§ 7.1 pm
§ The Secretary of State for Trade and Industry and President of the Board of Trade (Mr Paul Channon)
I beg to move,That this House welcomes the Government's approval of the Rover Group Corporate Plan; recognises the valuable contribution made by the vehicle industry, both United Kingdom and foreign-owned, to the United Kingdom economy; notes the important role of the United Kingdom component suppliers; welcomes the encouraging outlook for the future of the industry as a whole; and endorses the Government's policies to create the conditions for the long-term success of the industry.
§ Mr. Speaker
Under the terms of the business motion passed by the House yesterday, we are to discuss at the same time the amendment in the name of the Leader of the Opposition, together with the third item on the Order Paper:That the draft Industry Act 1980 (Increase of Limit) Order 1987, which was laid before this House on 19th February, be approved.I must tell the House that very many hon. Members are anxious to take part in the debate, and I appeal for short speeches.
§ Mr. Channon
Two motions are on the Order Paper for debate this evening—one relating to the motor industry in general, the other to allow an injection of equity into the Rover Group. I shall deal with both in my remarks.
I welcome the opportunity to have a debate on the fortunes of the motor industry. In recent months the House will be aware that the focus of attention has naturally been on the affairs of the Rover Group, culminating in the statement on the group's corporate plan that I made last month. That has tended to obscure other significant and positive developments that have been taking place in the rest of the vehicle and components industries.
First of all, I want to make clear—I am sure that the House agrees— that the motor industry, in its widest sense, is undoubtedly one of the United Kingdom's most important industries. It is a major contributor to the creation of wealth and employment, both directly and through the many supplying industries for which it is a customer. According to industry estimates, it accounts for about 600,000 jobs and represents some 2.5 per cent, of gross domestic product. Last year, its exports were worth nearly £4.5 billion—half from the components sector. The motor industry also occupies a very important place in the technological base of this country, both as a producer and customer. It has been in the vanguard of introducing new manufacturing technology, particularly robotics, and in investigating the potential of new materials such as ceramics.
It is also an industry that has seen considerable change over the last eight years. Eight years ago, the car industry was in a terrible state. Its reputation throughout the world was one of strikes, bad industrial relations, poor productivity and poor quality. British Leyland appeared to the outside world to spend more time on strike than at work and was associated in the public mind only with the pictures on television of the bully-boy tactics of men like "Red robbo" at factory gate meetings. It was hardly any wonder that the most common advice that any potential car purchaser was given was, "Don't buy a British car."
344 As a result, import penetration of the British car market had been growing by leaps and bounds—under 30 per cent, in 1974 to over 56 per cent, in 1979.
Most serious of all, the United Kingdom was no longer seen as a place where it was competitive to manufacture vehicles. That was the legacy of the 1970s— not an accidental legacy. Major investments were taking place abroad rather than in this; country. Tied imports by multinationals were growing, whereas these firms have recently been increasing their sourcing from the United Kingdom.
The past eight years have seen a sea change in the industry's competitiveness— promoted and encouraged by the better climate for business that we have created. It is a dramatic example of the change that has taken place under this Government. It is no longer strike-ridden, paralysed by wildcat strikes and endless demarcation disputes. Austin Rover enjoyed over 99 per cent, strike-free working in 1985 and 1986. Similar improvements have taken place all over the industry.
There has been an equally dramatic change in the industry's productivity record. With investment in new manufacturing technology and improvements in working practices, the United Kingdom is now on a par with the best and most efficient plants in Europe. As the professor of motor industry economics at University college, Cardiff has said recently:Britain is becoming a highly efficient place to manufacture cars. The underlying productivity is as good as anything on the Continent".There is also a renewed recognition of the vital importance of quality for success in the market place. We have been particularly keen to emphasise that through my Department's national quality campaign. All manufacturers have greatly improved their quality performance. Hertz, the world's leading car rental company, has recently said that it now feels that Austin Rover meets the high standards it requires for its fleet in terms of reliability and value for money. It has placed a £36 million order with Austin Rover for 1987. Peugeot-Talbot's determination in this area has taken its Ryton plant to the top of the Peugeot Group's international quality league. Nissan consider that the quality of the cars produced at its new Sunderland factory is at least as good as in its equivalent Japanese plant. The component suppliers have also made tremendous strides in improving quality— as all the vehicle manufacturers will acknowledge.
The Rover Group obviously occupies a central position in the United Kingdom vehicle industry. I have already told the House that the Government have approved the Rover Group corporate plan in full. That means that the Government have backed the strategy which the company's management, following a thorough examination, has formulated. It is a positive strategy for the continuation of Austin Rover Group as a major producer and leading exporter of cars made in Britain. An important feature in that strategy is developing the model collaborative programme with Honda with a new medium-sized car, the AR8. Austin Rover Group and Honda have both determined that their relationship should be a long-term one whose exact form will develop in the light of experience. The corporate plan also provides for a £200 million investment to take the new K series engine forward to full production. That is evidence of ARG's commitment to developing the small car range as a vital part of its marketing plan.
345 The sharper commercial approach of the Austin Rover Group is already showing up in increased fleet orders and in improved United Kingdom market share. In the first two months of the year that has been running at just under 17 per cent.— significantly up on the levels in the last months of 1986. The export performance will be further boosted by the American launch of the Sterling, and therefore Rover Group's prospects are encouraging.
§ Mr. Anthony Beaumont-Dark (Birmingham, Selly Oak)
I have the genuine privilege of possessing one of the first Rover Sterlings in the country. I have had it since June and I have not had a moment"s problem with the car. Does my right hon. Friend accept tht the most important change that has taken place at Austin Rover is improved quality control, good labour relations and high quality? Having regard to my right hon. Friend's recent statement, and whatever the problems at Leyland Trucks—we all understand those problems—does my right hon. Friend agree that Austin Rover has a genuine, high flying progressive future that augurs well for the manufacturing and motor industries of the midlands?
§ Mr. Channon
I agree with my hon. Friend. I have also had a Sterling for a considerable length of time and I endorse what he says. The importance that my hon. Friend attaches to quality and industrial relations are two of the key factors in Austin Rover's future success. With regard to the corporate plan, the Government have given the Rover Group what it asked for and it is now up to that group to win its share of the market place; I see no reason why it should not.
Many hon. Members are interested in Land Rover. It is important, but I need not take up the time of the House in speaking about it in detail. The launch of Range Rover in the United States and steps to broaden the company's product base are key features in a strategy to take Land Rover into a position where it can successfully take its rightful place in the private sector.
Many hon. Members are interested in the commercial vehicles businesses. We obviously have had to take into account the fact that the whole sector faces very difficult market conditions not just in the United Kingdom but throughout Europe. The sector faces massive overcapacity, low profitability and a fall in demand for commercial vehicles, especially in developing countries to which British firms had traditionally exported a significant proportion of their output.
Throughout Europe, the response has been a mixture of rationalisation and increased co-operation. Following years of losses, General Motors has decided to cease production of heavy trucks in the United Kingdom. Iveco's French subsidiary has ceased truck production and last year Ford merged its truck operations with those of Iveco.
I told the House on 19 February of the plans for Leyland Trucks, Freight Rover and DAF to form a new joint company. The aim is to create a single, strong European joint venture able to move forward positively in a difficult market.
All right-hand drive trucks will be built in the United Kingdom, as will be the successful Roadrunner light truck which will be distributed throughout Europe. Freight Rover will continue to develop its van business in Birmingham, building on the opportunities of using 346 DAF's distribution outlets in Europe. DAF will manufacture medium and heavy trucks for left-hand drive markets. This new joint venture with integrated manufacturing and distribution facilities throughout Europe will enable Leyland Trucks and DAF fully to develop their business.
While the combined company will be stronger, the market it faces will still be very difficult. Over-capacity in Europe has fallen, but remains a significant problem. The production levels of six or seven years ago were heavily dependent on markets outside Europe where demand is unlikely to recover quickly. Of course, I regret the closures of the Leyland engine plant and foundry and the Scammell works at Watford, and I am grateful for the constructive concern and great interest which my hon. Friends the Members for South Ribble (Mr. Atkins) and for Watford (Mr. Garel-Jones) have shown. With losses running at £1.5 million a week, rationalisation was vital if Leyland Trucks was to have a real future. I believe that the merger with DAF, which is itself profitable, can provide that future.
I well understand concerns about the effect that this may have on the component suppliers in the United Kingdom. Rationalisation of Leyland was unavoidable. The joint venture with DAF will be reflected over time in changes in the components industry. But the opportunity to create a viable and secure truck industry in the United Kingdom which the merger presents offers by far the best prospects for the future of the components industry. I assure the House that the merged company intends to make significant and continuing purchases of components in the United Kingdom.
§ Mrs. Ann Winterton (Congleton)
What figure can my right hon. Friend put on the percentage of components purchased in this country? What assurances has my right hon. Friend been given that this level will be kept to by the new Anglo-Dutch company?
§ Mr. Channon
It has promised to purchase a significant amount of supplies from the United Kingdom. With the new opportunities available to the merged truck venture, the prospects for United Kingdom components suppliers are better than they would have been under an option which would have been extremely painful for the Leyland truck industry. It is up to components suppliers to deliver what the customer wants on quality, reliability and price.
The House will recall the Government's intention to meet the debts and the cost of rationalisation of the Rover Group's commercial vehicle business. As I told the House on 6 March, these are now expected to total £680 million.
The statutory basis for the injection of new Rover Group equity is the Industry Act 1980. Section 5 of the Act— I have tabled a motion dealing with this— places a limit on certain kinds of funding for ex-NEB companies which, for these purposes, means Rover Group and Rolls-Royce. The order which I laid in draft before the House on 19 February increases the limit from £4.4 billion to £5.25 billion. This increase will ensure the necessary headroom over the overall limit to permit the Government to subscribe for new equity in the Rover Group and, following the intention which I announced to the House on 18 December, in Rolls-Royce.
§ Mr. John Smith (Monklands, East)
On a point of clarification about the writing off of the Rover Group's debts, what difference would this make to interest payments by Leyland Vehicles? The Secretary of State has 347 talked about losses. Many of the losses arise from interest payments. If Leyland Vehicles were not being disposed of, what would be the continued reduction, as a result of writing off the capital debt, in the amount that the company was losing?
§ Mr. Channon
Clearly, there would be some effect. The debts and the cost of rationalisation are expected to be about £680 million. This aspect would have to be analysed in detail. It is difficult to get an exact picture of it. The right hon. and learned Member is on a good point. Of course writing off would make some difference to the debts of the truck company. It is necessary to write off the debts and the cost of rationalisation at this time so that the car business is not burdened with the debts of the truck business. I am speaking in shorthand, but that is the significant reason for the actions that I am recommending to the House.
§ Mr. David Madel (Bedfordshire, South-West)
My right hon. Friend has referred to General Motors' decision to cease manufacturing heavy trucks. General Motors still makes military vehicles for the Ministry of Defence. We in Dunstable are desperate to have that crucial order renewed.
§ Mr. Channon
My hon. Friend is perfectly right. Of course the company is contending with others for military orders. There is no reason to assume that it will not be considered seriously along with all other serious contenders.
§ Mr. Kenneth Hind (Lancashire, West)
On the point about Dunstable, I hope that my right hon. Friend is aware that the Leyland truck division is also keen to acquire part of the order for military vehicles and, through the Ministry of Defence, will compete vigorously for it.
§ Mr. Channon
My hon. Friend is right to make that point. I agree with him, too. Luckily, I am not Secretary of State for Defence. Military orders are important to both companies. Both will be considered seriously. There is some movement by Scammell from Watford, which will have some benefits for Leyland, although it is regrettable for Watford. There is some concentration of the truck business in Leyland. I think that that will help meet my hon. Friend's point.
I shall deal with the automotive industry as a whole. No one can doubt that, with the achievements of the industry in improving its performance and with the better climate for business which we have created in this country, the United Kingdom is once again recognised as a good place in which to manufacture vehicles. Major new investments are taking place or are planned. The multinationals are particularly prominent in this regard.
Ford, for example, has announced plans to spend nearly £1.5 billion in Britain between 1986 and 1991 on its plants and the development of new vehicles and components. Last year Vauxhall spent £100 million on a new paint plant at Luton. It has already approved a £160 million investment programme between now and 1992, 348 with an additional £40 million to be spent on General Motors' United Kingdom component plants. Other projects are currently under consideration.
Lotus has recently announced a significant expansion of its operations at Hethel. This will create more than 1,000 jobs over the next five years and involve an investment of £57 million. Peugeot-Talbot chose its Ryton plant as one of the locations for building the Peugeot 309. It is putting further investment into the plant to prepare it for the production of its new mid-range car towards the end of this year. And there is Nissan's decision to advance the start of full production at its Sunderland plant and build engines there £ a sure sign of its long-term commitment to manufacturing in the United Kingdom.
All this increased competitiveness is reflected in improvement in the local sourcing of cars by the multinationals and by their increased use of British-made components. Ford is at present building more than 70 per cent, of its United Kingdom sales in its United Kingdom plants and these vehicles have a United Kingdom content of more than 80 per cent. Similarly, Vauxhall is now producing 70 per cent, of its United Kingdom sales here— up from only 45 per cent, in 1985. Although its United Kingdom content level is not yet as high as Ford's, it re-sourced over £100 million worth of components to United Kingdom suppliers in 1986 and it anticipates a similar performance this year. Nissan will also be a major customer of the United Kingdom components industry. It has said that at least 85 per cent, of the European Community content of its Sunderland production will come from the United Kingdom. This obviously reflects the increasing competitiveness of the components sector.
