HC Deb 20 November 1979 vol 976 cc884-94
The Secretary of State for Industry (Sir Keith Joseph)

With permission, Mr. Speaker, I should like to make a statement about the British Leyland 1980 corporate plan. In reviewing the plan, the Government have borne very much in mind their responsibilities to the taxpayer as well as to all those concerned with the future of BL. I am bound to say that the situation is not encouraging. The company continues to be in a poor financial state and faces strong competitive pressures in the 1980s. Only with very substantial improvements in BL's all round performance will the company survive. Success cannot by any means be guaranteed.

Details of BL's recent performance and of the plan are contained in a report by the staff of the National Enterprise Board, which I have today placed in the Library of the House and in the Vote Office.

The plan offers, in the BL board's view, the only feasible strategy which could give BL the chance of being viable. The chairman has writen to assure me that, if the Government decide to support the plan, the board and management will pursue it with the utmost vigour. However, in the same letter—which I am publishing in the Official Report—the chairman states clearly that if there is a significant shortfall in cash flow whether due to major disruptions through internal or external strikes, or to delays in any of its programmes for investment and launch of new products, restructuring and redundancies or for improving productivity and working practices, or to any other cause internal or external, the board will abandon the plan.

The plan envisages a requirement for £297 million of public funds in 1980, with a further £133 million between 1981 and 1983. These two sums together represent the £225 million balance of the original Ryder £1,000 million, plus £205 million to meet the cost of redundancies and closures under the management's restructuring programme. The company seeks approval at this stage for only its 1980 requirements.

In the light of the chairman's letter, the Government have decided to fund the plan up to the end of 1980–81 by the provision of £150 million in equity form, with an additional facility on which BL would be entitled to draw on evidence of need up to a maximum of a further £150 million. In addition, we accept the BL board's request for conversion to equity of the £150 million loans provided in 1977. The Government will also be looking to BL to contribute to funding needs from its internal resources, including the disposal of assets where this makes commercial sense. To the extent that the plan calls for funds going beyond the Ryder £1,000 million, clearance from the Common Market Commission will be necessary.

I am sure that right hon. and hon. Members on both sides will join with me in wishing the BL board, management and work force success in the task that lies ahead.

Mr. John Silkin

The Secretary of State said that success cannot be guaranteed. Does he agree that the key to BL's future lies in the new model programme? As a new model takes about four years to reach fruition, and as his plans end in 1980–81, how does he propose to guarantee that the new model programme, should it be the right one, is able to continue?

Secondly, as the statement implies—as I believe that it does—that there will be significant sale of commercial assets, which assets does he believe, or has BL told him, it would make commercial sense to sell?

Finally, as France and Germany in particular find it necessary to invest at least double the amount about which BL is now talking, how much more of our domestic market does the right hon. Gentleman feel that he is able to see disappear to our foreign competitors without himself being willing to provide the investment funds?

Sir K. Joseph

The plan goes up to 1985, but the only finance requested by the BL board is for 1980. It is true that new models are an essential part of the plan. It is intended that one new car model will be launched in 1980, and new truck models will also emerge during that year. Therefore, to some extent, they are imminent. However, while new models are vital, they are not the only component of success. There are also pro- ductivity and quality. As to disposals, the judgment on them is for the management.

Mr. Bruce-Gardyne

While entirely understanding the political logic of what my right hon. Friend has just announced, may I ask him whether he will contemplate the possibility that a trickle system of support for this industry must be open to question on commercial grounds, and that there must be at least an argument for saying that the time has come to appoint a receiver with the obligation of obtaining the maximum financial resource for this business as a going commercial concern to the extent that it can be made such? Can he assure the House that we shall be given an early opportunity to vote on this matter so that hon. Members may register their responsibilities to their constituents as taxpayers for what decisions are taken in their name?

Sir K. Joseph

When my hon. Friend studies the letter that I am publishing in the Official Report, I think that he will find that the attitude of the BL board to the performance required to fulfil this plan is a realistic one and is not consistent with his description—which I well understand from past occasions—of trickle finance. Moreover, there have been just enough changes in performance, both in management and in some parts of the work force, to justify what the Government have decided.

I shall have a word with my right hon. Friend the Leader of the House on the possibility of a debate on the subject.

Mr. Terry Davis

How much money must BL find from internal sources? Do not the present stock levels show that the real BL problem is a sales problem and not a production problem?

