Heavy price of under-investment

Heavy price of under-investment
By Clifford Webb

Land Rover, long regarded as the jewel in BL's crown, is paying a heavy price for years of under-investment and bad management. A belated £200m four year modernization programme due for completion this year has been overtaken by a huge retrenchment scheme involving the closure of nine component plants to concentrate on its Soliihull headquarters site.

The management says that the move is not intended to reduce overall capacity but to cut production costs to a level at which Land-Rover export prices will recover their competitiveness with the Japanese. By re-opening the adjoining Rover car plant which was closed three years ago it will save £14m a year, much of it in reduced transport costs. In some overseas markets, Japanese four-wheel drive vehicles are up to 50 per cent cheaper. That has enabled them to double their penetration of world markets from 25 per cent to 50 per cent in a little over four years and is one of the main reasons why Land-Rover production has fallen steadily from a peak of 61 000 to 41000 last year, its lowest for more than a decade.

From a position where it had almost a world monopoly, Land-Rover's share of overseas markets has fallen to about 25 per cent. It is now suffering what other parts of BL suffered in the past. Ten years ago its vehicles were in such demand that they had to be rationed. Today it is fighting for survival against a growing number of rivals. Austin Rover has completed its retrenchment and is now reaping the reward with new models manufactured in two largely rebuilt and modernized plants at Cowley and Longbridge.

Two years ago, Mr Michael Hodgkinson, who was then managing director of Land- Rover put it into perspective when he said: 'I am doing 14 years product development in four years. Nobody did anything here for 10 years.'

Only the Land-Rover's tremendous reputation, and in particular its standing with the military, enabled it to survive such neglect. A former sales director said: 'We lived on a reputation built over 35 years. We were the envy of every motor manufacturer in the world including the Americans, the Germans, the French, and the Japanese.'

With 80 per cent of all its production going overseas and 60 per cent of that to armies and police forces, it has lost valuable sales to much cheaper products such as Toyota's Land Cruiser, Nissan's Patrol. and Diahatsu's Taft. It has also been affected by rapid fluctuations in the economies of Third World countries. Nigeria, for instance which normally takes 5000 Land- Rovers annually, took only 500 last year as a result of the collapse of its oil-based economy.

Mr Hodgkinson left BL in 1982, halfway through the £200m investment programme. He was replaced by the present managing director, Mr Tony Gilroy who had just rescued Freight Rover, the group's van subsidiary, from near collapse and had earlier played a key role in launching the successful Metro at Longbridge. At one time Renault was prepared to let BL produce a much needed new car under licence in return for access to Rover's four-wheel drive knowledge.

Sir Michael Edwardes, then chairman of BL, considered it too high a price to pay and rejected Renault's offer. Since then, the French state- owned group has acquired American Motors Corporation (AMC) the smallest of the United States motor groups and producers of the Jeep. It rushed through a European version of the notoriously thirsty Jeep. but so far has made little impact.