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Secret documents revealed: The future of BL

De-Classified government documents: The future of British Leyland

We've got our hands on recently de-classified government documents that shows what the newly-elected Conservative administration of 1979 thought of British Leyland and its future. We're serialising the documents in three parts. This first one covers September-December 1979 and runs to 123 pages.

During the 1970s, British Leyland had been through the mill - first with bankruptcy in 1974, followed by the government bail-out in 1975, and then the eternal struggle to keep the company's head afloat in tough times.

In May 1979 the Conservatives swept into power with Margaret Thatcher at the helm - and thanks to the National Archives, we know that BL came very close to being closed just months into the administration change.


The future of BL, part one

After five years as effectively a nationalised industry (although the government only ever remained a majority shareholder), under a Labour government, the future of BL was always going to to come under intense scrutiny following a government change. And so it proved. Margaret Thatcher was elected by a country that was sick of industrial turmoil - and her determination to stand firm against strikes and the all-powerful unions proved popular.

But the matter of BL and its future was one of some urgency. Since the Labour government's bail-out of the company in the closing months of 1974, and the subsequent Ryder Report on its future, the government had pumped in around £1bn of taxpayer's money. And this was clearly incompatible with Margaret Thatcher's 'market forces' ideal.

It could be argued that BL's future prospects had looked a lot brighter since November 1977, when Sir Michael Edwardes had been appointed the Chairman and Chief Executive of the company. He immediately set about abandoning the Ryder plan, retrenching a smaller, leaner BL, and returning it to profitability. And that meant savage rationalisation of factories, workers and model lines. He was instrumental in closing the Speke factory near Liverpool in 1978 after strikers had crippled the plant - but he knew many more would need to go in order to match the company's lower build numbers. And to give you an idea - in 1974, British Leyland's market share in the UK was 33%. By 1979, that number had reduced to just under 20%. And export sales had collapsed in pretty much the same way.

But Speke had just been the beginning. More factories would need to close; more jobs had to go. In September 1979, BL chairman, Sir Michael Edwardes, warned Margaret Thatcher that there would be further factory closures, most notably MG at Abingdon. But it was all part of the plan to create that leaner, fitter BL - which would be ready for a further injection of government cash at the turn of the 1980s. Because although the Austin Metro was nearing introduction, there had been a dearth of new models since the arrival of the Rover SD1 in 1976, and with weakening demand, there was little or no profit with which to invest in future model programmes. And Sir Michael Edwardes would be asking for more.

The National Archives reveal that back in September 1978, the then Secretary of State for Industry - Eric Varley - had approached Edwards and his opposite number at Ford - Sam Toy - asking why the British car industry was in such a state, and what could be done to turn things round. They responded that in light of the sheer number of vehicles lost due to industrial action, the end of the 'unofficial strike' would be the first change they would recommend.

One year on, and with this ringing in his ears, the new Secretary of State for Industry, Sir Keith Joseph, reviewed Edwardes' latest union pay claims for BL. Workers were asked to vote for the 1980 Corporate Plan, which incorporated these changes to union working practices, as well as agreeing to 13 full- or partial-factory closures and the loss of 25,000 jobs. And in the lead up to the vote, Margaret Thatcher's policy adviser, John Hoskyns said, 'the result of the ballot will clearly be a material - but by no means the only - consideration, in considering whether to commit further sums of taxpayers' money.'

Michael Edwardes, on the other hand, decided to play hardball, publicly stating that if there wasn't a 'yes' to the ballot, he would not be approaching the government for further funds for new model development. And that would effectively mean the closure of BL.

But, in the run up to the vote, both Margaret Thatcher and Keith Joseph made it clear that even with a 'yes' vote, the government's funding is guaranteed. 'as it might be misconstrued to imply that the government is already pulling back from the prospect of tough decisions on British Leyland.' On 1 November 1979, BL announced that the vote had been a resounding 'yes', with 87.2% of the workers agreeing with Michael Edwardes' tough new plans for the company.

In the wake of the vote, and the government's decision not to automatically give BL a further tranche of cash, it was clear that the government still wasn't convinced about the future prospects of BL. The Chancellor, Geoffrey Howe hypothesised about what would happen to BL in a letter to Keith Joseph: 'You said that they could be about 300,000 job losses in the unlikely event of a complete and permanent closure of BL, and a net loss to the balance of trade of £2.2bn a year. This strikes me as a highly unrealistic hypothesis. 