Sir K. Joseph

The details about the internal resources depreciation provision will be found in the document that is now available in the Vote Office. Certainly there is a sales problem for some BL products, but for others there is a queue.

Mr. Hordern

In view of the long and continuing indebtedness of BL to the tax-payer, and in view of my right hon. Friend's obvious confidence in the management, what possible point can there be in the continued intervention of the National Enterprise Board in this affair? Will my right hon. Friend now consider bringing BL under the direct control of his Department?

Sir K. Joseph

I said to the House that if the BL board repeated its wish to be transferred from the NEB I would study its arguments; I did not say that its case was on all fours with that of Rolls-Royce. That still remains the position.

Mr. Penhaligon

Does the right hon. Gentleman's statement mean, in effect, that if there is a substantial strike by British Steel the Government will close BL?

Sir K. Joseph

That raises a number of hypothetical questions. In my statement I set out the position as seen by the BL board and by the Government.

Mr. Cryer

Does the right hon. Gentleman accept that, with BL admittedly in a poor financial state, it would make sense if the Government assisted by the use of selective import controls—in addition to advancing money—as that would also ensure continuing demand for British steel? Does he not think that that is an important factor?

Does the right hon. Gentleman accept that some Opposition Members are concerned about the strong threats that are attached to the advance of money? Does he accept that the workers have a contribution to make, and that if they differ from the management, that should be no reason for the board to abandon this plan? For example, 14 months ago the BL management threatened to sack workers for refusing to work a night shift at the Rover plant in Solihull, which is now on a four-day week. What would the right hon. Gentleman say to critics who describe the situation as being very much like corporate Fascism?

Sir K. Joseph

Import controls are not the answer. BL is a large exporter and the way for it to recover its share of the market and to prosper is by being competitive, not by being protected. Of course the workers have a contribution to make. There is some evidence that they recognise that fact more and more.

Mr. Kenneth Baker

Does my right hon. Friend agree that recent events at BL justify his confidence in the continued existence of the company under the management of Sir Michael Edwardes? While there are modest signs of hope for the success of the general support, does he regard the statement that he made today as being in the nature of BL's last chance?

Sir K. Joseph

I associate myself with my hon. Friend's commendation of and tribute to Sir Michael Edwardes. However, I do not wish to dilute or qualify the balanced picture which I tried to present in my statement. There is enough evidence to justify the Government's proposals. Future success is up to the management and work force of BL.

Mr. Archer

Since the people that the Secretary of State referred to as those who are concerned with the future of BL include the present and future population of the West Midlands, and since the Government are ensuring that the West Midlands economic development council is not available for consultation, will the right hon. Gentleman give an undertaking that no decisions affecting the future of BL will be taken without the fullest consultation with the trade unions, the local authorities and the hon. Members who represent that region?

Sir K. Joseph

The Government try to keep themselves aware of the opinions of all who are concerned, including those whom the right hon. and learned Gentleman has mentioned.

Mr. Hal Miller

While I thank my right hon. Friend for the encouragement that he has given to all those who work in BL and for giving the lie to those who put it about that the Government would not support this British industry—[Interruption.] Oh, yes; in my constituency many such rumours were put about.

Mr. Skinner

The hon. Gentleman is enjoying himself.

Mr. Miller

Will my right hon. Friend confirm that the money is intended for investment in new models and that it is not for the support of working capital? Therefore, in a real sense, it is up to the workers to make a success of the plan.

Sir K. Joseph

I agree with the last part of my hon. Friend's question. However, part—not a substantial part—of the money will be for working capital, the larger part will be for investment, and some will be to meet closure and redundancy payments.

Mr. Park

First, is the Secretary of State satisfied that the proposed contraction will not lead to further contraction? There is a danger that Sir Michael Edwardes may have gone too far. Secondly, what opportunities will there be for British components manufacturers to tender for the BL-Honda and the other models for which, so far, they have not had the opportunity to tender? Thirdly, what consideration has been given to the use of plants due for closure as industrial estates? Will the right hon. Gentleman give consideration to the provision of finance so that new Jaguar, Rover and Triumph models may be brought forward before 1985?

Sir K. Joseph

The answer to the first two questions is that the Government have confidence in the management of BL. Both matters are for the management to decide. The possible use of plant that is closed is for the market and the authorities concerned to consider in each case.

