was the man the IRC wanted to run a merged organisation. The Times newspaper appeared to have got wind of this and in its 1 June edition revealed that talks were taking place between British Motor Holdings and Leyland.
- Tony Benn
Mr Anthony Wedgwood Benn (now Tony Benn), the Minister of Technology, had suggested that BMH and Leyland should get together in joint export operations designed to increase their competitiveness in world markets.
In spite of the gloomy economic outlook, BMH was determined to press ahead with plans to invest at the rate of £20m a year to increase capacity from its existing 1,100,000 vehicles to 1,250,000 vehicles by 1970. BMH also revealed in June 1967 that the many barbs directed at the group by its critics in recent years for being too inbred and too slow to use business management techniques had sunk home.
Accommodation at its staff college at Haseley Manor, near Warwick, had been vastly increased since February 1967, but what was even more important, top management specialists had been recruited from outside BMH to hold key positions in the college. In addition, the courses offered had been so extended that the college’s new title would now be the Central Training and Productivity Services Centre. It was intended to build up a number of small, highly professional teams at Haseley Manor to provide management with consultancy services.
The man in charge of the whole operation was Neville Patterson, who was recruited from ICI.
‘The whole enterprise is receiving the most enthusiastic backing of Sir George Harriman and his board. With their blessing, we are trying to give a new emphasis and a fresh cutting edge to certain vital aspects of the group’s management and training set up.’
Another part of Joe Edwards master-plan to rejuvenate BMC was put in place at the end of June 1967. The British Motor Corporation announced the appointment of 48-year-old Filmer (Phil) Paradise (left), the extrovert cigar-smoking American who headed Ford’s operation in Italy until a few months previously, to oversee its European manufacturing and sales network.
He became Managing Director of BMC International Services, BMC Europe and BMC Switzerland and he would be based at the corporation’s European headquarters in Lausanne. His recruitment was credited to BMC’s Deputy Managing Director with responsibility for sales, Lester Suffield.
Also in June 1967 the British Government relaxed a little the ongoing credit squeeze. They reduced hire purchase deposits to 30 per cent with repayments extended from 24 months to 30.
At the July board meeting of the Leyland Motor Corporation, Sir Donald Stokes told his colleagues that various discussions were being held with BMH to try and avoid both companies competing in the same market sectors. Stokes stated that the interests of the shareholders were paramount, but the talks would continue in order to retain the goodwill of the Industrial Reorganisation Corporation.
On 28 July, Sir Donald Stokes met the Minister of Technology, Anthony Wedgewood-Benn, to find out the attitude of the Labour Government and the Monopolies Commission to a proposed BMH-Leyland merger. By now Lewis Whyte of the Leyland board, who had come on board with the 1962 Leyland-ACV merger, was investigating reorganising the company’s share equity in order to make a bid for BMH.
By early August 1967 rumours of merger talks were reaching the press but they were emphatically denied. The year was panning out into a public relations battle between BMH and Leyland. The probable aim to boost their respective share prices, should a merger come to pass. Autocar magazine published an edition devoted to BMH. Managing Director Joe Edwards said of future BMC models: ‘We shall stick to our inbuilt primary safety: front wheel drive, Hydrolastic suspension, a wheel at each corner, inherent rigidity, good visibility, steering and braking.’
The magazine was also told that the aim of BMH was to produce 1,500,000 vehicles a year by the 1970s. Sir Donald Stokes had asked former Leyland Director Jim Slater, who had set up his own investment business, to investigate the finances of BMH.
By and large Slater was in favour of a BMH-Leyland merger, though he preferred an amicable takeover. A gloomy assessment completed on this day, reported doubts about whether the forthcoming ADO14 BMC 1500 could achieve the required success. Jim Slater said the BMH management had shown, ‘a serious lack of foresight’, its board was unimpressive and the firm had ‘an enormous staff surplus.’
He also said that BMH had not started graduate recruitment until 1963 and the fall-out rate had been high. Excluding Jaguar Cars, it had seven model ranges when Ford had four and there had been no attempt to concentrate production of one model in one factory. In addition to this its commercial vehicle business was under assault from Ford and Vauxhall.
Overseas BMH had performed better and BMH did have, ‘an immensely strong liquid position.’ Jim Slater predicted that in the 1966-67 financial year BMH would turn in a financial loss of no more than £10m.
