HC Deb 19 February 1987 vol 110 cc1059-73 3.32 pm
The Secretary of State for Trade and Industry and President of the Board of Trade (Mr. Paul Channon)

With permission, Mr. Speaker, I should like to make a statement concerning the Rover Group.

I am pleased to be able to announce today the Government's approval of the Rover Group's 1987 corporate plan. The plan is reviewed annually to cover a rolling period of five years ahead; the strategy in this plan, which relates to the period 1987–91, will evolve in that period to meet market developments. In accordance with usual practice, I am today placing in the Library of the House a summary of the plan excluding commercially sensitive details.

The plan sets out a positive course for the continuation of Austin Rover as a major producer and leading exporter of cars made in Britain. The programme of model collaboration with Honda will be taken forward with a new medium sized car, the AR8, for which a manufacturing agreement should shortly be concluded. The future relationship between the companies will of course continue to develop in the light of experience, but it is the intention of both companies that the relationship should be a long-term one and should endure beyond the life of existing design and production contracts. The Government very much welcome this joint intention to continue to strengthen links in the future.

The corporate plan provides for the new K series engine to be taken forward to full production and used in Austin Rover's smaller engined cars. This engine will equip the company for the next decade with a new high economy engine designed to meet new emissions controls and will also make a major contribution to Austin Rover's strong presence in the small car sector, which, with the planned further development of the model range, is a vital element in the company's marketing plan.

Turning to Land Rover, the plan takes account of the launch of Range Rover in the United States this year, which will be a major step in diversifying Land Rover's market base.

On the commercial vehicle businesses, my hon. Friend the Minister of State, Department of Trade and Industry told the House on 13 January that the sale of Leyland Bus to a management buy-out had been completed. I told the House on 2 December that Rover Group was also holding commercial discussions with DAF in relation to Leyland Trucks and Freight Rover, and separately with Paccar in relation to the trucks company. Following these negotiations, Rover Group and DAF have proposed that Leyland Trucks, DAF Trucks and Freight Rover, shall combine to form a new Anglo-Dutch joint venture. As recommended by the Rover Group board, the Government have accepted these proposals, which create a company with the capability to achieve a major presence in the European commercial vehicle market. The agreement will also include the associated parts operations and certain overseas operations. These proposals build upon important existing distribution links between the companies. RG will take a 40 per cent. shareholding in the new grouping based on the value of the assets it brings to the merged operations and will have board representation. DAF will hold the remaining 60 per cent. Market conditions permitting, it is the firm intention of RG and DAF to float the company within two to three years.

Within the joint company Freight Rover, which is planning to invest in a major model replacement programme, will continue to manufacture vans at its Common lane site in Birmingham. Leyland will continue as the focal point for truck manufacture in the United Kingdom, and I expect the Albion plant to have a continuing role in the joint operation as a producer of axles.

These decisions take place in the context of severe overcapacity in Europe. As I made plain in my statement in December, all the commercial options open to Rover Group in relation to the trucks business would involve significant rationalisation and restructuring with inevitable job losses. I regret these. The Scammell plant at Watford will be closed and its production transferred to Leyland. The engine and foundry plant at Leyland will not be part of the new company and activities will be gradually run down for closure by the end of 1988. Some 1,700 jobs will be lost through those closures and a further 560 through slimming of the Leyland and Albion operations. Employment levels at Freight Rover are expected to be maintained.

I believe that this agreement offers the best prospect of building a secure long-term future for Leyland Trucks and Freight Rover and the House will be pleased to know that the plan developed by the two companies envisages significant expansion of truck production at Leyland including for export and an important expansion of the export of Freight Rover vans.

As part of this restructuring, the Government intend to write off the accumulated debts from Leyland Bus and Leyland Trucks left in Rover Group, and the restructuring costs resulting from their sale. The Government have notified the European Community Commission of this intention and the normal procedures are in train. The Government intend to provide up to £750 million for this purpose. I am laying an order today under the Industry Act 1980, and Rover Group will hold a general meeting in March.

The proposals which I have announced today will strengthen both Rover Group and the vehicle industry in this country. Success now depends on achievements in the market place. Mr. Day has focused sharply on the need for commercial success in recent months, and I am encouraged by news that Austin Rover's market share so far this year is sharply up on that of recent months. With new marketing initiatives, increasing sales, recent successes in the fleet market, such as the orders by major car rental companies, and the launch of the Sterling and Range Rover in the United States this year, Rover has the opportunities and skills to succeed.

In short, these proposals will give the go-ahead to Rover Group's corporate plan; safeguard the manufacture of trucks within the United Kingdom in the context of a new European joint venture; and free Rover Group from the accummulated debt of the truck and bus businesses. I am certain that the House will support that.

