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Rover Group

Volume 130: debated on Thursday 31 March 1988

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11.59 am

I should make it plain at the start that this is in no sense an attempt to pre-empt the debate that is to come. I applied for this Adjournment debate before the statement on Tuesday was public knowledge.

With your permission, Madam Deputy Speaker, I should like to leave a little time for my hon. Friend the Member for Birmingham, Northfield (Mr. King) to join the debate. He and I share the Longbridge works and most of the workers live in our constituencies.

I welcome the Under-Secretary of State for Industry, who has had a long connection, in his constituency and now in his official duties, with various forerunners of the Rover Group and who triumphantly concluded the recent deal for the sale of Leyland Bus on which I congratulate him. It is singularly appropriate that he has also had close experience of British Aerospace. He is in a unique position to advise the House on the benefits of the deal, so I do not apologise to him for the inconvenience of bringing him back to London for the debate, because he will welcome the opportunity to expand on the remarks of the Chancellor of the Duchy on Tuesday which, necessarily in responding to questions, were slightly disjointed.

The agreement between British Aerospace and the Rover Group is a great coup. Certainly it is a political coup. It is no wonder that the Opposition are asking for a full-scale debate, as they made such a sorry fist of the questions on the statement. They could not understand that limiting the tax losses was of benefit to the taxpayer. Indeed, they started burbling about child allowances in the context of what most of us concerned with the motor industry would regard as a most significant development and opportunity.

The political aspects certainly reflect the cracking pace that the Department of Trade and Industry under Lord Young has set in moving towards an enterprise basis and in returning to the private sector in a state of health the industries that have been in its charge.

It is worth emphasising that the Rover Group agreement is not just a political coup. It is a commercial coup because the speed with which the agreement has been reached has done a great deal to ease, if not end, the uncertainties that might otherwise have affected suppliers, dealers, customers and those who work in Rover. That confidence is very important.

We should not overlook the fact that while Rover has been in public ownership there has had to be each year full Government consideration of the corporate plans, with a great deal of discussion in the media and elsewhere about whether such plans were being funded in full and whether they responded to the capacity of the industry or its competitive prospects. All that discussion, which was necessarily spread out over some months each year, did a great deal of damage to the certainty that suppliers, dealers and workers in industry naturally expect to enjoy. I am glad that they will no longer be exposed to such intense scrutiny and the expressions of such doubts, whether or not they were justified.

The agreement also marks the care that the Government have taken with the Rover Group. It is not a question of getting rid of it at any price, as the Opposition have been trying to suggest. The Government have sustained it almost at any price, and certainly at great cost to the taxpayer. Therefore the Opposition are in some difficulty. On the one hand they suggest that Rover is being got rid of at any price, and on the other hand the say that the Government are doing too much to help it. The Opposition will have to make up their mind which path they wish to pursue.

Conservative Members certainly take confidence from the progress that Rover Group has made under Mr. Graham Day and his management team to improve the margin on its vehicles, to improve the quality of those vehicles, to develop markets for them, to return the company to a trading profit and enable it to resume its rightful place in the private sector. That is a mark of the progress that has been made. It is not a sign of defeat or failure; it is a very strong signal of confidence in the progress and viability that the company has achieved.

Part of that confidence comes from the collaboration with Honda. In the days of the Ryder report—if we can remember those gloomy days—I said in the House that the future for the company, as it then was, rested in collaboration with other companies. At that stage, we had not envisaged the collaboration with Honda which has been most fruitful in terms of shortening the design cycle, bringing forward new models, sharing the experience of such a skilled engineering company as Honda and developing remarkable products which now enjoy success in the market place.

The additional collaboration with British Aerospace marks another step in the same direction. I welcome the fact that collaboration with a British company is about to start, thereby giving further confidence to dealers that there will be no hiccups in the marketing of vehicles, and that customers may retain their traditional loyalties and continue to support the product.

