§ 3.41 p.m.
§ The LORD PRIVY SEAL (Lord Shepherd)My Lords, with the permission of the House, I will repeat a Statement which is now being made in another place in regard to Chrysler, and in doing so I will use the words of my right honourable friend the Secretary of State for Industry:
"As the House knows, Her Majesty's Government first learnt of the possibility of Chrysler withdrawing from this country from reports of a Press conference taken by the Chairman, Mr. Riccardo, at the end of October.
"This was despite the approach made to him by my predecessor, my right honourable friend the Secretary of State for Energy, in January and the very closest contacts maintained through the year with the senior management of Chrysler UK.
"I at once wrote to Mr. Riccardo to seek clarification.
"On 3rd November he and his team told my right honourable friend the Prime Minister, myself and other colleagues that his Board had decided they would provide no further funds for Chrysler UK.
"From the time Chrysler Corporation took over in 1967 to the end of this year Chrysler UK was expected to have a cumulative trading loss of £80 million, with the expectation of losses continuing at a substantial rate next year.
"The Board of Chrysler Corporation had decided they could not continue to meet such losses from their own resources. Accordingly they told us they would start liquidating Chrysler UK from the end of November—that was in under four weeks' time from that meeting—unless Her Majesty's Government in the meantime took it over.
"This is the fearsome choice we have been wrestling with ever since.
"Liquidation would put 25,000 people out of work in Chrysler, with at least as many more in supplying and related industries.
"We should lose the important contract to supply car kits for assembly in Iran, with all the effect this might have 1348 on our prospects of further trade with that country. We should lose other exports.
"The gap left by the disappearance of Chrysler from our own market would cause serious damage to our balance of payments.
"On the other hand, just to take over Chrysler UK completely—even with a £35 million payment which Mr. Riccardo subsequently offered us in later intensive negotiations—would have passed over to us very substantial existing liabilities and heavier still prospective financial commitments.
"We should have had to take direct responsibility for heavy redundancies whatever happened—heavier than those which, as I shall tell the House later, will now have to be faced.
"We should have become responsible for the direction of the United Kingdom operation even though Chrysler offered to provide the necessary managerial, technical and distributing skills and facilities in this country and abroad and the necessary design assistance for a new model range.
"We should have been dependent on them, but they would have had power without responsibility and without the incentive to minimise losses and maximise profits and to make a real success of this difficult operation.
"We did not consider that this would be a satisfactory or indeed tolerable situation for the Government to be in.
"We have studied many schemes with the Chrysler team.
"Ministers have had 11 meetings with Mr. Riccardo and there have, in addition, been many meetings with officials.
"I am now able to tell the House that in the end we have achieved an agreement.
"We were prepared to accept an alternative solution only when Chrysler eight days ago made it clear that they would now be prepared to remain in this country, and that Chrysler UK would have their full support.
"They will streamline their operations by moving assembly of the Avenger car from Ryton to Linwood.
1349 "Of their present 25,000 employees, there will have to be some 8,000 redundancies; but the stark choice is between keeping this opportunity to maintain these 17,000 jobs or losing not only the full 25,000 but also many others in firms which depend on Chrysler.
"The Chrysler management are now telling representatives of their workforce how this necessary rationalisation will affect them.
"The redundancies will fall most heavily in the Midlands, where we have the best prospects of providing other work as trade picks up.
"The employment and training services agencies stand ready to help in all possible ways.
"Because the Chrysler Corporation made clear throughout that they were not in a position to advance the necessary further funds to the United Kingdom company, we have devised with them a scheme to share risks and expenditures.
"For next year they forecast a loss of £40 million.
"We have offered to meet this, in addition to meeting half of additional losses, if any, up to limits of a further £20 million next year; £20 million in 1977; £15 million in 1978; and £10 million in 1979, making a total commitment to provide up to £72.5 million over these four years.
"But together, we aim to turn these losses into profits; and we shall share equally with them in any profits which accrue in these years.
"We have also undertaken to provide a loan of £55 million to finance capital expenditure on plant and model development.
"This loan will be at a rate of interest no less than the Government lending rate.
"The Chrysler Corporation in return will guarantee the first half of this amount, amounting to £28 million.