I warmly welcome, as I am sure the House does, all these developments and we will wish to continue to encourage the multinationals to increase their participation and sourcing in the United Kingdom where they play a valued role in the economy not only as vehicle manufacturers but also as component producers. Dagenham is the centre of Ford Europe's diesel engine production. Ford is a major exporter of engines from the United Kingdom. In 1986, Ford produced 666,000 petrol and diesel engines in its British plants, more than two thirds of which were exported.
More generally, every car built by Ford at any of its European plants will contain some British components. Similarly, General Motors also produces significant numbers of components here. Its AC Sparkplug plant at Southampton will supply catalytic converters for all GM's European assembly plants. Delco Electronics in Liverpool is producing liquid crystal display instrument panels for export to South Korea. The contribution of the multinational companies to the United Kingdom— in particular, their recently enhanced commitment— deserves proper recognition.
The results of all these changes since 1979 are now starting to show through. Car production has picked up from the low levels of the early 1980s. In 1986, over I million cars were produced for the second year running.
Import penetration has been stabilised. Last year saw United Kingdom production starting to recapture the home market. The share of the market taken by imports fell by two points to under 56 per cent. So far this year imports have taken less than half the market. This is an encouraging trend and one which should continue with improved local sourcing by the multinationals.
349 Export prospects are also improving, with companies re-entering former markets. Austin Rover's exports last year were 16 per cent, higher than in 1985. The Rover Group has returned to the American market with the Rover Sterling and the Range Rover— both of which have had an enthusiastic reception.
§ Mr. Roger King (Birmingham, Northfield)
Is my right hon. Friend aware that, within 12 days of the Rover Sterling having been launched on the United States market, 1,043 cars were sold?
§ Mr. Channon
Yes; it has had a very good reception in the United States of America. I hope that that initial success will continue and I see no reason why it should not.
Peugeot-Talbot became in 1985 the first of the multinationals to restart production of left-hand drive cars for export to Europe. At the top of the range, Rolls-Royce is continuing its excellent export performance. Looking to the future, Nissan plans to export at least a third of its Sunderland production from 1989 onwards. And if Ford's Dagenham and Halewood plants can maintain their recent quality and productivity improvements, exports to the continent of 50,000 vehicles a year could begin in the early 1990s, with a gain of around 1,000 jobs.
The success of Jaguar is a splendid example of the change in the fortunes of the motor industry. I have noticed that one or two Opposition Members try to ignore Jaguar, for it provides incontrovertible proof that privatisation works. [Interruption.] Yes, they have to heckle Jaguar, because they are jealous.
The company's recently announced preliminary results show production up by 8,000 vehicles, or 24 per cent, since 1984, the year in which Jaguar was returned to the private sector. Over the same period, exports rose by 29 per cent, and after-tax profits nearly doubled, being up by 96 per cent. Productivity has also risen significantly but the company's success has led to the creation of more jobs. At the end of this year, Jaguar will be employing around 12,000 people as against under 10,000 in 1984. Jaguar's commitment to the British components industry also deserves praise. Its cars have a 90 per cent. United Kingdom content and Jaguar has done much to help improve the competitiveness of its suppliers.
The problems of the vehicle assemblers in the 1970s have inevitably affected components suppliers. The necessary rationalisation that has taken place has diminished their British customer base. The regeneration of the car industry is therefore good news for the components sector as well. It should provide it with a more solid customer base. Also, components suppliers have begun to look with increasing success to overseas markets.
When I read the Opposition amendment to the motion in the name of my right hon. Friend I was astonished. It refers tothe Government's neglect and indifference towards the motor vehicle industry in the United Kingdom".I remind the House that since 1979 this Government will have provided over £2 billion in equity support for the Rover Group. Even accepting the Opposition's irresponsible and profligate attitude to taxpayers' money, it is a curious definition of neglect and indifference.
The motor industry in the United Kingdom is at last becoming a success story again. Hon. Members will have seen in the press recently the reports of all the companies.
350 The greatest threat that the motor industry could face is the election of a Labour Government. Quite apart from the disastrous effects on competitiveness of a return to the high inflation, high taxation and militant trade unionism which a Labour Government would bring, Labour's policy to switch from vehicle excise duty to an additional tax on petrol would add some 39p to a gallon of petrol, hitting the high mileage business and rural user.
What do people think would happen to the car industry then? Selective import controls, as proposed by the Opposition, would be met by swift retaliation, just at the very moment when British exports are beginning to take off, while the hostile attitude displayed by some Opposition Members, particularly last year, to multinational manufacturers such as Ford and General Motors would jeopardise future investment in the industry in the United Kingdom.
Over the past eight years, we have created the conditions which have allowed the motor industry to tackle successfully the fundamental problems which affected it in the 1970s and before. The industry is now in better shape than it has been for many years.
A recovery is well under way in many sectors and a sound base has been established for the future. Our policies will enable the industry to build on this base and continue to improve its competitiveness. I look forward to the future of the car industry with optimism. With multinationals sourcing more in the United Kingdom, we can expect car production to increase and import penetration to decline further, and we can look for continued progress in recapturing export markets and increasing sales in Europe.
I invite the House to reject the Opposition's sour and carping amendment, typical of a party in terminal decline, and to support our motion in the Lobby tonight.
§ Mr. John Smith (Monklands, East)
I beg to move, to leave out from "House" to the end of the Question and to add instead thereof:condemns the Government's neglect and indifference towards the motor vehicle industry in the United Kingdom which has led to massive job losses throughout the country, severe damage to the industry and its components suppliers, and a serious deterioration in the balance of trade in manufactured goods; deplores the Government's dogmatic insistence that the Rover Group should be privatised as soon as possible instead of strengthening and expanding its crucial role as the only British-owned volume multi-product vehicle producer; rejects the proposed gift-wrapped surrender of control of Leyland Trucks and Freight Rover to DAF and requires the Government to renegotiate the transaction on the basis of a genuine joint venture with each party having a fifty per cent, interest; and calls on the Government not to proceed with the closure of the engine and foundry plant at Leyland and the closure of Scammell at Watford.I agree with the Secretary of State for Trade and Industry that this is a timely debate because important issues affecting the motor vehicle industry are under discussion and up for decision. But there is no blinking the fact that the years since 1979 have been years of retreat and difficulty for the British motor vehicle industry. Just as we have seen manufacturing industry as a whole decline— there is 20 per cent, less manufacturing industry today than in 1979—and just as we have seen our balance of trade in manufactured goods deteriorate so badly that we are for the first time in modern history in deficit, so we have seen the same process reflected in the motor vehicle 351 industry, which is an abosultely crucial part of British manufacturing industry. It is important not only in its own right, but as a source of orders for the British components industry. In more recent years, we have seen the brunt of the decline borne by the truck and bus part of the industry—both once vigorous and prosperous parts. They were so vigorous and prosperous that they took the car industry on their back during its difficult years.
Despite the Secretary of State's attempt to present the British motor car industry as a type of paradise, the truth is that we have seen the complete end of General Motors heavy truck production at Dunstable. That company is one of the multinational companies, some of whose activities the Secretary of State praised, but I noticed that he did not say anything about it leaving heavy civilian truck manufacturing completely.
We have seen Bathgate, once an important part of the motor vehicle industry, advertised by the Rover Group as a suitable site for a large retail shopping complex-that is a sign of the times. Of course, we shall discuss in detail the proposals for Leyland in relation to DAF which, as the Opposition state in our amendment to the motion, are a surrender to DAF of control of an important industry.
The matter of commercial vehicles will be an important part of the debate, but before I deal with it, I shall refer to the Rover corporate plan. The motion asks hon. Members to welcome the Government's acceptance of the corporate plan. Those of us who have studied the corporate plan, which is available in the Library, will have noticed points about it that I wish to bring to the Secretary of State's attention. However, before I raise what I consider to be some problems relating to the Rover Group, or at least to the intentions that are disclosed in the corporate plan, I make it absolutely clear that Opposition Members wish the Rover Group every success in its drive to increase its share of the British domestic market and to reconquer lost domestic markets. I congratulate all those in the company who are involved in expanding sales on the European continent. We all know how important the successful launch of Rover Sterling is in the United States and how important and satisfying it will be for everybody involved in the company, not least those who depend upon it for their livelihood. The consequences of the Rover Group not being successful are horrendous in terms of jobs and the consequences for the motor vehicle industry and its components suppliers.
Having said that, and wishing every success to the company and those who work for it in their drive towards increasing its share of markets, one is bound to notice some disturbing elements in the corporate plan. The first is the Government's dogmatic insistence that privatisation must be one of the principal objectives of the Rover Group. I should have preferred to see in the corporate plan an assertion that the major objective— indeed the overriding objective—is to strengthen and advance the expansion of the company and the industry. I fear that if privatisation is made the driving force behind the corporate plan, decisions may be taken to push it towards short-term profitability to justify its flotation and privatisation, and that might have long-term adverse consequences for the industry, particularly for its size.
I refer to page 7 of the edition of the plan that is available in the Library.
§ Mr. Smith
I shall deal with two points and then give way to the hon. Gentleman.
Page 7, item 2, of the corporate plan refers to an evolving product plan, which, over time, will move the business up market and into specialist niches. What does it mean? On the face of such elliptical phrasing, it is not clear what is intended. Is the intention to move out of the volume production of smaller cars and to what is sometimes called the BMW solution—that is, producing a smaller number of higher value cars? If that is the plan, it will cause great concern. It will mean a reduction in the number of cars produced. It v/ill have serious and obvious consequences for the people employed, and even more severe consequences for those who work in the component supplying industry. We are entitled to ask for more clarity about what is meant. Frankly, as it stands, the statement does not mean much at all. It hints at a possible way in which the company might go without saying precisely where.
§ Mr. Norris
The right hon. and learned Gentleman stressed that the overriding concern of the corporate plan was privatisation. Of course, he knows that that is not so. Before the paragraph in the corporate plan that deals with privatisation, there is a clear statement that the overriding objective of the company is to restore profitability, and, through such profitability, develop self-sufficiency. Does the right hon. and learned Gentleman deny that the objective of self-sufficiency, regardless of one's views of the company, is of paramount importance?
§ Mr. Smith
Of course we want the company to be profitable. Who in his right mind would not wish it to be profitable and successful? There is no denying that privatisation is regarded as such an important objective that, after the business objective on page 3 of the corporate plan, it is underlined as one of the group's objectives. It mentions the Government's commitment to privatisation—which, of course, the company, which is owned by the Government, accepts. It is reasonable to ask whether the wisest course to be followed by the Rover Group at present is to pursue a policy of privatisation. Opposition Members certainly do not think so. The overriding objective should be to strengthen the company, make it as effective as possible and to allow it its share of markets. I leave aside the matter of its ownership until success is achieved by the company.
I hope that the Minister will answer the question about the so-called evolving product plan. The other matter that causes some concern—at least in the terms in which it is expressed in the corporate plan—is the relationship with Honda. The corporate plan states that there should be an increased recognition of the importance of Honda to ARG. Perhaps I look at words too closely. I am not sure whether that sentence means that we should recognise the obvious importance of it or whether increased importance is to be given to the relationship with Honda. It is certainly not clear from the way in which that sentence is phrased. Everyone could have an increased recognition of that importance without the importance being increased. I suspect that it is hinted that the importance is being increased.
Opposition Members have always made it clear that we strongly support intelligent collaboration between self-standing equal partners. It makes common sense for the motor vehicle industry. If it is intended that there should 353 be a steady retreat of Austin Rover's influence and a steady increase in Honda's influence, it is quite different, and the House should know about it. On the whole, it would be better if corporate plans that are made available to hon. Members are phrased in a way that makes sense to those who seek to comprehend them. I cannot understand precisely what is meant by that part of the corporate plan. If the trouble is that it has been filleted so much before it has been made available to hon. Members, perhaps now and again we should get a fuller version.
What has happened to the ARG project? It is not referred to in the plan. Is the Metro to be replaced, or is the project to be dropped? Is there merely to be a reskinning of the Metro? That raises questions about whether the product line will be adequately reinforced in future. I shall be grateful if the Minister will help us on such rather detailed but important matters about Austin Rover.
§ Mr. Doug Hoyle (Warrington, North)
Has my right hon. and learned Friend seen an article in the 2 January edition of The Birmingham Post about the Metro? It states that the Government were so eager to hand over full information to Ford that it states that theDepartment of Trade ad Industry allowed Ford to see the production costs for every Austin Rover model, showing that the cost of the Metro—which gives Austin Rover almost 40 per cent, of its sales— was £100 higher than the Ford Fiesta, giving Ford the edge in last summer's discount war. Ford was able to push discounting to the point where Austin Rover would have had to sell the Metro at a loss. Jean Denton, who was Director of External Affairs"—[Interruption.]—What are hon. Members worried about? Are they frightened by what is coming out? They should just listen. The article states:Jean Denton, who was director of external affairs for Austin Rover, said …'This decision provided the opposition with all the information they would have given their eye teeth for'.Is my right hon. and learned Friend aware that the management was instructed to give that information by the previous Secretary of State for Trade and Industry, the right hon. and learned Member for Richmond, Yorks (Mr. Brittan)? Is it not a disgrace that a Government who wrap themselves in the flag are always selling patriotism short and that the previous Secretary of State for Trade and Industry sold the company short? Should he not be here to answer that charge?
