HL Deb 17 January 1967 vol 279 cc28-36

3.55 p.m.

THE MINISTER WITHOUT PORTFOLIO (LORD SHACKLETON)

My Lords, I should like to repeat a Statement which is being made in another place to-day by my right honourable friend the Minister of Technology regarding Rootes Motors, Ltd. The Statement is as follows:

"In December, 1966, the Government were asked by Rootes Motors Ltd. what their attitude would be to an application by the Chrysler Corporation for Treasury consent under the Exchange Control Act 1947 to enable them to inject more capital into Rootes and, in the process, to obtain control of Rootes.

"This request was considered by the Government in the light of the exchange of letters between the right honourable gentleman, the Member for Barnet and Chrysler in 1964, when Chrysler first made a substantial investment in Rootes.

"On that occasion Chrysler gave an assurance that it would not act to take control 'against the wishes of the British Government of the day'; and the then Chancellor of the Exchequer (Mr. Maudling) in return gave an assurance that in reaching a decision about the transfer of control to Chrysler the Government would 'take into account the interests of a prosperous and viable development of the motor car industry in general and of the Rootes business in particular'.

"The Government have therefore, in the context of the recent Rootes approach, consulted the leaders of the principal British-owned motor vehicle firms to see whether a viable solution designed to enable Rootes to continue as a British-controlled company could be devised. No such scheme proved practicable.

"Before reaching a decision the Government sought from Chrysler a number of undertakings about its future policy for the Rootes Group. These included maintenance of a majority of British Directors on the Board of Rootes; an exchange of Directors with Chrysler International S.A. and Simca S.A.; confirmation of Rootes' expansion and development plans, particularly at Linwood, in Scotland (where the major development involving substantial increase in employment will take place); the expansion of exports to all practicable markets; and the offer of a participation by the Industrial Reorganisation Corporation in Rootes (carrying with it the right to nominate one Director to the Board) in order to maintain a stronger British interest than otherwise seemed possible. Chrysler has given these important undertakings.

"The Board of Trade have considered whether this transaction should be referred to the Monopolies Commission for investigation and report. However, in the light of the information available to them, they have decided that the public interest does not require that such a reference should be made.

"In all the circumstances, the Government have decided not to object to the Chrysler proposal. The necessary Treasury consents have been given.

"At the request of my right honourable friend the First Secretary of State, made under section 2(i)(b) of the Industrial Reorganisation Corporation Act 1966, the Industrial Reorganisation Corporation has agreed to a participation in Rootes in accordance with Chrysler's undertaking.

"I am circulating with the OFFICIAL REPORT my exchange of letters with Chrysler containing the important undertakings required by the Government and given by Chrysler. Copies are now available in the Vote Office.

"I should like to announce a more general decision taken, arising from the full and detailed examination made into this matter. The Government are convinced that the British-controlled firms would gain greatly if they could co-operate much more fully in overseas marketing arrangements. The Industrial Reorganisation Corporation have therefore also agreed to discuss with the British-controlled motor manufacturing firms the possibility of close co-ordination and co-operation between them in their efforts overseas."

My Lords, that is the end of the Statement.

Following are the letters referred to by Lord Shackleton:

Letter of January 16, 1967, from The Rt. Hon. Anthony Wedgwood Benn, M.P., Minister of Technology, to Mr. I. J. Minett, Group Vice-President, Chrysler Corporation:

"I refer to the discussions which have taken place between us about your proposals for an injection of further funds into Rootes, which would have the effect of control of Rootes passing to Chrysler Corporation(Chrysler). Under these proposals additional funds of up to about £20 million would be made available to Rootes, as to approximately é10 million by a rights issue of Preferred Ordinary Shares to Rootes shareholders which would be underwritten by Chrysler (without commission) and as to £10 million by an issue of Unsecured Loan Stock. On taking up their entitlement under the rights issue Chrysler would obtain voting control of Rootes.

