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Rolls-Royce

Volume 201: debated on Friday 20 December 1991

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10.15.am

About 85 years ago, a business partnership developed which some would have said was the ideal combination. It was almost a business marriage made in heaven, because it was between a Mr. Royce and a Mr. Rolls. Mr. Royce was an inspired engineer, a man of great ability who understood not only how to create a very important and efficient motor car but how to maintain its quality. He also knew that his customers would appreciate that. Mr. Rolls had a car sales shop in London, and they created a building which became synonymous with everything that was best in British engineering. When people talk about quality they say, "This is a Rolls-Royce product," and they are unaware of mentioning anything unusual.

My constituency faces one of the most frightening aspects of the development of the recession in Great Britain. Many companies have faced difficulties, but the Rolls-Royce motor company has always succeeded in returning large profits because, throughout the world, its customers valued each Rolls-Royce and were prepared to buy new models with only minor changes and to commit themselves to large sums to guarantee a first-class product.

That was not really surprising, because the first Mr. Royce charged a great deal of money for his car. The original cost was £900, and Rolls-Royce cars have not become any cheaper. The cars maintain a high standard of hand work. It was not just the coachwork that was important to the customer but the quality of the engineering. Many people were trained as Rolls-Royce chauffeurs and it was customary to find details of such training added to qualifications for a job. Unless people understood the Rolls-Royce, they would not be taken on to look after one of these special motor cars.

It is important for the House to understand the difficulties that face Rolls-Royce and especially what is happening to my constituents. When Rolls-Royce was broken up, the aero engine division formed a separate company and Rolls-Royce Motor Cars was floated and became a profitable concern. Not only do our royals have Rolls-Royce cars in their stables, but Rolls-Royce cars used to be the accepted form of transport for ambassadors and the heads of industry. That should still be the practice, because it incorporates an image of the United Kingdom.

However, Vickers took over Rolls-Royce in 1980. It is a traditional engineering company and, during my time as a Member of the House, it has not only had a direct involvement in defence engineering but has received over the years a substantial amount of taxpayers' money in terms of research and development. Vickers' corporate ethos is different from that of the car company, and it was obviously aware of that, because it took over the services of Sir David Plastow, who joined Rolls-Royce as a young man.

When Rolls-Royce began to produce a large part of Vickers' profits, one hoped that that contribution would be appreciated. However, the recession totally changed Vickers' attitude to one of its hitherto most profitable and constructive manufacturing units. That became clear less than a year ago, when Vickers Precision Engineering—another part of the group—faced real difficulties in my constituency.

With little concern being shown for the unions or the work force, immediate changes were made to that company's work patterns. The principle of first in, last out, was jettisoned without consultation or any attempt at explaining to the work force why it had been done. Many employees found themselves treated with scant respect and little understanding.

I know that, because I made representations to Vickers' management in respect of workers at a particular foundry. It was made clear to me that those workers' loyalty, preparedness to adopt new techniques and understanding of the need for flexibility would not deflect the management from their intention to close that foundry. That was a clear sign of Vickers' new attitude towards many of its engineering units.

What subsequently happened to Rolls-Royce was horrendous and totally irresponsible. When the recession first hit the company, it was obvious that it would grow more severe. The present management has a great deal to answer for in the existing situation. For a long time, there was a feeling that being a member of Rolls-Royce management was something of a soft option. Only a few years ago, the company had not only full order books but a waiting list, with some customers having to wait years to obtain the model that they wanted. Customers in many parts of the world were prepared not only to go on the waiting list, but even to pay a deposit to be able to join it.

There was no question of management having to go out to sell its product all over the world. In effect, it stayed at home and the world came trundling to its door. The result was an incredibly frightening inertia and an increasing inability to understand that, marvellous though the product was, it had to be sold—particularly in countries adopting new engineering and anti-pollution techniques and other innovations.

Rolls-Royce management eventually acknowledged those trends and was prepared to make product changes—but did not recognise the signs that, in future, the company would not have it all its own way, but would need to invest heavily in research and development and invest continually to develop its overseas markets.