I wish to make one or two further points that would do a great deal to buttress the confidence of those in the industry and the all-important customer. I refer to the Metro in particular. I shall question the Minister in a moment, but I believe that we already have an assurance that the next model jointly to be produced with Honda will be continued—it is now codenamed the R8.

However, I want to look a little further ahead. If the Metro model is to be replaced, the necessary steps will have to be taken now for it to be produced in 1990. If we were to have the R8 in 1989, we must have the new Metro in 1990. That means that work must be undertaken. That vehicle is clearly important, and not only for those who have the interests at Longbridge at heart. As two of every three vehicles sold by Rover are Metros, and as it is the only model on the best selling list, it is vital for the work force that suppliers and dealers should be able to sustain their businesses.

Is my hon. Friend the Minister able to say anything about the outcome of the discussions in Japan between Lord Young, Professor Smith and Mr. Day? Was there any discussion of models after the R8? Did Honda say anything about its future intentions? Did it say whether it wished to go it alone on a green field site, or is it looking forward to continuing its collaboration with Rover and British Aerospace?

I appreciate that it may be difficult for my hon. Friend to give an open answer to a very important question, but it leads on to my next point. My hon. Friend the Member for Northfield and I believe that it is important to retain volume car and engine manufacturing at Longbridge, not just for constituency reasons but for west midlands reasons and state of technology reasons.

Never let us forget that at one stage the Longbridge plant accounted for over 50 per cent. of all the robots installed in this country. It is at the cutting edge of technology. That is why it is important to be able to look forward to continuity, so that further development similar to that which is being undertaken in association with Warwick university may proceed.

If there has been any suggestion that Honda may not wish to proceed other than on a model-by-model basis and that it may have long-term plans to proceed independently, why, oh why, should a condition be imposed that British Aerospace must not divest itself of its cars division for five years? It would be foolish to preclude another manufacturer that might wish to take advantage of the excellent K series engine that is being produced at Longbridge, because it would add considerably to economies of scale and would enable the company to send some of its models down the assembly line, thereby reducing costs. What is the reason behind the imposition of that condition?

We have nurtured the Rover Group to the point at which it may at last be returned to the private sector. The agreement is a mark of success. It prepares the ground for the further progress and development to which I am glad to note that British Aerospace is committed.

12.12 pm

I am grateful to my hon. Friend the Member for Bromsgrove (Mr. Miller) for allowing me to say a few words in this debate. I warmly support all that he said. He put the case extremely well.

Broadly speaking, I welcome the Government's decision to merge British Aerospace and the Rover Group. I make no comment about price, but it ought to be placed on the record that only two years ago the management was interested in purchasing Land Rover for about £250 million. At that stage, Land Rover was not even in the black. British Aerospace has negotiated a substantial bargain.

The Rover Group is not confined solely to Land Rover and Austin Rover cars. It still retains a 40 per cent. shareholding in Leyland Daf, which is now in profit. My hon. Friend the Minister has an immediate interest in that company. The Rover Group also retains a 25 per cent. holding in Unipart, the spare parts distribution and manufacturing section of the original BL cars group. It is trading very well indeed — as is Istel, the computer software and services subsidiary. The Rover Group is more than just a car manufacturer.

I welcome the deal and the price that has been paid. It has pleased many because of the resultant increase in the industrial strength of the new company. The House will recall that we sought to achieve that in the late 1960s. It was said that we had to be big to be beautiful and that we needed big muscle to succeed, but we learnt that we can be too big and that we can have the wrong muscle. I very much hope that the synergy of this arrangement is correct and that particular parts of this greater organisation will not disappear and wither away.

We hope that the industrial strength of the new company will be great, but we must ensure that there is a commitment to the maintenance of the car industry. It is essential that where the Rover Group is to find its market within the European Economic Community should be clearly defined. The group has at last pulled itself out of the financial quagmire and is now trading in the black. By all accounts, it should be doing a great deal better during this financial year.