"They will also provide £10 million to £12 million for the first stage of a programme to enable the C6 Alpine model to be assembled at Ryton from kits imported from Simca in France; and if this enterprise is successful—as we must all endeavour to see that it is 1350 —later stages to be considered would provide for the United Kingdom supplies for these cars to be increased from rather over 50 per cent. to 100 per cent.
"This would involve a further capital development programme for Chrysler UK of about £23 million.
"The effect of this scheme is to provide work at Ryton in place of the Avenger assembly.
"In the early stages there will be 2,500 redundancies there; there will also be substantial loss of jobs initially at Linwood.
"Chrysler UK has not been able to convert its short-term liabilities into medium-term finance.
"The London and Scottish Clearing Banks have agreed in principle to provide a medium-term loan up to £35 million against the guarantee of Her Majesty's Treasury, which would be counter-guaranteed by the Chrysler Corporation.
"All these measures of financial support have of course been offered subject to our obtaining Parliamentary approval.
"The total potential commitment will be £162.5 million, but this includes the maximum guarantee liability for the £35 million medium-term loan, the full £28 million of capital development which is counter-guaranteed by Chrysler Corporation and the maximum possible loss payment year by year.
"These guarantee commitments are payable only if Chrysler Corporation were to be unable to honour them. That is the maximum extent of our commitment; it is important to make clear that it is not open-ended; it is clearly defined.
"The responsibility for the success of the operation is also Chrysler's.
"As activities in this country have been running down for some weeks, it is essential to get work started as soon as possible.
"I shall therefore be laying the necessary Order in this House"—
that is, the House of Commons—
"later today.
1351 "The House will thus see that the situation has changed dramatically since November. The Chrysler Corporation instead of pulling out completely, as was their earlier intention, are now prepared to increase substantially their financial commitment in this country.
"They also intend that Chrysler UK will now an important and expanding role in their worldwide activities.
"And that will be fully integrated into their overseas market structure.
"In addition, the Board of Chrysler Corporation have approved an important declaration of intent about the long-term future of Chrysler UK. Copies of their declaration of intent are available in the Printed Paper Office.
"So we have the basis for a continuing operation into the 1980's; which will provide jobs for 17.000 out of the present 25.000 workforce, not counting many more jobs in related firms.
"We have safeguarded the important Iran contract and avoided further damaging consequences to our balance of trade from the disappearance of Chrysler production in this country.
"We shall be appointing two directors to the Chrysler UK Board and will be developing a planning agreement with the company.
"The whole future of this operation depends on the fullest co-operation of the workforce in accepting redundancies and the movement of work between plants and in collaborating to improve productivity.
"I have kept in touch with the trades union leaders and with members from Chysler constituencies and further necessary consultations are now in train.
"It will not help to try to allocate blame for all the industrial relations troubles of the past which are highlighted in the Central Policy Review Staff Report which has just been published.
'We must all—Government, management and representatives of the work- 1352 force—ensure that industrial relations are put on a sound basis so as to secure the future of this operation in the United Kingdom with all that this implies for jobs and the balance of payments."
My Lords, that concludes the Statement.
§ 3.53 p.m.
Lord CAMPBELL of CROYMy Lords, we are grateful to the noble Lord the Lord Privy Seal for repeating the Statement made in another place. Taken with the British Leyland scheme, it means massive support by the British taxpayer for a large part of the British motor-car manufacturing industry. Does the noble Lord agree that this requires the most careful examination as to whether this is the best course in the circumstances from the standpoint of prospects for the car industry—that is, the prospect of pulling itself out of its present depressed state and returning to a competitive, healthy condition? Is not this a very expensive way for the country to remedy a bad record, internationally, of labour disputes as the CPRS report, published only today, now shows? Can the Government tell us whether any assurances have been given by the trade unions concerned that working methods and productivity will be improved as part of the plan, including acceptance of the proposed redundancies? This is a crucial point, in view of the difficulty in this field which the noble Lord, Lord Ryder, appears to be having with Leyland. It also accords with the recommendation of the CPRS report that requests for financial assistance from car manufacturers should be dealt with on the basis that provision of capital is dependent on achieving specific improvements in productivity.