It is noticeable that, since the war, there have been only five new Rolls-Royce models. It is not a car that alters every year—and it was that very stability and purity of line that attracted many customers in the past. They understood that they were buying a high-quality car, and did not seek superficial changes to its trim, or new bows fitted in inaccessible places, just to prove that they had purchased the latest model. Rolls-Royce's customers were content in the knowledge that the car's quality represented value for money.

Unfortunately, that is no longer true. Eventually, there were clear signs that the company was in severe financial difficulties, with overseas sales dropping noticeably. Management began to talk about work force cuts, and then imposed a three-day week.

My real complaint about the company's management is that it reacted in the most incredibly panicky way to a situation that is not entirely unusual, and which one can expect to change for the better when the country begins to emerge from the present appalling recession.

With the start of the three-day week, it was also made clear to the work force that there would be until Christmas several weeks of restraint, during which it would be required to work only a number of hours—and that over the Christmas holiday there would be a long lay-off, which would be economic from the company's point of view. The work force was prepared to accept that, because it believed that the new year would bring not only an increase in work but a return to a stable throughput of cars.

There has been tremendous co-operation with Rolls-Royce management at every level of the unions. Unfortunately, that may have been misinterpreted not as sensible flexibility or acceptance of the pressures on the company resulting from the recession, but a weak-willed inability on the part of the work force to understand the economy. Certainly there was no sign that management would, for its part, exercise tolerance and be similarly prepared to negotiate changes rather than impose them.

In the 1970s, Rolls-Royce was in considerable difficulties at one London plant, which had work force troubles. There were strikes, and clear signs that the unions at the Mulliner Park Ward factory, whose members were producing high-quality, customised vehicles, were ready to fight their corner with intransigence. That has never been true of the work force at Crewe.

I emphasise that, because a high-quality product relies on the quality of the work force that produces it—the two are directly linked. One cannot produce a motor car of such a standard by machine and assemble it like a Meccano set, with pieces bought in from small factories in the west midlands. There may be an upturn in the sale of popular cars, but customers throughout the world willing to pay the kind of money that is asked for a Rolls-Royce do not want a popular car off the production line that has been manufactured by a series of robots—even though such cars may be in their company fleets and be owned by members of their own families. Such customers buy a Rolls-Royce because they know that a substantial proportion of the car has been handmade.

I refer not just to the upholstery. Some of the media seem to believe that a Rolls-Royce is an ordinary car with some nice veneer and expensive hide seats. In fact, it is a very special car, because much of its engineering is handmade. People are quick to say. "How extraordinarily 1910—still to have a quality product made largely by hand."

That is a bizarre attitude to take. If one visits an expensive jewellers on Christmas Eve, one will find people buying high-quality products. They do not make those purchases because they imagine that those items have been turned out by a multiple jewellers' manufacturing flat unit in Birmingham—excellent though such products may be. Those customers will be looking for high-quality hand work and for something that will last them for as long as they wish to keep it. That has always been the type of product that Rolls-Royce has produced.

I return to the point that the work force at Rolls-Royce, apart from being highly skilled, is stable. It has given the management no problems in terms of consistent strikes, an inability to accept new working patterns or a refusal to consider the need for flexibility.

How is the work force to be repaid for its loyalty? Some of the families of those in the present work force have seen every male member working at Rolls-Royce—grandfathers, fathers, uncles and brothers. They were devastated when they were told suddenly during trade union negotiations that the company is in real difficulties and that it intends to impose new Japanese-style working practices.

If the House thinks that I exaggerate, I shall recount exactly what happened. With the company on a three-day week, and the unions having accepted a two-week lay-off over Christmas and the new year, negotiations began with the management. The unions knew that there would be a series of meetings. Without any consultation, however, the management decided that it would close down, as it were, and that it would go for 420 compulsory redundancies.