I am encouraged by what Mr. Graham Day said in his circular to all employees. He said that the company has made great progress and is determined to maintain it. There could be no better signal of that determination than an announcement that the company intends to retain its present volume of car production at around 500,000.

My hon. Friend the Member for Bromsgrove referred to the commitment to the new Metro project, which represents two fifths of current production. It is essential that distributors and dealers throughout the world should have such a car in their inventory. If they do not have a supermini car, they cannot face competition from all over the world. The Metro is consistently in third place among the top 10 cars in this country. It accounts for a substantial components input at the Longbridge works, where there are hundreds, if not thousands, of components suppliers. We look forward to the new management endorsing its determination to remain in that market by announcing that the new Metro will go full steam ahead.

If there is to be a change of direction, the £95 million that was spent on developing the K series engine and fitting out a new gear box factory, which the car will use in conjunction with the forthcoming R9 model, will have been largely ill spent. It can be justified only by large-scale production of new engines and gear boxes; 300,000 units a year are needed for the new Metro and the R8 car that is to be manufactured next year. Large-scale production is needed to justify the expenditure that has already taken place and that is still taking place. I look forward to a commitment on that scale.

I recognise that it is impossible for the company to publish confidential details of its forthcoming models. That information is rightly kept secret. However, we are living in unusual times and it is not unreasonable to ask for such a commitment. The Rover Group has the ability to prove that it is a worthy part of the car industry. Enormous strides have been made in productivity and quality. This last outpost of a rich British motoring legacy can deliver the goods and it is doing so. It deserves more than a lingering decline into obscurity. I am sure that the new management will grasp the opportunity to make a great success of it.

Not long ago, Austin Rover ran a slogan, "Now we're motoring." Unfortunately, it did not. Perhaps the smile on Professor Rowland Smith's face shows that he has thought of another one: "Watch us fly." This time it really must.

12.20 pm

I am particularly pleased to be answering the Adjournment debate initiated by my hon. Friend the Member for Bromsgrove (Mr. Miller). It gives me great pleasure to congratulate him on raising this subject; whether by accident or by design, he finds himself in the front line as a result of the announcement made earlier this week.

The House will be aware that my hon. Friend is one of the authorities on the motor industry. He is chairman of the all-party motor industry group, and he is heard on these matters with respect. So it is, too, with my hon.

Friend the Member for Birmingham, Northfields (Mr. King) who in his past incarnation—and in his present incarnation as the hon. Member for the constituency that includes Longbridge — knows much about the importance of Austin Rover.

This is an ideal opportunity for the three of us —saving the presence of the hon. Member for Monklands, West (Mr. Clarke)—to discuss the excellent news of earlier this week. I know a little about the Rover Group, as I represent the constituency that includes the town of Leyland, where it all started. Up there, they still talk about "Spurrier" or "Leyland Motors". I am very much involved, too, on the British Aerospace front and, incidentally, that company is still known as English Electric. The traditional names that abounded have changed.

I know from my experience of Leyland DAF and Leyland Bus, which featured in the press only yesterday, as well as of British Aerospace, just how important and ideal the combination of the Rover Group and British Aerospace will be. To add weight to the success story that is British Aerospace and will be British Aerospace and Rover, let me cite the acquisition by BAe of Royal Ordnance in my constituency, which has been extremely well run by BAe's managers, building on a very good work force.

In engineering terms and in a variety of other ways, the combination is excellent news. I very much agree with my hon. Friends the Members for Bromsgrove and for Northfields that the Opposition have been slightly wrong-footed on this; I put it no higher than that. We shall view with a great deal of interest their contribution to the debate that they have requested, and which I understand we are likely to have. We are very proud of the achievement that this spectacular deal represents in both political and commercial terms. It is an achievement for which my right hon. and noble Friend the Secretary of State should be congratulated. We shall welcome the investigation that the Public Accounts Committee has suggested it may carry out, as well as the close examination of the deal by the Opposition, because we believe that it is an excellent deal that will stand the test of time.