'Parts of BL are profitable and there is no reason why they should not continue in business. Other parts could be run down over a period rather than closed immediately. To the extent that BL loses its previous market share, it must be the case that other British manufacturers will pick up at least some of their business.'

Going further, Keith Joseph continued speculating over the possible ramifications of closing BL rather than agreeing to Michael Edwardes' investment plan. 'The main difficulty about closing BL now is a psychological one and related really to Edwardes' personality and image. I assume that he is better known to the public than many cabinet ministers and very highly regarded. To reward Edwardes' effort and his workforce backing with closure would seem to be a deliberate blow against everything the government is trying to encourage. We can be virtually certain that BL won't fly, yet it would be difficult to close it now in a way which promoted moderation against militancy. We're still in a no-win situation.'

During this, Pat Lowry of BL confirmed that Communist Union convenor and chairman of the Leyland Combine Trade Union Committee, Derek Robinson, had been dismissed on 22 November 1979. This was a decision described as 'encouraging' by Keith Joseph, even if it failed to moderate his sceptical line towards BL, and its chances of future survival.

Triumph Acclaim (1)

But the tide of opinion within the cabinet was clearly moving towards closure - or at the very least a break-up - of BL. The BL deal with Honda was in the offing after months of negotiations, and was seen as a very positive step. But it was down to the government to approve it - 'Should BL be allowed to sign-up with Honda on 20 December? The arguments for this are quite strong: it is a way of keeping options open (the cancellation charges if BL pulls out at only £5.5m). But how definite an assurance is needed about government approval for the plan before Honda will be prepared to sign?'

But in the closing days of 1979, Keith Joseph's paper on BL was published, with the Prime Minister's office responding with tacit support for BL - despite the potential pitfalls. 'The choice is stark. Either the government cuts its losses now at a PSBR cost in 1980-'81 of some £1.4bn and 200,000 unemployed; or it finds an extra £130m in 1980-'81 in the hope that BL will struggle through to viability (with a less than 50/50 chance of survival). In his paper, Keith Joseph recommends the second course, in particular the approval of BL's Corporate Plan for the next five years; and the precise limit of 1980 funding to be left to the chancellor'.

There was another issue that encouraged the government to support the corporate plan. 'The need for urgency arises because other BL will lose the opportunity of signing the collaborative deal with Honda, for a new middle-sized car - the LC9 (above as the Triumph Acclaim), which BL plans to assemble from mainly Honda components.'

Part Two will cover December 1979-March 1980, a further 164 pages of documents. A key feature of these papers is the governement discussing Ford's green light for Bob Lutz - then head of Ford of Europe - to buy British Leyland.

Part one of the National Archives report on BL's future prospects, from September-December 1979:

British Leyland: What The Prime Minister Thought.

Comments

Andy    on 10 April 2013

Thanks for posting this. Perhaps it will go some way to explain why we really have no car industry left whilst the French manage to have Renault, Peugeot and Citroen. Thanks Maggie....

rovsterling    on 10 April 2013

Thanks Maggie indeed - Thank you for bringing Nissan and Toyota to the UK - Thank you for getting rid of the unions and making it possible for Jaguar, Land Rover and Vauxhall to actually build cars in the UK that people will buy verses Peugeot / Citroen being on the verge of bankruptcy.....RIP.

Triumph Tim    on 19 April 2013

UMMM In Japan they are all UNIONIZED..
Guess what?
They can afford to buy new vehicles with
the better pay. And you wonder why the UK
Economy is sinking..

Rhyds    on 10 April 2013

@86602cb521a65e7a5b1ecbc4074cae63:disqus We do though. Look at Nissan, Toyota, Honda, JLR, MINI and Vauxhall. All building cars in Britain that people across Europe want to buy. And if you read the article you can see that the Govt bailed BL and got it sorted out.

Jamie Alton    on 11 April 2013

Foreign companies are being paid to build cars in the U.K. and take their profits back to their home countries. This isn't progress when the government hands tax payer's money to foreigners to pollute in the U.K. for the sake of zombie jobs and a zombie economy. This is why the GDP isn't relevant any more, and although a GDP in the low 2% margin may seem almost non existant, the GNP, minus government wages and debt is in greatly, negative territory.