In late August 1967 it was revealed that the British Motor Corporation had sacked one in 10 of its 11,600 strong franchise-holder and dealer network to produce what a company spokesman described as a, ‘sale set-up offering better financial prospects for the remaining dealers and a more efficient outlet for our products.’
This was a complete reversal of BMC’s policy of retaining every available outlet in order to deny them to the opposition. Before the cuts the company held 42 per cent of retail car selling outlets in the United Kingdom. Then BMC announced that from 1 January 1968, the Austin and Morris names would disappear from the commercial field. From that date, the group’s commercial vehicles would carry a common BMC badge. It was fresh evidence that BMC was deeply committed to a major reorganization of its whole sales and distribution operation.
BMC was fighting to hold its 30 per cent share of the United Kingdom commercial market, but it was known that Ford’s extremely successful Transit van had made some inroads into this. It was largely to counter this loss that BMC earlier in 1967 introduced a new range of light vans known as the 250 JU series.
On 13 September 1967 the former BMC Chairman Lord Lambury, formerly Leonard Lord, died. After his retirement in December 1961 he had become President of BMC. What is not known is whether he acted in an advisory capacity to Joe Edwards and Sir George Harriman during this period and whether his death acted as a catalyst for Sir George Harriman to agree to a merger with Leyland, now that his mentor had departed the scene.
The British Motor Corporation increased its share of motor-car registrations in August 1967, reversing the trend shown earlier in the year.
For August, the BMC share was 31.6 per cent against 28.9 per cent in July and around 38 per cent for August of 1966. Ford’s share at 24.5 per cent was slightly below the 25.4 per cent of July, but still comfortably above the 23.9 per cent of August 1966. BMC’s performance reflected good sales of the ADO16 1100s and Minis.
British Motor Holdings told the media on 27 September that it was expecting to snap back to a profit of over £10million in the 1967-68 financial year.
Mr Ron Lucas, Deputy Managing Director of British Motor Holdings said: ‘We have pulled back some of the initial £7,500,000 loss in the first half of the last financial year. The second half of that year was a more profitable one for us. I shall be very disappointed if we do not make a profit of £10m in the current financial year. I do not expect the figure to be in that range, I expect it to be more. However, it is impossible to forecast a result after only two months of the year.’
Sir George Harriman, Executive Chairman of British Motor Holdings, expected BMH’s recovery to continue. BMH was planning to spend an average of £20million a year over the next four years to increase its capacity by about 250,000 vehicles. The group planned to finance the expansion out of cash flow and was aiming to step up the rate of return on investment to 20 per cent. This implied pre-tax profits of around £40m at the end of the four years. Sir George was convinced that total production for the current financial year would top 1,050,000 units. This was an increase of 150,000 over previous estimates and BMH expected to provide 40 per cent, or 60,000, of these.
One of the group’s main marketing aims was further penetration into export markets. The company’s sales chief, Mr Lester Suffield, said: ‘We believe the greatest opportunity for still further increasing our business lies overseas.’
The Times newspaper wrote: ‘The British Motor Holdings profit projection announced yesterday is almost certainly conservative, and barring the unexpected £15 million to £20million seems more likely than the £10million mentioned by Mr Ronald Lucas, the Deputy Managing Director.’
In October 1967 BMH had to endure another critique of its fortunes. The monthly Car magazine published an article by John Bescoby, Tutor in Industrial Studies at the University of Newcastle upon Tyne, which analysed BMC. The magazine used the phrase, ‘increasingly rapid decline in the fortunes of BMC’, in its sub-heading, which revealed the kind of mindset the corporation was having to combat.
Mr Bescoby wrote: ‘Meanwhile BMC, which is the original and by far the larger component of BMH, is causing serious concern outside Government circles. Investors are aghast at its financial deterioration, students of management and labour relations are seriously worried about recent trends inside the company and potential buyers as well as dealers and existing owners are distressed by its failure to keep up with the opposition in market research, product planning, body styling and reliability.’
This was similar to the argument put forward by Anthony Bambridge in The Observer. The article continued: ‘Its position, however, is no longer impregnable and recent press reports now put its share of the home market at 27 per cent compared with 60 per cent 15 years ago. This means that Ford, wholly owned in America, is now in a position to challenge for the lead in home sales instead of having to rest content with a market share that was until recently less than half of BMC’s and declining steadily.