Mr. John Smith (Monklands, East)

Is the Secretary of State aware that everyone in the House will wish success to the Rover Group in competing in overseas markets and increasing sales? However, is he further aware of the dismay that will be felt on both sides of the House at the fact that 2,400 jobs are to go, that the engine plant at Chorley is to disappear completely, like the foundry at Farrington, and that the Scammell plant at Watford is to he closed?

With regard to the Rover corporate plan, the Opposition welcome the commitment to the AR8 and the K series engine for which we have long pressed. What has happened to the AR6 project? Is it included in the corporate plan?

Can the Secretary of State assure us that the stronger links envisaged with Honda will not lead to a merger on the lines proposed for Leyland Vehicles and DAF? What is the Government's intention about the future ownership and development of Land Rover about which the statement is significantly silent?

I want to consider the major elements in the Secretary of State's statement about Leyland Trucks. Is it not crystal clear that, on the basis of a 40 per cent. to 60 per cent. share of the equity in a joint company, DAF will have clear control of the new merged operation? Is the Secretary of State aware that the 1985 DAF annual report states: One of DAF Trucks' policy aims is to maintain the company's independence"? In an interview in the Financial Times of 22 December, Mr. van der Padt made it clear that his company would retain its own identity and engineering capabilities. Is it not clear that he has achieved his objective but that the British Government have not achieved theirs?

Why has Freight Rover—a very successful company with increasing sales, an increasing work force and a strong market performance—been included in this sale? Is it being included as a sweetener for DAF? Why must we sell a profitable company or surrender control of it? Is it not ironic that we appear to be surrendering control of Leyland Vehicles because it makes a loss and surrendering control of Freight Rover because it makes a profit? What is the value of the Rover Group's 40 per cent. share in the new company? [Interruption.] The Chancellor of the Exchequer says that we will discover that when it comes to the flotation. It is important to discover it now before we decide whether this is a good deal. Clearly the Chancellor is happy to remain in ignorance, but I hope that the House will want to know the value of the assets that are committed to the joint venture. If and when flotation occurs, what will happen to the proceeds of the 40 per cent. share? Will they go to the taxpayer, or will they be used to finance future development in Austin Rover? What sort of financial support did Austin Rover ask for from the Government in the corporate plan and what has it received?

What we are witnessing today is the effective surrendering of the control of the British truck and van industry, and no Government should be proud of that.

Mr. Channon

By the tone of his questions the right hon. and learned Gentleman shows that he is not living in the real world. To hear the right hon. and learned Gentleman one would not get the impression that this truck business has been losing £1.5 million a week. It has lost £300 million over the past five years. We have achieved an agreement under which it will be part of a European scale operation with a turnover of £1 billion, and it will be the fourth largest truck company in Europe. An increased number of trucks will be sold and the volume will be considerably increased. That is good news for the future of the truck industry in Britain.

The right hon. and learned Gentleman asked what the Rover Group asked for. It asked for what is in the corporate plan and it has been given everything that it asked for. The corporate plan will be published in the normal way and placed in the Library. It contains everything that the Rover Group asked for. The right hon. and learned Gentleman is disappointed because he is trying to pretend that the Rover Group asked for something that the Government did not give it. The Government did what the Rover Group wanted because we have confidence in the commercial future of that company. I hope that the House understands that.

The advantages of this sale for Freight Rover are enormous. There will be firm plans for the future of the company, with the design and development of a new model range for manufacture at the Common lane plant. There will be opportunity to develop a substantial export business to Europe. There is a good chance that by the 1990s exports could be as much as 20 or 25 per cent. of the company's production. That is good news for Freight Rover and its continuation. There has never been any suggestion of Honda merging with the Austin Rover Group.

The right hon. and learned Gentleman asked me about the AR6. There is already an investment of about £200 million in the K series engine and the related gear box. That is evidence of the Rover Group's continuing commitment to the small car sector. The timing of further investment is a matter for the company to decide.

Mr. John Mark Taylor (Solihull)

Does my right hon. Friend accept that those of us who have always regarded Leyland as an unnatural aggregation are very pleased with his statement and with the continuing process of finding separate destinies for the subsidiary parts of the Rover Group? Would he care to put a time scale on the privatising and floating of Land Rover?

Mr. Channon

My hon. Friend will recall asking me that question a little while ago. We should like Land Rover to be returned to the private sector within a reasonable period. That cannot he considered until we are sure that it is in an excellent position. I am confident that Land Rover will soon have the best possible future as a manufacturer of a renowned British product. My hon. Friend will find that it is an ex tremely satisfactory position and proceeding well.