Essexandy    on 10 April 2013

A bankrupt company only surviving because of massive handouts from the taxpayer, much like a large part of UK industry at the end of the 70s. What a remarkable turnaround in the fortunes of our car industry in the intervening 24 years. Now the French are facing the same problems with 'their' car industry.

rx8moneypit    on 17 April 2013

Times haven't changed with uk companies surviving by paying very low wages which are then topped up by govt handouts.
As for the "UK car industry" that statement is some kind of joke, JLR - indian, Bentley and Rolls Royce - German (did we win the war?) , Vauxhall - American, MG - Chinese etc etc
The manufacturing might of this country has been squandered by lazy management, lack of investment and that foolish woman who was once in power and it is only now that lack of North Sea oil revenue, the foolish actions of Bankers have shown that this country is in a perilous state, unlike Germany who improved workers pay and conditions while strengthening the employers/unions relationships and became an industrial giant of the modern world.........if only SHE had the intelligence to see that a nation of shopkeepers selling coffee to each other was a recipe for disaster

NorthernCommonSense    on 11 April 2013

What stands out from this ping pong of letters (and with the benefit of hindsight), is that the Unions despite their disruptive portrayal , may have had a point. They were , (in principle ), trying to negoitiate a working partnership with management to share decisions.
This is ironically exactly what the "new" Japanese plants introduced years later.
Perhaps the Union leaders actions were deliberately beligerant, but for those who witnessed the working conditions on the factory , and the remote and aloof behaviour of management it is understandable that frustrations arose. The days of the Golden Trough style of Management are long gone, all workers now sit toegther in the canteen. ( Aprt from the Governement - who actually decide to be "aloof" in one comminication above !)
What seems more shocking is that the Government of the day were very much more concerned of how they would appear, and seemed to completely overlook that at the bottom of the whole mess were real workig people and families.
Fast forward to the successful car plants of today and we see the Koreans working to a long term 40 year plan - and were heavily subsidised throught their bankrupt years.
Nissan Sunderland is one of the most productive plants in the world, but most workers there are no better off in real terms than their fathers who worked in the steelworks, ship yards and coal mines.
'Makems' used to 'work' a Saturday moring shift, then clock off to watch the 'Black Cats' in Roker Park, and sink a few pints afterwards. Now the Nissan workers cant afford to pay to watch such cr@p, dont have a pub to drink in (because the beers too taxed!). They now have to save all their wages so their children can go to college ( get a job - not in Nissan) and lend them money to buy a house...What a mess.
We moved on , but where to?
We stil have poor management skills, misguded low sikilled workers, and above all else, the same out of touch Government . It all conspired to knacker the country then and looks likely to repeat itself.

Mi16    on 15 April 2013

Very interesting for someone who lived, worked and bought cars through the period. Few commentators in the media seem to have had any real knowledge or first hand experience of what was going on or any desire to admit to the mess we were in during and immediately before "the winter of discontent" which brought about the Thatcher government.

I had forgotten about Speke and those dreadful early TR7s (the later Coventry built ones were much better, but still not good). It wasn't just Leyland, the Rootes/Chrysler/Talbot story was pretty unedifying along with the Linwood factory and Triumph Motorcycles (NVT at that time) post Meriden strike were very shoddy and outdated (last new British motorcycle I bought was a 1976 Bonneville - in those days the workers cooperative let new owners visit the factory).

Thankfully we have all moved on and what a credit it is to our motor industry that it is in such good health despite the economic mess, compared to French one which has the same sort of death wish we had back in the 70s.

andrew123    on 18 April 2013

Andy, I am not certain whether you are being serious or facetious. I suspect the former. I also suspect that you were not even alive in the 1970's. I say this because you need some knowledge of history in order to appreciate where we are now with our motor industry. The problems confronting our motor industry in the 1970' were a microcosm of wider problems with the UK economy and were epitomised by the problems with British Leyland which was, in effect, a state owned company. The company was on strike for more days in the year than they were working and when they were working output and quality were appalling. The UK was losing it's talent via a brain drain as top rate tax was 83% (103% for some in certain circumstances) and inflation peaked at 26%. There were many other problems as well and we were the basket case of Europe, non-competitive and certainly not attracting inward investment. In 1979 Margaret Thatcher was elected on a mandate to reverse this decline. Her free market economic policies, copied around the world, leaves us where we are now. We have perhaps the most vibrant automotive industry in the world. We attract investment and talent from around the world. Our vehicle production is higher than it has been for decades and they are in demand around the world. This international trade is brilliant for the UK and even more our automotive products and services are very high quality and hence have a high profit margin. There is much more to say but I am sure you will be pleased to know that I will now stop.

expert diy    on 12 May 2013

A Cornish Man, I live a long way from the car manufactory but I did live through the Thatcher era. whilst I only heard negitave things about her, this blog is very interesting.

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