§ Mr. Smith
My hon. Friend must have anticipated that I was coming to the most important criticism that I have to make of the Government in relation to the Rover Group. How on earth can we trust the stewardship of the Rover Group to a Government who, only a year ago, were prepared to sell the whole operation to its group's principal competitor, Ford? That shows this Government's responsibility towards that important industry.
The Government profess support for the company as presently constituted, but we must remember that a significant number of Conservative Members and the Government were prepared completely to abandon their responsibility for it. That was stopped because there was a campaign against it. The Government had to turn tail and abandon their plan. However, a great deal of commercial damage was done to Rover Group's profits 354 not only because of the uncertainty that was caused during that period, but because it is not quite clear— that is why the intervention of my hon. Friend the Member for Warrington, North (Mr. Hoyle) was so apposite—that a great deal of commercial information appears to have been given during the takeover discussions with Ford.
My hon. Friend referred to Jean Denton, the director of external affairs. In The Birmingham Post she said:I have always considered that handing over that information to a major competitor was even more damaging than the insecurity of customers during the merger talks. This decision provided the opposition with all the information they would have given their eye teeth for.If, as my hon. Friend suggested, that resulted from a Government instruction that that information should be given to a competitor, an even more serious charge is that the Government not only neglected their responsibilities in relation to the Rover Group, but that they helped one of the Rover Group's principal competitors to gain an advantage over it in the market place. At some stage I should like the Government to provide an answer to the very serious points that have been raised about their conduct during that period.
I turn to one of the other very important issues that we are discussing—the Government's proposal to surrender control of Leyland to DAF. When the Secretary of State first came to Parliament some months ago, the proposal was that discussions should take place with Paccar on the one hand and DAF on the other. The question of an outright sale to Paccar was specifically mentioned by the Secretary of State, but the reference to DAF was in terms of a collaborative arrangement. Something quite different emerged from the discussions. When the Secretary of State made his statement it was presented as a joint venture. The Secretary of State has told us again this evening about an imaginative new joint venture between Leyland and DAF. From that, one would imagine that it will be a partnership of equals. Indeed, Ministers have appeared on television programmes in which they have drawn parallels between the Leyland-DAF proposal and the Anglo-Dutch Shell company.
§ Mr. Smith
I shall tell the hon. Gentleman why not. In one case there is a partnership of equals. In this case— with one side having 60 per cent, and the other having 40 per cent.— the situation is quite different. If Conservative Members argue that one can have a 40 per cent, share and still be a real partner in the venture because one still has a significant minority shareholding, why is it that when one looks at the directors of the company one finds that that is not reflected in the same proportion of directors? The Secretary of State was asked several times about this when he made his statement. I asked him how many British directors of the joint company there would be. There was no response, for two possible reasons. Either the Secretary of State did not know, which is bad enough, or—perhaps even worse—he was ashamed to say. That obvious question was put, not once, but several times.
We now discover that only two of the nine directors on the supervisory board are British and that only one of the eight directors on the management board is British. That is an amazing joint venture of apparently equal partners. It blows the cover and all the public relations puff that accompanied the Government's presentation. The truth is that Leyland Vehicles Ltd. has been handed on a plate to DAF.
355 Another test can be applied: how many job losses will there be in the Netherlands? There will be none. However, there will be considerable job losses in the United Kingdom. It is not, therefore, a 50–50 per cent. partnership. Our motion says that the Government should not renegotiate the partnership and move it towards 50 per cent. Our position has always been that British Leyland should stay British, in public ownership and wholly under British control. However, we have to accept that the Government have entered into an arrangement that will lead to a 60:40 per cent. divide.
The very least that can be demanded is that the Government must make a reality of their profession of a joint venture arrangement and renegotiate the deal so that there is at least a 50 per cent. British interest. That is the Opposition's concession. It is a reasonable concession. That renegotiation should he in line with the Government's profession and with their future profession about the future sources of components. At the moment all we have from DAF is a bland promise about that question and about the disposition of products as between Dutch and British factories. The British ought to have an equal and an effective say.
When the Minister of State replies to this debate I should like him to tell us what assurances of a binding character were obtained for the component supplying industries in this country before this deal was entered into. Many of those industries have a long-term commitment to Leyland. Cummins, for example, supplies engines to Leyland. The company is apprehensive that that order is now gone for ever and that its engines will be replaced by DAF engines. That ought to have been a material factor in the negotiations. The Government should not have permitted an arrangement to be entered into under which British components manufacturers would be prejudiced. The time to fix the deal was when the negotiations were entered into. If DAF had been genuine about its promise, it would have had no difficulty about entering into arrangements of a more binding character. However, this Government are prepared to take easily given assurances and bland promises instead of insisting upon the solid commitments that anybody with a sense of stewardship for the industry would demand.
Why on earth should we give up 100 per cent. control of Freight Rover and include it in the DAF deal? It is a highly profitable and successful company. It is doing well in the market place. However, that 100 per cent. control has gone into the deal as a sweetener for DAF, because DAF would not enter into the arrangement unless it gained control of Freight Rover. It is a one-sided deal that was entered into by a Government who are negligent of British interests. It means that control of the last British owned heavy motor vehicle producer in the United Kingdom has passed to a foreign competitor. That can be seen in the composition of the board of directors.
Is the Secretary of State honestly able to maintain that it is any sort of a deal when Britain has only one out of the eight directors on the key management board? Part of the sorry saga has been the proposal to close the engine plant and the foundry plant at Leyland. That causes very deep concern to those who work in the engine plant and in the foundry and also in the community that is so closely associated with the enterprise. I understand that concern is already being expressed by Leyland Vehicle customers that in future they may be unable to obtain the 400-series engine. Customers of the foundry are also deeply worried 356 about the future source of their components. Indeed. there is the serious possibility that many customers of Leyland vehicles will go abroad to find the components which used to be supplied by the Leyland plant.
As the Secretary of State knows, the unions have stated their willingness to enter into discussions with the management. I believe that the Secretary of State had discussions with the trade union representatives on that point. They have suggested that they are prepared to take up any proposals that the management might put forward for putting the engine and foundry plants into the economic position required by the company. They were even prepared to consider quite substantial job losses, voluntarily, to maintain the engine and foundry plants. It will be a sad day when we see those two important plants close.
The other victim of the Leyland-DAF deal is the Scammell plant at Watford. That closure is a wholly indefensible part of the arrangement. The Secretary of State often discusses the losses that have been made by Leyland Vehicles. However, it is interesting to note that when I asked him earlier what the difference would be following the write off, it was conceded that the losses would be much less after the write off had taken place. I was surprised that we did not receive that figure. We should be given it because it is highly relevant to whether this is a wise decision. As a result of the Government writing off the debt obligation, the losses would be much smaller. In that case, the matter takes on an entirely different light and needs to be reconsidered.
I remind the House that between 1976 and 1986 there were only three years in which Scammell was in deficit. The largest loss came in 1986 with a loss of £3 million, which is a relatively small amount in the context of the industry. The projected loss for 1987 is only £1 million. Following the DROPS contract which Scammell secured, the company was calculated to have a secure arid profitable future for the period between 1988–95. The company has a superb record of labour relations. Only two and a half days have been lost in industrial disputes during 68 years of industrial activity.
The loyal, dedicated and committed work force at Scammell supply important specialist vehicles for the Ministry of Defence. If it closes, we shall lose a major design and technical capability in the United Kingdom. To put it no higher, there is controversy as to whether Leyland Vehicles will be able to supply the range of vehicles for the Ministry of Defence, the components for which for many years it has relied upon Scammell to provide for example, tank transporters, crash tenders, RAF refuelling vehicles and other specialist military vehicles.
Great expertise in military vehicles has been built up over the years at the Scammell plant at Watford and now that is to be thrown aside. Losses will also be sustained by the components suppliers such as Cummins and Perkins which will suffer as a result of the closure at Watford. Those who supply brake equipment, cabs and other parts of the plant will suffer from the closure. The decision to dispense with an effective and well functioning part of the British motor vehicle industry is an act of wanton destruction.
In our contributions to the debate, we have all stressed the importance of the components sector. The Rover Group alone spends £2.38 billion each year with more than 2,000 British companies. That contribution is enormous.
357 It is of great importance to the question whether the Rover Group remains a large volume producer, producing in excess of 400,000 vehicles at present.
The engineering director of Rover Group, Mr. Andrew Barr, stated in his evidence to the Select Committee on Trade and Industry on 18 February 1987 that if the group went out of mass production,it would have a dire effect on the components industry.That is why the size of the Rover Group and the loss of control of Leyland is so important to the components industry when we are losing not only markets but the capacity to decide who will source the products that the industry produces.
Instead of the sunshine picture that the Secretary of State sought to portray, we see an industry which is in grave difficulty and in which we are losing important capacity, jobs and market share. That will have a domino effect throughout the component sector.
There is still time for the Government to make it unequivocally clear that the Rover Group will stay in volume car production, and to make sure that that is written into the corporate plan and that that is an objective of the company's owners—the Government.
There has been too much retreat in the industry and the notion that the Rover Group should enter into the so-called more profitable niche of the higher value-added car, and abandon or greatly diminish its production of the others, is simply not tolerable. It is difficult to discover the company's plans in that respect. However, it is legitimate for the House of Commons and even more important for the Government to make clear where they stand on that important issue that is so crucial to the future of the group.
There is still time for the Leyland-DAF deal to be renegotiated and for the Government to insist on a proper 50:50 partnership that would give some reality to the notion of a joint venture. There is still time to negotiate the future of the engine and foundry plants. Especially in the light of customer pressure, there is still time to decide that it will be deleterious to the company to lose those facilities. There is still time to stop before that happens. Co-operation with the work force could bring forward a new survival plan for the engine and foundry plants at Leyland. There is still time to stop the wanton destruction of the Scammell plant at Watford.
When one considers the realities of the matters that we are discussing today, one can see why the Secretary of Stage painted a wholly one-sided picture of the motor vehicle industry. We are all committed to its success. It is too important for us to take any other position and we are wholeheartedly behind its future success. However, we should like far more care to be given to safeguarding its future and maintaining the British element of an important British industry.
§ Mr. Robert Atkins (South Ribble)
As the hon. Member for Leyland in the constituency of South Ribble, I shall confine my remarks to Leyland Vehicles Ltd. in its twofold role of Leyland Bus and Leyland Trucks.
There is not time to rehearse again the history endured by Leyland Vehicles in recent years. Many hon. Members take an interest in these matters and will be readily knowledgeable about the problems. Suffice it to say that, as my right hon. Friend the Secretary of State for Trade 358 and Industry has said, through the taxpayer the Government have invested about £2 billion in the company since 1979.
However, there have been problems of product, market place, industrial relations, productivity and a variety of other difficulties with which we are all too familiar. It must be said that the blame for that has lain as much with the management over the years as with the work force, whether it has been a lack of communication, policy changes or industrial relations. In recent months and years, the employees of Leyland have done their bit to make the company more successful. With cause, they are tired of continuous change, of being the butt of music hall jokes and of an uncertain future.
I shall deal briefly with Leyland Bus before talking about the main problem of Leyland Trucks. Under the management buy-out that is shortly to be completed, Leyland Bus is making good progress. I supported the management buy-out as the best available option and I continue to do so. I hope that as Ian McKinnon, George Newburn and the others who are running the company get more involved in its operation, they will involve the employees more than perhaps has been the case in the past.
I am especially delighted to welcome—I gather that it is not yet been absolutely confirmed— the fact that Leyland Bus has obtained a new order from the Kowloon Motor Bus Company in Hong Kong for 110 buses. That is a great tribute to the company's work. Hon. Members, especially my right hon. Friend the Secretary of State, will know how hard we are still working to pull something out of the bag in Thailand and how important that is. The difficulty is that Leyland Bus makes large buses and the market has been increasingly for small buses because of deregulation. However, deregulation has provided what the public has wanted. It is sad for many people in my constituency and elsewhere that Ribble Buses now operates Mercedes buses whereas in the past it operated Leyland buses, but deregulation has saved the ratepayers of Lancashire county council nearly £6 million a year in subsidies, and that must be recognised.
Under the package that Leyland bus is trying to put together with Lancashire Enterprises for a retraining operation, the European social fund, which matches the money that the Government provide, has said that it will provide substantial sums. I understand that the Government are normally expected to reduce the bids that are submitted for matching funds from the social fund—that is called a policy of linear reduction—because, inevitably, far more companies apply than there is money to go round. Normally the reductions are of 40 per cent. to 50 per cent., and no exceptions are ever made. Therefore, I am particularly delighted that I have been able to meet the deadline of 12 o'clock last night and to persuade my right hon. and learned Friend the Paymaster General to agree to a reduction in the linear reduction from between 40 per cent. and 50 per cent. to only 20 per cent. He has agreed to do that because of the exceptional circumstances confronting Leyland Bus in the town of Leyland. I am delighted at that good news, which is subject only to confirmation by the European Economic Community social fund. It demonstrates that the Government are prepared to listen when a local Member puts a case to Ministers.