Mr. Ian Wrigglesworth (Stockton, South)

Is the Secretary of State aware that the announcement about the long-term relationship with Honda is welcome and that my hon. Friends and I wish it well? Is he further aware that the announcement about the trucks division is a sad epitaph on the eight years during which the Government have been responsible for British Leyland? What bids and proposals were considered for that division? What consideration was given to the bids by Lancashire Enterprises Limited and Paccar? Was consideration given not to a 60: 40 split, but to either having Leyland control over the Anglo-Dutch enterprise or to having at least a 50: 50 split?

Mr. Channon

I am grateful for what the hon. Gentleman said about Honda, and I am glad that he supports the collaboration.

On the merger, the only bids were from DAF and Paccar and I advised the House of that in early December.

The Government endorsed the view of the Rover Group board that DAF's was the best of the bids, which is why we proceeded with it. The deal involves a merger of the two companies, not a sale of assets. It is a reasonable valuation and an exceedingly good deal for the truck industry. Therefore, I disagree strongly with the hon. Gentleman's comments about the past seven years. The future expansion of the industry is on the road and looks good.

Mr. Robert Atkins (South Ribble)

Is my right hon. Friend aware that my constituents do not take kindly to the activities of the hon. Member for Gordon (Mr. Bruce), who does not have even the courtesy to be here to listen to my right hon. Friend's statement? The hon. Gentleman made inaccurate remarks about the plants, job losses and locations in my constituency and others.

Does my right hon. Friend agree that the deal offers the best possible future both for my constituents and for those who work in Leyland? The alternative of remaining in the Rover Group is unacceptable on the ground that it would probably mean more job losses and eventually the closure of the plant. Can my right hon. Friend confirm that there will now be continuity at the Leyland assembly plant and the design and development testing track? Can he also confirm that there will be exceptionally generous —[Interruption.] If Opposition Members cared so much about people's jobs, they would be quiet. Can my right hon. Friend confirm that exceptionally generous redundancy offers will be introduced over a period? Will he stress to the Rover board that when the flotation occurs shares should be made available to the company's employees?

Mr. Channon

Yes, I shall certainly do what my hon. Friend has suggested about the flotation.

I am astonished that the hon. Member for Gordon (Mr. Bruce) is not here this afternoon, after his announcement yesterday and having placed an early-day motion on the Order Paper. He gave the misleading impression that 20,000 jobs would be lost. That was a disgraceful remark. I am entitled to say that in his absence because he should have been here. He has caused a great deal of damaging uncertainty to those involved. he should be thoroughly ashamed.

My hon. Friend is entirely right about the alternative solutions that are available to the company. I am convinced that this is the best deal and that it offers the best future for Leyland, the people whom my hon. Friend represents and those employed at Leyland. Difficult decisions have been taken. There will be continuity for the Leyland assembly plant. Redundancies are a matter for the Rover Group and its employees. I am happy to confirm that it is making what I hope people will think to be generous proposals, and I hope that they will be welcomed.

Mr. George Park (Coventry, North-East)

The Minister said that success depends on the market place. That being so, I wonder whether, in agreeing to merge Leyland Vehicles with DAF, he took into account the fact that, in November of last year, Leyland Vehicles took the lead in the market. It registered 805 trucks of more than 3.5 tonnes, compared with 658 for Daimler-Benz and 256 for DAF. Leyland maintained its lead. Given these figures and the need to reduce excess capacity, which I accept, would it not have made more sense for the merger to have taken place in the reverse direction, rather than to lose control of a strategic part of our industrial base, with consequent redundancies? If the climate of economic growth is as the Government say it is, surely this is not the time for the Government to lose their nerve in supporting key sectors of industry.

Mr. Channon

The hon. Gentleman is quite right in drawing attention to Leyland Trucks' share of the British market. He must understand that the company has lost £300 million over the past five years. As I told the House, it is losing £1.5 million a week. In those circumstances, the solution that he advocates — that is, of taking over DAF, which is a profitable company at present—simply was not on offer. I am convinced that, in all the circumstances, we shall see a much stronger commercial vehicle industry in this country with the rationalisation that will take place and with the emphasis on the export of light trucks. We shall see a joint venture—a merger of the two companies — which will be a powerful organisation in Europe and which will lead to more strength for the company.

Sir Reginald Eyre (Birmingham, Hall Green)

Is my right hon. Friend aware that he is to be congratulated on the realism of his proposals and that the underpinning of Austin Rover that will be achieved by the Government's further commitment that he specified is to be welcomed? Will he confirm that, with the joint venture proposals affecting Freight Rover, there will be no loss of jobs at the Common lane factory in Birmingham? Will he confirm also that the prospects of the joint truck venture will be improved by the availability of the sales network in Europe that DAF has built up?