The unions responded by saying that they were still prepared to talk with the management representatives. They decided that they would offer alternative measures that would not make it less likely that the company would get the economic result that it wanted but would cushion both the work force and the factory against the worst of the consequences of the company's difficulties. In effect, the unions said "Change is best negotiated. Co-operation is won through consultation—the future by agreement."

The company had already imposed what was called a new green book. In effect, it was a one-sided agreement between the management and the work force. It then announced, in the most frightening and panicky move that could ever have been taken, that there would be 420 compulsory redundancies.

I shall tell the House how the management made the redundancies known to the work force. It should be remembered that the management is supposed to understand the needs of modern industry. What did it do? On the last Friday of the month, it suddenly decided that they would issue compulsory redundancy notices. It was so ill prepared that it was forced to use a series of motor cycle messengers and a manager in a Rolls-Royce to go round throwing the redundancy notices at the employees concerned.

When I say "throwing", I am not exaggerating. One man, who was working on the line, had his notice flung into the car on which he was working. That was followed by the man who threw it at him saying, "They've got you." Some employees received their redundancy notice in the post. Some ex-wives were given employees' redundancy notices. In some instances, employees were tapped on the shoulder and told, "Don't report back to work. Leave now and take your things."

The resultant chaos and deep emotional upset had never been seen before in my constituency. I am talking about people who had gone into Rolls-Royce to be trained as apprentices and who had remained there throughout their working lives. They found that everyone they knew was in the same situation. They were given a letter that suggested that they had a right of appeal and that they would have the chance to challenge what was described as an "evaluation" of their working abilities.

Those evaluations caused deep offence. I am sure that they will be the subject of complaints when many appeals are taken to the tribunal. Men who had city and guilds qualifications and many years of practical experience, and who were still comparatively young, were told by people who did not have the same engineering experience, "You are not capable of doing the job. You are not flexible. You cannot move from one place of work to another. You will have to go out on the stones."

The company's position soon became clear to those who were targeted. Some of them had a specific problem. For example, one man looks after his 81-year-old mother. He was told, "You must go because you are not flexible. You can't do night work." There were others who had had minor illnesses in the past. Many of the others who were targeted had one black side that stood against them—they were trade union representatives. That was the worst crime of all. When the compulsory redundancies were announced, 16 shop stewards went out of the door.

It was clear that it was the intention of Rolls-Royce to move from being a responsible, highly regarded and important manufacturer producing luxury cars to one that could be regarded as the worst sort of manufacturer of cheap goods. That has produced real agony in my constituency, and real anger. There were men in tears on the shop floor. Men came into my constituency office and it was clear that they were devastated by being given notice and by the savagery with which it had been done. They were entirely undermined, as were their views of themselves.

Why has the company found it necessary to behave in such a brutal and unimaginative way? Is it a company which has no future? Is the company so poor and have we become so much a third-world country that it has to be sold to the highest bidder, who preferably will be foreign and who will take over a high-quality name and sell the goods elsewhere in the world? Far from it.

One of the reasons for there being so much ill will within my constituency—I was amazed when I was told about this—was that, when the management was behaving in the way in which I have described, there was a growing waiting list for a new Bentley—the Bentley Continental—that will cost £160,000. It seems that the "gamble", as it was described in The Timeson 1 July 1991, has paid off. Customers have snapped up the first two years of production, placing deposits of £20,000 on each of the 600 Continentals. That has been done well before the first car will be made in November. Deposits alone have raised more than £12 million.

There is a strong suspicion in my constituency that Rolls-Royce is subsidising much of the redundancy costs through the pensions holiday that it has enjoyed over the past five years as a result of the Government's legislation. There is a worry that some firms plan to subsidise redundancy payments on the basis that they have made no contributions to pension funds. What could be greater cynicism that that?

There is a long waiting list for a new high-quality car, the Continental. The company has already taken many deposits. Rolls-Royce said, "If we were choosing a time to launch the Continental, it would have been difficult to pick a more turbulent period to do so." It then talked about sales in America and what has happened to the company because of additional taxation of 10 per cent. in America, and various other problems that have made real changes necessary.

