The car industry
Italian fiasco
Geoffrey Robinson
The British Government's strictures on the Chrysler Corporation's behaviour towards its t-IK operations must have struck a strangely
hollow note in Rome. For the now nationalised British Leyland has taken the extraordinary decision to put its Italian subsidiary, Leyland Innocenti, into liquidation and to sack its entire work force of 4,500, as the consequence of what Must be considered a most inept and bungled negotiation.
Anyone with any knowledge of, let alone sensitivity to, industrial relations in Italy, could have predicted the outcome of Leyland's hliner-style head-on confrontation with the unions. The scene was set from the first with t_he absurd appointment of Mr Percy Plant,
fresh from the liquidation of Leyland's Spanish oPeration, as head of Leyland Innocenti and as !i'lch in charge of the negotiation. As the !talians saw it, one might as well appoint a hangman to negotiate for a condemned man. But beyond such fundamental tactical and PsYchological errors as that, the plain fact is that it is simply not on in Italy, with the highest level of unemployment in Europe at present, for anY grouP of union representatives to accept, and get accepted by their members, an enforced lydundancy of one third of a company's work .toree. In attempting to force through the l_olPossible Leyland has succeeded in projecting for itself the unacceptable face of international caPitalism and in embarking on a battle which the unions could not afford to lose. It may, of course, be fashionable, in British Leyland and elsewhere, to consider these sorts of self-conscloUsly tough and hard-nosed attitudes as the key to managerial respect and industrial success. In the real world, of course, industrial or other toughness is only useful if there is a creative and purposive intelligence directing it if it is used, that is, in support of a clearly and fully thought-through strategy. And it is larecisely this that seems to have been lacking _11_, the case of Leyland's handling of an admittedly difficult situation in Italy.
The strategy that Leyland should adopt was clearly spelled out in the Ryder Report when it
iPtsrojected for the Group the target of doubling -f-k sales in Europe over the next five years. not are those, and I am among them, who do .,°.°t. believe this can be achieved. After the
Italian debacle, one can only be more strongly _Pessitnistic. For Italy must by any standards rank as a high priority. It is, next to Germany and France the third largest market. But more than this, Italy alone of Leyland's three major European export markets was the one country where Leyland had a reasonably well established position. Moreover, it was precisely this need to protect a strong market position that necessitated the original acquisition of Innocenti, a need based in turn on the conviction, wholly vindicated by the Ryder Report, that Leyland had to survive in Europe if it was to survive at all.
With the benefit of hindsight Leyland may regret, not so much the original acquisition, but the subsequent investment programme that was undertaken to consolidate Innocenti's position as a producer of premium priced upmarket Minis. I was in charge of Innocenti at the time and advanced the arguments that were unanimously approved by the British Leyland main board in favour of a re-vamped Bertonestyled Mini and take my full share of responsi bility for those decisions. Had we all been clever enough to foresee the oil crisis, the world recession, the rampant infflation, the massive drop in car sales (at 40% in Italy the highest in Europe), then we would not have gone ahead. But we, like the rest of the industry, were regrettably not so clever and went ahead in Italy where Innocenti was clobbered by a further factor that seems to have been much more pronounced in Italy than in the rest of the EEC: the trend of Italian consumers to move 'down-market' and to purchase strictly econ omy vehicles. Nothing could have made life more hard for Innocenti than this vicious combination of general and specific difficulties, Having said this, however, Innocenti is anything but alone in facing difficulties. The acid test of a company's management is its ability to fight its way out of such difficulties and its will, once decisions have been taken and money spent, to stick the course and make those decisions come right. Leyland's panicky response was to insist on reducing production and manpower by a third at one fell swoop with the predictable' consequences.
What is worse, moreover, is that the bloody and ugly denouement has occurred at the very time that there were strong signs that the Innocenti Mini programme was beginning to work — and to do so despite all that had happened over the last few months which could not have been better calculated to make the programme a complete failure. The Italian Mini is currently outselling the Belgian produced Mini by a factor of two to one in Germany. For the month of October it achieved in Italy its highest sales level and market share since its launch with approximately 2.5% of the market — a bigger market share than that achieved in France and Germany by the entire Leyland range. It is a common sight now in Italy's main cities and after a slow start — which is not unique for many subsequently successful motorcars — it is increasingly popular and was incidentally very favourably reviewed in last week's Autocar. What with certain modifications could have provided a useful bridge to 1980 — the most likely date for the introduction of Leyland's full Mini-replacement — is now stopped dead on the tracks. One can only fear the worst for the superb but .now dating Issigonis Mini as Ford prepares to launch its own small car, as Volkswagen steps up the production of its Golf and Polo models and competition in an over-supplied European market gets progressively more intense.
But if Innocenti, its brave new Mini and its 4,500 employees look at this stage the most likely potential casualties of Leyland's bungling, the real and almost certain fatality is the image and capacity to sell of Leyland itself. It has created an impoverished and disillusioned sales network and faces a hostile press and bitter public who will no doubt be very wary of buying British.
Leyland on the other hand may well plead that its present excess capacity and the current losses at Innocenti were such that the balance of overall advantage lay in favour of closure even at the expense of a drop in sales and market share. To which one can only reply that Leyland now, as previously, has its own inbuilt capacity shrinker in terms of its ever contracting ability to produce to declared capacities; and that if the same financial criteria were applied to the volume car operations in the UK, they, too, would be for the chop.
What was, when I knew it, a proud vigorous and profitable small company will no doubt now be swallowed up into the amorphous Italian state corporation IRI, in circumstances that do no credit to anyone involved but merely serve to confirm trade union suspicions of capitalism and its works and to add another nail to the coffin of private enterprise in Italy. The damage to Leyland in Italy goes far beyond the arguments on statistics and will take a long while to repair. Leyland has achieved the singular distinction of turning a limited short-term problem into a total and probably long-term disaster.
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