Does the noble Lord also agree with Conclusion No. 5 of the CPRS Report; namely, that investment alone is not enough to improve productivity? Lastly, what consultations, if any, have the Government had with Chrysler dealers?—because it is on their efforts that a great deal in these proposals will depend.
§ Lord BYERSMy Lords, in thanking the noble Lord for repeating that Statement, I must at the outset express our doubts as to whether this is the right long-term solution either for the country or for Chrysler workers. Of course, we 1353 shall study the reports in detail, but one thing is clear—that is, that the industry is patently over capacity. Yet we are trying to protect existing jobs instead of using every means we have to create new jobs in industries which have a potential for expansion and which are not in the declining league. As I see it, all the Government are doing is to try to keep in being four car manufacturing companies when the market does not justify more than three. I cannot help feeling that we shall rue the day when that decision was taken.
I would ask, if Chrysler is successful, what will be the future for British Leyland in this very restricted market with four companies operating? I should like to follow the noble Lord, Lord Campbell of Croy, in asking the Government, as I did after the Leyland announcement, what guarantees will be sought not just from the unions but from management as well to ensure uninterrupted production by getting the procedures right and greater productivity, both of which are vital to the future of the car industry, whether it be Chrysler, British Leyland, Vauxhall or Ford? I feel, as I stressed on the occasion of the Leyland announcement, that this is the key and that if we are to follow the route which the Government have outlined it will not be a successful operation unless we get a guarantee now—and not just pious hopes—that we shall have productivity. It must, however, be a guarantee by both sides of the industry.
§ Lord SHEPHERDMy Lords, I cannot complain about the way in which the noble Lords, Lord Campbell of Croy and Lord Byers, have commented on this important Statement. For some weeks now, we have been wrestling with this problem and I agree with the noble Lord, Lord Campbell of Croy, that this proposal of the Government requires most careful examination, such as it has received from the Government during these very difficult weeks.
It is not solely a question of saving jobs, though, God knows! that is important enough, particularly in Linwood in Glasgow. It is also a question of fulfilling a commercial undertaking to Iran, where they have assembled a plant for Avenger kits which have been supplied from here. There are many other factors that we 1354 have had to weigh in the balance in arriving at this decision. I shall be quite frank with the House in saying that, had the Chrysler Corporation of the United States not been more forthcoming in the very last stages of these negotiations, the proposals of the Government could well have been very different. But the Chrysler Corporation have committed themselves to some £63 million of new investment and new confidence in the Chrysler organisation in the United Kingdom and I believe that this is a factor which we should all bear very much in mind. True, it is being matched with very large sums by the British taxpayer, through Her Majesty's Government, but the amount is relatively small if the Chrysler Corporation remain in business and particularly, too, if the operation is successful. But even if the operation here was not successful, the amount that would be involved would be approximately half of the total sum that would be involved in the first 12 months by way of redundancy pay, loss of tax and many other factors that would arise as a consequence of putting perhaps some 55,000 men out of work.
However, these are matters which clearly must be part of our careful examination, and I wonder whether—particularly when noble Lords have read the distressing report of CPRS—this is a subject which we could debate in the New Year. I think that there are many lessons to be learnt. Certainly in regard to labour relations—and here I agree with the noble Lord—one of the factors of the motor industry (and I suppose it is true of many of our industries) is that the weakness is not that of investment, although investment has its part to play; it is the failure of this country consistently over very many years to be able, through managerial arrangements, or through workmen's co-operation, or because of a multitude of factors, to earn the necessary return on the capital invested.
Here I would agree with the noble Lord, Lord Campbell of Croy. The noble Lord asked me whether we have received specific assurances from the trade unions in regard to this matter. We have been negotiating with the Chrysler Corporation, and I fear that too much about those negotiations has leaked, and some of the leaks have been ill-informed. But we have 1355 sought to keep this matter on a confidential basis. Therefore we have not at this moment been able other than to discuss it with the trade union leaders. But at the end of the day what really matters is the arrangements that are made, the understandings that arc arrived at, with the work force in the factories. The noble Lord, Lord Campbell of Croy, will remember that I spoke about the planning agreements. One of the essential factors of the planning agreements will be an agreement by management, Government and the work-people as to the manning of these factories. Part of that planning agreement and what may flow from it will depend not only on the agreement as to the manning, but also on the way in which that figure is brought down, so that we can at least match the productivity of our Western European competitors.