I am now writing to say that provided Chrysler gives Her Majesty's Government the Undertakings set out below, the Government would not object to these proposals and that, accordingly, the necessary consents of the Treasury under the Exchange Control Act 1947 will be forthcoming. These consents will, of course, be subject to compliance with the normal detailed requirements of the Government's exchange control policy which have been explained to your representatives (S. G. Warburg & Co. Ltd.).

The Undertakings referred to above are as follows:

  1. (i) Chrysler will not initiate any action to impair either the home or overseas operations or the management and direction of Rootes as a British company in its relations with the Government, labour, its British shareholders, and the public.
  2. (ii) Chrysler undertakes to maintain a majority of British Directors on the Board of Rootes.
  3. (iii) Chrysler confirms the plans of expansion covering development work at various factories, and especially at Linwood in Scotland, where the major development will take place and where it is planned to increase employment by several thousands; these plans are essential if Rootes is to remain competitive, achieve its proper share of exports and return to reasonable Profitability.
    4. 31
  4. (iv) Chrysler plans to achieve a progressive increase in the export of Rootes products without restriction to all practicable markets and to continue to make available its full international organisation for this purpose. They note that, in the view of Her Majesty's Government, the test of the fulfilment of this undertaking would be that the export percentage of the products of the Rootes Group should be at least as high as the average for the British Motor Vehicle Industry as a whole.
  5. (v) Chrysler will nominate a Rootes Director (British) to each of the Boards of Simca S.A. and Chrysler International S.A., and it is understood that a Simca Director (French) will be nominated to the Board of Rootes.
  6. (vi) Chrysler confirms its intention to leave at least 15 per cent. of the entire equity capital (Ordinary, "A" Ordinary and Preferred Ordinary) in the hands of shareholders other than Chrysler, provided that in calculating this 15 per cent. Chrysler may take into account any shares held by the Industrial Reorganisation Corporation (I.R.C.) or put by I.R.C. to Chrysler (in accordance with Undertaking (vii) below).
  7. (vii) Provided that Chrysler acquires Preferred Ordinary Shares in excess of its rights entitlement of £6,263,686 nominal, it will make available to I.R.C. at par up to £1,512,228 nominal of such excess. i.e., up to 15 per cent. of the total Preferred Ordinary Shares, of £10,081,519, on condition that I.R.C. participate to the same percentage in Chrysler's undertaking to subscribe up to £10,000,000 Unsecured Loan Stock. I.R.C. will have the right on 1st: January, 1972, to put these securities to Chrysler at par plus any accrued but unpaid dividend or interest.
  8. (viii) I.R.C. will have the right to nominate one Director on Rootes Board as long as it owns all the securities mentioned in Undertaking (vii) above.

I should be grateful if you would formally confirm that Chrysler gives these Undertakings which, it is understood, between us, may be made public."

Reply dated 16th January, 1967, from Mr. I. J. Minet to The Rt. Hon. Anthony Wedgwood Benn, M.P.:

"We refer to your letter of 16th January, 1967, in connection with Rootes Motors, Ltd. (Rootes) and confirm our Undertakings as follows:

  1. (i) Chrysler will not initiate any action to impair either the home or overseas operations or the management and direction of Rootes as a British Company in its relations with the Government, labour, its British shareholders, and the public.
  2. (ii) Chrysler undertakes to maintain a majority of British Directors on the Board of Rootes.
  3. (iii) Chrysler confirms the plans of expansion covering development work at various factories and especially at Linwood in 32 Scotland where the major development will take place and where it is planned to increase employment by several thousands; these plans are essential if Rootes is to remain competitive, achieve its proper share of exports and return to reasonable profitability.
  4. (iv) Chrysler plans to achieve a progressive increase in the export of Rootes products without restriction to all practicable markets and to continue to make available its full international organisation for this purpose. They note that, in the view of Her Majesty's Government, the test of the fulfilment of this undertaking would be that the export percentage of the products of the Rootes Group should be at least as high as the average for the British Motor Vehicle Industry as a whole.
  5. (v) Chrysler will nominate a Rootes Director (British) to each of the Boards of Simca S.A. and Chrysler International S.A.: and it is understood that a Simca Director (French) will be nominated to the Board of Rootes.
  6. (vi) Chrysler confirms its intention to leave at least 15 per cent, of the entire equity capital (Ordinary, "A" Ordinary and Preferred Ordinary) in the hands of shareholders other than Chrysler, provided that in calculating this 15 per cent. Chrysler may take into account any shares held by the Industrial Reorganisation Corporation (I.R.C.) or put by I.R.C. to Chrysler (in accordance with Undertaking (vii) below).
  7. (vii) Provided that Chrysler acquires Preferred Ordinary Shares in excess of its rights entitlement of £6,263,686 nominal, it will make available to I.R.C. at par up to £1,512,228 nominal of such excess, i.e., up to 15 per cent, of the total Preferred Ordinary Shares, of £10,081,519 on condition that I.R.C. participate to the same percentage in Chrysler's undertaking to subscribe up to £10,000,000 Unsecured Loan Stock. I.R.C. will have the right on 1st January, 1972, to put these securities to Chrysler at par plus any accrued but unpaid dividend or interest.
  8. (viii) I.R.C. will have the right to nominate one Director on Rootes Board as long as it owns all the securities mentioned in Undertaking (vii) above.
We agree that these Undertakings may be made public."

4.2 p.m.

The Earl of BESSBOROUGH

My Lords, we must all be grateful to the noble Lord, Lord Shackleton, for repeating this important Statement. I am very grateful to him. I think we must all be glad that some solution has at last been reached, after the very long and protracted negotiations. I was particularly glad to hear that there would continue to be a British majority on the board of Rootes Motors, but I should like to ask the noble Lord this question. Does he believe that the participation of the Industrial Reorganisation Corporation is really necessary? Might not this be interpreted as, perhaps, uncalled-for Government intervention? Is this exactly the right role for the I.R.C. as it was originally contemplated? As I see it, the money is available, and a British majority on the Board is agreed. Therefore, I am not quite clear why the Industrial Reorganisation Corporation should be involved, and should be represented on the Board.

LORD OGMORE

My Lords, I am grateful to the noble Lord, Lord Shackleton, for repeating the important Statement which we have heard to-day. It is quite clear, is it not? that the Americans will now obtain control of Rootes; in fact, the noble Lord, Lord Shackleton, said so. In these circumstances, can he inform us what the present position is with regard to the motor industry as a whole? In other words, what proportion of the motor industry as a whole is now controlled by the Americans? Is it not a fact that a far greater proportion is now controlled—or will be, when the Rootes deal is through—by the Americans than by British firms? Is it not a very sad day for British industry that this should be so? And is it not an ominous thing for the future, especially the future of this important export trade, that the majority interest should be in the hands of the Americans, who are one of our greatest competitors?

LORD SHACKLETON

My Lords, taking the remarks of the noble Earl, Lord Bessborough—and I am grateful to him for his welcome of this Statement—I agree that this participation by the Industrial Reorganisation Corporation is a rather interesting one, and I would have judged it to be rather unusual in comparison with some of the activities in which I should expect the Industrial Reorganisation Corporation to be involved. But, clearly, this is a matter for most careful judgment, and the primary purpose was to ensure a specific British voice on the Board. Obviously, it could be a matter of opinion, but after very careful consideration it was decided that it was in the interests of the country, and indeed of the new group, that this arrangement should be made.