I wish to deal with the particular problems of Leyland Trucks. In recent years Leyland Trucks has achieved more success than for many years. It now has the largest United 359 Kingdom share of the truck market. That is evidence of a good product, a good design, of the fact that the work force has put its back into the job, and of improved productivity. Nevertheless, the problems of falling export markets, substantial losses, over-capacity in the European and world truck market and, above all, the need for reinvestment must be faced.
I shall look at the facts of the Leyland-DAF deal, first, in terms of over-capacity. My hon. Friend the Member for Bedfordshire, South-West (Mr. Madel) knows only too well the problems that have confronted Bedford Commercial Vehicles Ltd. because of the difficulties of the market. Leyland Trucks has also faced those problems. There are more trucks being made than there are people prepared to buy them. The losses generated in the past few years are familiar to all hon. Members, particularly those who take an interest in these matters. My constituents associated directly with the company, as well as those who are not, understand only too well that these losses cannot be allowed to continue. The company is haemorrhaging cash to the extent of £1.5 million a week and that cannot continue.
The alternative options to the Leyland-DAF deal are worse than the deal. On the information provided to me, I am convinced that if the Leyland-DAF deal does not go ahead the Rover Group will he forced to reduce further the number of jobs in the short term and to close the company in the long term. I am not prepared to tolerate that.
Taxpayers—and that means all of us—have invested substantial sums in the company. I know that no matter how committed and understanding my constituents are about the problems of Leyland, even they would be pushed to agree to invest more funds in the company. We may regret that fact of life, but it is, nevertheless, a fact of life.
DAF is known to Leyland Trucks. All the reports I have suggest that the present operation with DAF is extremely successful. People like DAF, the trucks and the arrangement. Everything is going well. DAF is not unfamiliar. The DAF deal will provide more export outlets both within the EEC and in other parts of the world over and above the existing outlets that Leyland has in the Third world and Africa. DAF will put in £150 million of reinvestment.
Nevertheless, my overriding anxiety, and I suspect the anxiety of all hon. Members, whatever their view, is that many people will lose their jobs. That is intolerable and frightful under any circumstances. However, the redundancies will take place over a long period and the settlements are exceptionally generous. I know that the Department of Employment, both locally and regionally, is doing all it can to provide facilities on site for retraining, job hunting and all its other undertakings. That will be small help; it is not a substitute, but it will help in some way.
We shall also see the continuity of the design centre and LAPland as the Leyland assembly plant is known in my part of the world. It is an important, modern, efficient operation. There may be reductions in the work force, but essentially the future for both those areas is as strong as it ever could be.
Finally, we are being offered the chance of a flotation in two or three years' time on the Dutch and United Kingdom stock markets. I have a commitment from my right hon. Friend that he will encourage DAF and Leyland to ensure that employees get a fair crack of the whip.
360 Those are facts of the deal but several questions must be asked on behalf of my constituents and others. But, first, I pay tribute to my right hon. Friend the Secretary of State, my hon. Friend the Minister of State and his predecessor my hon. Friend the Member for City of Chester (Mr. Morrison) who have been extremely tolerant of the delegations that I have been able to bring. I pay great tribute to the leaders of the trade unions locally who, while understandably frustrated, uncertain and worried on behalf of their members, have on numerous occasions, in rational, reasoned and tolerant ways, put forward their ideas about the future. Their members owe them a great. tribute for what has been done on their behalf.
Members of the council across the political divide have come to see Ministers and have been heard. That is all to the good. Hon. Members will know that I have asked questions, deposited petitions and made as much noise as I often do about matters relating to my constituency.
The nub of the problem is the 50:50 split to which the right hon. and learned Member for Monklands, East (M r. Smith) addressed his remarks. It is suggested that I am opposed to such a split and actively favour a 60:40 split. That is not true. Obviously, I would prefer an equal merger and I said so in December when the statement about talks with DAF and Paccar was made. But the company's negotiating position is not strong. My investigations arid discussions with senior management and Ministers show clearly that the original split was more likely to be 75:25 and that the pressure from Ministers and others led to a change in the proportions. In addition, the proportion of the two companies' assets is now 60:40. DAF would not accept anything less. Perhaps in reply my hon. Friend the Minister will confirm that, broadly speaking, that is the position. In those circumstances, I have supported a 60:40 split rather than raise false hopes of anything else. Surely that must be prudent on behalf of one's constituents.
I agree with the right hon. and learned Gentleman that the two-level board split is unsatisfactory and I invite the Government to press more strongly for a fairer split of the board. If DAF is worried about having a majority, the difference between one, two or three out of nine will not make any difference. Therefore, I hope that it will consider that carefully.
There is a problem with the engine plant. Where will the DAF engines come from? What will Leyland Bus do, because it uses the TL 11 and wants to continue doing so? I hope the possibility of some sort of limited manufacture of the TL11 engine, to name but one, can be put together in the interests of Leyland Bus and others. I am doing what I can to assist that and it may be possible, but I put it no higher than that.
I am also worried about the pension fund. In a recent letter I raised the problem about the constitution of the trustees and who was responsible with Mr. Graham Day, the chairman of the company. He wrote back on a number of points, but he concluded his remarks by saying:Details of the structure of and the trust deeds of a new Leyland DAF scheme are not yet available.I appreciate that there are problems, but we need to know, as soon as possible, on behalf of those who are involved, that their future, in terms of the pension scheme, are secure.
Fourthly, there is the problem of communication. Hon. Members will know that I have raised on numerous occasions, privately and publicly, my concern about the poor quality of communications in the company. There is 361 no need to go into the reasons for that; it may be something to do with constant management changes. Trade union leaders and representatives at all levels, no matter what their political or industrial persuasions, say that communication could and must be improved. Therefore, I was delighted to read a report in The Guardian last Thursday in which Mr. Frank Sweens, DAF's director of social policy and a member of the company's executive board, said:DAF … would like to introduce new industrial relations procedures into Britain.These could revolutionise some practices and eventually involve several works councils, elected by employees, with guarantees of access to management at regular meetings.It must be said, to those who understand these matters, that in Holland the standards of employee-employer relationships are better than almost anywhere in the world. We can learn from that. Mr. Sweens goes on to say:I can understand why workers are still worried—that if things go bad, they fear we would bring production back to Holland. But that is not logical. No company is willing to destroy that capital and we do not have the capacity in Holland. We intend to grow and make profits.There is hope. I and my hon. Friend the Member of the European Parliament for Lancashire, Central (Mr. Welsh) share the prospect of going to Eindhoven, seeing the chairman of DAF and discussing some of the points that he raises and that I have raised. I hope that that will go some way towards demonstrating my commitment and concern on behalf of my constituents.
Fifthly, I keep pressing the Government—I hope that they will react to that pressure— for much more competitive finance for export deals. That is a continuing problem, and something that we need to develop. We talked about the Thailand deal and how much was done, although we do not yet have the order. That demonstrated that we can put a package together. We need to examine whether we can do that more frequently and more effectively. Those are the questions that need to be answered.
I shall now say a word or two about the Opposition. I resent the suggestion that the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) made in the House some months ago, that the General Motors deal was a plot devised by Conservative Members and others to do Leyland down. I must tell him, in his absence, that many of my constituents now feel that the General Motors deal might have solved matters. I recognise the problems that are facing General Motors and my hon. Friend the Member for Bedfordshire, South-West, but that is as a result of things that happened some time ago. The right hon. Gentleman and his allies have a lot to answer for. Many of my constituents feel that most strongly, and they are not all Conservative supporters.
I object to this inherent talking-down of the north-west. We have a devil of a lot going for us. Leyland, despite what anyone else may say, is not a one-industry town. It is part of the constituency and borough of South Ribble, where there is a devil of a lot going on, whether it be Baxi, which makes fires and is taking on new people, British Aerospace, the most successful aerospace company in the world, or smaller companies such as Norlec, which is expanding and developing all the time. It was announced the other day that British Car Auctions at Walton Summit is about to expand its operations because it is so successful.
362 There is a lot of good news, and talking down the north and north-west does not help other people to understand how important that area is. I could accuse the Opposition— particularly in view of the vast numbers who are present tonight—of being a little two faced. I heard an Opposition Front Bencher say, "Could be better, this deal, but I am not complaining." He would not admit that publicly, but he said it privately. I have a great deal of respect for the right hon. and learned Member for Monklands, East—[Interruption.] It was not he who said it. I shall not deploy that now the hon. Gentleman to whom I refer knows who he is. I have evidence which I will show if necessary.
The right hon. and learned Member for Monklands, East speaks with authority on these matters in the Labour Party. He should be providing more leadership and guidance to those who need it in this difficult time. Instead of many Opposition Members using cheap slogans, which do not address the problems and which mislead people, we need to talk about and understand the problems and guide the people who, understandably, are angry, frustrated and depressed.
With regard to the Labour Party, one expects that point of view, but what I object to extremely strongly is the attitude of the Liberal party. It is two faced. The hon. Member for Yeovil (Mr. Ashdown) said in December how keen he was on the DAF deal. The hon. Member for Gordon (Mr. Bruce), in his absence, when my right hon. Friend the Secretary of State made his statement recently, said that he was in favour of the Paccar deal. On a number of matters he was inaccurate. He said that there was a plant in Lancaster. My hon. Friend the Member for Lancaster (Mrs. Kellett-Bowman) will be delighted to learn that, but there is not one. The hon. Gentleman suggested that there would be 20,000 job losses, and that all the jobs would go to Holland. He was wrong and should have the grace to admit so. He has been inaccurate and his scaremongering has been a discourtesy to my constituents and to the House. However, we have come to expect that of the Liberal party. It will jump on any bandwagon which is going in any direction as long as there is a future in it for it.
§ Mr. Malcolm Bruce (Gordon)
Will the hon. Member acknowledge that in the early reports of the proposal we were hoping for a joint venture, which was a 50:50 split?. The 60:40 split required some consideration. Will he further acknowledge, therefore, that the consequences of the loss of control to Holland has led to a situation where, according to some people in the trade unions, the Dutch Government have said that there will be no redundancies in Holland, even if there are redundancies in the United Kingdom? Does the hon. Gentleman believe that that is within the spirit or legality of the treaty of Rome, and does that give assurances for the future?
§ Mr. Atkins
I shall quote, from Hansard, the words of the hon. Member for Yeovil. He did not mention a 50:50 split. He said:Does the Minister accept that, of the two options before us, the DAF option is preferable?—[Official Report, 2 December 1986; Vol. 106, c.765.]I shall need notice of an examination of the treaty of Rome, since I do not pretend to be a constitutional expert, and I am not prepared to make an off-the-cuff judgment. Perhaps I could write to the hon. Gentleman, as Ministers often say.
363 Leyland Trucks has hit rock bottom. Many expert commentators in the industry, and outside it, reckoned that this had to happen. A prominent sales director, the chairman of the Leyland Truck Distributors Association, has described what is happening, in the context of the Leyland-DAF deal, as excellent news. That is someone who knows the market. He understands the problems and he has made it quite clear what his view is. Having said that, for too long the employees have been pushed around, morale has sunk to rock bottom and they are uncertain of the future. This is a lifeline, perhaps the only hope for a brighter future. I do not accept that there is an argument for delay, which has been advanced by some hon. Members. The losses will continue, the market place will not improve, and who will pay?
§ Mr. Ken Eastham (Manchester, Blackley)
I come from the engineering industry and I often hear, from Government Benches, about losses and taxpayers' moneys. I wish, on occasions, that Conservative Members would have the same concern when it comes to farmers and the massive subsidies that they receive from the taxpayers; evidently they can put into storage all kinds of food which cannot be consumed. Will the hon. Gentleman justify that, because he says that we can no longer afford to do that for industries such as engineering? What is the hon. Gentleman's attitude to other industries besides engineering?
§ Mr. Atkins
You might draw me to account, Mr. Deputy Speaker, if I were to venture into an agricultural debate.
§ Mr. Atkins
I take the point. I do not wish to develop this at length, but the hon. Gentleman might be surprised to know that I have some sympathy with his point of view. I know that my right hon. Friend the Minister of Agriculture, Fisheries and Food is seeking to address that problem at this very moment. He is having great difficulty because the farming community is understandably concerned about its future, and we must recognise that as well.
I recognise the understandable concern, depression, frustration and anger of many of my constituents who work at Leyland Trucks, and it is because of that that I shall support the Government tonight, not because the Government have told me to. I am not so important that one vote matters either way and I am sure that Ministers would understand if I felt that I had to vote against the Government tonight. But the House knows full well that I am not frightened of fighting my corner, and I defer to no one in my support for British industry and for the industry in my constituency. I shall vote for the Government's motion because, having examined all the options to the best of my ability, I believe that the DAF deal holds out the best prospect of survival for the longterm future of the trucks division.