Mr. Channon

I am grateful to my hon. Friend and thank him for his question. I can confirm that there is no reason to assume that there will be any loss of jobs at the Common lane site or in Freight Rover in general. I confirm also that Freight Rover will benefit in the way that he said. This offers an exceedingly good opportunity for Freight Rover in the future.

Mr. Gregor MacKenzie (Glasgow, Rutherglen)

Does the Secretary of State accept that, as was pointed out by my right hon. and learned Friend the Member for Monklands, East (Mr. Smith), 2,500 fewer people will work in the motor car industry as a result of the arrangements that he has announced? The Secretary of State made passing references to the Albion motor works situated in Glasgow, an area of exceptionally high unemployment. Hon. Members for the Glasgow divisions wish to know precisely what he meant when he said that there was a future for the Albion works. What positive guarantees will he give? The Minister spoke also of the 560 jobs that are to be lost in the Leyland and Albion operations. How many, if any, will be lost in the Glasgow Albion works?

Mr. Channon

The right hon. Gentleman is quite rightly concerned about the Albion plant. I understand that. There will be rationalisation, as I said in my statement, but I believe that Albion has a continuing future as a manufacturer of axles. That would not necessarily have been true under all the options that were available to me. That should be welcomed. It is important that Albion should continue to manufacture axles for the merged company. I hope that the right hon. Gentleman will welcome that. Of course I cannot tell him to the exact figure what the results will be. Perhaps he will be in touch with the company about that matter, but I am glad to say that, as I have already announced, there will be a continuing future for Albion.

Mr. Richard Page (Hertfordshire, South-West)

Although I do not welcome any plant closures, will my right hon. Friend please accept that his news today is the only chance for genuine, long-term jobs in Leyland Trucks? Will he also please confirm that the redundancy terms will be generous and that some of them will be half a year's salary, plus statutory redundancy, and that advice centres will be set up in areas such as Watford to help to re-employ those people who will be losing their jobs, thus filling skill shortages in the Watford area and helping to satisfy the demand in the many new industries that have been established in that region?

Mr. Channon

I confirm what my hon. Friend says. Obviously the company will be discussing this matter with its employees, but the company tells me that the redundancy terms are indeed generous.

On my hon. Friend's point about this being the best solution —and, indeed, on the point made by the right hon. Member for Glasgow, Rutherglen (Mr. MacKenzie) a moment ago — the solution that I have announced today is not what is causing redundancies. There is massive over-capacity in the industry. Whatever solution was announced, there would, unfortunately, be no alternative but rationalisation in this industry. The House ought to understand that, as I told it last December.

Mr. Dave Nellist (Coventry, South-East)

Why should this House believe the promise of future security from this Secretary of State who washed his hands of the Climax affair and who handed the Austin Rover group, following British Leyland, into the hands of the fellow who butchered the shipbuilding industry and who is now going to butcher the car industry? Why should we believe his promise when today he announces that 2,500 families, in his terms, are being rationalised? Where we come from we call it the dole.

Mr. Roger King (Birmingham, Northfield)

On a point of order, Mr. Speaker.

Mr. Speaker

I shall take it in a minute. —[Interruption.] Order. Hon. Members should not refer to strangers in the Galleries.

Mr. Channon

I have already explained to the House why rationalisation of the truck industry is needed in this country. That is an unfortunate fact, but the hon. Member must recognise that the truck companies are losing £1.5 million a week.

As for his general question about the car industry, the hon. Gentleman can choose to believe what he likes, but I believe — and I think that most hon. Members will support me—that the proposals for the Rover Group in general that I have announced today offer the best prospects for its continuing commerical success and for the continuing success of Austin Rover as a major producer and leading exporter of cars made in Britain. We have to take action, and we have accepted the Rover Group's corporate plan. I believe that it has a very good chance of success.

Mr. Steve Norris (Oxford, East)

Will my right hon. Friend accept that Austin Rover's commitment in the corporate plan to maintain volume and to continue the production of the small car range will be very reassuring to those of us who have been worried by misleading press speculation to the contrary in recent days? Will he accept from me that, coming on top of the 500 new jobs that have been announced for the Montego line at Cowley, his statement will be very good news in my constituency and that it will reassure that skilled, dedicated and now growing work force?

Mr. Channon

I am extremely grateful to my hon. Friend. I, too, am very pleased indeed that the Rover Group has recently taken on 500 additional people at Cowley. That helps to give the lie to those who are painting such a picture of gloom. The prospects for this company can be very good indeed, provided that sensible plans are adopted—as I hope they will be today.