‘In the longer term, BMC’s deterioration makes it easier for the giant American General Motors Corporation to assert (through Vauxhall) its customary dominance even over Ford.’
The market share figure of 27 per cent was from December 1966 when BMC were plagued by the Morris Radiator and Longbridge driver strikes. The Ford sales surge didn’t come, with cars like the Mark 4 Zephyr/Zodiac in their range, the Dagenham men still lacked a portfolio of models that appealed to all sectors en masse.
Bescoby was more on the money when he discussed labour relations. BMC had the worst strike rate in the British motor industry: ‘BMC’s failure to solve its labour relations problems has undoubtedly contributed to its present situation. Naturally other firms in the industry have been beset by labour problems – some of them severe – but what distinguishes BMC is its apparent inability to deal with them and to establish an organisational structure with the authority, resources and courage to innovate successfully in this admittedly difficult field.
‘Moreover, the company’s unwillingness to admit that the situation owes anything to defects in its own structure or behaviour does not augur well for any substantial improvement in the near future. Six years ago, BMC appointed a Director of Industrial Relations. This was a new post and it seemed then that it might lead to a new approach. Then (as now) there was an urgent need for the development of policies which could be applied throughout the organisation and which would introduce an element of standardisation into the patchwork which exists in BMC’s empire of scattered factories.
‘However, the practice of making ad hoc decisions at different works seems to have continued and there is little evidence to suggest that overall company wide policies in labour relations are beginning to emerge.’
What analysts didn’t really understand was that, like other firms, BMC had a disputes procedure in place. However, a strike was more likely to speed the grievance process up, circumventing management and union officials and hitting the employer where it hurt, and this mindset was widespread on the shop floor at the time.
Mr Bescoby continued: ‘BMC also continues to employ a notoriously complex piecework system and with hundreds of different rates in upwards of 20 plants it is difficult to discern a clear pattern of equitable wage payment. This complexity of rates offers untold possibilities to the enterprising shop steward on the look out for arguments which can be used to justify a claim for increased pay.
‘If he can demonstrate that higher rates are being paid for apparently similar work in other departments – or even in other factories of the corporation – then his revelations may be used to jack up the rates of the workers in his section. Only very recently has it been revealed that something is being done to try and sort out the situation; things are still only in the discussion stage. Action must quickly follow if further trouble is to be avoided.’
The last sentence illustrated the complete lack of understanding of the mentality of the shop floor worker by analysts. Car workers in BMC stubbornly resisted the introduction of measured day work long and hard, Longbridge finally submitting in 1972.
Bescoby referred to the BMC A-Series engine: ‘But the real trouble here is that the power unit is very long in the tooth and does not offer the standards of smoothness, silence and performance which are now demanded both in export markets and increasingly at home.’
Ironic, considering the engine went out of production in 2000! The A-Series was, in fact, a remarkable power plant that defied the ageing process. Bescoby probably hit the nail on the head when he said: ‘Labour planning has also suffered from inadequate forecasting and the resulting redundancies have diminished even further any remaining reserves of goodwill which exist between the company and its employees.’
On 13 October 1967, The Times newspaper published details about the British Motor Corporation’s new £16m engine plant at Cofton Hackett, Longbridge, which was planned to start limited production in two months. The article said that Cofton Hackett would make a four and six-cylinder versions of the most advanced design of overhead camshaft engine to be produced in Britain for a mass production family saloon.
The new engines would be of 1.5- and 2.5-litre capacity for front-wheel-drive vehicles. This was referring to the E-Series engine, although British buyers would not see a 2.2-litre version until 1972 and never got the 2.6-litre variant that some export markets received.
The article stated that, when production got into full stride in about the middle of 1968, they would be coming off five assembly lines at the rate of 5000 a week.
The more emissions friendly layout of the E-Series promised much, particularly in relation to the American market, which was introducing stringent regulations to combat pollution. BMC intended to produce the new engines more cheaply than it had ever done before.
To achieve this it was spending £14m on machinery alone providing what Mr Bill Davis, Deputy Managing Director in charge of production, described as, ‘the greatest concentration of modern equipment in an area of comparable size anywhere in the motor vehicle manufacturing world. We shall build engines and gearboxes which will later be assembled in another part of the new plant to produce a complete power unit. It will all be several years ahead of its time so we have a kind of compound interest in our investment before we even begin,’ he said.