The most important relationship of a Member of Parliament, after that with his maker and his wife, is that with his electorate. In my party a Member of Parliament is not a delegate, mandated to vote certain ways on difficult issues, but, none the less, we must justify our actions to those who put us here when the election comes. It is very easy to be a populist of Left or Right to take the easy option in the belief that one's constituents will regard 364 one in higher esteem. We are all guilty of that to some degree, but there comes a time when one must make a judgment, take a stance, give some advice. One gives the advice that one thinks is right and one must rest on the consequences. That I have tried to do throughout the past few days, weeks and months. I rest on that, and I am prepared to stand by it now and whenever.
§ Mr. Ian Wrigglesworth (Stockton, South)
Three shop stewards from my constituency have visited the House today and we have been involved in discussions in an effort to keep another engineering plant in my constituency from going broke and out of business. Like other hon. Members who represent northern constituencies and who have had a series of such meetings over the past few years, I have sympathy for the constituents of the hon. Member for South Ribble (Mr. Atkins) who will be made redundant. I join in the tribute to the work force at Leyland for the way in which it has succeeded and has improved the operations there over recent times.
However, when the hon. Gentleman bewails and acknowledges the mismatch between the capacity in the truck industry and the size of the market for trucks, I must tell him that his Government have played a part in bringing that about. One of the reasons for the massive over-capacity in the truck industry, as indeed in many other industries, is that over the past seven or eight years Britain has faced a severe depression brought about directly as a result of the Government's economic policies. If the Government had pursued different economic policies and had been prepared to co-operate internationally much more, we might not have seen such a substantial depression in the truck market which has led to the massive over-capacity to which the hon. Gentleman referred.
I share with the hon. Gentleman and with the right hon. and learned Member for Monklands, East (Mr. Smith) some of the anxieties and the desire to have answers to some of the questions about the deal with DAF. I too would have prepared a 50:50 deal between Leyland and DAF. I cannot understand why, when there is a 60:40 deal, only two directors are on the board. If there were to be 40 per cent. share ownership, one would have thought that at least 30 per cent.—three of the nine directors—and possibly more, would have been representing Leyland on the board. The Minister must reply to those points and explain why there is such a small representation on the board of directors and the management board.
I should also like the Minister to respond to questions that have been asked about the position in some of the subsidiaries and other parts of the enterprise, particularly that in Watford, which has been devastated and completely closed down as a result of this proposal. The right hon. and learned Gentleman asked about military vehicles and there is considerable anxiety about that matter. I should like the Minister to tell the House not only whether there were adequate consultations within the company, which the hon. Member for South Ribble has just raised with him, but whether there were any consultations with the Ministry of Defence about the implications of the closure of the Scammell plant before the decisions were taken. How will the vehicles that Scammell has made for years now for the Ministry of 365 Defence be replaced? They are of vital significance and the Minister must tell the House exactly what will happen to those supplies.
The hon. Gentleman mentioned consultation within the company. I am pleased that he referred to the quotation from the personnel director of DAF. One of the major successes of recent times, which the Secretary of State rightly mentioned in his opening speech, is the improvement in industrial relations within the motor car industry. The Secretary of State referred to the Labour party's amendment to the Government motion, but he did not refer to the amendment in the name of myself and my hon. Friends in which we have retained some of the words in the Government's motion.
The Government are right to acknowledge and pay tribute to the improved industrial relations, and to recognise the valuable contribution made by the vehicle industry and the component suppliers. They are entirely entitled to that, but it is not sufficient just to say that. Improvements having been made on the industrial relations front, a further step remains to be taken to get to the position outlined by the director of DAF which his company wants to see within the new combine. Those are the sort of industrial relations that we should be importing from Europe. If the hon. Gentleman believes that those are the sort of industrial relations that should exist within British companies, I cannot understand why he supported his Government in opposing modest proposals such as those contained in the Vredeling directive and the fifth directive for the introduction of such industrial relations into British companies.
One reason for our not being opposed for ever and a day to the Rover Group remaining in the public sector is that we want to go further than that. As well as good industrial relations within the organisation and participation we want to see employee share ownership within the company. That obviously cannot be achieved unless the company is returned to the private sector.
§ Mr. Michael Fallon (Darlington)
Before the hon. Gentleman leaves that point, will he clarify it, because I am not sure that I heard him correctly? Is he stating that it is alliance policy that the Rover Group as a whole should be privatised? Is that the alliance position?
§ Mr. Wrigglesworth
I will come to the alliance position in a moment. That position is outlined in the amendment that we have tabled to the Government motion. The Government are obsessed by privatisation which is diverting the management and work force of the company from the primary objective. Indeed, the hon. Member for Oxford, East (Mr. Norris) stressed that point when he intervened in the speech of the right hon. and learned Member for Monklands, East. The primary objective is to make the company profitable and successful, to regain market share at home and abroad. When it has been profitable for five years, we can have the luxury of debating how and when the company should be privatised. We must keep the objective firmly in our sights of making the company profitable and ensuring that it is sustained in profit for some time. We can then worry about the ownership of the group.
§ Mr. Wrigglesworth
No, because many other hon. Members want to speak.
The alliance has consistently backed the long-term strategy of the company. We have welcomed the collaboration with Honda. I believe that that collaboration with Honda is one of the most important keys to a successful future for the Rover Group. That is so important because it provides the Rover Group with access to the Pacific basin and to the skills and technology available in the Honda group. In the long term, it will provide a firm basis for the Rover Group to continue as a volume car producer.
It would be difficult for Leyland to sustain that position on its own. Honda is of a size which makes the partnership a partnership of equals, one which I believe can and should be sustained and improved and will grow closer over the years. It is therefore most regrettable that its progress was impeded by the discussions which the Government initiated with Ford over the future of the Rover Group.
It is not surprising that Honda wonders about the Government's commitment to the future relationship when it finds that the Government have had discussions with Ford about selling the business to that company. Not only did that impede the growing relationship between Honda and the Rover Group; it created great uncertainty in the market place and among the dealer network which is such a key part of the future of the Rover Group.
The company's achievements in recent years have been considerable. Productivity has now risen to levels comparable with European plants. Quality has improved, with warranty claims being cut by half in the past four years. Absenteeism is now below the industrial average and the industrial relations climate has improved to the extent of a two-year pay deal aimed at harmonising blue and white-collar conditions of work and last year was a strike-free year.
Last Wednesday I visited the Cowley plant and looked at the technology which has been introduced there, which matches the technology being operated at Longbridge. There is no doubt that the country can be proud of the company. The investment has been very successful and performance is now being achieved in the plants which matches the best in the world. There is still room for further improvement, but remarkable progress has been made.
For the past three years, until the writing off of the £750 million Leyland Vehicles debt, the company has received no financial assistance in the form of loans or equity. The downside is that the Rover Group's production has fallen to 410,000 vehicles in 1986 from 611,000 in 1978. Its market share fell from 17.9 per cent. in 1978 to 15–8 per cent. in 1986. That figure has now improved and that is very welcome. I congratulate the company on pulling back those figures. Operating losses have occurred in every year since 1981, except 1983. The loss for the whole of 1986 is expected to be about £120 million.
With the model range begun in the late 1970s now complete, the company badly needs resources to fund a new model range. Clearly the resources are unlikely to come adequately from profits. Instead of rushing to divest the group of many of its activities to speed privatisation, the Government should have backed professional management and a highly skilled work force with a commitment to a future model programme which gave 367 certainty for a long enough period to ensure that the company could build on recent successes and return to substantial profits.
The decision fully to fund the AR8 and the detailed agreement with Honda on the models being produced with that company are welcome. However, it will be important to monitor the level of United Kingdom content in those models. The company claims that the content at present in the Rover 800 model is 85 per cent. measured by ex-factory prices. It has stated that its aim is to achieve EEC content as close to 100 per cent. as possible. Clearly it is in the interests of this country that the components are sourced as far as possible from suppliers in the United Kingdom.
The postponement of a clear decision on the Metro replacement—the AR6—is more worrying. Although the Minister referred to the investment of £200 million on the K series engine and related gearbox developments, there is no clear commitment in the corporate plan about the Metro replacement. As the right hon. and learned Member for Monklands, East said, there is a danger and fear that we may see a reskinning of the Metro rather than the development of a new model.
The Times motor correspondent on 10 February suggested that the company had cut £80 million from the estimated £250 million invested in the new model. If the decision on the small car replacement is taken too late and a mistake is made once again of soldiering on with an outdated small car range, including the reprieve of the Mini, which is now 30 years old, there will be too great a dependence on Honda in the relationship.
Even with the booming domestic car market, the prospect of the Rover Group achieving an early increase in market share is clearly limited. With Ford increasing production from 380,000 to 450,000 by 1988–89, Vauxhall increasing from 220,000 to 300,000 and Nissan building up to 100,000 by 1991, the Rover Group is clearly operating in a very tough market. Although there is a welcome buildup in the number of British-built cars to be sold in the United Kingdom, the future of Rover remains clouded. I hope that when the Minister replies he will give a commitment to the long-term support of the company's plans so that it can edge back its markets share in the face of that competition and ensure that it becomes profitable for some years to come.
The decline of the motor industry generally lies in many ways at the heart of the massive deterioration of the manufacturing trade balance which the House of Lords Select Committee on Overseas Trade identified in its report in 1985. Of the turnround of nearly £12 billion between 1978 and 1984, some £3 billion was accounted for by motor vehicles and components. That is a substantial part of the turn-round in the balance of payments deficit in manufactured goods. Clearly, that has been caused, to a considerable extent, by the economic policies pursued by the Government in their early years of office from 1979 to 1981 when there were crippling exchange rates and high interest rates which have been sustained since then. Those are an enormous burden on industry and especially on the motor car industry.
The Secretary of State rightly paid tribute to the success of Jaguar. However, there is no doubt that one reason why Jaguar has been so successful is the advantage that it has obtained on the exchange rate balance with the United 368 States. The relationship between the dollar and the pound is giving the company an edge in United States markets that has helped it to be successful.
As well as backing the Rover Group and supporting the industry in the long term, I hope that the Government will provide economic policies to help not only the industry but all manufacturing industry to succeed and grow and to beat the competition from overseas. Central to that are interest rates and the exchange rate. I hope that in the Budget next week the Chancellor of the Exchequer will substantially reduce interest rates, announce that Britain will join the European monetary system to underpin that reduction, and pursue an exchange rate policy to help manufacturing industry to compete in markets abroad and ensure that Rover and the rest of the British motor industry not only keep their market share but increase it in years to come.
§ Mr. Deputy Speaker (Sir Paul Dean)
Order. I repeat Mr. Speaker's appeal for brevity. Many hon. Members with strong constituency interests hope to speak in the debate.
§ Mr. Roger King (Birmingham, Northfield)
Any debate on the British motor industry should mention one area in which we have been predominantly successful for many years. I refer to the nation's ability to design some of the world's finest formula 1 racing cars. We are without equal in all aspects of motor racing, be it formula 1, formula 3 or formula Ford car racing. Dozens of manufacturers are engaged in producing such cars for a highly discerning market, not just in Britain but throughout the world.
We have firms such as Lotus, Williams, McLaren, Benetton and Lola, and drivers such as Nigel Mansell who perform in 19 countries in a sport that is watched by more people than any other sport in the world. It also provides a good and successful testing area for new initiatives and designs such as the active suspension system, which forecasts the state of the road in front of the car before it travels over that area. All those items are translated back into the motor industry for use on everyday passenger cars. We should endorse the substantial abilities of our engineers in the competitive world of motor sport.
It is good news all the way for the motor industry, especially this year. At long last, we are beginning to push back the import penetration that was described by my right hon. Friend the Secretary of State. We are now below 50 per cent. import penetration, and this is reflected by the increased activity of all our car manufacturers. We all know about Jaguar, with its commitment this year to take on another 700 workers. We know about the amazing turnround experienced by Peugeot-Talbot, which is now exporting cars back to Europe. Lotus, under the ownership of General Motors, is ready to invest a substantial sum in a new factory in East Anglia. We should also congratulate Ford, which is No. 1 in the market place. It is a well-known and well-respected British manufacturer which has done much to provide the resources for our manufacturing industry during the past 10 to 15 years—and, of course, the past 75 years. It celebrated its 75th birthday last year. Vauxhall, too, is working hard to reestablish itself as a British manufacturer.
We are boosted by competitive United Kingdom currency, good productivity and attention to quality and 369 delivery at the right time. Those are all criteria to provide the success that our motor industry is on the verge of turning into a roaring success.
The Rover Group is doing especially well. In the United States, the new car has been extremely well received, with more than 1,000 cars sold in the first 12 days. The importers forecast that, in the latter part of this decade, and certainly by 1990, about 90,000 Sterling cars will be required each year for the United States market. I need hardly mention what sort of income that is likely to bring to the United Kingdom economy. If those figures are achieved, that one product will earn between £2 billion and £3 billion. The importers in the United States claim that the figures will be achieved.
Recently, I visited Dallas, and spent an evening with the vendor of the Sterling car in that city. He said, "You build them, and I will sell them." He had already sold the first 13 cars, including his demonstrator. He apologised for driving us round in a Cadillac, which cost $10,000 more than the Sterling and was only half as good, and said that he had 35 Sterlings on back order and had closed his order books, although he insisted that he wanted quality, not quantity.