Mr. Doug Hoyle (Warrington, North)

Will the Secretary of State explain what he means by a joint venture when the foreign competitor has the major share? Will he also say what consultations took place with the trade unions and the employees? Will he accept from me that thousands of people have been left in the dark at Leylands? Will he also say who will manufacture the power train and the cabs of the future? Will it be DAF? If it is, that means that Leyland Lorries will become a screwdriver plant. Who will manufacture the military vehicles that at present are made by Scammell? Finally, will he go along and explain the real world to the redundant workers at Chorley, Leyland and Watford?

Mr. Channon

The hon. Gentleman will not take on board the fact that this company has had a series of appalling losses in the past few years and it was essential — whatever Government were in power — for this company to be rationalised. What I have announced today will provide a better future for the production of trucks at Leyland.

The military contract will be transferred to Leyland and will be more secure.

On the question of the joint venture, I described fully in my statement the arrangements that we are making in this merger — the share of the Rover Group in that merger and the eventual intention to float the shareholdings of the DAF shareholders as well.

The Leyland company will put something in employees' pay packets today concerning the merger and, of course, there will be consultations in the normal way through the usual procedures of the company.

Mr. lain Mills (Meriden)

Can my right hon. Friend remind the House just how much money this Administration have spent on supporting the Austin Rover Group? [Interruption.] I am grateful to the Opposition for their help. I have two questions —[Interruption.] The Opposition appear to find this matter amusing. I thought that they took it seriously. What effect will the £750 million write-off have on the future of my constituents who work for Land Rover? Will my right hon. Friend clearly state that the skills of DAF in having a European network of distribution and manufacture will make it a good partner for Leyland Vehicles?

Mr. Channon

I can give my hon. Friend that assurance. My hon. Friend asked me how much money had been spent on the Rover Group. The Varley-Marshall assurances for the associated debt came to more than £2 billion. Some Opposition Members try to peddle the idea that the Government have not supported Austin Rover, but that is absolutely nonsensical.

As regards the effect of £750 million write-off, one of the most important effects is that it will remove the millstone of the accumulated bus and truck debts from the shoulders of the car production of the company.

Mr Jack Straw (Blackburn)

Does not the Secretary of State understand that his decision today is a betrayal not only of the British manufacturing industry but of thousands of people in Lancashire who depend upon Leyland for their employment and prosperity? Does he also accept that, whatever the difficulties of the European truck manufacturers, the difficulties of Leyland will be made far worse by his dogmatic and incompetent approach to the problem? Since he has decided upon the total closure of the foundry and engine plant at Chorley and Leyland, where will the engines for the Leyland trucks come from?

Mr. Channon

The hon. Gentleman makes wild statements but refuses to tell the House what alternative plans are available. He is well aware that what I am trying to do is to provide a better and more secure future for Leyland and those who are dependent on the truck industry in Lancashire.

Mr. Straw

Where will the engines come from?

Mr. Channon

I will deal with that if the hon. Gentleman will allow me. The result of the Leyland truck decision that I have announced today—the effect would have been the same whatever the decision — is the rationalisation of that industry. As a result Leyland will produce good light trucks for the merged company. That will result in a massive increase in exports. There will be a substantial part of engine requirement for Leyland sourced from United Kingdom manufacturers. I believe that the prospects for the components industry and the trucks are better under this proposal than the alternative proposals.

Dame Jill Knight (Birmingham, Edgbaston)

Is my right hon. Friend aware that the survival of literally thousands of small businesses depends on their continued ability to provide component parts to the Austin Rover Group? Has he a word of encouragement for them today? What effect does he believe his announcement will have on them?

Mr. Channon

I can help my hon. Friend on that point. My announcement will ensure a securer future for the Rover Group and will therefore mean a securer future for the component manufacturers. I believe that she can tell her constituents who are involved in the components industry that my announcement today on the Rover Group will provide component manufacturers with better opportunities, provided they are reliable, produce good quality goods, deliver on time and charge the right price.

Mr. D. N. Campbell-Savours (Workington)

Will the proceeds of the sale go to the Government or the company? Is it not true that the great majority of engines will, following this deal, be built in Holland and shipped to Britain?

Mr. Channon

It will depend on the sort of engine. The light engines will be manufactured in the United Kingdom and, over a period of time, more heavy engines will be built in Holland. [Interruption.] I do not know why the Opposition find that so astonishing. It is perfectly obvious that that will occur as a result of rationalisation. That is what I announced in my statement. Opposition Members should pay attention. As a result of rationalisation, we will have a better truck industry throughout Europe and it will be achieved as a result of this Anglo-Dutch joint venture.

