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British Leyland

Volume 81: debated on Monday 17 June 1985

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3.31 pm

With permission, Mr. Speaker, I shall make a statement on the BL 1985 corporate plan. I am making available in the Library of the House and in the Vote Office a report by BL on its recent performance and details of the 1985 corporate plan.

The company submitted its corporate plan in December 1984, at the end of a year in which BL's recovery had been slowed by continuing over-capacity and highly competitive conditions in most of BL's markets. There has, however, been a significant improvement in performance in the first part of this year.

In March the company put to us outline proposals for further collaboration between Austin Rover and the Honda Motor Company, extending the successful collaboration on the Acclaim, Rover 200 series and the XX executive car project. The central element was a joint design and development programme on a further new car, embodying the best technology of both companies. It was also proposed that the Austin Rover group would manufacture in the United Kingdom the Honda version of the new vehicle and that Honda would manufacture in Japan for ARG. BL would also manufacture other Honda models for European sale.

Honda also said that it was considering setting up its own engine manufacturing plant in Swindon to supply engines for these Honda vehicles and the Rover 213, which currently uses an imported engine.

The Government welcomed these negotiations and have given their approval in principle to these proposals, which, now also agreed in principle between Honda and BL, provide for collaboration on the new model, the manufacture of certain other cars for Honda by BL and Honda's further consideration of the engine factory at Swindon.

The Government undertook with the company an examination of the basic corporate plan and possible variants. In the light of this the Government have given approval to the plan as amended by BL to incorporate the substance of the collaborative proposals.

As the House knows, one of the BL board's objectives is to return the business to the private sector as soon as practical. Further steps towards this objective are under consideration and I will keep the House informed of progress.

Is the Secretary of State aware that I had hoped to come to the House today to welcome with relief the Government's support for the corporate plan, including an engine development? As the statement is full of ambiguity, perhaps the Secretary of State will give us some further information in reply to questions? Is there not some deliberate fudging of some crucial issues in the statement? First, is the Austin Rover group to develop its own new British designed and manufactured engine to replace the A series engine?

Secondly, in the proposed new jointly developed car, which I understand to be a smaller version than the XX, what is meant by
"embodying the best technology of both companies."?
Is the Austin Rover group, or Honda, to supply the engine?

Thirdly, in terms of the plan and the statement, can we be assured that Britain will maintain, through the Austin Rover group, its own major British-owned engine designing and manufacturing capability?

Fourthly, in his statement the Secretary of State referred to Honda supplying engines from Swindon for "these vehicles". Does he include in that phrase the new joint car as well as the Honda vehicles to be assembled by ARG, and the Rover 213?

Fifthly, with regard to the Honda cars to be assembled at Longbridge, is this a short-term project, which represents the desirable utilisation of underused facilities, or is it a long-term project, which may mean the Austin Rover group accepting a much diminished role in terms of future car production in this country? Will the Honda cars assembled at Longbridge be counted against the Japanese voluntary import restraint, as the Secretary of State assured us is to be the case with production at Nissan?

Sixthly, if BL has to finance future development from profits, the proceeds of privatisation and borrowing, what is the amount of the guarantee of borrowings agreed by the Government with BL, and why is it not spelt out in the statement for the information of all concerned? Why is there such coyness about the money?

Seventhly, the Secretary of State said that the Government had examined variants of the corporate plan. Was one of those variants the idea emanating from the Prime Minister's own policy unit, to buy engines from Honda? Why does she have such little faith in British technology?

Eighthly, is the right hon. Gentleman aware that in its report BL states that sales of buses have been badly affected by the decline in United Kingdom bus and coach purchases? It also refers to major uncertainties. As the major factor in that decline and uncertainty is the Government's transport policies, would it not make sense to abandon them and help Leyland Vehicles as well as millions of passengers?

Ninthly, why are the Government persisting in selling off the profitable subsidiary, Unipart, the financial success of which would strengthen the group if it were retained?

Finally, can the Secretary of State tell us specifically about Honda's plans at Swindon? Are they to be confined to engine production for Honda vehicles, or is there an intention to enter upon full-scale vehicle manufacture?

In answering those precise questions, will the Secretrary of State bear in mind that the Government's good intentions will turn on his avoidance of ambivalence and ambiguity?