So automated was the layout that it would require a labour force of only 1,100 men. There were five assembly tracks employing transfer bar conveyor systems with major components being fed direct by overhead conveyor from the machining area. A special feature was the semi-automatic assembly of cylinder heads. The engine and transmission units would be tested on an overhead balcony before the final build-up.
The Cofton Hackett plant would be seen by historians as a costly white elephant that absorbed precious BMC funds, but it was much nearer to Longbridge than Morris Engines in Coventry which was ultimately closed, while Cofton Hackett survived until 2005.
What stained Cofton Hackett’s part in BMC’s plans was the engine it initially produced. The OHC E-Series engine in both 1485cc and 1748cc four cylinder form simply lacked the torque of the existing OHV B-Series engine, but experimental OHC conversions of the A-Series engine were also torque shy in the lower and medium rev range, it was a penalty of the more emissions friendly layout.
Furthermore, as the E-Series engine never found its way into an export market sports car (MG planned to use it in the ADO21 and then the 1985cc OHC Triumph/Saab engine became available) and restrictive European emissions legislation did not come into force until 1992, the E-series engine became superfluous.
It was during the weekend of 13-15 October that Prime Minister Harold Wilson along with Technology Minister Anthony Wedgewood Benn convened a meeting at Chequers between Sir George Harriman of BMH and Sir Donald Stokes of Leyland. The Prime Minister suggested that a merger between British Motor Holdings and the Leyland Motor Corporation would be in the national interest. Sir George Harriman of BMH later said: ‘When the Prime Minister asks it’s not a good thing to say no. After Chequers I did feel an extra compulsion to go ahead.’
When Sir George Harriman agreed in principle to a merger it was on the understanding that BMH would emerge as the dominant partner.
On 16 October British Motor Corporation announced some new models for 1968. One of the new models was the ADO61 Austin 3-Litre, designed to replace the Farina ADO53 saloons and, at the London Motor Show, BMC lifted the veil prematurely on the Austin 3-Litre, which was scheduled for production in early 1968, but with 100 being distributed in the meantime for three months customer evaluation.
Using a revised version of the 2912cc C-Series engine driving the rear wheels and featuring Hydrolastic suspension, from an engineering point of view the new Austin was not a bad car. However, it used the ADO17 1800 side-doors and boxy styling at a time when customers had a wide choice of stylish executive cars from the likes of Jaguar, Rover and Triumph. And as Ford found out with the Zephyr/Zodiac Mk4, the Austin lacked the perceived brand values of these rivals. The ADO61 Austin 3-Litre ceased production in 1971 after 9992 examples.
The Austin 3-Litre could, though, be looked on as a cheap to develop stopgap that would do until Jaguar produced their new small car. The failure of this car was used as another stick to beat the BMC management.
The British Motor Corporation also announced the six-cylinder, 2.9-litre ADO52 MGC sports car, capable of 126mph. Like the Austin 3-Litre, the MGC used the new version of the six-cylinder C-Series engine in an MGB bodyshell. What the media were not told at the time was that an Austin Healey version, the ADO51, had been engineered but that was vetoed by Donald Healey.
The MGC was intended to replace the Austin Healey 3000. The ADO51/52 project was dogged by controversy with brickbats flying between Morris Engines and MG. Early cars and those tested by the press suffered from slow revving engines and poor handling caused by the overweight engine, this killed sales. Later cars, as owners of surviving examples will testify, were much better.
The next day BMC announced the Mk2 Mini and Mk2 ADO16 (below), now available with an additional 1275cc variant.
These new variants were actually more important to BMC than any new models. The new 998cc Mini 1000 was added to the range of standard ADO15 models to join the existing 848cc car and there was more standardisation of parts between the Austin and Morris versions. The 1300 version of the ADO16 came in the nick of time for BMC and would revitalise sales of the model in 1968. In 1968 ADO16 production peaked and the car reasserted itself as Britain’s best selling car, which was one in the eye for BMC’s critics.
On the same day Leyland board member Lewis Whyte wrote a memo. Whyte wrote that a Leyland-BMH merger would make no sense without, ‘a radical realignment of the multiplicity of separate companies and plants. A massive reorganisation, streamlining, concentration and elimination would be necessary… it does not seem worth while even discussing the matter further unless BMH would be prepared to think along these lines.’