Rolls-Royce has shed about 700 jobs at Crewe this year and a further 500 from the Mulliner Park Ward coachbuilding subsidiary in London. The result is simple. In December 1991, unemployment in my constituency was 4,276–7·9 per cent. That is an increase, from December 1990, of 47·3 per cent. That is happening because Rolls-Royce, British Rail Engineering Ltd. and a number of small companies are going under.

Rolls-Royce has contributed to that number for one simple reason. It said in public that it intended to move towards new Japanese-style work practices and that there was a great deal of enthusiasm for the move among the work force. I see astonishingly little sign of it. I believe that the work force has been betrayed. Its loyalty, its commitment and the many hard times that it has endured in the past have been totally ignored by the management, which thinks that in future it will be able to rip off not just its work force but its customers.

If we move towards a system under which many engine parts are bought in and much of the work that is presented to the customer is said to be acceptable simply because of the veneering, the coachwork and the upholstery, we shall soon find that the marketplace will begin to react. Rolls-Royce customers know what an engine ought to sound like. They know what quality they want. They will not continue to buy Rolls-Royce cars if they are not provided with the same quality of product as they enjoyed in the past.

What has been the Government's role? Some of the legislation has not improved the position. Furthermore, the Government have a great deal to answer for in their handling of the economy. We are in a deep recession which is going on far longer and is doing far more damage to our manufacturing base than was envisaged. There are those who would ask, "What is the loss of one major motor car company compared with the loss of so many of our high-quality manufacturing companies?" I would say in reply that Rolls-Royce has become almost an emblem of what is important to British engineering. It has trained generations of engineers. Rolls-Royce cars have been sold all over the world and have always stood for first-class quality.

Many German manufacturers seem to be better at making a profit than we are. They would be happy to take over this factory and its product. Yesterday, I was asked by Rolls-Royce representatives to speak to them because of their deep concern that the Prime Minister had been seen getting out of a Mercedes car at Maastricht. They were deeply affronted and upset about that. I do not see why that should surprise Rolls-Royce. If the company carries on as it is now, the Prime Minister will be seen getting out of a BMW. if not a Mercedes, and if he is not getting out of a BMW he may even arrive in a Fiat. If we go on for very much longer in this way, the Prime Minister will soon demonstrate his vision of a classless society by arriving in the smallest type of Japanese car.

Incompetent people, sitting in front offices, are not involved in manufacturing. They are not important to the people of this country, but without its work force Rolls-Royce would not exist. Who do the people sitting in front offices think is making their profits for them? They are being made by the men and women on the shop floor who have devoted their lives to this company but who have been treated with contempt by management which is totally unconcerned about their future, or the future of my constituency.

On the spirit of ecstasy—that very beautiful lady, synonymous in line and shape with all that is best in Rolls-Royce, who sits on my desk at home—shadows occasionally move. Sometimes it looks as though the spirit of ecstasy is weeping. In my view, she is weeping for the time when quality, commitment to the work force and, above all, responsibility were something that Rolls-Royce stood for. Those days may be long gone.

10.44 am

The Parliamentary Under-Secretary of State for Industry and Consumer Affairs
(Mr. Edward Leigh)

I am glad to have this opportunity to reply on the important subject of Rolls-Royce, one of our finest engineering companies. I do not necessarily agree with everything that the hon. Member for Crewe and Nantwich (Mrs. Dunwoody) said, but it is obvious that she speaks with great knowledge of these matters and with great commitment to her constituents. The whole House will therefore be grateful to her for bringing the company's problems to our attention.