It is characteristic of the right hon. and learned Gentleman that on 15 May he said that if the Government

"support the corporate plan and give BL the resources that all who work there believe that it deserves and which the Opposition certainly support, I shall be the first to congratulate the Government."—[Official Report, 15 May 1985; Vol. 79, c. 332.]
I think that the right hon. and learned Gentleman may have missed the chance of congratulating the Government first. It would be typically ungenerous of him to do so.

There is no fudging of these issues. First, the right hon. and learned Gentleman asked me whether BL is to develop an engine to replace the A series—that is the K engine. The answer is yes.

My goodness, if I detailed every product that was to be produced, it would be a very long statement.

Secondly, the right hon. and learned Gentleman asked what it meant when I said that the new car would embody the best of both companies' technologies. It meant that the new car would embody the best of both companies' technologies. Surely that must be the best way to produce a successful motor car.

The engine will be supplied in accordance with the agreements that are reached, and I expect that the cars produced in Britain will have British-produced engines. The cars that are produced overseas will bave Honda-produced engines.

Fourthly—I think—the right hon. and learned Gentleman asked whether the engine plant at Swindon was projected for just the "other cars" or for the YY car as well. The answer is that the new car has not yet been defined and the engine plant at Swindon which is under consideration is to produce engines for the Honda-badged cars and the Rover 213.

Fifthly, the right hon. and learned Gentleman asked whether the Honda-badged cars produced in Britain would count against the industry-agreed informal quota of Japanese cars on the British market. The answer is no, because the aim is to achieve a level of British content that will qualify them as European cars to be sold in the European market. [Interruption.] It will be done as soon as possible.

Order. There are 10 questions to be answered, and if the Opposition Front Bench ask supplementary questions as we go along, we shall be here for a long time.

Sixthly, the right hon. and learned Gentleman asked about changes in borrowings and guarantees. There have been no changes in those matters. Seventhly, he asked about variants of the plan and referred to the influence of No. 10. The right hon. and learned Gentleman should not believe all that he reads in the papers. If he bases questions on speculative stories in the press, he must expect to be told firmly that he should do better homework and listen more carefully to the answers that he gets.

As for BL and buses, the concept of a bus manufacturing company should be that it produces buses to suit the needs of the consumer. The Transport Bill is aimed at putting consumers' needs first.

Will my right hon. Friend accept from me that the town of Swindon will be grateful for the news that, as a result of his statement, there is to be a resurgence of engineering jobs to replace those that will almost certainly be lost in another industry in the town? The statement will, therefore, be warmly welcomed. Will my right hon. Friend assure the House that he will not listen to the criticisms of the Opposition Front Bench in a way that might lead to a reduction in the number of new jobs created in Swindon?

I can undertake that I will always listen to criticisms, whether from the Opposition Front Bench or anywhere else, if they are sensible and well informed. That does not give me too much work to do when listening to the Opposition Front Bench. I share my hon. Friend's pleasure at the fact that new jobs can be expected in Swindon if the new engine factory goes ahead there, as we all hope it will.

Is the right hon. Gentleman aware that the approval of the corporate plan is very welcome and that the only hope for the future of BL as a volume producer in world markets is close collaboration with Honda? Will the right hon. Gentleman clarify one particularly ambiguous point in his statement? He said that Honda would give further consideration to the engine factory at Swindon. What does "further consideration" mean?

It means "further consideration". The company is considering the proposal to build an engine factory at Swindon. In my view, it is important to encourage the company to do that. It is difficult to see how the requisite levels of United Kingdom content could be reached in the Honda-badged motor cars if the engines were not built in the United Kingdom. It would perhaps be possible, but it would be difficult.

Is my right hon. Friend aware that, despite the carping tone of the right hon. and learned Member for Monklands, East (Mr. Smith), he is to be congratulated on his statement, which will be warmly welcomed in the west midlands and will have a beneficial effect in raising morale in that area among all those engaged in the motor industry? Can my right hon. Friend confirm that British Leyland will retain control of all aspects of its technology, which is so important to its engineering future?

I am grateful to my hon. Friend. Both Honda and BL agree that although they will be involved in collaborative ventures they will retain their identities and technologies. That is particularly important in engine technology.

