British Leyland cuts prices - Sir George Harriman interview

THE GUARDIAN

Sir George Harriman and Sir Donald Stokes, joint chiefs of the new British Leyland Motor Corporation, are united in their belief that they can capture a significantly larger share of the export market. Prices have been cut by up to 10 per cent in a number of major markets as a result of devaluation which will increase their competitiveness considerably. Sir George, who is chairman of the new group, expressed his hopes to Malcolm Burne.

As Britain's largest exporter what sort of an impact can British Leyland Motor Corporation have on the export drive and the balance of payments?

'The whole idea behind BMC and Leyland getting together is to make British companies stronger so that they can have more competitiveness in export markets. The present combined export earnings are in the region of £250-£260 millions a year and our goal will be to put this up to £320-£350 millions as soon as possible. What you have to do is to study all the prices of your different models in the different markets of the world, which we have done.

One also has to take into account the fact that we shall be seeing increased costs. So while there has been a 14.3 per cent devaluation a lot of this will be absorbed. The import bill rises by the full 16.7 per cent and we have lost the rebates. We have adjusted for this, but what it really means is that in BMH, anyway, we shall be increasing the volume of our exports with more competitive prices, but that export prices ex the UK will be more profitable than they were in the past. They were certainly marginal before devaluation came about.'

You say that you will be increasing your volume of to meet the possible scale of demand, taking into account the home situation?

'Yes. I suppose if one looks at this point in conjunction with the present economic conditions in the UK where without any doubt the Government will be trying to curtail internal spending, then it would seem to fit into the pattern, whereby if there are restrictions on spending on motorcars, then the excess can go into the export market. At the moment the home side seems to be rather strange. Unpredictable is perhaps a better word. We are selling more at home now than one would have thought at this time of year. This is perhaps because of fears of all the restrictive measures that are being talked about, and I think the next critical date must be March 19 when the Chancellor announces his Budget.

Do you think that other UK exporting companies are going about devaluation the right way?

'I do, yes. I think all of us understand quite clearly that the first essential of a successful company is to live in a successful country, and therefore exports have got to take priority. I have always been a firm believer that a sound export trade needs a healthy home market behind it. Mind you, I think the Government could do more to help exporters along. They could restore the rebate, for example, and I believe they are now considering this. They could also find some method of getting round GATT regulations that they say inhibit them from helping exports. But I would have thought that this was not beyond them.'

In a world dominated by strong American, German and Japanese competition, the speed with which the new group will be able to seize the benefits of rationalisation is of paramount importance. How soon will you be able to reap the economics from the merger?

'It will take between three and four years. This is inevitable. Do bear in mind that when you start thinking of designing trucks or motor-cars it takes three years from the drawing board to production. Add to this another possible year to sort out the design and rationalisation commensurate with your competitive models, it is going to take, as I say, about four years before the ultimate final benefits are seen. However, there are bound to be interim benefits that one can get from a merger of this nature. One thinks, for instance, that in many of the export markets where we overlap in terms of having two separate companies operating, then you can see that administration can be halved, and perhaps two factories can be joined together in places like Australia, so there will be immediate benefits in the interim stage.'

It looks as if BLMC will be increasing its competitiveness in world markets considerably. How have the Germans, Japanese, and so on reacted to the merger?

'The reaction in Europe has been that this is the sort of thing they feel has got to be done in Europe. They have been a little apprehensive about the scale of US investment that has been going on in their area. This they must combat. As far as the Japanese are concerned they are past masters of copying things.'

How will the merger affect the motor component firms? Have they now got to rationalise?

'As far as the motor component firms are concerned they have now got to start thinking big and producing big with all the emphasis on economies of scale. Whereas before the merger, say, four individual groups were each supplying BMH or Leyland with 100,000 dynamos, the same order (400,000 dynamos) is now likely to go to only two, or perhaps even one, of the original four.'

Do you see BLMC acting as a kind of IRC for the component firms, lubricating what might be a tight financial position hampering rationalisation?

'Not at the moment, but this might come. I certainly might inject this thinking.'

Could you sum up with what your future targets are?

'We are determined to make the economy of this country as straight as ever we can by increasing our exports, and believe it will have a long term effect on the success of the internal economy whereby we shall become a highly profitable company in the years to come. The foundation of thousands of outlets round the world is a jolly good one on which to base an expanding export business.'