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British Leyland Motor Corporation 1968-2005

The Story from Inside

The History Press

High Expectations Confounded: 1968–75

Those responsible (the government through the Industrial Reorganisation Corporation, and the companies themselves, apprehensive about remaining alone and too small to survive) for putting the new corporation together saw certain opportunities in BLMC: its size would provide the means for successful growth and the ability to concentrate resources by rationalisation would save money and raise the standard of each new product. This last belief in particular was strongly held by many of the management, who clearly assumed that the performance standards of the concentrated activities were, or could be made to be, of a sort and standard to compete with the rest of the world. Thus the formation of BLMC was seen as the opportunity for building a company that would be a powerful force in the world motor industry.

It will help to understand what happened in the early years if those beliefs and assumptions are examined to see how realistic they were.

The first matter to consider is whether it was realistic to expect to draw into a coherent whole the many and varied companies that were being brought together. The companies involved were designing and producing a range of cars that covered just about the whole car market, the same for commercial vehicles and then a wide variety of such things as construction vehicles and equipment, rounded off by the production of refrigeration equipment and a printing works.

The British Motor Holdings 1967 company report included the following list:

• Austin, Austin-Healey, MG, Morris, Vanden Plas Princess R, Wolseley and Riley cars, Austin and Morris Mini-Cooper cars.

• Austin and Morris light vans, light commercial vehicles, trucks, tractors and Gipsy cross-country vehicles

• Jaguar and Daimler cars

• Daimler buses and military vehicles

• Guy trucks and buses

• Vehicle bodies and press tools for the motor industry

• Marine and industrial engines

• SU Carburettors

• Fisholow and Gridway products and domestic appliances

• Prestcold refrigeration equipment

• Nuffield Press

In fact, on closer examination things were not quite as difficult as they looked. The companies fell into three groups – Cars, Commercial Vehicles and a miscellaneous group broadly related to construction. These three groups were operationally and commercially very different from one another and required little rationalisation with one another. However, as part of BLMC they would need to adopt common administrative practices in such things as financial reporting, controls over investment and matters of major policy. Within each group, and BLMC-wide in some cases, there would have to be common terms of employment, payment structures and so on. Changing all these practices would take a lot of planning, explanation, discussion and administrative effort before they could be put into practice. This would take time, but there would be no great practical difficulties in the way – except the not-to-be-underestimated inbuilt resistance to any changes to the existing company cultures, different for each company and ingrained over many years.

The greater problem is the much more important matter of rationalising a company's product range and with that its production facilities and design and development resources and practices. This rationalisation can apply both within one company and, with more difficulty, between companies. Within BLMC this work lay almost entirely in the Cars Group, by far the biggest of the groups and on whose success the whole future of BLMC depended. The other groups had much less need for product rationalisation within their companies, little between companies and almost none with the other groups.

In the Cars Group, rationalisation was needed both within companies and between companies. On paper, a logical and coordinated range of models and major components could be planned with relative ease. In practice, to replace an established wide model range with a more limited one to be produced in the same, or perhaps greater, volume than the wider range being replaced has many difficulties. New models cannot be developed and brought into production quickly, even if unlimited resources are available – and BLMC resources were limited not only in numbers but also in skill. Introducing several new models in a relatively short time requires more investment in a given period than that needed for a properly spaced and steady replacement cycle. Over and above this, if a new model is to replace more than one existing model there may not be enough appropriate production capacity available to produce the higher volumes of the new model, especially if the replaced models were produced in more than one factory, and so yet more extra investment is required.

The same thing was true for engines. When BLMC was formed it was producing eleven unrelated engines between 1 and 4 litres. Of these, only BMC's 15-year-old A series was made at a competitive scale. The investment required at that time for new high-volume engines involved large transfer lines. The investment cost per unit of capacity was broadly similar for engines and vehicles. New vehicles were expected to generate additional sales, but it was hard to see that investment in engines would have the same result. In an investment-constrained environment, vehicle investment was to take priority.

Whether the vehicle range or the engine line-up is rationalised, the factories not needed must be closed. With the trade unions' attitude to plant closure, BLMC faced a very formidable task indeed in the early years.

The rationalising of the model range also brings other risks. The first is that the normal level of production will not be maintained while the changes are being made. The second is that a reduction in the model range will bring a loss of sales even if the new models are of a higher standard than the old ones, because the limited range will entail the dropping of some marques. Buyers, however illogically, may have a loyalty to one of the dropped marques and will not necessarily turn to its supposed replacement under a different marque name.