Is the Secretary of State aware that as it is nearly 10 years since the Secretary of State and his colleagues voted against the public saving of the old BL, my constituents and the hundreds of thousands of other people who depend upon the motor industry would be pleased if the Government were fully committed to BL's corporate plan? If the Secretary of State has good news and has succeeded within the Government in achieving acceptance of the corporate plan as presented, why can he not say so? Perhaps I have misunderstood the ambiguities in his original statement, which were not cleared up in his answers to my right hon. and learned Friend the Member for Monklands, East (Mr. Smith). Have the Government given BL the necessary financial guarantees for which it asked—without ambiguity? An answer to that would reassure several hundred thousand people in the west midlands.

I am glad that the hon. Gentleman took our minds back over the last 10 years, because 10 years ago another mistake was made at a time of near disaster in BL's affairs. That was why I and a number of my right hon. and hon. Friends voted against the ill-conceived measure introduced by the then Government. In the last 10 years the British motor industry has also suffered from a grave increased penetration of our domestic, market by imports. Between 1974 and 1979 those imports increased by 28·4 percentage points. I am happy to say that between 1979 and 1984 the tide was stemmed and the increase was only 1·2 percentage points.

House will be aware that the Labour Government's record in this respect was disgraceful, whereas ours is a great improvement.—[Interruption.] That happens to be true, and the Opposition know it. The true stuff is the good stuff, and the good stuff is the true stuff—that is why the Opposition get it from me.

The hon. Member for Birmingham, Perry Barr(Mr. Rooker) asked about financial resources. The Government are not making financial resources available to BL. BL's requirements for capital will be satisfied from its internal generation of cash and from its borrowings. There are no changes in guarantees.

As in earlier years, there have been discussions about BL's borrowings and we reached agreement with BL on its likely future pattern. We also reached agreement on the treatment of receipts from privatisation. The Government will monitor carefully all aspects of BL's performance, including its financial performance and borrowings. If it becomes clear that BL has a need, or if it fears that it will deviate from the agreed pattern, the company will talk to the Government.

Is my right hon. Friend aware that I approve of the corporate plan, which was well worth waiting for? Will he comment on the proposals for the return to the private sector of Unipart, particularly since none are keener to see the project succeed than the people who work for that company?

Yes, Sir. The people working for Unipart are enthusiastic about a return to the private sector. I hope that that will be accomplished, market conditions permitting, during this year.

I am glad that the Government have approved the corporate plan, which will allow BL to develop the K series engine. Is the right hon. Gentleman aware that many people throughout the country have waited anxiously for this decision because their livelihoods depend upon it? As people's futures are at stake, it is too serious a matter for the right hon. Gentleman or anyone else to try to score political points. Is the right hon. Gentleman aware that there is no point in his hon. Friend the Member for Swindon (Mr. Coombs) clapping his hands at the thought of Honda bringing 500 jobs to Swindon if 500 other jobs are to be lost in the west midlands, because we shall be back to square one? Is he further aware—

Is the right hon. Gentleman further aware that the work people and management, who have made enormous efforts to bring BL to this point, would have been ill served if the Government had done anything other than they have done today?

As I understand it, the hon. Gentleman is saying that he would like to congratulate the Government, but in an entirely non-partisan way.

May I say how pleased I am to hear of my right hon. Friend's approval of the corporate plan and the way in which it identifies the determination of BL to be as competitive as the best of its competitors? Is he aware that Mr. Horrocks, chief executive of BL Cars, when asked by the Select Committee on Trade and Industry last year whether the company wanted any more money from the market or from the Government, replied that the company did not want one penny piece more? Will my right hon. Friend make it absolutely clear that the very substantial investment that will be required for the welcome improvements in the product range will be raised entirely from within the resources of BL?

I thank my hon. Friend for what he has said. As I think I explained earlier, the resources that BL will require are to be raised partly from internal generation of cash and partly from borrowings of a normal commercial nature. The Government will not be putting in any extra money by way of equity or the like.

I inadvertantly omitted to answer one of the points raised by the hon. Member for Coventry, North-East (Mr. Park) about the extra jobs that might be created in Swindon in relation to jobs that might be lost elsewhere. I emphasise that the plant which we hope will be built in Swindon will supply engines for the Honda vehicles to be made by BL and for the Rover 213, which currently uses an imported engine, so they will all be new engines and, one hopes, new jobs.

Order. No fewer than 38 right hon. and hon. Members have already applied to take part in the next debate, so I appeal for brief questions, which, I hope, will lead to brief answers.