Indeed, the Japanese press has been saying how good our Sterling is in Japan, where Honda builds it. The report of a recent road test in Japan said that, except for one or two little niggles— these were not quality faults, but windows that do not wind down electronically in one go at the touch of a button so that the driver can pay his money on the many toll roads in Japan—the Sterling was the finest car currently available on the Japanese market. That says a great deal for the design expertise of Austin Rover engineers, who have built a product similar to the Honda car but have made a better job of it.
The Austin Rover sales for February were the best for 13 months, showing a 17.14 per cent. share of the United Kingdom market. Exports to Spain— a large growth area for the company— are up by 54 per cent., and exports to France this year are up by 13 per cent. That is encouraging news.
My constituents in Northfield, where the Longbridge plant is situated, welcome the Government's support for the Rover Group board's corporate plan, because it sets out a sound future for development and prosperity in the city of Birmingham. It has been earned only because of the productivity of the factory and the quality of the product that it is turning out, as the work force consistently gains quality bonus payments as a result of producing goods right first time on the production line.
We welcome the introduction of the new K series engine, which will give the Rover Group a technological lead over many competitors, as the other manufacturers look at ways of improving engine efficiency with their existing designs before investing, at very high cost, in new ceramic technology in the next century. Austin Rover has a window of opportunity, with a highly efficient and technologically advanced engine in the K series with which to exploit the market place in the United Kingdom and Europe.
With a new engine, we need a new car. Some hon. Members, including the right hon. and learned Member for Monklands, East (Mr. Smith), have said, "Where is the AR6? We do not want a reskinned Metro." Nor do we in the area, in the company or anywhere else. Any new car 370 will be just that, whether it is the so-called AR6 design, which has been completed in prototype form, or a more advanced design based on the existing Metro size but featuring a new suspension, gearbox, engine and almost everything else. I am convinced that, whatever the company produces, it has a track record, starting with the Mini, the 1100, the 1800 and the present Metro, of providing the best package of its size and type of any car manufacturer. Whatever it produces will be a successful car.
As to whether the company will remain in volume production, Mr. Day is on record as saying that the company is not coming out of volume production, which is why it has signed a deal with Honda to produce the AR8, which will probably be made at Longbridge. What sort of quantity can we expect? The figures are not forthcoming from the company, but it has been suggested that, all things being equal and with a range of models based on the AR8, a figure of 6,000 units a week is not unrealistic.
If we add the figures for the AR8 to those for the new super-K Metro, we could have a car plant producing more than 500,000 cars a year by the end of this decade—something that will have an enormous effect on the profitability of the business and on all the component suppliers in the west midlands and the country. That augurs well for the partnership with Honda. It is a partnership of equals so that in the latter part of this century we can develop the automobile in conjunction with one of the most advanced car manufacturers in the world.
The people of Birmingham warmly welcome the successful negotiations with regard to Freight Rover, for which I have a particular affection. I spent five years of an engineering apprenticeship with its predecessor, Morris Commercial, and I involved myself in the original design of the predecessor to the present Sherpa van, of which the only common panel is the roof panel. This is a breathtaking opportunity for the company. It has the full support of the work force which, on the day after my right hon. Friend announced approval of the corporate plan, was on television saying that it was the best bit of news it had had in years. People were saying how much they were looking forward to working with DAF, which will unlock the key of Europe for that company in producing a much larger range of vehicles.
Indeed, putting the DAF name on the front of a van or truck is very much like putting the name of Rolls-Royce on the front of a Metro. DAF is well respected throughout Europe as a substantially well engineered truck and if it is putting its name on a Freight Rover van or a Leyland Roadrunner truck, it must enable that product to reach a far wider and more discerning European market then ever before. The deal between Freight Rover and DAF inspires confidence.
DAF has put it on record that it intends to double output from around 20,000 a year to 40,000. It is providing the investment for the new van, which is currently being drawn up in prototype form at the Washwood Heath plant. It required a substantial investment to bring that into production. Rover Group did not have the money to do it separately, but will now have to do it in conjunction with DAF. It augurs well for Birmingham and the local economy. Birmingham will certainly benefit enormously.
My right hon. Friend may care to know that the people of Birmingham, my constituents and many others who 371 work in the motor industry within that region fully support the Government's corporate plan and view with confidence the future of the business and will work extremely hard because, in the end, it is up to them to make it the success we all wish for.
§ Mr. George Park (Coventry, North-East)
When Conservative Members have finished posturing, the question of jobs should still be paramount in this debate. It is encouraging that, once again, Britain's car plants are engaging employees, increasing production and productivity and committing themselves to forward investment to continue to raise the quality and quantity of the product. However, recognition should be given to the fact that part of the resurgence is due to currency movements, particularly in the sourcing of components, and we have a long way to go to make any impact on the thousands of jobs that we have lost in the west midlands alone in the previous decade.
Recently, as the Secretary of State said, over half the cars sold in Britain were actually made here, but we still have the position whereby a car with engine, gearbox, steel body panels, fascia, instruments, steering gear and brake parts all coming from Japan can still claim to have a 50 per cent. local content. It is clear that a new method of assessment is urgently needed, based on 80 per cent. local content, before it qualifies as European in origin and measured in terms of the actual cost of the vehicle. Such a method would encourage British components manufacturers to step up investment in research, development and production and provide more jobs.
Before hon. Members get too euphoric, they should realise that overall profits are still non-existent—or, at best, thin. In the past three years, the industry has received nothing from the Chancellor, unless one counts the previous Budget when vehicle excise duty was left unchanged. At present the Chancellor takes some £14 billion in road user taxes, including £820 million in car tax, collected by the industry for the Government, and about a further £700 million in unrecoverable VAT paid by companies on car purchase. Yet he refuses to do anything about the unique car tax, although the money lost by its abolition would probably be recovered by increased sales, and that again would lead to an increase in jobs.
In the words on the Order Paper, the Government recognise the valuable contribution made by the vehicle industry but fail to accept the need for a wholly owned British component in that industry and follow a strategy, if it can be called that, of indecent haste in getting rid of those companies in public ownership, irrespective of the consequences.
Despite acknowledged over-capacity in the industry, additional competitors are encouraged with grants and green field sites in the car sector, while in the lorry sector, because the Government are not prepared to try to rejuvenate that part of the industry, they hand over majority control to a relatively tiny, marginally profitable Dutch company, far from dominant in world markets. For DAF, the deal that gives it control of Leyland Trucks also provides entry to the van portion of the market. It gives it first class facilities—with the possible exception of the foundry which could have done with some investment in it—and an up-to-date model range. As if that was not enough, the profitable Freight Rover is thrown in to make the deal more tempting, plus a write-off of £750 million of 372 our previous investment. In time the new company can be sold off to private investors, which is the only consistent part of Government policy.
The immediate effects in Britain are the loss of 2,260 jobs at Leyland Trucks. That will have a domino effect on suppliers such as Cummins in Scotland and CAV, to name but two of the many suppliers, arising from the closure of Scammell, the foundry and the engine shop, plus the danger of further erosion of the 96 per cent. British content of Leyland Trucks by the possible sourcing of cabs from a Spanish company.
It is unfortunate, to say the least, that the British Government do not have the same confidence in their company as the Dutch Government have in DAF or the French in Renault. If they had, the deal could have been done the other way round or, as my right hon. and learned Friend the Member for Monklands, East (Mr. Smith) suggested, on a 50:50 basis, particularly as Leyland has 18 per cent. of the United Kingdom market while DAF has only 5 per cent. or 6 per cent. at the heavy end of the market. However, that presumes an industrial strategy which the Government do not have and a real recognition of the motor industry as the core of manufacturing industry, with a substantial contribution to make in the retention of industrial skills and minimising the brain drain.
The Government could remove obstacles to the success of British hauliers and their capacity to place orders for lorries. They could adjust the balance of the annual vehicle tax, which is £987 on a 38-tonne lorry on average in the Common Market compared with £3,100 in Britain. In Belgium, it is £624, but some hauliers qualify for a 65 per cent. reduction, which cuts it to £218. The tax on diesel fuel in Britain is 31p a gallon more than the average in the Common Market, which costs our hauliers £465 million more than their competitors last year. What sort of incentive is that?
Massive efforts and acceptance of change by workers and management in BL have led only to the loss or erosion of their jobs as their companies became viable and were sold off or merged with foreign competitors because the Government do not have the commitment to a wholly owned British section of the industry or the belief that we have the skills and ability to break into international markets. All that the Government want to do is wash their hands of the business as quickly as possible. We cannot endorse their policies.
§ 9 pm
§ Mr. Steve Norris (Oxford, East)
As always, I declare an active financial interest in the retail motor industry. Having worked in it for 20 years, I suggest that that at least enables me to comment with some knowledge in this debate if on no other occasion.
I wholly endorse the motion of my right hon. Friend the Secretary of State. I thank him and the Minister of State for the constructive way in which they have assisted me in my inquiries on behalf of my constituents in Oxford who are concerned with the Austin Rover plant at Cowley.
Over the past year the Cowley plant, and Oxford in general, has been awash with rumour and speculation, the vast majority of it ill-founded but real. It was based on real fears and concerns about the future of the company when there was so little hard fact to go on in advance of the 373 corporate plan being produced, and so many wild rumours and assertions were floated, it has to be said, by Opposition Members from time to time, and in the press.
In recent weeks, since the disclosure of the Ford talks, which I am glad did not come to fruition, but which I was perfectly prepared to see take place, on the ground that I do not believe that it is wise ever to shut one's mind to the opportunity of making progress in the volume car sector, we have had contradictory pieces of news. Within a week of an announcement of 400 white-collar job losses, there was an announcement of 500 job gains on the Montego line. Undoubtedly, people wanted to know whether that was good or bad news or whether there were any straws in the wind that could be picked out.
We must look at the corporate plan to see where it leads us and at some of the specific questions that arise out of it and affect Cowley. Several were set out by the right hon. and learned Member for Monklands, East (Mr. Smith). I believe that it is possible to answer them, on close examination of the plan.
The corporate plan made one point that must be made about the lure impetus of privatisation. I believe, and I think that most objective observers know, that only over the past few years has the commitment to self-sufficiency and the concept of denationalisation brought the whole of the British Leyland group—and its new form as the Rover Group—to the state where it has been prepared to look at profitability in the detail and with the commitment that it does now.
The corporate plan gave Rover everything that it asked for, as the Secretary of State said. It committed the company to a full model range, although it did not say precisely what it was, and it committed it to maintaining volumes, although it did not comment on expanding them. The plan talked about the need for better quality. We have seen that emerging in the Sterling 800 series, made in Cowley. It talked about the need for constructive collaboration with Honda.
Before I deal specifically with those points, I should like to deal with some outstanding issues raised by the plan as they affect Cowley. There was a great deal of concern in Cowley about the fact that the AR8 was going to Longbridge rather than to Cowley. There was a natural concern, which I expressed when I first heard the news. People said, "As we made the Maestro and Montego at Cowley, why did we not get the AR8?" That is important, and I hope that the House will recognise it.
We understand that the AR8 is not of itself specifically a replacement for the Maestro/Montego. That marketing and concept decision has yet to be made. I am given to understand that it would have been rather more expensive to have contemplated stopping the Maestro/Montego facility in Cowley and then retooling and commencing the AR8 than will be the case in Longbridge.
Thirdly, the model splits in recent years show that the Maestro, the Montego and the 800 have all gone to Cowley. It is reasonable to say that in the long-term context the decision to send the AR8 to Longbridge is in no way an adverse reflection on Cowley.
Did the absence of the AR6 put in doubt volume production and mean that we were no longer committed to a small vehicle? That is not necessarily the case. The right hon. and learned Member for Monklands, East can 374 be reassured, because the clear understanding is that the AR6 was very much at concept stage when it was being discussed.
The K series engine, the commitment to existing Metro volumes and the philosophy that Mr. Day has publicly expounded of a commitment to model-by-model quality and to the upgrading of each model into market niches fits quite happily into the concept of saying that the AR6—such as it ever was—is not a concept with which we specifically want to proceed at this stage. In no sense does that mean that the company is not still committed, as the corporate plan says, to a full range of products.
The issue of volume is crucial, because if the company is to continue as a volume producer we must start to put some numbers on the volumes—not least because, if the company has in two plants a theoretical capacity of about 800,000 units and if we are talking about unit volumes that will remain at about 354,000, then the reference by the right hon. and learned Member for Monklands, East to the so-called BMW solution clearly emerges as a practical runner. Whatever else that would do, in all probability it would mean one-plant operation. I say that quite openly, because I have addressed this on behalf of my constituents in Cowley and I am concerned that they should share with me the reassurance, stemming from the present market situation, that we will continue with two-plant production.
The figures do not show a happy trend. Production has fallen from the 1978 figure of 611,000 to just over 400,000 in 1986. However, there is now conflicting evidence about economic levels of volume production. That evidence emerges when the old-fashioned idea of a single dedicated line which involved the writing off of the entire tooling costs over a very considerable number of units is compared with the modern concept of flexible tooling, where a great deal of the capital cost can be rolled into a subsequent model.