The proceeds of the sale will go to the owners of the company.

Mr. Derek Conway (Shrewsbury and Atcham)

Is my right hon. Friend aware that more than 1,000 people in Shrewsbury work at Perkins Engines? Approximately 300 of those workers manufacture the Eagle engine that is supplied to Leyland. My right hon. Friend's announcement that the heavy engines will be manufactured in Holland is of no comfort to those constituents. By the same token, I am sure that the House will agree that we are faced with an appalling situation because there has been much scaremongering on the radio by the Liberal spokesman who has neither the courtesy nor the guts to be in the Chamber to question my right hon. Friend.

Some questions need to be clarified on the Paccar offer. That offer would have enabled a better United Kingdom manufacturing base to be maintained as Paccar wishes to expand its European market, unlike the Dutch group that wishes to rationalise that market. What were the dates of the Paccar and DAF offers, the financial difference between the two and the percentage of the British manufactured content in the proposals? Does my right hon. Friend concede that this issue is not just one of European unity but of British jobs and the British manufacturing base? In that sense, the Paccar offer would have been far more welcome to the people of Shrewsbury.

Mr. Channon

I appreciate my hon. Friend's concern about his constituents in Shrewsbury and those who work for Perkins. Whatever the solution reached, there were bound to be different effects to different component manufacturers. There is no clear, black and white standpoint— it would affect different people in different ways. I assure my hon. Friend that we considered the Paccar proposals with great care, and indeed I welcome Paccar's investment in Britain.

We had to decide what proposal gave the best future for the company, and the Rover Group recommended to me that the DAF proposal was the better on the grounds that I have outlined to the House. For that reason, and that reason alone, we agreed to accept the recommendations of the DAF proposal because it provided better choice.

Of course we considered the Paccar proposals extremely carefully. I can appreciate my hon. Friend's concern.

Mr. Nigel Spearing (Newham, South)

The Secretary of State has admitted that the engines for the heavy vehicles will not be built at Leyland. Does that mean that Britain will no longer be a volume engine truck producer? Where will the engines come from for the remaining Leyland bus group? Does it mean that Britain will no longer be able to design, build and deliver abroad a British bus?

Mr. Channon

No, the hon. Gentleman exaggerates. The intention is that over a period of years the Dutch will concentrate more on the heavy end of the market and the British on the light end. That is what is meant by rationalisation in this case. There will be more work for Leyland as a result of that and more light engines will be produced in Britain than previously.

Mrs. Ann Winterton (Congleton)

Is my right hon. Friend aware that the decision in connection with Leyland Trucks will strike dismay in the hearts of the manufacturing sector? I refer, as many of my hon. Friends have done, specifically to the components industry. What guarantees or information can my right hon. Friend give to the House about the British content of Leyland and the new series of vehicles in future as opposed to the Dutch content? Is he aware that major Leyland customers much preferred the Paccar option and that, conversely, the decision announced today may bring a silver lining to Sandbach in my constituency because those customers will, I hope, turn to the vehicles of Foden and ERF, which latter is the last independent British truck manufacturer left?

Mr. Channon

I know that my hon. Friend has a great deal of experience and knows the industry well. I hope that Foden and ERF will be successful. However, I cannot agree that the DAF deal is inferior to the Paccar deal, as she implied. We examined both extremely carefully and took account of the clear recommendation of the Rover group.

On the question of components, the DAF proposals envisage significant and continuing sourcing requirements in the United Kingdom—for example, for the majority of components in light trucks, suspension units, axles, engines and cabs. DAF intends to increase its purchasing in the United Kingdom. I am satisfied that the proposals will not have the fearsome effect on the component industries which my hon. Friend fears.

Mr. Gavin Strang (Edinburgh, East)

I accept the benefits of continued collaboration between Honda and Rover, but does the Secretary of State recognise that it is crucial that he gives a clear commitment to the long-term future of Rover as an independent British company, not least because of the damage that he caused the company when he tried to sell it to Ford?

Mr. Channon

As I said in my statement, the plan sets out the continuation of Austin Rover as a major producer and leading exporter of cars made in Britain. That is our plan and we shall achieve it.

Mr. Anthony Beaumont-Dark (Birmingham, Selly Oak)

Does my right hon. Friend accept that there will be widespread relief and genuine satisfaction that the Government share the view of many of us in the midlands that Austin Rover has a great future as a British company? Does he agree that that is shown by the writing off of £750 million? Does he agree that that is justified by the fact that it has obtained £184 million worth of fleet orders and has a splendid new vehicle in the Rover Sterling? Does he agree that, with this backing Rover must now save itself, its workers and our city's future through its own endeavours?