I do not agree with the noble Lord, Lord Byers, that because there is excess capacity in this country it is necessarily right immediately to reduce productive power. We are going through a period of recession; there is excess capacity throughout the world. But unless we at least seek to conserve what capacity we have, and to modernise it and make it virile, there will be no future for this country; certainly no future for the aspirations that we have.
The management of Chrysler are now discussing this subject with the leaders of the work force at Chrysler. There will be great anxieties, worry and concern by many within the industry. But I hope that there will be a realisation that we shall not get dramatic change. The view of the NEB has, I think, been well illustrated by the attitude of Mr. Whitaker at British Leyland; by the unwillingness to provide new capital until some improvement has been made in terms of productivity. We must bring this home to our work force. I believe that we still have time, although I agree with so many that perhaps time is now becoming very short indeed.
§ Lord CARRINGTONMy Lords, would the noble Lord the Leader of the House explain to the House why, in the light of the CPRS Report and the views of every single informed commentator, the Government think that Chrysler UK is a viable concern?
§ Lord SHEPHERDMy Lords, Chrysler UK. as a separate United Kingdom company, would have no viability at all. But there is a real hope, there is a belief—at least by the Chrysler Corporation—that by integrating Chrysler UK more fully (as it was not in the past) within the Chrysler overseas organisation, there is a chance of this company's becoming viable and making a major contribution to Chrysler as a whole, and of course to this country in particular. There are risks here, but bearing in mind the certainty of what would have happened had this company gone into liquidation, I should prefer to run the risks of the probable rather than of what may have confronted us.
§ Lord LEE of NEWTONMy Lords, is my noble friend aware that many others will sympathise with any Government who have to deal with the paradox of a sick industry which nevertheless plays a vital role in our export markets and in the levels of our employment at a time like this? Nevertheless, this industry has been sick for very many years. Is my noble friend aware that there are still grievous faults on both sides of the industry which, as the Report of CPRS has mentioned, have resulted in productivity in the British industry being no more per man than some 50 per cent. of the productivity on the Continent?
Is my noble friend further aware that we are extremely worried because huge blocks of public money are now at stake at a time when what I may describe as more deserving industries also need to be looked after? Therefore this risk is made the worse, I suggest, because the over capacity mentioned in the Report may well have an effect on our investment in British Leyland, which is of huge proportions. Thus I feel that nothing short of a direct ultimatum from the Government to the industry that the degree of public investment will be conditioned by the resolution with which all in that industry now proceed forthwith to put their house in order should satisfy anyone.
§ Lord SHEPHERDMy Lords, I could not disagree with the sentiments of my noble friend. But when one looks at the motor industry, and at Chrysler in particular, one sees that perhaps the greatest weakness is that there are some 450 separate suppliers of parts to a Chrysler 1357 motor car. One only need imagine the problems and difficulties which could arise in only one of those 450 companies to see the ravages that could affect the assembly of motor cars. The Government have placed this money as an act of faith. So far as the Government are concerned, it is certainly our intention to see, with the Chrysler Corporation of the United States, that this is made a viable company. There are risks, indeed. But I suggest to your Lordships that it is better to run those risks than to face the inevitability that would have arisen had we taken a counter decision with all that that would have involved, not only in terms of the immediate need of the Government to find money, but also in terms of the ravages of unemployment, especially in certain parts of the country where it could then have been running as high as 17 per cent.
§ Lord BLYTONMy Lords, is my noble friend aware that I take decided objection to public money being given to American capitalism? So far as the jobs are concerned, there was not much of a cry when 500.000 men were thrown out of the pits.
§ Lord SHEPHERDMy Lords, the reason why we did not seek equity in this company is very simple; namely, that had we sought equity we should then have been immediately committed to the very considerable deficit in which Chrysler UK has already involved itself. We have therefore taken the view that this is the best way to proceed if we are to seek to save this company.