My hon. Friend the Member for Bromsgrove asked about the commitment of British Aerospace in general terms. I am in no doubt at all that British Aerospace has taken on the company because it wants to develop and build upon it. BAe is keen to ensure that the work put in by Graham Day and his team is properly developed. BAe has said that it wants to abide by the terms of the business plan that Graham Day has produced. While there may be changes as time progresses—I hope that my hon. Friend will be watching for them and will give us the benefit of his advice—the company has told us that it looks on its acquisition of the Rover Group as a long-term investment and that it is committed to the maintenance and development in the longer term of the group's present business. Obviously BAe will address itself to the future well-being of the business and the shape of the product range.

While it would clearly be wrong for the Government to impose constraints on the management of the group, I should draw hon. Members' attention to BAe's own press release, which states that BAe believes that Graham Day and his colleagues have done an excellent job of repositioning Rover Group for the future and is keen to support his future plans for the Rover Group. The company has told us that it is conscious of the importance of Rover as a British-owned manufacturer of cars and four-wheel drive vehicles, not simply in terms of direct employment—to which both my hon. Friends referred— but in terms of Rover's significance to its supply industries, distributors, dealers and customers.

We have had a number of letters from component manufacturers and some from dealers saying how pleased they are that the deal originally suggested would be a British solution. The Opposition underrate the importance of that at their peril. The House will recall that in past discussions we all sought a British solution. British Aerospace further said that its purpose in acquiring Rover was to hold and develop its principal businesses and sees no reason to disturb these. British Aerospace's commitment is there, declared for all to see, and we can look forward to the result with confidence.

My hon. Friend the Member for Bromsgrove referred to Honda. Honda made it abundantly clear to my right hon. and noble Friend the Secretary of State, on his visit and in our earlier brief discussions, that it welcomed the continuity of Rover Group's British management team, which would be assured by British Aerospace's ownership of the company. Honda said that it is keen to be involved in the discussions, which may well go wider than the motor industry because of Honda's close involvement with a wide variety of activities connected with electronics and related matters.

My hon. Friend referred specifically to the Metro. My hon. Friends are right to suggest that the Metro has played a substantial part in the achievements of the Rover Group in recent years. As my hon. Friend said, about two fifths of the sales have been Metro sales. British Aerospace recognises that fact. I cannot give my hon. Friend an absolute assurance—I know he understands that—that the Metro as such will continue, but it would be foolish of British Aerospace not to recognise the importance of the Metro and of building on its success in the market place. I am sure that British Aerospace will look to the future along those lines.

Another point that needs to be reiterated, although my hon. Friends did not deal with it in detail, is that, although we have achieved much, we need to ensure that the European Commission hastens its progress in giving its support to the deal. My right hon. and noble Friend the Secretary of State has done much work already with officials in trying to persuade Commissioner Sutherland that much needs to be done. Commissioner Sutherland has said, rightly and properly, that an investigation will have to be carried out. We hope that he will be able to undertake it quickly and efficiently to ensure that the deal gets the go-ahead in the time scale that we seek for it.

It is a source of great satisfaction to me, as the hon. Member for the constituency that includes Leyland, to join my hon. Friends, whose experience is well known to the House as well as to their constituents in welcoming a deal that will do an enormous amount to resolve some of the difficulties faced by the Rover Group over the years and to build on the obvious commitment that the Government have shown to the Rover Group by virtue of the investment of about £2·9 billion since 1976.

The agreement will provide a good deal for the taxpayer and for the shareholders of the companies concerned and, most important, an excellent deal for both British Aerospace and the Rover Group in their many and various guises the length and breadth of the country. I am pleased to be able to give my support and encouragement to an interesting and exciting future for both companies.