Mr. Grylls

If my right hon. Friend is right that BL is in a poor financial state, is it not odd to pour £400 million more down its throat? Is not the solution, as he suggested some months ago before the election, to insist that BL finds money from its own resources by returning some or part of the business to the private sector? The one thing that BL does not need is more money poured down its throat. It needs more productivity and more sales and then it will have enough money without having to call on the taxpayer.

Sir K. Joseph

My hon. Friend is quite right in his latter points. However, I hope that he will recognise that there are costs to the taxpayer, whatever may be the decision of the Government. Disposals are a matter for the board. We look to it to make disposals where they would make commercial sense. There are already negotiations in progress on at least one disposal.

Mr. Dalyell

In view of the answer that the right hon. Gentleman has just given and the nagging speculation in the Scottish press, will he give a cast-iron assurance that the Government will do nothing to encourage the sale of commercial assets in the truck and tractor division in plants such as Bathgate and Albion?

Sir K. Joseph

The hon. Gentleman knows that I cannot give any such assurance about a management decision. The management needs my approval for disposals.

Mr. Dalyell

But what about the right hon. Gentleman's encouragement?

Sir K. Joseph

I have to plead guilty to the hon. Gentleman—we are encouraging the management to pursue disposals where they make commercial sense.

Mr. Hill

Has my right hon. Friend, through the NEB management, received the assurance that he sought at one time that improved labour relations and productivity could be confirmed by Sir Michael Edwardes? When my right hon. Friend talks about the 1980 new models, we can only hope that, once again, BL does not create a black market in new models because the production line is unable to keep up with demand. If my right hon. Friend can tell the House that he has been assured on those points, I will support him throughout in this matter.

Sir K. Joseph

There was an improvement in labour relations, so far as that can be measured by the number of disputes in BL in the last 12 months. There has also been some evidence of an improvement in productivity. However, both have been obscured and offset by the effect on BL of two external strikes—the transport drivers' strike and the CSEU dispute.

Mr. Rooker

Is the Secretary of State aware that no interpretation can be put on Sir Michael Edwardes's letter other than that, if the steel strike goes ahead and there is a shortage of steel for BL, it will abandon the plan? That is not a hypothetical question, as he told the hon. Member for Truro (Mr. Penhaligon). Will he state categorically here and now whether there has been any meeting by any Minister or civil servant in his Department with a representative from Renault about the possible purchase of any part of BL?

Sir K. Joseph

At any time?

Mr. Rooker

Since the right hon. Gentleman has been in office.

Sir K. Joseph

The question about the steel strike is hypothetical. Who can predict the length of any such strike, if it occurs, the effectiveness of such a strike or the stocks held by BL? All those factors make it a hypothetical question. Apart from a social function in Paris where I met a number of French industrialists, including a member of the top management of Renault, for a general discussion with no specific reference to BL, there has been no meeting between Renault and myself. To my knowledge, my Department has had no contact with Renault. I believe that today Renault dissociated itself from a report in the press yesterday.

Mr. John Patten

I accept that matters of international co-operation between BL and foreign firms are quite properly management questions, but will my right hon. Friend give an undertaking to encourage BL in all its present and future potential links with firms like Honda and in the forthcoming agreement at Cowley?

Sir K. Joseph

Yes, so far as it is proper for me to intervene in any such essentially management matter.

Mr. Stoddart

Is the right hon. Gentleman aware that I am relieved that he is at least providing £300 million for 1980, but that I am not at all sure that I like the implied threats that accompany it? Is he convinced that that amount of money will enable British Leyland to update its plant and models to compete abroad, and is he satisfied with the quality of management in British Leyland?

Sir K. Joseph

The amount of money is that which the BL board asked for, and I have great confidence and respect for the BL board. It is not my job to answer for the management of such a large company. That is up to the BL board.

Mr. Marlow

Did Sir Michael Edwards say in his letter to my right hon. Friend that his acceptance of Government money as equity will be dependent on achieving a wage settlement such as that proposed? No doubt when my right hon. Friend invests his own money as equity he looks to the dividends that he is likely to receive in a year or two. Could he say what dividend the public will get from the investment in British Leyland?

Sir K. Joseph

No, there was no such condition in the chairman's letter, and there will be no dividend during the currency of the plan. I repeat to my hon. Friend that, whichever decision the Government came to on the plan, there would have been costs on the taxpayer.

