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£1.7m operating loss throws BL recovery off course

20 March 1985

£1.7m operating loss throws BL recovery off course
By Jonathan Davis, Business Correspondent

BL's disappointing sales performance in the second half of last year was underlined yesterday when the state-owned car group reported that it had slipped back into loss at the operating and all other levels last year.

The annual results showed the BL group made an operating loss before interest and tax of £11.7 million, compared with the modest operating profit of £4.1 million in 1983. Under the original recovery plan agreed with the Government, the target of Sir Austin Bide, BL's chairman, was to break even in 1983 and move into the black last year. In its statement yesterday, however, BL said the recent rate of recovery had "not been sustained".

The pay strike last autumn at Austin Rover, BL's volume car business, was one important adverse factor, costing BL more than 86,000 cars worth nearly £500 million in lost production. BL also blamed the continuing overcapacity in the European car market, and competitiveness in the market. The group's total vehicle sales fell from 564,000 to 511,000.

The continued market difficulties of Austin Rover are known to be causing concern at the Department of Trade and Industry, which has been studying BL's corporate plan. Both the department and the company refused to confirm reports that the board had been asked to revise its plan, approval of which is not expected until after Easter.

BL has said it will waive the last £110 million of government aid under the cash injection plan agreed with the Government by Sir Michael Edwardes, BL's former chairman. The group' said yesterday that despite its loss last year, its balance sheet remained strong. BL intends to meet future funding needs from operating cash flow, further privatization measures and private borrowing.

Austin Rover made an operating loss of £26 million against a profit of £3 million in 1983. The cars division as a whole made an operating profit of £40 million (down from £73 million), largely due to the first- half contribution from Jaguar before its £186 million privatization. Without the proceeds from the Jaguar sale. BL's overall operating loss would have been £64 million. Unipart. the components division, likely to be the next privatization candidate, made an operating profit of £14 million.

BL's troubled truck and bus divisions continued to make losses. Despite a profit from both Land Rover and Freight Rover the non-car divisions made an operating loss of £49 million. compared with the previous year's loss of £66 million The net loss record by BL before extraordinary items was £81 million slightly worse than the previous years £74-3 million.

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