Mr. Channon

I agree with my hon. Friend. He mentioned fleet orders and it is encouraging that the group has received orders from Hertz, Avis, Europcar and others. The Government have done everything that the Rover group has asked them to do, and now it is up to it in the market place. I have every confidence that the group will succeed.

Mr. Tony Blair (Sedgefield)

Since the Secretary of State talked about realism, may I tell him that the unanimous view of both unions and management at the Cummins plant in north-east England, where several hundred of my constituents work, is that the proposed merger with DAF is the worst possible thing that can happen to the United Kingdom car component industry? What estimate has he made of job losses in the car component industry? As he has yielded 60 per cent. in the merger plan to DAF, what guarantee can he give either on the heavy or light truck vehicle market that DAF will not use this as a means of transferring production to Holland?

Mr. Channon

The company will be placed under joint ownership. Rover group has 40 per cent. with a seat on both boards. Both DAF and Rover want to make the company a success and to float it successfully in 1989 or thereabouts.

It is extremely difficult to quantify the effects on Darlington. I know that hon. Members are worried about that and I have seen correspondence about it. There will be some gains in light engines and losses on heavy heavy engines. I hope that the position in Darlington would not be affected enormously by either of these proposals. Obviously that is a matter mainly for the company to consider, and I hope that the hon. Gentleman will get in touch with it.

Mr. Roger King

Does my right hon. Friend accept from me that the people of Birmingham will feel great relief and confidence as a result of his statement this afternoon, first, because Freight Rover will be a partner in a European truck and van making operation which will involve it in having large sums for new model products which it wishes to introduce, and, secondly, because in my constituency his endorsement of the K series engine will enable us to continue to make a considerable number of small and super-mini cars for a discerning world market?

Mr. Channon

I agree with my hon. Friend; he is right. Freight Rover has an excellent future under these proposals and the K series engine will be of great value to the company. The future of Longbridge looks extremely good. I welcome my hon. Friend's support, and I am sure that he is right that this will receive widespread support in Birmingham.

Mr. Jim Craigen (Glasgow, Maryhill)

The Minister talked about expectations for the Albion plant and mentioned the options available to him. Can he be more specific about the assurances that he exacted about the future of the Glasgow plant and about the make-up of the 560 job losses?

Mr. Channon

I should like to help the hon. Gentleman as much as I can, but, if I am to be strictly accurate, all I can say is that under the proposals Albion will continue to supply axles to the new joint venture company. I hope that he finds that of some reassurance.

Mr. Michael Fallon (Darlington)

Will my right hon. Friend get it into his Department's head that the interests of the Rover Group are not identical with those of the British components industry? Why was the Paccar deal not preferred to the Dutch auction of British jobs?

Mr. Channon

I accept my hon. Friend's initial remarks: the interests of the components industry may or may not be exactly the same as the interests of the Rover Group. Different matters must be considered. I considered all those factors before accepting the Rover Group's proposal. If the Paccar proposals had been better, the Government would have accepted them. For all the reasons that I have given to the House, we believe that the DAF proposal is superior, which is why we accepted it.

Mr. Robin Corbett (Birmingham, Erdington)

Is the Secretary of State aware that what he has said about the AR8 and the K series engine will be welcomed in Birmingham and the west midlands? Can he clarify the position of the AR6? Will he also please explain how exporting more than 2,000 jobs and ending large truck engine production will do anything to protect our manufacturing base?

Mr. Channon

I am grateful for the hon. Gentleman's remarks about the AR8 and the K series engine. Everyone regrets the job losses, but they were inevitable under any commercial solution. I hope that the House will understand that. The losses are not caused by the DAF proposal, but would have occurred under any conceivable commercial proposal that the House had to consider. That is because for years there has been massive overcapacity in the commercial truck industry in Europe with massive losses. At present Leyland's losses are running at £1.5 million a week. There will be investment of about £200 million in the K series and related gearbox. That is the continuing commitment to the small car sector that the Rover Group is showing. Obviously the timing of further investment will be for it to decide and, no doubt, it will bear in mind what the hon. Gentleman has said.

Sir Dudley Smith (Warwick and Leamington)

Does my right hon. Friend agree that the car components industry is crucial to the west midlands? Given those circumstances, will he do everything to encourage the company — I welcome his announcement — to buy British where everything else is equal? With regard to Leyland, is my right hon. Friend aware that the Opposition will never learn that any enterprise cannot trade at a loss forever?

Mr. Channon

I agree with my hon. Friend, and I shall certainly do what he wants. I hope that the House realises that in the long term manpower levels in component firms will benefit from the fact that Freight Rover and Leyland Trucks will have a higher rate of production. That must be good for the component industry.