The best evidence that one can adduce is that because of robotics, the impact of flexible manufacturing and not least the impact of model range—one should look not just at the number of units that a company produces but at the number of units per model—the sort of figure that we have to consider in Austin Rover is larger than the 410,000 to 420,000 figure that we saw in 1986. Any corporate plan has to look at about 500,000 units to be a viable economic proposition. I think that the hon. Member for Stockton, South (Mr. Wrigglesworth) spoke about that. Can we look to that sort of production figure? At the moment, the evidence is rather good.
I welcome the impetus behind the resurgence of the Mini but I am not so sure that the Secretary of State for Social Services, with his AIDS campaign, would entirely approve of the moral tone adopted in the Christmas advertising campaign for the Mini. However, it certainly had an impact on sales. The important thing about the Mini is that in France, for example, it is still a cult car and leads people into Austin Rover showrooms where the other excellent products are on display. As long as the Mini is there and since its capital cost is effectively written off, Austin Rover might as well keep producing and using it.
The outlook for Metro is optimistic. However, the one that pleases me most—I am sure that the House agrees—is the performance of the Montego. Since its effective relaunch, it has taken on a new lease of life. Its fleet performance is excellent and everything augurs well for the car. It had a disappointing start, having failed to convince 375 the market either on perceived quality or reliability. It is now beginning to claw back and fleet owners are beginning to buy the car. On the back of that, Maestro is enjoying a resurgence. Earlier this year Maestro entered the list of top ten sellers. I am sure that the House will welcome the fact that British Telecom has placed an order for 5,000 Maestro vans worth £26 million. That is on top of van orders worth £140 million that have already been won by the company. Those orders exceed the 1986 total.
The 200 and 800 models have also been doing extremely well. The extra volume of sales has been derived not only from the Montego, the resurgent Mini and the Maestro, but from the export potential of the 800 model. The great thing about that is that the 800 is a high-value product and a great number of man hours, productive capacity and profits are involved. I believe that the figure of 500,000 units is not only achievable but likely. It is comforting to he able to look at a forecast and say it is not an optimistic or unreasonable one, but a solidly based forecast.
Bearing in mind the constraint on the length of speeches, I shall make one last reference to Honda. I do not share for one second the Opposition's fears about Honda. Japanese motor manufacturers want a European base. They do not have to come to Britain. Within the Common Market they may go to France or Germany or to one of the lower-cost economies such as Spain, Portugal or Greece. However, if the Japanese come here it is excellent news for Britain because that means the provision of additional jobs. However, if Honda comes to Britain, I hope that it will not adopt the Nissan solution—I say that advisedly. I accept that the Nissan deal introduced jobs to the British economy, but it also added another 100,000 units to the existing over-capacity in the market. To that extent, I believe that it was marginally counter-productive.
I believe that the Honda solution, wherein a Japanese manufacturer decides that the way into the European market is through collaboration with an existing manufacturer, using present capacity, is a sensible and productive solution for both companies. We should welcome that decision, because the Japanese skill and management techniques will benefit us and our style, design and ingenuity will benefit them. Between us, we can do well. Incidentally, we can beat Honda with the Sterling in the United Kingdom and in the United States.
Ironically, some of the trade unions, in their efforts to persuade us how appalling the Government have been in their treatment of British Leyland, have tended to denigrate the company. We need the press and others to leave the company alone for a while. They should stop knocking the company and allow it to get back on its feet and enjoy the position it deserves to hold. We must be constructive and committed both to future collaboration with Honda and to our present product range.
The present management at Austin Rover is the best and most realistic that we have ever had. That is reassuring news, not just for the plant at Longbridge but also for Cowley. If we have a motivated work force and management, we have no reason to fear the future of the British motor industry.
§ Mr. Stan Thorne (Preston)
I am glad to have the opportunity to participate in this debate. I do so primarily because I am chairman of the north-west group of Labour 376 Members who have a considerable interest in the manufacturing industries throughout the north-west, of which, of course, British Leyland is a major part.
I support the amendment moved by my right hon. and learned Friend the Member for Monklands, East (Mr. Smith). I shall refer to that part of the amendment that rejects the proposedgift-wrapped surrender of control of Leyland Trucks and Freight Rover to DAF".
Leyland is not far from Preston. In fact, some of the Leyland work force live in a variety of constituencies in the Lancashire area. Leyland as a town has suffered from previous factory contractions. Loss of manufacturing has a spin-off effect locally, as it is generally understood. An appraisal of the present makes references to the past virtually inevitable and, within the limited time at my disposal, I shall make this apparent.
Leyland Trucks has assets of more than £150 million. They are to he given away, if the Government have their way, to a foreign competitor. Leyland Trucks has sustained tens of thousands of families in the Leyland area for more than 50 yars. DAF has everything to gain from the Government's proposals and British Leyland everything to lose. It is against that background that the Opposition, and particularly people in the north-west, reject the Government's proposals.
It has been said that the Dutch have looked after their interests extremely well in negotiations in recent weeks. There are nine directors on the main board, only two of them from Leyland. Decisions will clearly be taken by DAF, for DAF. As we all know, because it is history, the Government have failed to sell off Rover and Land Rover to General Motors. Following protests from midland Tory Members of Parliament, among others, the Government now believe, and the hon. Member for South Ribble (Mr. Atkins) is convinced, that selling off Leyland Trucks to DAF will not be politically damaging. The future, certainly as far as the hon. Member for South Ribble is concerned, will answer that question.
Production of trucks involves high technology. It is a high-value, expanding industry. Leyland, with its new truck range, has an increasing share of a lucrative market and a worldwide reputation. DAF is being given Leyland's valuable and comprehensive distribution networks throughout the United Kingdom. More than 70,000 new commercial vehicles, valued at more than £1.5 billion, were registered in the United Kingdom last year. Leyland factories were used, as my right hon. and learned Friend the Member for Monklands, East rightly said, to support loss-making car plants over a decade.
The Ryder report showed, among other things. that, out of £74 million profits, £70 million was paid out in profit and only £4 million reinvested to replace aging plant and machinery. The £100 million investment came too late at exorbitant interest rate costs. This unjust debt burden forms a major part of the as yet to be proved—in spite of what the hon. Member for South Ribble said—£1.5 million which Leyland Vehicles is said to cost the taxpayer each week. No Conservative Member has produced the complete evidence to establish that point which is stated again and again in the hope, presumably, that people will inevitably accept it as the gospel truth. It is not. It has not been proved by anyone yet.
Over a decade ago Leyland Bus and Trucks had over 30,000 workers, of whom about 13,000 were at Leyland. Soon the total figure will be under 6,000—a massive 80 377 per cent. cut. Many famous companies were once owned by Leyland—AEC, Park Royal, Eastern Coach, Charles H. Roe, Guy, Bathgate and Bristol. They have all gone for ever. Are they to be followed by Scammell? Clearly they will be if the Government have their way.
At Leyland we have seen the closure of north works, south works, two engine plants, a tool room and foundry support plants. Now the Government propose that the remaining engine and foundry plants should also be closed. If Farington foundry goes, the manufacture of blocks for the industry will go too. The effect on the truck industry will be catastrophic. Leyland has a 400 engine which is a winner. The 430 engine is ready for operation. Ironically the highly successful DAF engine used in its popular heavy lorries is basically a Leyland 680 engine. To ditch engine manufacture and close the foundry is to rip the heart out of Leyland.
The work force of highly skilled designers, engineers and workers on the shop floor, with years of specialised knowledge, are to be denied their livelihood, although their commitment to Leyland Vehicles over many years is beyond doubt. There are in the Strangers' Gallery workers who have contributed 30 years each to the industry. The Government are prepared to scrap that involvement and commitment.
The insensitivity of Leyland management and of the Government reveals yet again, in spite of what has been said by Conservative Members, how much industrial relations have deteriorated since 1979. The Secretary of State for Trade and Industry began the debate with a slander on the trade union movement which has struggled over many years to maintain a reasonable standard of living. He made cheap jibes against active trade unionists in the area. Those who are listening to the debate and those who will read reports of it will not be unduly surprised because that is the Government's belief.
I have been aware for more than 50 years that labour is just like other commodities within the capitalist system—it can be bought and sold as and when required. Few employers recognise that human labour power must be treated differently from raw materials and machines. It takes a long time for some employers to learn that lesson. Unhappily, many big concerns in this country, aided and abetted by Government legislation, still fail to learn that lesson.
The complete failure to consult the work force at Leyland about their aspirations and ideas about future manufacturing in Leyland is one of the cardinal sins of Leyland management and the Department of Trade and Industry. Departmental officers and Ministers may pretend that they have met the work force for consultations, but those whom they have met will tell the House, if they have the opportunity, that the consultations were always one-sided. "You will do what we decide", has been and remains the message from the Department of Trade and Industry. Workers who have invested their labour in an industry are entitled to a direct involvement in decisions that affect their future. I am sorry to say that that fact is seldom accepted within our system of production for private profit. To employers, financial gain is more important than human relations.
The Government refer to a write-off of £750 million, which includes redundancy pay and closure costs. It also includes the debt owed by Leyland factories and factories 378 within the Rover Group. By international comparison, the Leyland Trucks debt is pathetically small. On average, British companies externally borrow 55 per cent. of their assets. In West Germany, the figure is 95 per cent. and in France it is 140 per cent. Japan has a massive 330 per cent. capital gearing.
The Government can and must insist on a change in the deal with DAF. A 50:50 partnership is a minimum requirement for a final agreement. That can be achieved by the Government making Leyland a financially attractive and equal partner to DAF, together with providing a firm commitment to manufacture engines at Leyland. If a 50:50 deal with DAF cannot be agreed, the Government should threaten to end our generous open-door policy to imports. A 50:50 deal involving equal partnership in decision making, with equal numbers on the board, is absolutely essential to the future of Leyland Vehicles. In the opinion of Opposition Members, nothing less than that will do.
We can all remember references to Britain being the workshop of the world. As I listen to some debates, I am often reminded that I was brought up within a few minutes' walk of Trafford park. Fifty or 60 years ago, I used to hear people talk about the greatest concentration of industry in Europe being within Trafford park. It could be said that Leyland has had a tremendous history of industrial development. A major decline in our manufacturing base has occurred since 1979—a massive contraction— leaving us with a huge import bill for manufactured goods.
A supplier to the motor industry, Lucas Industries Ltd., through Girling, produced brake units for the motor industry, but it completely closed its factory in Bromborough solely because it could make such units more cheaply outside the United Kingdom and import them into Britain. Given the Government's proposals for the DAF sell-out, how long will it be before DAF shifts production to Europe in pursuit of similar improvements in profit margins?
The present Government have allowed billions of pounds to be poured into our overseas competitors. They appear to believe that Britain's economic future lies in massive imports, in the interests of finance capital and the multinational conglomerates. The real interests of the British people, however, will be served by the rebuilding of our manufacturing industries, the control of overseas investment and the direction of major investment into research and development and the public sector—into houses, schools, roads, hospitals and people's welfare.
Our priorities must be to provide real opportunities for our young people to learn skills, to pursue educational growth and to lay a firm basis for improved standards of living for the underprivileged. The motor industry has a major part to play in that aim. Leyland Trucks, collaborating on equal terms in an equal partnership with DAF, could make a firm contribution to those goals. It is not too late for the Government to act. The next Labour Government will soon plan our economy to ensure a radical improvement in the quality of life for our people, and the sooner the better.
§ Mr. Speaker
Order. Before I call the next speaker, may I remind the House that a large number of hon. Members wish to take part in the debate. If hon. Members limit themselves to 10 minutes each, all will be called.
§ Mr. Richard Page (Hertfordshire, South-West)
I should say at once that my non-political experience has been completely and utterly in the motor industry, both in manufacturing and retailing. It is only right, therefore, that I should declare an interest.
When I look at the motion I see within it, despite the protestations of the Opposition parties, an example of the Government's commitment to Austin Rover in terms of the billions of pounds that have been spent upon subsidising and supporting that company over the years. Also when I look at the order I experience a moment of pure nostalgia when my eyes light upon the words "National Enterprise Board." The House will remember that the National Enterprise Board was set up when the last Labour Government went out to pick winners. The names Nexos, Twinlock and Inmos float before our eyes.
The motion is couched in both specific and general terms. I intend to deal with the specific problems that face the Rover Group. I make no apology for doing so. It makes a vital contribution to our economy. Nobody with experience and knowledge of the truck industry would argue that a deal had to be done to try to counter the massive over-capacity of truck production in Europe. If Ford thought that it was necessary to do a deal with Iveco—and I suggest that Ford know a little more about the truck market than Opposition Members— and if Bedford felt that it was necessary to do what they have done because they were unable to do a deal with Leyland, it was only natural, because fewer and fewer partners were available, that Leyland should do a deal with DAF. Indeed, it is most sensible that this should have happened.
My hon. Friend the Member for South Ribble (Mr. Atkins) made a most thoughtful speech. He outlined the reasons for the deal. I know from personal experience and from talking to my hon. Friend that he spent a long time agonising over the difficulties that face him and his constituency. However, he also gave a little hint—that perhaps it was better that this deal should be done sooner rather than later. In fact, I was left with the impression that a deal with General Motors might have been better, if it had been made a year or so ago.