One thing was clear: a lot of people knew that a merged Leyland-BMH company would require rationalisation.
The BMC propaganda offensive continued. On 19 October the British Motor Corporation announced it had poached Roy Haynes and Stanley Dews from Ford of Britain. Roy Haynes, Ford of Britain’s Chief Stylist who shaped the 1966 Cortina and Mk4 Zephyr-Zodiacs, was to become BMC’s Director of Styling. Stanley Dews also joined BMC as Director of Commercial Vehicle Design.
Mr Haynes would be based in BMH’s Pressed Steel Fisher plant at Cowley, the research and development centre. There would, BMC said, be no receding from the Issigonis advanced engineering concepts, nor any clash of ideas. The corporation’s chiefs directly behind the acquisition of Ford’s head stylist were Sir George Harriman, BMH Chairman, and Mr Joe Edwards, his Managing Director.
Sir George Harriman, the 60-year old Chairman of BMC, claimed that it was pure coincidence that his new signings came from Ford. ‘I want the best men and I am prepared to buy them no matter who they work for at present,’ he said. Now BMC had revitalised its design team. The following day Leyland responded. The Leyland Motor Corporation caused surprise by making a profits forecast of not less than £17m based on the un-audited accounts to 30 September 1967.
Leyland also decided to reorganise their share equity. As a result of this good news, the price of Leyland Motor Corporation shares exceeded those of British Motor Holdings just before representatives of the two firms met at Chequers in the afternoon. At Chequers, Sir Donald Stokes and Lewis Whyte of Leyland met with Sir George Harriman of BMH and his financial advisor, John Pears of Cooper Brothers. These were the first official merger talks.
The news that BMH Chairman Sir George Harriman was in favour in principle of a merger with the Leyland Motor Corporation had come as a bitter blow to Managing Director Joe Edwards. Edwards felt it would take another eighteen months to get BMH back to full health. Joe Edwards already had plans for further rationalisation of BMH.
He planned to close Morris Bodies in Coventry, Morris Radiators in Oxford, parts of the MG complex at Abingdon and Fisher and Ludlow at Castle Bromwich. This would axe another 8000 jobs from BMC’s payroll.
Edwards had also asked Jack Scamp, the industrial relations trouble-shooter, to join BMC to take charge of labour relations, but he declined. Joe Edwards had no intention of working for Sir Donald Stokes whom he felt was in cahoots with Prime Minister Harold Wilson in forcing a merger. This was a feeling shared by others in BMH.
Although there was no conspiracy as such, the Prime Minister, the Minister of Technology, Anthony Wedgewood Benn, and the IRC clearly favoured the Leyland Motor Corporation. After his success in selling buses to Cuba, Sir Donald Stokes had become the poster boy of British business, aided by Leyland’s efficient PR machine. Politicians and the media all fell for this image.
Nothing substantial was achieved that day except Sir Donald Stokes agreed not to make a takeover bid for BMH and to ask the Prudential Assurance Company to act as arbitrators.
In the November 1967 edition of Car magazine Raymond Baxter, BMC’s Director of Motoring Publicity, responded to John Bescoby’s critique of BMH in the previous issue of the magazine. The ex-Spitfire pilot pointed out that Mr Bescoby was relying on out of date information.
On the wage structure, Baxter wrote: ‘As long ago as July, it was announced that top level talks between management and unions had been in progress for some time. The declared intention was to examine this very difficult problem to the mutual advantage of both sides. Mr Joe Edwards, Deputy Chairman of BMC, made the purpose of the talks abundantly clear.’
‘The fact is,’ he said, ‘that certain segments of our wage structure are thoroughly out of date.’
Initially, at the request of the union representatives, no publicity was given to these negotiations. Eventually a ‘leak’ permitted publication of the story, by mutual agreement between unions and management.
The talks continue, but my point is that in view of the published facts, and the background information which would have been willingly put at his disposal had he asked, it is difficult to see how Bescoby can support his suggestion that BMH is complacent about labour relationships in the various factories under the groups control.’
Raymond Baxter also rounded on those who eulogised Ford’s methods.