On the point made by the noble Lord, Lord Ogmore, I fear, although I have tried to do some quick calculations, that I cannot give him a specific answer at this moment, but I should certainly be glad to do so on another occasion. Rootes themselves, I think, represented something around 10 per cent. of the British motor car industry, and therefore this change does not very importantly alter the balance. At a rough guess I should have thought it was something of the order of 50–50. In terms of assets, the biggest group operating in this field is, of course, the B.M.C.-Jaguar group, which is slightly larger; and that still remains. There is also the Leyland-Rover group, and at a very quick calculation I should have thought that the proportion was somewhere around 50–50. But I hope the noble Lord will forgive me if I have not got it quite right.

LORD OGMORE

My Lords, I take it the noble Lord would agree that, even if the ratio is 50–50 (and, speaking from memory, I think there is a slightly greater proportion of American-owned capital), it is a sad situation for British industry and a dangerous one.

THE EARL OF BESSBOROUGH

My Lords, I was grateful to the noble Lord for answering my question. I wonder whether he could tell me (perhaps I should know, but it was not clear from the Statement): Will the Industrial Reorganisation Corporation actually be investing any money in the new company?

LORD SHACKLETON

Yes, my Lords. I certainly said so. A statement is being published by Rootes and Chrysler which will be available. That statement goes into a good deal of detail, and the figures given show that the Industrial Reorganisation Corporation will acquire from Chrysler at par £1,500,000 nominal of the new Preferred Ordinary shares, being 15 per cent. of the total issue. I think the House would not wish me to go into greater detail, and the company will be providing a financial statement.

LORD SOMERS

My Lords, I would agree with the noble Lord, Lord Ogmore, that it is certainly not desirable that the whole of our motor trade should come into American hands, and although that is not the case, or anything like the case at the moment there is the beginning of a very dangerous leak. We have had Vauxhalls—

THE EARL OF LONGFORD

My Lords, I am sorry to stop the noble Lord, but is he about to ask a question?

LORD SOMERS

Yes, my Lords, when I eventually get there. I should like to ask the noble Lord whether he can explain what are the causes of this gradual leak, and whether it is likely to become any larger.

LORD SHACKLETON

My Lords, I must correct the noble Lord. It is not the beginning of what he chooses to call a "leak". Indeed, it could be regarded as the opposite of a leak—in fact, as an infusion. For a long time a large element of American capital has been invested in particular firms in the British motor car industry, which is so much part of the British scene, that some people may not be wholly aware that that is the case. Although, on emotional grounds, we should obviously all like to see everything in this country financed and run by the British, that is really not practicable. This is a continuing process, and I should have thought that there were many noble Lords on the other side of the House who welcomed this type of participation in contributing to the greater efficiency and viability of British industry.

VISCOUNT ECCLES

My Lords, I welcome the take-over by Chryslers, because I do not see that there is any other solution, but I should like to ask the noble Lord whether it is going to become a kind of doctrine that if we have a minority interest then the Americans (or anybody else, for that matter) are not really in control. Because, so far as my experience goes, it does not matter how you dress up a minority interest, it remains a minority; and the people who own the majority of the shares really control the business—and ought to.

LORD SHACKLETON

My Lords, I would not disagree with the noble Viscount in any way at all. I should have thought that what he has said is abundantly true—and, indeed, slightly obvious. However, the fact is that the board of directors do have some function to perform which is not in every respect determined by the majority shareholder. I entirely agree with the noble Viscount, but I should have thought that this was clearly natural in any business: that those who run it develop a certain loyalty to that business.

LORD HARLECH

But, my Lords, if the noble Lord agrees that fundamentally the United States company will in fact control the Rootes Group, what is the point of putting £1½ million of I.R.C. money into this particular consortium?

LORD SHACKLETON

My Lords, I think this has become a slightly circular discussion, which has brought me back to the noble Earl, Lord Bessborough. As I said, it is in order to establish a greater degree of British influence and a specific British voice on the board. If I may say so, I think noble Lords are pressing this in rather refined avenues. I do not dispute the control, but control does not necessarily determine every aspect of management policy.