The ghost of Rolls
David W. Wragg
There are times when company directors, in common with politicians, must feel that a correct decision is impossible. If the company concerned happens to be large and public, open to government money (which is not so unusual) and full of prestige, the position of the directors becomes manifestly more difficult In this light, one cannot but feel some sympathy for the two members of the Rolls-Royce board, Sir Denning Pearson, the chairman, and Sir David Huddie, in charge of engineering, blamed by the Department of Trade and Industry's report on the collapse of the company. Compassion alone does not dictate such feelings, for the idea that the politicians and their advisers are getting off lightly also plays a part. True. Rolls-Royce was a victim of the over-optimism which seems to be an inherent disease of not just the British aircraft industry, but of aircraft industries generally — with some experts giving the currently successful French another year at most! Poor internal control on stock, for example, kept capital tied up which could have been usefully released, while technical and financial forecasting was abysmal. At least one observer of the RollsRoyce scene believes that the company's troubles date from as early as the first world war, when it first entered the aeroengine field with up-dated versions of its motorcar engines, but this is perhaps an extreme view and the problems leading directly to the collapse are of much more recent origin.
Contraction within the aircraft industry after Labour came to power in 1964, due to the subsequent cancellation of major projects and to the sharing of work on others with European manufacturers, led in the end to a merger between Rolls-Royce and its only British competitor, Bristol Siddeley Engines, making what was at the time claimed by some to be the largest aero-engine manufacturer in the world. After the merger, the contraction continued. This was due directly to Labour's attempt to be good Europeans while at the same time following Anthony Wedgwood Benn's "white heat of the tech nological revolution " by fostering European aircraft projects. This policy not only failed in its object of buying Harold Wilson a place in Brussels, but meant that European aircraft projects became not so much potential markets for British engines and equipment, as in the past, but instead potential partners. It was very much a oneway business.
If this was not bad enough, the merger with Bristol Siddeley is supposed to have cost E60 million while Rolls-Royce attempted to make it work. By this time, during the late 160s, Rolls could ill af ford such sums because, unlike its American competitors, the com pany had been denied a steady stream of larger and more expensive engines which would have given it a natural progression in terms of turnover and technology towards engines of the RB211 standard required for the airbus and jumbo jet generation.
A simple fact of the matter was that, by the time of the RB211 contract, the engine was twice as powerful and much more than twice as expensive in terms of eventual unit cost as the largest Rolls engine then in production. Obviously turnover could not finance the new engine, but it had, not even done so in the United States where generous military contracts, the like of which even the American industry won't see again, had financed the develop ment of large engines suitable for adaptation to civil transport work.
Far from the Rolls directors, as the DTI report alleges, placing all of the company's eggs in one bas ket with the decision to proceed on the RB2I 1 engine for the Lockheed Tri-Star airbus, they were trying to avoid just this. Without the RB211, their only ad vanced project would have been the Olympus engine for the Concorde airliner obtained with the merger with Bristol Siddeley, of which success is still not certain and, if it is successful, will in any case be shared by Snecma of France.
It is just possible to speculate that, had the merger with Bristol Siddeley not taken place, or had BSE brought the contract for the TSR2 engine with it and the project not been cancelled, and had the internal financial control of Rolls-Royce been up to scratch, the collapse might not have taken place, But even so, the costing for the RB211 was some E100 million out, on the wrong side, and even with the increases made since, the engine is still no eriore expensive than the American competition. The continued existence of the three aircraft projects cancelled by Labour might have given Rolls-Royce the turnover and experience necessary for the RB2Il project, but in the light of such more realistic costing, would the project have been started?
The role of the Labour ministers in forcing Rolls to keep the cost of the RB211 down in order to gaol the Lockheed contract will never be known for sure, While a realistically costed project might not have succeeded with Lockheed, a lot of good could have been done with a British airbus, but for the Labour fear, ironic in retrospect, of upsetting the French.
Nationalisation of the aero-engine activities of Rolls-Royce was probably an over-reaction on the part of the Conservatives; some delay and a bridging loan might have done more and relieved them of many policy dilemmas in the meantime. Parallels with the'Mersey Docks and Harbour Board's' bondholders should be avoided, however, since Rolls has done, and will do, more for Britain than the docks at Liverpool, when they are working! But all of this is water under the ]aridge_ now. Fortunately, the RB2I 1 engine is settling clown well into airline service, and if only the new nationalised company and Lockheed are not too timid after the events of the past few years to push ahead with new versions of both engine and aircraft, something might still be made of the project. Further development is necessary, however, and the technological fall-out must be passed on to smaller engines, where the existing RollsRoyce range is approaching obsolescence, The risks and costs in aerospace are indeed huge, but so are the rewards of around £400 million a year towards the balance of payments, excluding saved imports, and in a country which is overcrowded and has few natural resources other than the skill of the natives, the rewards are indeed tempting.
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