Standard-Triumph 'Saved From Bankruptcy'

Finance, Industry, and Commerce
By Our City Editor

Just how bad was the financial position of Standard-Triumph International when it was taken over last year by Leylands is now revealed in the annual statement by Sir Henry Spurrier (left), chairman of Leyland Motors.

It also seems pretty clear from this statement that Standard were in a worse position and one that has proved more difficult to retrieve than even the Leylands board thought at the time of the bid. Sir Henry's present view is summarized in a short sentence,

"In taking this concern under our wing we have almost certainly saved it from bankruptcy".

When the bid was made Standards had a bank overdraft equivalent to over a quarter of its net assets. Sir Henry says the position is now under control: but this has been achieved only at heavy cost and by ruthless action. Two months after the take-over all except one of the former Standard board were asked to resign, and within another two weeks some 300 senior and semi-senior staff had also "been dispensed with".

Even so, the Leyland chairman still has to talk in terms of two or three years before the Standard part of the group realizes its profit potential. The sharp impact of the take-over on the Leyland profit figures has already been reported at the time of the preliminary announcement. The full figures now show that its impact on the balance sheet was equally drastic. Though the high cost of financing exports and completion of the Hispano Suiza contract were other factors, there can be little doubt that the main reason for the jump in the group's overdraft from under £2m. to nearly £13m. is to be found in the losses and financial stringency of Standard.

So far the parent company in the group is concerned, the chairman's statement shows that while the Production at Leyland heavy vehicles was at a record high level-and order books are full-this outcome has been achieved only at the price of allowing profit margins to narrow. Vehicle prices have not been raised (some have even been lowered) even though costs have continued to mount. Understandably, perhaps, the chairman gives no profits forecast-nor even any indication how profits have been faring in the first half of the current year. Neither does he comment about the future of the group's overdraft, except to say that he sees little hope that it can be reduced without Government assistance.

Leylands has in recent years, been rated one of the few growth stocks in the motor industry. It is probably still one in terms of output: but in terms of profit the trend for the immediate future is less clearly upward, though the main shock of the Standard acquisition is presumably now past.