I find it amazing that the right hon. and learned Member for Monklands, East (Mr. Smith) laid the blame on the Government because he was a fundamental moving force in scuppering that General Motors deal and he is proud of that. I listened with equal amazement to his criticisms of the possible effects of the closures on Scammell. I remind him that Scammell is in Watford and General Motors, with its military vehicle capacity, is located at Luton and Dunstable. I could see perfectly that a deal might have come forward in which the military contracts of Scammell and Bedford could survive in the same area. However, such a possibility was scuppered by the right hon. and learned Gentleman.
I am delighted that my hon. Friend the Member for Watford (Mr. Garel-Jones) is in the Chamber because I know that he has considered the effects this deal have on Watford. My hon. Friend is spending a great deal of time and trouble trying to make sure that the effects of the Leyland merger with DAF will have the minimum effect on his constituents.
I now turn to the car division in which Austin Rover's targets have, in the past, been changed and changed again almost on a monthly basis. From personal experience, I 380 have never known a company to expand out of disaster. It must cut and trim back to a clean core of efficiency and then expand. I must confess th.at I am not a gardener, but those hon. Members who are will know that one has to cut out the dead wood before one can expand.
Time and time again, the Government have demonstrated their support for the Rover Group. Perhaps today, for the first time for a decade, the Rover Group has a better chance of expansion and growth than ever before. However, there are problems and certain past decisions must be overcome. I refer to decisions such as the choice of new technology and the fact that export markets were given such low priority during the Edwardes' administration. The focus then was on efficiency and labour productivity. No one lifted his eyes to the horizon to see what life would be like in the late 1980s and early 1990s.
The continuing problems of the Austin Rover Group can no longer be laid at the feet of the work force because, in line with every other car producer in the world, the company cannot sell all the cars that it can build. The remorseless drive towards productivity has been obvious in almost every British plant. With that there has also been a heart-warming commitment by many more manufacturers to source and build more in the United Kingdom. We have heard, for example, that Ford is to raise its investment in this country and to make another 70,000 cars next year, raising its total to about 450,000. Vauxhall is to raise its total from 200,000 to 300,000 over the next three years. My right hon. Friend the Secretary of State has already mentioned what Peugeot-Talbot plans to do at Ryton in relation to the new family saloon.
Austin Rover has made tremendous strides in efficiency. It estimates that its productivity has increased from about 6 cars per man in 1979 to between 12 and 14 cars per man last year. That compares favourably with our continental competitors. However, we must be cautious about such forms of comparison because those calculations depend on the quantity of bought-in finished components that are included. Nevertheless, for all that, the work force has shrunk in the retreat from design, development and assembly to just assembly from a six figure number to below 50,000.
The future looks relatively secure because of the Government's vast commitment. However, the options are closing in remorselessly for the company if it is to be the master of its own destiny, free from Government, and from the designs and technology of foreign manufacturers in the future.
Over the past 10 years the Government have provided more than generously for Austin Rover, but I am apprehensive about the strategy of following the market down in the long term. That will mean an increasingly rapid loss of the ability to develop new models and that we shall become just an assembly platform for Honda in the United Kingdom. In turn that will bring an increasing reliance on Honda with the knock-on problems of loss of value added work, employment and technical capability. That was why I was delighted to hear the Government announce support for the K-series engine. That is an important stride back along the path that I have described.
We must accept that Austin Rover is now a minnow in the world of mass vehicle production. BMW, ostensibly a maker of quality cars with a small market share in each of the countries to which it exports, produces more cars and retains a larger share of the profit with each one than does Austin Rover. From the sidelines it is difficult to know the 381 required sales for Austin Rover to break even or to generate sufficient funds for the development of a range of new models.
Over the years we have had a series of different figures which have usually been of a lower and lower order. It seems increasingly difficult to achieve those figures through the growth of the home market alone, which is why the present efforts for exporting must be aggressively pursued. I understand that they have made some inroads into the fleet market, but I would not wish Austin Rover or any hon. Member to pin the future of the company on that sector.
§ Mr. Fallon
Does my hon. Friend agree that it is extraordinary that the hon. Member for Stockton, South (Mr. Wrigglesworth), having an hour ago suggested that the whole Rover Group should be privatised, has suddenly lost interest in the debate and the welfare of his constituents and those of my hon. Friend the Member for Watford (Mr. Garel-Jones)?
§ Mr. Page
My hon. Friend makes his point in a telling fashion. He will excuse me if I do not try to explain alliance policy. Alliance Members find it hard to explain their policies to themselves, let alone to the nation.
Bearing in mind your request to be brief, Mr. Speaker, I shall continue along my line. The Government must accept that if Rover is to have a future, an increasing reliance on Honda technology must be used only as a short-term crutch; the company must not depend on it in the long term. In future there must be strict agreement about the value added content of any of the deals carried out with Honda. Other countries insist on an active level of participation and Austin Rover would be wise to do exactly the same.
Austin Rover has a better chance of survival now than it has had in the past decade. It must continue its drive for quality, which has dramatically improved over the years. However, I must remind the company and hon. Members that its competitors have not stayed still. Austin Rover must attack its foreign market more aggressively and look to occupy a slot in the market, not perhaps so much for quantity, but certainly for quality. It must ensure that its internal design capability does not become located in Japan.
While the choices are narrowing, with the support and help of the Government the future looks bright.
§ Mr. Doug Hoyle (Warrington, North)
I immediately declare an interest as president of the Association of Scientific, Technical and Managerial Staffs which has a large number of people in the motor industry. We are speaking not just about those who manufacture the vehicles, but about the components industry and an industry with high technology. Today we are debating the future prosperity of the United Kingdom. Without a major motor industry, we should be in great difficulty.
Like many hon. Members, I welcome the fact that the multinational companies will produce more cars in Britain. We must not be complacent about that. We must not think that that is because those companies are becoming more benevolent. The reason for that is the currency changes, particularly the relationship of the deutschmark to the pound. The Secretary of State asked 382 why Opposition Members are often suspicious of multinational companies. It is because their decisions are not taken in this country. As to Ford and General Motors, their deficit in the balance of trade with this country is hundreds of millions of pounds. Even if they concentrate a little more production here, a large gap will still have to be filled. That is why it is important that we have an indigenous motor manufacturer.
I am concerned about Leyland Trucks, not only as the president of ASTMS, but because the people concerned are my neighbours and friends. It is not easy to regard those people as unemployment statistics. Some 2,200 people will be made redundant in Leyland Trucks by the DAF takeover—that is what it is, a takeover. We are talking about highly skilled people. They were the aristocrats of the engineering industry. They dominated the market in which Leyland Trucks is based. They had a proud record, because they designed vehicles, manufactured the engines and gear boxes, and produced axles—the complete vehicle.
As my right hon. and learned Friend the Member for Monklands, East (Mr. Smith) said, for many years Leyland Trucks carried the whole of the Leyland car industry. The reward for sustaining that is that the employees are being faced with redundancy. That is unnecessary because, as has been said, it has a large share of the British market, 18 per cent., and a good product range. We are told that there is an over-capacity and that Leyland Trucks is a loss maker.
I cannot imagine that we would be having this debate if this were the French National Assembly. Renault Trucks is an enormous loss maker. Indeed, it could be said that it is pulling down Renault Cars. Nobody is saying that the French Government intend to give up Renault Trucks. They will continue to put money into it. They have not sought a merger deal or allowed DAF to take over Renault Trucks. They would consider it inconceivable to give away what is a jewel in the crown for the future prosperity of France.
That is the situation with regard to Leyland Trucks. It has been dressed up by the Secretary of State as a joint merger but it is a takeover. It is no good us talking, at this stage, of an equal partnership; it is not there. I am at a loss to understand how this can be termed a joint venture. It could be a joint venture—my hon. Friend the Member for Preston (Mr. Thorne) was right—if it was a 50:50 split. That is why—I am sorry that the hon. Member for South Ribble (Mr. Atkins) has gone—I say to him that there is great concern among the employees in Leyland factories and plants.
§ Mr. Roger King
The hon. Gentleman mentioned Leyland and DAF merging and he has also mentioned Renault Trucks, which has a plant in this country. Did not Renault Trucks take over the Commer-Dodge factory? Would not the workers there have welcomed the presence of Renault Trucks, which is expected to be in profit this year?
§ Mr. Hoyle
The hon. Gentleman— I shall not give way to him again—is not detracting from what I am saying. I am saying that, despite Renault being in difficulties, the French Government are continuing to put money into it. That is why it can turn the corner. I do not know what is amusing about the fact that the French have pride in their own industry. I do not find it amusing that 383 the French are determined to retain the jewels in their crown. Those who will lose their jobs in Leyland will not find it amusing; nor will the 5,000, perhaps more, who will lose their jobs in the component industries.
There are many unanswered questions and I hope that the Minister will give us some replies. Why can we now write off £750 million just like that? Why could we not have done it before and retained the company? My right hon. and learned Friend the Member for Monklands, East asked how far writing off that debt would have brought down the losses that Leyland Trucks is supposed to have sustained. We have had no answer. I hope that the Minister will reply to that, because that too could be illuminating. If we could do it for DAF, why could we not do it for Leyland Trucks and allow it to remain independent? Those are the sort of questions that must be answered.
We have been told by the Secretary of State in the past that Leyland will concentrate on the production of light trucks. Does that mean that DAF will assemble heavy trucks here, or will they be imported? We need to have the answer to that question. The Secretary of State seemed to say that there would be some production of heavy trucks here, but that needs to be confirmed.
The Secretary of State said that there would be a significant United Kingdom content. What does that mean? Why was that not negotiated? Why was not that figure arrived at before we gave the company away? That is what we have done. We have given the company away to DAF who said, "Thank you very much," and Freight Rover has been thrown in. Why could not a minimum British content have been laid down?
Leyland produces buses. The bus production unit will be in some difficulty over engines. But DAF also makes buses. Where does that leave the new management takeover bid that has been made for Leyland Bus? We need an answer to that question. Will DAF be bringing buses in in increasing quantities?
Hon. Members from both sides of the House have asked about military contracts. Apart from ERF, no indigenous lorry company is manufacturing in Britain. Where does that leave us? Conservative Members are always patriotic, or so they tell us, but where does that leave us in relation to defence contracts?
At the moment, Freight Rover buys in power trains from other Rover Group companies. How will the component sourcing policy be affected? Will that continue? [Interruption.] I am asking the Minister, not Conservative Back Benchers. I know that the hon. Member for Birmingham, Northfield (Mr. King) would like to sit on the Front Bench, but I rather think that he will not be a Member of Parliament for much longer. Meanwhile, he can enjoy himself, but let us have the answers from the Minister.
Conservative Members are all very happy with the Government and believe that the Government have been able to put enough money into the corporate plan for the future of Austin Rover to be assured. I am not as confident as Conservative Members because Austin Rover is still being run down. Llanelli Radiators is for sale, yet that is a profitable company. ISTEL, the computer services company, is also being sold off. Where will the sell-offs end?
I referred earlier to the fact that the Government are determined to privatise Austin Rover as soon as possible. Once the general election has passed, will the Government 384 be prepared to accept an offer for the company? So eager were the Government last year for Ford to take over Austin Rover that when the top management of Austin Rover refused—I believe quite rightly—to allow Ford to see the production costs of every Austin Rover model, including the Metro, the Secretary of State's predecessor, the right hon. and learned Member for Richmond, Yorks (Mr. Brittan), ordered them to do so. That really was selling Austin Rover down the river.
What happened after Ford examined the detailed costs? Ford found that it could underprice the Fiesta in relation. to the Metro by £100. Until then, the Metro was selling better than the Fiesta in the market place. After then. throughout the whole of last year, its market share slumped. The Fiesta's market share rose to 7.5 per cent., while Metro sales slumped. If that is not selling the company short, what is?
How can the Government talk about the national. interest, with all the investment that has taken place, when the previous Secretary of State, with the Government's backing, told the management to open up the books and show them to a foreign competitor? That does not fill me with any confidence that the Government are prepared to back Austin Rover in future.
I agree with many of the comments made by Conservative Members tonight. When we come to the new deal with Honda, we want some of the technical know-how and part of the high technology. We do not want all the low technology. Whether we will get that, or whether the determination is there in the Department of Trade and Industry to make such demands, is a different matter. I am not filled with any optimism by the Government's past performance. Nor am I filled with any optimism by the. way in which they have been prepared to give away Leyland Trucks, with the best product range in Europe, to DAF on a plate.
I hope that the new Sterling is a success. I want the company to go from success to success. Leyland has a very loyal work force which is second to none. The work force and their families deserve the prosperity. I say to the Secretary of State and the Minister who is to reply, for God's sake show a bit of confidence in the home product. They should back the indigenous motor manufacturer in the way that the French back their industry. They should have the pride in their industry which the Italians have in theirs.
There is no way other countries would give their companies away. It is amazing, when we are lectured in the House about the losses and the over-capacity in the truck industry, to realise that Sweden, with no home market, is the leader in Europe. What the Swedes can do, we can do as well. The Government should not turn the tap on and off. They should turn it on full stream, give the funds to Austin Rover and let us make a success of the British motor industry and particularly the indigenous British motor industry. If they have confidence in it, the workers will show that they can manufacture the best products in the world.
§ It being Ten o'clock, MR. SPEAKER proceeded to put forthwith the Question which he was directed by paragraph (4) of Standing Order No. 52 (Consideration of Estimates) to put at that hour.