Mr. Dennis Skinner (Bolsover)

Why can the Dutch Government build trucks when the Tory Government cannot? The only thing that the Government are capable of is sending a boy genius from Guinness to the Dispatch Box to tell us that we shall get rid of another 2,500 jobs in Britain.

Mr. Channon

I have explained that on innumerable occasions. What I have been trying to tell the House, and I think the House as a whole understands it, is that this will increase production and provide a securer future for the truck industry.

Mr. Bowen Wells (Hertford and Stortford)

Is my right hon. Friend aware that he deserves the congratulations of the House and the country on preserving a manufacturing base for trucks in Britain? Is he aware that the strength of the DAF organisation, with its distribution in Europe, will enable us to build a new company which is capable of competing with its strongest rivals in Europe? Is he aware that, far from there being 2,500 job losses, which are regrettable, what would have happened, if he had not made this proposal to the House, is that we would have lost more than 5,000 jobs with the closure of the Leyland trucks factory?

Mr. Channon

I hope that the House realises that, with this joint venture, we shall have one of the largest commercial vehicle companies in Europe, with a European-scale operation, volume increasing and a larger number of trucks being produced. That must be good news, not bad news.

Mr. Derek Spencer (Leicester, South)

Does my right hon. Friend agree that the Labour party does not understand the difference between a business which is a wealth creator and a business which is a wealth consumer? For far too long, Leyland Trucks has been a voracious consumer of wealth. The best chance that we have of turning it into a wealth creator is the arrangement that my right hon. Friend has announced.

Mr. Channon

I entirely agree with my hon. and learned Friend, and I am grateful to him.

Mr. Tony Favell (Stockport)

How much will this merger cost the taxpayer?

Mr. Channon

We shall write off the debt in the bus and truck operations. In some senses, one could say that that has already been lost. I can assure the House that there will be no further call on the Rover Group for the losses—which I hope will not exist—in buses and trucks in the future. That is good news for the taxpayer.

Mr. Tony Baldry (Banbury)

Does not the creation of 500 new jobs at Cowley demonstrate that, if the British car industry produces cars of the quality that people want to buy, it leads to more jobs on the production line? The greatest burden that Austin Rover at Cowley now carries is the Oxfordshire Labour party. The Labour-controlled city council and the Labour-dominated county council are vying with each other as to who places the greatest percentage increase in rates on Rover, and the greatest burden on businesses by extracting further rates from them.

Mr. Channon

I am not in the least surprised by what my hon. Friend has said. I am sorry to hear it.

Mr. Robin Corbett (Birmingham, Erdington)

That is not true.

Mr. Channon

If my hon. Friend the Member for Banbury (Mr. Baldry) says that it is true, I am sure that it is.

As to the prosperity of Cowley, as my hon. Friend points out, I am glad that Austin Rover has recently taken on 500 people. I am glad that it has also won orders in the fleet car sector. That is extremely good news.

Mr. Kenneth Warren (Hastings and Rye)

May I support my right hon. Friend's conclusion that this is a good deal? Unless there had been such a deal, there would have been no jobs at Leyland Trucks. I support the statement that was made by my hon. Friend the Member for Congleton (Mrs. Winterton), but, in evidence given to the Select Committee on Trade and Industry last week, the directors of Leyland Trucks told the Committee, in public session, that there had been no consultation between them and the corporate directors of Rover as to their future.

Mr. Channon

I am grateful to my hon. Friend for his support. What I have announced today is the considered opinion of the Rover Group, which the Government have independently considered. The Government came to the view that it is in the national interest that this proposal should go forward. It is the best opportunity that we have; it is a good opportunity. I hope that it will be widely welcomed. It is good news for the car and truck industry and Freight Rover.

Mr. John Smith

The Secretary of State said that Rover will have two seats on the hoard. How many seats are there on the board? Will the right hon. Gentleman tell us how many jobs will he lost in the Netherlands truck industry and the extent to which capacity in the Dutch motor vehicle industry will suffer as a result of this merger?

Mr. Channon

The right hon. and learned Gentleman omits an important point — [Interruption.] I am surprised that Opposition Members do not like me answering the questions that they keep asking me. The right hon. and learned Gentleman omits the important fact that the DAF operation is profitable. It has been making money, whereas Leyland Trucks has been losing hundreds of millions of pounds over the years. That is the difference between DAF and Leyland Trucks. That is why these steps have had to be taken. Any alternative steps that would have had to be taken would have been worse than these proposals, which provide a secure future for the truck industry.

Mr. John Townend (Bridlington)

On a point of order, Mr. Speaker.

Mr. Speaker

I shall take points of order after the business statement.