§ Lord ROBERTHALLMy Lords, I wonder whether the noble Lord the Lord Privy Seal can say a little about a point that was raised by both the noble Lord, Lord Campbell of Croy, and the noble Lord, Lord Byers; that is, the relationship between the Government's policy towards Chrysler and their policy towards British Leyand. That is the new factor about the situation: that the Government will be supporting two competing firms each of which is competing with firms in the private sector. It is extremely difficult to make out what the Government's industrial policy is without some indication about the relationship between these two companies, which are very nearly subsidiaries.
§ Lord SHEPHERDMy Lords, the facts are (are they not?) that for one reason or another we are taking into this country, through imports, certain types of cars, mainly because they are small; and, as the CPRS paper unfortunately says, overseas cars have certain material advantages. If the British car industry was able and willing to produce the cars that the market demands and cars of such a quality that the public themselves would wish to buy them because they had confidence in them, then there is room for all the four companies and there are also very great opportunities for sales in the export markets. There is no reason to believe that the four companies cannot survive in this country if management, designers and workpeople have the will to go out and fight, not only to protect their markets but also to make inroads into the overseas markets, as foreign companies have done in this country during the last two or three years.
§ Lord SHINWELLMy Lords, since my noble friend has suggested that there will be a debate on this subject, when obviously we can expect further clarification, may I ask him whether any action of a constructive and positive fashion will be taken before a decision has been taken in another place and, presumably, in your Lordships' House? That is my first question. The only other question I wish to put, on the assumption that there is to be a debate, is this. Has there been any discussion with the unions concerned on the subject of redundancy and an assurance conceded by the unions that the redundancy proposition will not be countered by objections of a destructive character and that, even after an agreement has been reached and the proposition of the Government implemented, there will he no action taken by the unions officially on the subject of the amount of redundancy that occurs?
§ Lord SHEPHERDMy Lords, in regard to the first of my noble friend's supplementaries, it is a question for another place whether it approves the Order that the Secretary of State will be laying in another place tomorrow. I have no idea, because it is not my responsibility, as to when that Motion will be taken, but until that Motion has been approved there can be no full assurance 1359 to Chrysler that the Government are able to undertake their side of the agreement. I would take the view—and this is clearly in the interests of the Chrysler Corporation—that an early debate and an early Resolution will be necessary in the House of Commons.
In regard to consultation with the trade unions, as I said earlier one of our difficulties is that we have been negotiating with the Chrysler Corporation and we have not been in the position to consult the trade unions, the men on the factory floor, first as to the proposals and, secondly, as to the questions of redundancy and the transfer of work. If we had had more time, my Lords, it may be that we could have entered into that matter, but we have not been able to do so.
Clearly, however, this has got to be done by the management, because the Chrysler Board is still responsible, not the Government, although obviously it is for the Government themselves to give what encouragement and advice they can to the trade unions. But plainly it is a matter of supreme importance, if this agreement is to be proceeded with and if there is to be any real hope that this company will survive, that it has the fullest co-operation. Whatever hardship may be felt by some, I hope there will be a recognition that, instead of some 50,000-odd, perhaps, losing their jobs, we have at least been able to limit the number to about 8,000 within Chrysler.
Baroness WARD of NORTH TYNESIDEMy Lords, having regard to the immense amount of taxpayers' money which appears to be going to be involved, may I ask the noble Lord whether, when arriving at their decision, the Government took into account the fact that there is a tremendous problem arising in the steel industry and a tremendous problem arising in the railway industry? May I have an assurance that when the problems of those industries come to be discussed we shall not be told that all that has been done for Chrysler really affects the future of the steel workers and the railway workers, who have quite as many problems to cope with as Chrysler? I do not myself feel that we ought to give more to Chrysler than we are able to give towards looking after our steel workers, who also have problems all over 1360 the country, and to our railway workers. What I really want to know is whether the Government looked at these three problems in relation to the money which they are going to take from the taxpayers in respect of the Chrysler matter.
§ Lord SHEPHERDMost certainly, my Lords. This has been part of the rather agonising consideration that we have gone through during the last few weeks. But the noble Baroness, I am sure, is appreciative of the very considerable sums of public money which have gone into both the industries to which she has referred. Both have their problems; but I could not go any further into that matter than I have done today.