To add to these difficulties, the very senior management in the companies were mainly hostile to the centralisation and rationalisation. Given that the constituent companies had been independent (this was true even of Austin and Morris, even though they had together formed BMC for some years), it was inevitable that most of the executive board members who had their own operating empires would be strongly in favour of being allowed to continue without interference from the centre. In this view they were supported by almost all their company management and workforce

Thus there were many risks facing the most important part of BLMC – the cars business. However, within the Cars Group there were strengths. One was that Austin-Morris had a core range of successful high-volume front-wheel-drive cars (Mini, 1100/1300) that was ahead of its time. Subsequently all the successful European manufacturers based their product line-ups on such a range of front-wheel-drive models, but at the time of BLMC's formation Austin-Morris was leading the world. This leadership, properly developed, gave it a great chance to prosper. Other product strengths lay in the Jaguar and Rover brand and, most of all (although not well perceived in BLMC), in Land Rover.

One of the biggest risks (perhaps the biggest) lay in the very poor state of industrial relations. There were many, many bargaining units – each product company had several. Any serious change to working practices had to be taken to the unions and they normally opposed any change, so everything had to be argued about, which took a long time, and the bosses of the companies – the Managing Directors and Manufacturing management – spent their time dealing with the unions and were not able to concentrate on manufacturing improvements. In the end, they came to ignore the task of making improvements.

Inevitably, strikes were frequent, directly costing sales and steadily eroding customer confidence – and indeed becoming something of a public joke. They also had serious practical effects – in Austin-Morris, when production facilities were installed they were made larger than forecast demand indicated to allow for production losses from strikes. Between this and the inability to improve manufacturing efficiency, it was clear a great improvement in industrial relations had to be made if BLMC was to be successful. Bringing about this improvement would require great management determination and skill.

One other big risk was that the product development resources, especially the skills, in the Cars Group, particularly Austin-Morris, would not be adequate for the task of producing the more limited range of new 'better' models. Both the Mini and the 1100/1300 ranges had been just about competitive in quality and reliability for their time on introduction, but there were ominous signs of falling behind, referred to in the Prologue. The Maxi, which was in development at the time of the merger and which was launched in 1969, was to fall well below competitive standards despite its good innovative concept. The risk that new models would be anything but completely competitive was as serious as that posed by poor industrial relations.

The third serious risk came from profitability levels. The 1968 after-tax profit of £20 million on sales of £974 million was quite inadequate. As already said, the hope of those responsible for the formation of BLMC seems to have been that rationalisation would raise profitability to adequate levels. Even this (defining rationalisation as making BLMC into one coherent whole) was unlikely to be enough. Improvements in matters that would not come directly from rationalisation, such as industrial relations and standards of operational performance, particularly in product development and manufacturing in cars, would certainly be needed as well.

Altogether, turning BLMC into a successful, sustainable company was going to be a tough mission – not just because of the task of rationalisation, but because there were serious risks to the rationalised company from the poor state of industrial relations, doubts about product development strength and an underlying financial weakness.

The seriousness of these risks seems not to have been fully foreseen by those responsible for putting BLMC together, or it was believed to be outweighed by the foreseen advantages. So the company started its existence.

The first actions were mainly administrative. The corporate staff was led by John Barber, who had been finance director of Ford of Britain and had been recruited to take up the position of finance director of BLMC. Inevitably he turned to Ford as a source of people to staff the central organisation and also as company staff for the corporation's operating companies, mainly Austin-Morris. Ford at the time deservedly had a very high reputation as being a well-managed company, with good management systems and able people. Some corporate staff members, particularly for senior positions, were also recruited from outside the motor industry. Recruitment from outside the industry brought in able individuals and fresh ideas but also slowed things down while the recruits adapted to their new environment.

Functions such as personnel soon had the strength to engage on such matters as agreeing common terms of employment for similar work in the different companies; the finance staff introduced common accounting and reporting procedures and a review and approval procedure for major investments. More quickly, indeed, than might have been expected, a reasonable degree of central control was established. However, even in the areas where action was taken, bringing commonality was not straightforward. Finance was a particular example. Common reporting systems were introduced, using Ford terminology. These reports were required from each company but each company had its own accounting conventions, which differed significantly. Thus, although both used the required Ford terminology, the same cost figure in, say, an Austin-Morris report did not represent the same value as one in a Rover report. This took a lot of sorting out and for some years, comparisons between companies could not be relied upon to be accurate.