I welcome in principle the approval of the BL corporate plan, particularly after such lengthy consideration. Will the Secretary of State estimate the effect on manpower employed by BL in general as a result of the variants in the corporate plan, especially as many of us were concerned that not every avenue had been explored previously? For instance, Charles Roe in Leeds is now back in production with sufficient orders to give continuing employment to 71 people. Secondly, to what extent will the manufacture of Honda engines in this country lead to a transfer of technology rather than merely using a British work force?

I am sorry that the hon. Gentleman cannot bring himself to welcome the statement in practice as well as in principle. If the collaboration goes ahead successfully and the objectives of the corporate plan are fully met, the prospects for jobs will be brighter than they otherwise would have been, but it is not possible to enumerate the jobs concerned. On the second point, I cannot say that I believe that there will be a great deal of transfer of technology, because it is primarily the manufacture of engines that will be undertaken.

British Leyland's accumulated losses are more than £1·6 billion, will my right hon. Friend be more specific about the borrowing requirements as a result of the corporate plan? Will he have a word with the Chancellor of the Exchequer, because if the Government stand behind any BL borrowing and give a guarantee that will not affect the PSBR, whereas if this were a nationalised industry it would affect the PSBR? Is this not an anomaly that should be eradicated?

One can never cease to marvel at the definitions of the PSBR around the edges, but what my hon. Friend says will be of great interest and a matter of discussion for many years to come. I cannot add to what I said earlier about the pattern of BL's borrowings. We have agreed with BL the pattern for its future borrowings, and the company and ourselves will keep a careful eye on them. If BL wishes to make any changes in its planning, it will come back to us.

Will the Secretary of State make it clear that the Government are committed to the development of the K series engine by Austin Rover? Will he also make it clear that before there is any privatisation of BL, many of the thousands of millions of pounds invested by the taxpayer will return to the taxpayer rather than go into private pockets?

For the second or third time, I must say that the Government are committed to the corporate plan, which is committed to the developement of the K engine. Sadly, many thousands of millions of pounds which have been invested have simply been lost due to the very unwise way in which the previous Government supported the Ryder plan, and many millions have been lost over the years because of fruitless, stupid and anarchic industrial disputes in the company.

Will my right hon. Friend accept the grateful thanks of my constituents at Longbridge for his continuing support of the BL corporate plan, which will lead to the production of additional new cars and engines at that plant? That is just as it should be in a factory which in terms of productivity is the most efficient in the world. Is this not a bad day for Opposition Members, who have decided that what concerns them most is who provides the toilet rolls?

I do not know about my hon. Friend's last point, but I am pleased that we have been able to continue our support of British Leyland, I hope that we shall be able to continue to do so in future. Productivity levels have greatly improved, but I am sorry that things were somewhat spoilt last year by some industrial disputes, and I very much hope that that will not recur this year. This is a bad day for the Opposition. They had hoped for bad news, but they have not received it.

Will not this plan primarily benefit the Japanese capitalists, and is it not further back door penetration of the British economy? Instead, should not the Government be encouraging public authorities, such as transport companies, area health authorities, British Telecom and the Post Office, to purchase BL products so that overcapacity is eliminated?

The answers to the hon. Gentleman's questions are no, no, no, and no respectively.

As the first agreement with BL had a hole in it, in that Honda could have exported to Spain whereas British Leyland's market share was the EEC, defined by individual countries, will my right hon. Friend make sure that Spain does not become a back door entry into the EEC by Honda from Japan, thereby impairing the market that is supposed to belong to British Leyland in the EEC as a whole? What are the implications of my right hon. Friend's announcement for the British components industry?

The implications for the British components industry are favourable. Indeed, there will be greater opportunities for that industry, provided, as ever, that it is competitive on quality, price and delivery.

As to my hon. Friend's first point, the situation has now radically changed, as both Spain and Protugal will join the European Community on 1 January next year.

Did the Minister make any attempt to bring the new Honda development to development areas, which has been the policy of successive Governments? Secondly, with regard to the statement about the British content of Honda motors, has the Secretary of State had any discussions with the Common Market authorities on this matter?

On the second point, no. These matters are fairly well understood, not least because of the discussions that have taken place from time to time about the Nissan cars that will be produced in Britain. On the first point, the Honda Motor Company suggested that if it built an engine plant here it would do so at Swindon. It has purchased a suitable site, which also happens to be in a convenient place for the BL works at both Cowley and Longbridge. It would have been wrong for me to try to persuade the company to do something which it did not think was calculated to make the greatest possible success of the enterprise.