The future of the company is a matter of great concern to us all, and the Department is therefore following developments very closely. As the hon. Lady said, the Rolls-Royce motor car is a symbol of British excellence. Without any doubt, it is the best car in the world. It represents our country well beyond our borders. Everyone recognises it for what it is—the product of British skill and craftsmanship. As the hon. Lady said—I have walked around the works in Crewe—it is not just a question of excellent design or good upholstery. Excellence in craftsmanship and engineering goes right to the heart of every component in the car. If hon. Members have any free time, I recommend that they visit that factory. It is a revelation to see just how excellent our engineering standards can be. The hon. Lady spoke in moving terms about that and I endorse everything that she said about this wonderful British product.

Rolls-Royce has enjoyed a decade of success. However, I am just as concerned as the hon. Lady that this company, which is a national institution, now finds itself having to tackle some very difficult problems. A series of events have occurred that have had a serious effect on the market for these luxury cars. World economic conditions, the war in the Gulf and tax changes in the vital United States market have combined to stifle sales. The hon. Lady may be relieved to hear that only last week the Secretary of State wrote to the United States Government about their swingeing tax on luxury cars. We await a reply. We are working with the European Commission on that subject. I assure the hon. Lady that the Secretary of State is concerned about the effect that that United States tax has had and we intend to take action.

I am grateful to the Minister for making that point. We are very concerned that the Secretary of State for Trade and Industry has not visited the Crewe factory and has not looked at any of the other problems that we have encountered. I hope that the Department of Trade and Industry will make representations with real vigour. The Secretary of State certainly does not seem to understand that there is a problem.

I can assure the hon. Lady that the Secretary of State has met the chairman of Vickers and is pursuing the matter with great vigour. She knows that our regional office has done a considerable amount of work. Mr. John Pownall, regional director of the Department of Trade and Industry in the north-west, has had a series of meetings with the Crewe development agency. At the most recent meeting, on 25 November. we offered the agency £40,000 of matching grants to meet half the costs of two projects, to help to develop a strategy for technology transfer and a business in the environment programme for firms in the borough. I hope that the hon. Lady accepts that the Department of Trade and Industry is taking steps to help. I am happy to visit her constituency to meet the borough council with her. It is most important that Department of Trade and Industry Ministers do not spend all their time in London, important though our responsibilities to the House are, but travel around the country, as I do almost every day of the week. I hope that that commitment will help the hon. Lady. I have already visited the works, but if I were invited I should be delighted to visit again.

Rolls-Royce is the last significant domestic car maker wholly owned by British interests and it is therefore right that the whole House should follow developments closely. Vickers acquired the company for £35 million in 1980. It was floated in 1973 after the collapse of its then parent aero-engine maker in 1971. City estimates of its current value vary between £250 million and £600 million. In the following 10 years, investment proved profitable and as late as last year—it is important to make this point, because it puts the debate in perspective—it made nearly one third of Vickers' £100 million profits. With the collapse of sales, in 1991 it will make an estimated loss of £60 million. Its problems are serious, but we hope that the parent company, Vickers, has the resources to overcome the problem; it is clearly seeking to do so.

A brief look at what has happened in the United States is a good, if unhappy, illustration of what Rolls-Royce faces. In a typical year, almost half the cars that it produces are exported to that country. In 1990, it assembled a total of 3,300 cars and, as usual, about 50 per cent. were exported to the United States. Compared with last year, sales in the United States have fallen by half this year. Overall, it seems that this year's total sales for Rolls-Royce cars will be some 50 per cent. lower than in 1990.

I hope that hon. Members will join me in understanding the difficult market conditions that all luxury car makers are facing and the need for them to take positive but difficult steps to secure their future. In the markedly changed circumstances in which Rolls-Royce Motor Cars finds itself, the company has been taking urgent and sometimes painful decisions to restructure its manufacturing operations and to bring costs into line with the new and much lower level of sales.

As the representative of the factory's workers, the hon. Lady dealt with the issue of job losses, which of course are regrettable at any time. I appreciate hon. Members' concern for the employment prospects of Rolls-Royce's work force at Crewe, but manning is a matter for the commercial judgment of the company and it would be counterproductive for the Government to try to intervene in the normal commercial processes. I do not think that the hon. Lady, despite her criticism of the company, suggested that we should do so.

