Mergers – Auto Alliance

TIME magazine
Mergers: Auto Alliance

The last major British-owned auto manufacturers, British Motor Holdings and Leyland Motor Corp., have decided that cooperation can be more profitable than competition. They have joined forces to form British Leyland Motor Corp., which will be the second largest carmaker in Europe (after Germany's Volkswagen) and fifth largest in the world, and will have annual sales of $2 billion. Its hefty catalogue of cars will include BMH's Austins, Morrises, Rileys, Wolseleys, MGs and Jaguars, and Leyland's Triumphs and Rovers along with its buses and heavy trucks.

With a production line geared to roll out over 1,000,000 vehicles a year, BLMC figures to fill 40% of the domestic market and be Britain's No. 1 export earner besides – with $700 million a year in sales abroad.

'We've been thinking about it for years, but we wanted the merger on satisfactory terms,'

says Leyland's Sir Donald Stokes, 53, who will be deputy chairman, managing director and chief executive officer of BLMC, with British Motor Holdings' Sir George Harriman, 59, as chairman of the board.

Rise & Fall. The merger is a personal triumph for Sir Donald, whose company has pushed steadily forward from its 5.3% of the domestic market in 1964 to its present 12%. Meanwhile, British Motors, which 18 months ago claimed 44% of the British market, has slipped to about 29%.

It is widely agreed that British Motors did not make the most of modern market research as it continued to turn out a wide variety of cars with various emblems and idiosyncrasies. A believer in loose 'federal' management of different lines, Sir George missed the benefits of intensive production of big-volume sellers, and many of his models aged noticeably as competitors catered to changing public tastes.

'The potential is there with British Motor Holdings, but it's going to take a much tighter organization,' said Sir Donald after he returned from a tour of his plants and dealerships last week. Soon some unprofitable lines will have to be dropped. And obviously, said Sir Donald, 'we have to move toward the General Motors type of integration and more new models.'

But it will require heavy investment ($360 million, according to industry estimates) and perhaps three years before BLMC will be ready with its first new car. Between now and then, the newly merged company's US competitors in Britain – Ford, Vauxhall (GM) and Rootes (Chrysler) – are not going to stand idly by.