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Rover Group

Volume 129: debated on Wednesday 9 March 1988

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5.

To ask the Chancellor of the Duchy of Lancaster when he next plans to meet the chief executive of Rover Group to discuss the company's future.

The Chancellor of the Duchy of Lancaster and Minister of Trade and Industry
(Mr. Kenneth Clarke)

At the moment I have nothing to add to my statement to the House on 1 March.

Will the Minister tell the House what assurances the Government are seeking on future model developments in the British Aerospace talks? I am referring particularly to the update of the Rover 800 by 1992, the future of the R9, the Montego replacement, and other models. What would the Government do to make such assurances stick? For example, would they deploy their golden share in British Aerospace to safeguard the long-term position of vehicle production in the interests of balance of payments and employment in the industry?

Future model development is a matter for the management of the company. It is a commercial rather than a political decision. British Aerospace has told us that it is interested in continuing the development of the Rover Group, and obviously it is seeking to acquire it as a going concern. If the negotiations result in a merger between the two companies, the new management will have to address itself to the question of model development in order to protect its role in the market in future. We would not use the British Aerospace golden share in any way, because it would not apply to new acquisitions. In the course of the negotiations we are considering what view, if any, we will take about the Rover shares when we sell them.

Will my right hon. and learned Friend, in discussions with the chairman of the Rover Group, ensure that any conditions relating to the deal with British Aerospace for the period prior to any final agreement will not exclude any offer that may be superior in terms of security to the work force or return to the taxpayer and that, in the period after such an agreement, they will not exclude future participation or joint venture by other motor companies?

As I explained to my hon. Friend when I made my statement, we agreed that at present the negotiations between British Aerospace and the Rover Group should proceed on an exclusive basis. We shall have to await the outcome of those negotiations, but, if they were to be successful, and if we were considering a final offer, we would have to consider what other offers have been forthcoming from other interested companies.

Having read about all the buying and selling that is going on between the Rover Group and British Aerospace, I should like to underline to the Minister the fact that the livelihoods and jobs of thousands of workers are involved. Does the Minister accept that there should be full consultation with the trade unions, and will he bear in mind the livelihoods of those thousands of workers, irrespective of who owns the undertaking?

There is no pie in the sky involved. These are all serious negotiations. The hon. Gentleman is right that the negotiations concern important businesses and that the well-being of thousands of people depends on British Aerospace and the Rover Group continuing to be a commercial success. We believe that the Rover Group will be best placed in the private sector. The present negotiations are worth encouraging and we are awaiting the outcome of them. In the end, we shall make our decision about the holding in the Rover Group based on our best judgment of the interests of the taxpayer, the company and the work force.

When my right hon. and learned Friend meets the chief executive of the Rover Group, will he discuss the amount of capital that is needed to update the Land Rover and Range Rover line, the van lines and the various new model developments? Will those costs be reflected in the price that is charged for the Rover Group to whoever may be buying it?

Anybody contemplating purchasing a company of this size must address himself to exactly the kind of issues to which my hon. Friend refers. In deciding on the final price, and when we judge any offer that may be made, we must take an overall view of the value of the company to the taxpayer and the balance sheet that the new company will require. We shall bear in mind all the relevant considerations, including the ones that my hon. Friend has given.

My understanding is that there is a prospect of development on the Bathgate site, and I trust that there will be some new development on that derelict site. It is now a matter for planning law in Scotland; it is not the responsibility of myself or of my hon. Friends at the DTI.

Is it not important that the Government should now stand completely aside until negotiations between the two companies are concluded? Should not both companies be seeking to convince City investment institutions of the merits of their case, without the Government being involved?

At present, the two companies are negotiating. Obviously, as the owner of 99·8 per cent. of the shares, we shall be closely involved. If the negotiations are successful a bid will be forthcoming for our shares, which we shall judge.

There is only one other way in which we are involved. My right hon. and noble Friend the Secretary of State is in Japan, or is about to land there, and no doubt he will repeat what we have been saying about our wish for Honda to continue to be involved in co-operation with the Rover Group, which has been welcomed by Honda and the Rover Group so far.

If the Minister has thought about the Rover Group and its future in any sense other than how quickly he can wash his hands of it, and if he has thought about British Aerospace—the proposed partner in this illogical and silly union—will he say what effect the rising pound, which is now up 14 per cent. in real terms compared with the end of 1986, will have on the business of both those groups? Does he agree with the Prime Minister and The Sun newspaper that the rising pound is good for Britain? Is it good for Britain's manufacturing industry?

I do not know whether the hon. Gentleman's only interest is to try to ensure that the Rover Group remains nationalised for as long as possible, or whether he is contemplating the renationalisation of British Aerospace. Such matters are best determined by making the best judgment of the commercial future of the companies in the private sector, and that benefits the work force as well. The rising pound certainly damages some industries and helps others, but the rising pound is a sign of the strength of the British economy. More stability in exchange rates is desirable, and my right hon. Friend the Chancellor of the Exchequer obviously welcomes the extent to which a strong pound keeps down inflationary pressures in Britain.