§ Lord POPPLEWELLMy Lords, is my noble friend aware of how much sympathy we have with the Government in the decision they have had to take in this matter? Noble Lords will be aware that the Hillman people failed miserably in 1967, and had to bring Chrysler UK into existence. This was a failure of the structure of the industry at that time, and was an indication of how sick this industry really is. When we look at the manufacturing side of industry as a whole and see that the disputes in the car industry outnumber those in other industries three to one, does this not indicate the real problem that is involved? Is my noble friend therefore able to give us an assurance that it will be part of the specific task of the two directors who are to be appointed to ensure that the labour relations in Chrysler as a whole are dealt with more adequately in the future than they were in the past? Other industries have a disciplinary code which has obviated these disputes. Chryslers seem to have ignored that completely, and so we have the awful position that there is, which might have had a big effect upon the availability of investment. In view of the huge sum that is now going to be put into Chryslers, or which is to be guaranteed to Chryslers, will my noble friend give the House an assurance that it will be part of the specific duties of the directors so appointed to look after our interests?
§ Lord SHEPHERDMy Lords, in reply to my noble friend I may say that one of the great difficulties which beset the Leader of the House when dealing with Statements that he has made is when he should seek to bring the discussion to an end; because 1361 it may appear that he is seeking to bring it to an end for (shall we say?) his own comfort. We have now been on this matter for some 39 minutes. It is a subject which is in itself worthy of a debate, and if the House wishes it I will provide an opportunity for a debate after Christmas. I make only one qualification now; for I know that there is a Scot who has been trying to get in; and, since Scotland is involved I hope that the House will allow my noble friend to put his question. To my noble friend Lord Popplewell I will only say that when you place directors on a board they are not necessarily placed there for specific purposes. To my mind, the best solution, not only for getting an agreement on manning but also for monitoring the programme and seeing that it is being accomplished is through the planning agreements which the Corporation and the Government have agreed to enter into.
§ Lord HUGHESMy Lords, having regard to what my noble friend the Lord Privy Seal has said about both the possibility of a debate and the time factor, I will confine myself to a single question on the Scottish position. My noble friend said that there would also be a substantial loss of jobs initially at Linwood. I presume that the insertion of the word "initially "has to do with the subsequent transfer of Avenger jobs. Can my noble friend tell me what is meant by the substantial loss of jobs in the first instance and the extent to which it may be expected to be mitigated by the transfer of the Avenger jobs?
§ Lord SHEPHERDMy Lords, it is the intention that the Avenger production, particularly that intended for export to Iran, shall be transferred to Linwood. This means that the phasing out of the Imp and the Hunter will cause initial redundancies. When the Avenger is moved and is in full operation at Linwood it is estimated that there will be a shortfall of some 1,500 from the present 7,000-odd workforce. If this could be made successful then, of course, there may be further opportunities for expansion; but that is the present assumption—made not by the Government but by the Chrysler Corporation itself.
My Lords, we have now spent 42 minutes on this matter and I wonder whether we should not now proceed to 1362 the other debate in which I know a great deal of interest has been shown.
§ Lord LUCAS of CHILWORTHMy Lords, surely if the noble Lord the Leader of the House allows a noble Scot exclusion, will he not allow a noble retailer one word on this very important matter? —because Chrysler retailers have very little confidence in the Chrysler situation as they have read it and have taken little more comfort from the Statement. Chrysler have gone too far back. Chrysler's moving the Avenger to Linwood (with the Linwood reputation being what it is ever since it started) will hardly enhance their reputation with the dealership. Have the Iran authorities given Her Majesty's Government any assurance that they are going to continue with that programme, and increase it; for that is all that is left of Chrysler UK at the present moment?
§ Lord SHEPHERDMy Lords, the Government of Iran have been consulted and it is their firm wish that the contract for the Avenger kits should continue as before. Clearly there must have been disquiet and uncertainty among Chrysler dealers, but I hope that what has now been announced, and particularly the fact that the Chrysler Corporation of the US are prepared to back the project with their own money, will be a sufficient inducement to the dealers to go out and sell those cars against foreign imports.