Similarly, Bescoby’s quote from The Economist – ‘BMC (market) research is light years behind that of Ford‘ – must be seen to be as unjustified in implication as the words themselves are meaningless; vide his own observation on Ford’s experience with the current Zephyr/Zodiac range. Either a mistake was made in the assessment of potential demand for these cars, or the cars themselves, in some way, failed to meet the public’s requirement of them.’
This was a valid point, Ford’s surefire methods had failed with the MK4 Zephyr/Zodiac and it would not be until the Granada that the firm had a convincing contender in this market segment. Baxter discussed badge engineering: ‘One has become familiar with the accusation that BMH, and particularly BMC, has squandered its resources on badge engineering.
‘What is so frequently overlooked is that this situation was never embarked upon as a deliberate act of policy. The series of mergers which culminated in the formation of BMC presented the new Corporation with an enviable collection of successful product names and marketing structures throughout the world.
‘Wantonly to have consigned to anonymity such a heritage would have been economic Luddism. Between 1959 and 1965, despite the multi-label and marketing structure which some critics find so offensive, BMC alone made a total net profit before tax of over £100 million and earned £838 million in exports.
‘Now, no one at BMH pretends that nothing has changed since 1964 to 1965, when BMC alone made a net profit of £22,780,000. But Bescoby makes little more than a half-hearted attempt to recognise recent major developments in the rationalisation policies to which the Corporation is now clearly committed. The fact that the commercial range is no longer sold under the names of Austin and Morris, but of BMC, must surely be of major significance in terms of future policy.’
Raymond Baxter concluded: ‘What is puzzling is why a writer like Bescoby should apparently choose to ignore what is being done, in preference to focusing criticism upon problems the existence of which is seen to be recognised by BMH.
‘The facts, however, will speak for themselves. Changes already made will soon bear fruit. There is an inevitable time lag in industrial reorganisation. Many of Bescoby’s comments, and those of other critics, have been made during the interim period between cause and effect. Much remains to be done, but this too is recognised at BMH. And let no one imagine that there is any lack of will, energy or skill to accept the challenge of the times.’
However, on 2 November 1967, BMC hit another problem. ADO16 1100/1300 production at Longbridge ground to a halt because of a shortage of components. Because BMC had decided to reveal Mk2 versions of the Mini and ADO16 at the October motor show, there had been insufficient time to produce adequate quantities of new components for the facelifted cars. These were reported to be mainly grilles from Morris Radiators and engine blocks.
The new variants introduced the 998cc and 1275cc versions of the A-Series engine into mainstream production cars. Prior to this the single carburettor 998 cc engine had only seen use on the low-volume Riley Elf and Wolseley Hornet and the 1275 cc unit had been used in the rear wheel drive ‘Spridget’ sports cars.
The Mini Cooper 1275S engine used a completely different block and more expensive specialised components. The expansion of production of the new engines resulted in quality issues.
In the preceding weeks about 800 engine blocks had been rejected because they did not reach required standards of quality. It was reported that the great majority were rejected because of blow holes in the castings. The castings were supplied partly from within BMC and partly from outside. This problem was then compounded by news of an even more serious threat to production caused this time by a strike at one of BMC’s major suppliers, Birmingham Aluminium Casting at Smethwick.
In the pre-merger publicity stakes this was a bad news day.
British Motor Holdings claimed on 6 November to be steadily improving both its sales and profits. In a statement with the preliminary profit figures BMH claimed a ‘significant increase’ in its share of the market during August and September when conditions improved on the easing of Government restrictions.
From holding 28.9 per cent in July 1967 they had increased their stake in the recovering British market to 31.6 per cent in August and 33.2 per cent in September 1967. The next largest share of home market registrations was Ford with 22 per cent. Clearly the Ford sales surge had dissipated.
Even before the market improved BMH had started to better its own position. In the first half of the year to July 31st 1967 it made a huge £7,500,000 loss before tax but in the second half it earned a profit of £4,300,000 bringing the loss to £3,200,000. Sir George Harriman, the cChairman, and his fellow directors believed that the 1967/68 year’s results would show a ‘considerable improvement.’ In the year 1966-67 BMH produced 693,964 vehicles including 25,047 by Jaguar, which was brought into the group a year before.
On 8 November 1967, Lewis Whyte of Leyland presented the company’s figures and forecast to the Prudential Assurance Company, who were acting as arbitrators. Leyland forecast profits of £21million for 1967-68 and £25.5million for 1968-69. The next day it was the turn of BMH to present its figures and forecasts to the Prudential Assurance Company. This was done by Ron Lucas of BMH and John Pears of Cooper Brothers. BMH predicted profits of £20million for 1967-68 and £49million for 1968-69, the latter figure based on a UK market penetration of 38 per cent.