Inevitably, companies sometimes have to adjust or rationalise their structure, employment levels or product lines because of changing market conditions. As the hon. Lady said, the work force has been cut by almost a third. Redundancies of more than 1,200 have reduced it to about 3,000. A three-day week is being worked and there will be an extended Christmas shut-down at Crewe. I am told that the work force is co-operating in the introduction of flexible working practices. The company is 10 weeks into a complete review of the business and how it can be made more efficient. It believes that those measures will reduce its costs by £640 million, and thus enable it to achieve a break-even point at an output of several hundred cars fewer than previously. One regrets any redundancies, but I am sure that the hon. Lady will accept that, through no fault of the company's the market in the United States has collapsed.

Unfortunately, people have come to understand that redundancies, properly handled by union negotiation, are necessary under a Conservative Government. What they will never accept is the brutal ignorance of the manner in which these redundancies were made and the savagery with which all internal relationships have been destroyed. That is why so many union shop stewards had to go. The company will find it almost impossible to operate in the future.

I listened with great care to the hon. Lady's remarks on those matters and I have noted them. She will not expect me to comment on them now, but no doubt inquiries can be made later.

The decision as how best to safeguard the company is a commercial decision for the owners. Vickers plc, which has owned Rolls-Royce since 1980, should look at what avenues are open to secure a successful future for Rolls-Royce. It has said that it will examine all the options and make an announcement at the appropriate time. At this stage, I share the company's confidence that Rolls-Royce Motor Cars will recover from its present trading difficulties.

The hon. Lady referred to speculation that Vickers might want to dispose of Rolls-Royce Motor Cars. There has been speculation in the press that there might be an outright sale or that an outsider might take a substantial shareholding. Companies such as BMW, Ford and General Motors have been mentioned. For the time being, that is only press speculation and the House would be wise to treat it as such. The important point that I want to convey is that Vickers is confident that Rolls-Royce Motor Cars will recover from its present trading difficulties. However, changes in manufacturing methods and working practices may have implications for employment.

The company's commitment to produce the highest-quality cars for the long term is shown by the fact that, despite a difficult year for sales in 1991, expenditure on research and development is being maintained at a similar level to that in 1990. The hon. Lady mentioned research and development. If the company is to retain its competitive edge, it must maintain expenditure on research and development.

Rolls-Royce, in keeping with its reputation for technological excellence, has continued to innovate and refine its products. For example, fuel consumption has been improved by more than 25 per cent. in the past five years.

Rolls-Royce Motor Cars also manufactures the Bentley marque. Bentley has achieved much of the company's success, and some 60 per cent. of the company's sales are under the Bentley badge.

Employment prospects for the work force are naturally tied to the continued commercial success of the company and its technology. I have already confirmed my confidence in Rolls-Royce's future.

Despite what has been written by motoring journalists, one could hardly contemplate assembly outside this country being successful without the loss of one of the essential attractions of the car—its unique Britishness. To reassure the hon. Lady, I refer to the trade mark issue, which is important. Rolls-Royce plc, the aero-engine maker, owns and licenses the Rolls-Royce Motor Cars trademark, but Vickers plc owns the company. Under the original licensing agreement, Rolls-Royce plc retains the right to withdraw the use of the name Rolls-Royce in whole or in part if the car business is sold to a foreign buyer. That right extends to areas other than ownership—for example, quality—and Rolls-Royce plc regularly monitors the licence. That is an important protection which the hon. Lady did not mention.

I stress that one of the essential attractions of the car is its unique Britishness. The continuing manufacture of Rolls-Royce cars in Britain is thus of prime importance. I hope that the main assembly facility at Crewe will therefore have an assured future. That future may involve some type of partnership or collaboration, because the cost of development is high. However, as I have already said, what option to follow is a matter for the owner——

It being Eleven o'clock,MR. SPEAKER interrupted the proceedings, pursuant to Standing Order No. 11 (Friday sittings).