Several Hon. Members rose—

Mr. Speaker

Order. If hon. Members co-operate and ask brief questions, I shall call them, as I know that there are constituency interests. However, I hope that hon. Members will be brief, because of the debate that is to follow.

Mr. Cockeram

Does my right hon. Friend accept that in a period of world recession and high interest rates, many small and medium businesses are struggling to survive, and they resent the fact that they are being taxed to prop up a company with such an appalling labour relations record?

Sir K. Joseph

I repeat that there would also have been a cost on the taxpayer from any other decision, and I remind him that a large number of small and medium companies are also suppliers to BL.

Mr. Budgen

I congratulate my right hon. Friend on having resisted the much larger demands of British Leyland for about £2 billion, but does he agree that there is considerable danger that this system of financing by trickles and dribbles will cause the profitable parts of British Leyland to be dragged down by the unprofitable parts?

Sir K. Joseph

I take my hon. Friend's comments seriously, but we have a realistic BL board, and it is not right to assume that it approached the Government for a much larger sum of money, as was indicated in newspaper reports.

Mr. Butcher

Will my right hon. Friend bear in mind the grave concern of major British component manufacturers that together employ about 450,000 people over the proposed BL-Honda deal? Bearing in mind that my right hon. Friend must allow the company's management to manage, will he consider issuing guidance, as do Ministers in other countries, to British car assemblers that there should be minimum percentage British component factor in all cars assembled in this country?

Sir K. Joseph

A substantial part of the car that will be built with Honda will be supplied by British factories, and component manufacturers are sensibly pursuing sales abroad as well as at home.

Mr. Stokes

Is my right hon. Friend aware that there are many good employees in BL, and a lead and encouragement must be given to these people if the company is to be saved? They must assert themselves against the extremists.

Sir K. Joseph

My hon. Friend will agree that Sir Michael Edwardes is making great efforts to give what appears to be an effective lead.

Mr. Park

On a point of order, Mr. Speaker. The Secretary of State must have been misinformed. He said that the BL-Honda car will be assembled mainly from parts made in this country.

Mr. Speaker

Order. I do not know whether the Secretary of State is right or wrong, but he takes responsibility for his statements in the House, and we cannot argue that matter now.

Sir K. Joseph

Further to that point of order, Mr. Speaker. If I said "mainly" I was wrong, but I do not think that I did.

Mr. Adley

In relation to disposal of assets, my right hon. Friend repeated the phrase "where this makes commercial sense", but will he consider that, although he is presuming that British Leyland is the sole arbiter of what makes commercial sense to British Leyland, he is not supposing that British Leyland is the sole arbiter of what makes commercial sense in the national interest? Does he recognise that, as in the case of MG, there may be a direct conflict between the national interest and that of BL? On that issue at least will he keep an open mind and keep an eye on British Leyland to ensure that it does not act in its own interest and contrary to the national interest?

Sir K. Joseph

I am sure that my hon. Friend will make it necessary for me to keep an eye on that aspect, and I am assured that serious negotiations are going on.

Mr. Beaumont-Dark

Is my right hon. Friend aware that his statement will be widely welcomed in Birmingham and the West Midlands, not just at British Ley- land but amongst the hundreds of component manufacturers whose jobs depend on a prosperous British motor industry? Does he agree that many hon. Members who criticise British Leyland would better spend their time seeing the problems of the industry in practice instead of just talking from theory?

Sir K. Joseph

Yes.

Following is the letter:

"The Rt. Hon. Sir Keith Joseph, Bt, MP,

Secretary of State for Industry,

Ashdown House,

123 Victoria Street,

London, SW1E 6RB.

19th December 1979

Dear Secretary of State,

I should like to make clear beyond any doubt the basis on which my Board have sought from the Government the funds needed for the 1980 Corporate Plan.

Considerable hazards face us from within and without. The Board will monitor progress very closely, and if shortfalls in performance place the achievement of the Plan in jeopardy, then the Board consider that they will have no option but to abandon the Plan.

In particular if there is a significant shortfall in cash flow whether due to major disruptions through internal or external strikes, or to delays in any of our programmes for investment and launch of new products, restructuring and redundancies or for improving productivity and working practices, or to any other cause internal or external, the Board will abandon the Plan.

If the Government decides to support the Plan and provide the funds, you can be assured that the Board and management will pursue it with the utmost determination and commitment. I have every reason to believe that this goes for our employees as well.

Yours Sincerely,

Michael Edwardes."

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