On 14 November at the Prudential Assurance Company, the firm’s Investment Manager, Gordon Clarke, delivered his verdict on the prospects for BMH and Leyland. The Prudential reduced BMH’s profit forecast for 1968-69 to £32m based on a UK market share of 35 per cent. The Prudential also adjusted Leyland’s profit forecast for 1968-69 downwards to £23m.
The upshot of all this was that the Prudential suggested that in a merged company, 55 per cent of stock should go to BMH shareholders and 45 per cent to Leyland shareholders.
This disappointed Lewis Whyte of Leyland, although Gordon Clarke of the Prudential argued that time was against Leyland with BMH’s fortunes on the up. John Pears of Cooper Brothers, acting for BMH, stated that the company now, ‘knew where it was going.’
In a compromising mood, Pears then suggested that a fifty-fifty merger might be acceptable to the BMH board. Lewis Whyte commended the Prudential for being objective and unbiased, but their conclusion had disappointed Leyland. It was decided that John Pears and Lewis Whyte would meet again on 17 November 1967.
On this day Lewis Whyte offered Pears, BMH’s representative, a one for one share exchange, the Chairmanship of the merged company to Sir George Harriman, with the dual roles of Deputy Chairman and Managing Director going to Sir Donald Stokes. John Pears countered this by advocating the financial terms suggested by the Prudential with Stokes sharing the role of Managing Director with Joe Edwards or becoming Deputy Chairman. The following day the British pound was devalued, making exports cheaper. The Government also instigated another credit squeeze.
As President of the Society of Motor Manufacturers Sir George Harriman had a suite at the Hyde Park Hotel in London. Here, on the Sunday morning of November 19th, John Pears of Cooper Brothers met with Sir George and fellow BMH board member Ron Lucas to discuss the merger negotiations with Leyland.
That afternoon Sir Donald Stokes and Lewis Whyte of Leyland joined them to continue the merger talks. Sir George Harriman announced that the BMH board had agreed to the 55-45 equity split suggested by the Prudential. Lewis Whyte countered this by claiming that the previous day’s devaluation of the pound would hurt BMH more than Leyland. But there was agreement that a share for share exchange was likely to prove more acceptable to both company’s and for an equal number of directors with Sir George Harriman as Chairman and Sir Donald Stokes as his Deputy.
A sticking point emerged in the role of Joe Edwards in the future merged company. Harriman wanted Edwards as Joint Managing Director, the Leyland men said there could only be one. Harriman decided to ask the BMH board for their opinions.
The next day Longbridge produced the last Austin A40 (above) – altogether 364,064 cars were produced since it had made its debut in 1958. Annual production had tailed off since the introduction of the ADO16 Austin 1100 in 1963. Gradually BMC was pruning its model range.
Since the 19 November merger talks, Sir George Harriman had consulted the BMH board. The BMH men were unhappy with the one for one share exchange and the position of Joe Edwards in a merged company and Harriman had conveyed this to Sir Donald Stokes by telephone. Then both men had travelled together to Moscow as part of a Confederation of British Industry delegation, but talks between the men produced no further progress. Stokes pointed out that the Leyland share price was now higher than that of BMH.
On 28 November, in a telephone conversation between Sir George Harriman and Sir Donald Stokes, the latter realised that an impasse existed between BMH and Leyland and decided to break off the merger talks. The next day the Leyland board met and unanimously agreed that, in any merger with BMH, Leyland should be the dominant partner and exercise complete executive control.
Chairman Sir Donald Stokes told the Leyland board that the company could not survive indefinitely on its own and that a merger with BMH was vital for its long term survival. Stokes claimed that Leyland needed greater size in order to raise the finance to expand and compete in international markets.
Stokes also revealed that he had been consulting the merchant banker Sir Sigmund Warburg, who advocated that Leyland should make a takeover bid for BMH. Lewis Whyte then outlined to the Leyland board what this would entail.
Since the 29 November board meeting, Leyland’s Sir Donald Stokes and Lewis Whyte had been to see the merchant banker Sir Sigmund Warburg who told them that Stokes should not share power of a merged motor giant with anyone. Warburg had begun to put together a bid for BMH on Leyland’s behalf.
