HOW THE WHEELS CAME OFF

Geoffrey Owen on what really caused the death of the British-owned motor industry

THE Wimbledon syndrome was again in evidence at the London Motor Show last week. An array of talent was on display, but very little of it was British. Since BMW's takeover of Rover — the former British Leyland — in 1994, virtually the whole of the British motor industry has passed into foreign hands. Even Rolls- Royce Motors, the epitome of Britishness, was sold to Volkswagen last year.

How did this situation come about? Should we blame managers, unions, gov- ernments, or a combination of all three? Part of the answer to these questions can be gleaned by tracing the post-war history of Rover and BMW.

In 1960 the original Rover company, based in Solihull near Birmingham, was in good shape. It had scored a big interna- tional success with the Land-Rover and its saloon cars were much admired by affluent customers for their comfort and reliability. Many motorists remember with affection the Rover 3-litre, launched in 1958, and the sleek Rover 2000, which came five years later.

At that time Rover looked a better bet than BMW, which had almost gone bust at the end of the 1950s. It was on the point of being taken over by Daimler-Benz, then was saved at the last moment by the inter- vention of a wealthy private investor, Her- bert Quandt; the Quandt family still holds a controlling interest in the company.

After the rescue, BMW adopted what management gurus call a 'niche' strategy, making high-quality, well-engineered cars for people who wanted something sporti- er than a Mercedes. This move turned out

to be brilliantly successful, but it was not at all obvious in the early 1960s that Rover, competing in roughly the same sector of the market, would be unable to keep up.

Unlike BMW, however, the Rover direc- tors decided to throw in their lot with a larger group, and this was when things began to go wrong. The 1960s was the decade of merger mania in Britain. The general view, in the motor industry and others, was that only the giants would sur- vive. In 1967 Rover readily accepted a takeover offer from Leyland, the truck company, which already owned another Midlands car-maker, Triumph. The Rover managers thought that within a larger organisation they would have the resources to broaden their model range — plans for a new luxury car were well advanced — and to build up their sales in Continental Europe.

Unfortunately, Leyland's ambitions did not stop with Triumph and Rover. In 1968 Donald Stokes, the company's ebullient boss, was persuaded by Harold Wilson and Tony Berm (both of whom believed that big is beautiful) to merge with the ailing British Motor Corporation (BMC). The new entity, British Leyland, was to be Britain's national champion in cars and trucks.

BMC was the country's largest manufac- turer of mass-market cars, but its Austin and Morris models were losing sales to Ford, and Leyland's managers had no experience of competing in this league. The outcome was calamitous. Not only did the creation of British Leyland fail to stop the rot at Austin and Morris (the lacklustre Allegro and Marina were no match for Ford's Escort and Cortina), but it also damaged the healthier parts of the group, including Rover.

Instead of proceeding with the planned luxury car, which would have fitted in with Rover's philosophy of cautious expansion, the decision was taken to go for a more ambitious project — an 'executive' saloon to be built in a new factory in volumes far exceeding anything that Rover had achieved before. The idea was that this new model would be the first in a range of high- quality cars, aimed squarely at BMW and Mercedes-Benz.

The concept was good but implementa- tion was abysmal. The scale and complexity of the project put immense strain on Rover's managers and workers, and when the car was finally launched in 1976 it was dogged by quality problems. Sales were far below target and the new factory was woe- fully under-used; it was shut down in 1981 and production transferred to the Austin/Morris factory at Cowley.

By this time British Leyland (which was

nationalised in 1975) was in a parlous state. It was clear to Sir Michael Edwardes, chairman from 1977 to 1982, and to his successor, Sir Graham Day, that the company had no future as a mass-mar- ket producer. The only sensible strategy was to move up-market and to make maxi- mum use of the Rover name which, despite recent travails, still had a quality Image. At the same time Honda was brought in as a partner to provide techni- cal support. In 1987 the British Leyland name was dropped in favour of Rover. What the new Rover Group now needed was a range of cars at least as good as BMW's; but too much ground had already been lost. While British Leyland had been floundering, the German company had not deviated from its chosen strategy and helped by a much more buoyant home market — had gone from strength to strength. Rover, by contrast, even with Honda's help, was looking increasingly vul- nerable, not least because so many other manufacturers had entered the luxury end of the market.

The final act in the drama began in 1988 with the sale of Rover to British Aerospace. This bizarre transaction, moti- vated mainly by the Thatcher govern- ment's eagerness for privatisation, provided no long-term solution. Five years later the company was up for sale again. Just why BMW decided to buy it remains something of a mystery, but its managers thought they would be able to develop Rover as an international brand, comple- mentary to, but not overlapping with, BMW itself.

Was there any moment in this sad story when the decline could have been halted? Perhaps the old Rover gave up its inde- pendence too easily in 1967. But that error, if it was one, was massively com- pounded by the Leyland/BMC merger in the following year. If Leyland had stuck to Rover and Triumph, it might have been able to create a family of high-quality cars, alongside its successful truck business, just as Mercedes-Benz had done in Germany. The merger with BMC threw everything out of joint.

Quite apart from the organisational problems that had to be solved, Donald Stokes and his colleagues made the mis- take of trying to do too much — a new Austin range, an entirely separate Morris range, as well as the new Rover cars. It was a grandiose vision which bore little relation to the resources and skills avail- able.

The decline of Rover, and of the British- owned motor industry as a whole, was an avoidable disaster. The problem was not that British engineers and workers were incapable of making good cars, but that a series of management decisions, some of them encouraged by governments, allowed many of the industry's strengths to be dis- sipated. This is not to whitewash the trade unions — the motor industry suffered more than most from anarchic labour rela- tions — but it was not the unions' fault that British Leyland got its new model pro- gramme so badly wrong.

Thankfully, these failures are in the past. Over the last two decades a new motor industry has taken shape, albeit under for- eign control. British car exports have risen sharply; three-quarters of them now come from the three Japanese companies which have built assembly plants here, and from the three older foreign subsidiaries (owned by Ford, General Motors and Peugeot), all of which have greatly increased their productivity.

Meanwhile BMW is struggling to revive the one-time national champion. The new Rover 75 is a promising start and two more new models, updated ver- sions of the Rover 200 and 400, were unveiled at the Motor Show last week. The irony is that this up-market strategy is precisely the one which the old Rover company could and should have pursued in the 1960s and 1970s. Thirty years of mismanagement and the damage done to Rover's reputation will not be easily reversed.

Geoffrey Owen's new book, From Empire to Europe: the Decline and Recovery of British Industry Since the Second World War, has just been published by Harper- Collins.