Does my right hon. Friend agree that possibly the only disappointing thing today has been the rather churlish acceptance of this excellent news by the Opposition? Does he further accept that for the midlands motor industry the statement is one of genuine joy and satisfaction? As was said about the El Alamein battle in the second world war, if that was not the beginning of the end, it was the end of the beginning. This new acceptance by the Government of the BL corporate plan is the end of the beginning, and the future of the BL now lies with the management and the workers, and the people of the midlands. I have no doubt what their response will be. We shall win new markets, new cars and new jobs for the British nation. That is the important thing about today's announcement, and the midlands are grateful to my right hon. Friend.

I thank my hon. Friend for his comments. What is remarkable is not that the Government are once again approving a BL corporate plan but that the Honda Motor Company has taken the step of accepting that the quality levels of BL are now such that it feels safe and comfortable about BL producing Honda cars with a Honda badge, and for Honda to sell them. That is a great change from the unhappy situation five years ago.

Does my right hon. Friend accept that probably the only other group of people apart fom the Opposition who do not welcome the plan are some of Honda's motor manufacturing competitors? Can he reassure the House, as he did by innuendo earlier, that this in no way interrupts the Government's plans for the privatising parts of the motor industry?

I am grateful to my hon. Friend for what he has said. I would never be a man to be found guilty of innuendo, so I make it plain that the approval today will advance the cause of privatisation.

Can my right hon. Friend confirm that one of the main influences on the Government in making this forward-looking decision is the vast improvement in industrial relations and productivity at BL plants? Will he also confirm that the Government can reasonably look forward to a continuation of this process, which will lead to further security and growth in employment in the west midlands and elsewhere?

This is so, and had industrial relations and the productivity level not improved from the appalling state that we found five years ago, we could not have approved a plan of this kind. Nor would the Honda company have proposed such a collaboration in those circumstances. I agree that the future of the company is in the hands of the work force, and I wish it well.

Is not the way that the right hon. Gentleman treats these matters of employment, which are of considerable significance to many of our constituents, typical of his offensive, sick and perverted personality?

The hon. Gentleman is basing his question on an entirely false hypothesis. He should understand that he is sick and disappointed at the good news.

It is typical of the reaction of my constituents that they will be pleased with today's statement, as will many of us who wish to see the United Kingdom remain in volume car production and engine manufacturing development. My constituents' pleasure will not be qualified by the fact that they well remember what happened to the British motor cycle industry and do not want to repeat those mistakes.

I hope that we shall not repeat those mistakes, and I take great encouragement from the many improvements in BL. There is still a great deal to be done, and it is regrettable that last year there was a slipping back in industrial relations and productivity. Underlying trends are good, and I hope that the company will justify the Government's faith in it.

In view of the answers that the Secretary of State has been able to give, does he feel that the Prime Minister and her policy unit did any service to British industry and to BL in particular by putting forward the proposition that BL should capitulate to the Japanese and buy Honda engines instead of developing its own? As to import substitution and the voluntary restraint on Japanese car imports, why is the right hon. Gentleman treating Honda-badged, United Kingdom-produced cars differently from the way in which he intends to treat Nissan-produced cars? What will be the percentage of British components, excluding manpower, at the start of the production of the Honda-badged cars in the United Kingdom, and as a long-term objective? In making this calculation, will the Honda engines produced at Swindon to go into the Honda cars produced at BL Longbridge count as a British component contribution?

The treatment of Honda cars made in Britain will be exactly the same as the treatment of Nissan cars made in Britain. I hope that there will be a rapid building up to a European content of at least 80 per cent., on the same definition as that used for Nissan. As for the engines, I do not know what the right hon. Gentleman would call an engine that is manufactured in a factory in Britain by British workers, if it is not British.

I hope that the right hon. Gentleman will not take that view of British-designed products produced in overseas countries. I think that he would land us in a great deal of trouble if he did.

On the right hon. Gentleman's first point, the points from the No. 10 policy unit were, as always, helpful and probing questions and suggestions. There was never any suggestion of asking BL to capitulate. That is a figment of the right hon. Gentleman's imagination and that of the press.