Sir Donald Stokes wrote to Sir George Harriman of BMH on 1 December, re-opening merger negotiations. In his letter Stokes pointed out that as BMH had lost money overall in the 1966-67 financial year, a one for one share offer was a ‘considerable concession’ on Leyland’s part and although he would be happy with Harriman in the role of Chairman, he did not want him as another Chief Executive Officer or to share power with another Managing Director.
Sir George Harriman of BMH replied on 7 December to Sir Donald Stokes’ letter personally. Harriman confessed that events had been moving in Leyland’s favour and that the profit forecasts BMH had given to the Prudential were now ‘almost worthless.’
Harriman stated that a one for one share exchange was now acceptable to the BMH board and suggested that the board of a merged company should consist of four full-time and one part-time director from each side plus two neutral or public figures acceptable to both boards. There would be three Deputy Chairmen, Stokes, Joe Edwards and one of the neutral figures. There would not be an Executive Chairman or Managing Director for the time being and divisions like BMC, Jaguar and Pressed Steel would retain their autonomy.
Harriman argued that a large organisation would be too large for one man to handle. At a BMH press luncheon in London on 12 December, Sir George Harriman, the Chairman of British Motor Holdings, predicted an increase in BMH’s annual exports of over 100,000 vehicles as a result of devaluation.
‘Assuming an increased demand for your products,’ said Sir George, ‘the next question was whether you could meet it and BMH did have the capacity to meet the increase.’ Looking at the markets with the greatest potential he chose Europe as being one of the first. In the Common Market/EEC/EU, ‘we shall expand our business from 65,000 vehicles a year to 100,000 a year and in EFTA from 48,000 up to 60,000 a year. We can also see that there are vast opportunities in the United States,’ he said.
On the specific price reductions which devaluation had made possible, he instanced up to 12 per cent in Holland, up to 10 per cent in France, up to 9 per cent in west Germany, up to 6 per cent in Switzerland and up to 4 per cent in Norway. He explained his use of the phrase ‘up to’ because ‘with a Mini, an 1100 or a Jaguar and so on we do get varying equations when you study it model by model.’
The price reduction in North America – about 3.5 per cent – was lower because BMH models now incorporated safety devices to meet the new regulations.
It was revealed that AEI Finance Director John Barber was joining the Leyland Motor Corporation in a similar capacity. He would be directly responsible to Sir Donald Stokes, the Chairman and Managing Director, for all the financial aspects of the Group’s expanding activities at home and overseas. Walter Boardman, a director of Standard-Triumph, would continue as group financial accountant.
- John Barber
John Barber’s lack of financial qualification did not stand in his way when he joined Ford after seven years in the Civil Service. He became Finance Director within six years of joining the company and was responsible among other things for founding the highly successful Ford Motor Credit Company. In 1965 he joined AEI as Finance Director.
On 13 December, Sir Donald Stokes of Leyland wrote a four-page letter that was hand delivered to BMH’s Sir George Harriman at the Hyde Park Hotel in London.
Stokes agreed financial terms on the merger and the number of directors but suggested that, instead of the neutral public figures that Harriman had suggested, the Industrial Reorganisation Corporation should nominate such persons as directors. Stokes was not in favour of retaining autonomy for separate divisions and stressed the need for an executive at the head of the company to have overall control.
Two days later Sir George Harriman replied to Sir Donald Stokes stating that the only thing that they disagreed on was whether the company’s policy should be implemented by one man or the heads of the individual operating companies. Sir Donald Stokes and Sir George Harriman met Minister of Technology Anthony Wedgewood Benn on 19 December. With an impasse existing between the two companies, Benn suggested bringing in a mediator, Sir Frank Kearton of Courtaulds and the Industrial Reorganisation Corporation.
New Leyland Finance Director John Barber in a report suggested the need for fundemental change at BMH. He suggested the company should have three basic models plus a successor to the Mini; cut out all the parallel ranges in favour of possibly Mini, Morris 1100, Austin 1500 (Maxi) and Wolseley 2000, dropping Riley altogether; and reorganising its sales network by setting up 500-1000 main dealers and vetting the rest of the 6000 outlets.
Again, a lot of people advocated rationalisation, but these plans remained on paper.
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