In the years that followed, the corporate staff numbers and functions greatly increased. Soon Berkeley Square became too small and the headquarters moved to much larger premises in Marylebone Road. A new ancillary headquarters office was also opened in Coventry. By 1975 there was complete centralisation, at least on paper. There were nine operating divisions, all reporting to John Barber, by then group managing director and deputy chairman of BLMC, who also had thirteen staff functions reporting to him.

In arriving at that state, there had been changes of organisation involving the reshuffling of some of the operations into different divisions. Austin-Morris was split into three parts – Austin-Morris Division (essentially a sales company), and two manufacturing divisions – Body & Assembly and Engine & Transmission – manufacturing for Austin-Morris only. The most important change, however, was to merge Rover and Triumph into one Rover-Triumph company. This would prove a test of the values of rationalisation.

As already said, the success of BLMC essentially depended on the success of the Cars Group – and the success of the Cars Group depended on the development of a coherent range of cars, cars being produced to high standards and satisfying customer needs in terms of quality, reliability, accommodation, performance and service, and developed and introduced in a cycle that kept the whole range up to date and competitive.

Within the Cars Group, the cars produced were aimed at three different market sectors. The first group, produced by Austin-Morris, were passenger cars aimed at the high-volume market. The second group were passenger cars produced in limited volumes, aimed at the premium sector of the market and produced by three companies – Triumph, Rover (as stated above, fairly soon to be joined together) and Jaguar. The third group were sports cars, produced by Austin-Morris (MGB and Midget), Triumph (TR6, GT6, Spitfire) and Jaguar (E-Type). One model that did not fit into any of the above categories was the Land Rover (produced by Rover).

At the start of BLMC the Austin-Morris range of cars covered the whole of the volume car market with the Mini, Morris Minor, 1100/1300, 1800/2200, Morris Oxford and Austin Cambridge. There was also the Austin 3 Litre, bidding for a place in the specialist sector but soon dropped from the range. At the core were the Mini, 1100/1300 and 1800, all front-wheel-drive models.

The first new product launch by Austin-Morris was the Maxi. Development of this model was well under way at the time of the merger. Although the concept of a five-door, medium-sized car with a new engine and five-speed gearbox was excellent, the new management had severe reservations about its style (compromised by use of Austin 1800 doors) and the state of development of the new power train. The programme was delayed while a minor restyle was undertaken. However, time pressure was growing and the Maxi was launched with many unresolved problems, particularly with its new gearbox, problems from which it never recovered.

The first major strategic product decision was to move away from a complete front-wheel-drive range and develop, under the influence of the Ford newcomers with John Barber in the lead, the rear-wheel-drive Marina, in imitation of the very successful Ford Cortina. At the time, Austin-Morris engineers were working on a replacement for the Mini (the 9X), a new small engine to replace the A series and a significant upgrade to the 1100/1300. This work was shelved in favour of the Marina, to be launched in 1971, while the successor to the 1100/1300 range, the Allegro, was put back to 1973. The 1100/1300 had been a great success, with annual sales higher than those of any other Austin-Morris model. The Allegro was a disastrous replacement, clumsily styled (as the Maxi had been), with many faults and annual sales well below those achieved by the 1100/1300.

In 1975 the 1800/2200 range was replaced by the Princess 1800/2200 completing the renewal of the Austin-Morris range with the notable exception of the Mini, which continued throughout this period with the addition of the restyled Mini Clubman. Heritage models (Morris Minor and Oxford, and Austin Cambridge and Austin 3 Litre) were progressively dropped and not replaced. The number of minor variants in the ranges, particularly the removal of the so-called badge-engineered versions that had used such old BMC-owned marque names as Riley and Wolseley to identify 'upmarket' versions of a car, was also reduced. A note on this: 'badge engineering' got a very poor reputation through unjustified journalistic attacks. In reality it was a very sensible way of differentiating 'upmarket' versions of a model range, a practice that all manufacturers used, and much more satisfying than describing them as 'hi-line' or similar.

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Excerpted from British Leyland Motor Corporation 1968-2005 by Mike Carver, Nick Seale, Anne Youngson. Copyright © 2015 Mike Carver, Nick Seale, Anne Youngson. Excerpted by permission of The History Press.
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