HL Deb 06 February 1986 vol 470 cc1302-11

5.11 p.m.

The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Lucas of Chilworth)

My Lords, with the leave of the House, I will now repeat a Statement made by my right honourable friend the Secretary of State for Trade and Industry in another place on the subject of British Leyland. That Statement is as follows:

"Yesterday I informed the House that talks were at an advanced stage on the proposal for a merger between Land Rover Leyland and the Bedford Commercial Vehicle subsidiary of General Motors. It is the Government's intention that subject to satisfactory terms and conditions, and the receipt of firm undertakings from General Motors on their manufacturing and sourcing intentions, these negotiations should be brought to an early and successful conclusion.

"I also confirmed that following an approach by the Ford Motor Company, wide ranging but at this stage exploratory discussions with the Austin Rover Group were in progress which might lead to a proposal for the merging of these businesses. I wish to inform the House at the earliest opportunity on the most recent developments affecting these discussions in particular as regards Austin Rover.

"The Government would have preferred to have waited until the exploratory talks had clarified the difficulties and opportunities a merger might have created, and then taken a decision in principle, on the basis of a considered analysis, whether to pursue the possibility further. Speculation surrounding these exploratory talks has itself given rise to very great public concern and uncertainty. If this were to continue for any extended period it could have seriously damaged the prospects for Austin Rover's business, its employees, its suppliers and its dealers. Nor would such a period of uncertainty have been helpful to many people associated in comparable ways with Ford's business in this country. Concern about these developments was expressed very clearly on all sides of the House in yesterday's debate. The Government have given full and immediate consideration to the situation so created. We have decided that it would be wrong for the uncertainty to continue, and the right way to end it is to make clear that the possibility of the sale of Austin Rover to Ford will not be pursued.

"It is, however, the Government's intention, with the agreement of the BL board, that negotiations should be pursued for the separate privatisation of Unipart by an early placement of shares with United Kingdom institutions.

"Collaborative arrangements in the motor industry will become increasingly necessary and important. Austin Rover Group's successful relationship with Honda is an example of this. I hope that Ford and Austin Rover will also consider positively other opportunities for collaboration. I should like to pay tribute to Ford's contribution to the United Kingdom economy through research and development, manufacturing and employment.

"I hope the Government's decision and the ending of uncertainty will leave Austin Rover free to devote their efforts to the further development and growth of their volume car business, building on the creditable progress which has already been achieved."

My Lords, that concludes the Statement.

Lord Bruce of Donington

My Lords, we on this side of the House are grateful to the noble Lord for repeating that Statement. It would seem that there are certain marginal advantages in the return to Cabinet Government, because the decision not to continue with the Ford negotiations was expressly repudiated by the Government only yesterday. This is what the Government said yesterday: The question that we must address is: can or should BL continue as it is, whether in public or private ownership? I believe that it cannot do so. Even if it could, it should not, because in today's world standing still means dropping backwards. Concluding his speech in winding up, the Minister said: At this stage, we should negotiate as best we can."—[Official Report, Commons, 5/2/86; cols. 345–47.] Now today we have in the Statement: I hope my decision and the ending of uncertainty will leave Austin Rover free to devote their efforts to the further development and growth of their volume car business, building on the creditable progress which has already been achieved. It is amazing what public opinion, and opinion even within the ranks of the party opposite, can do. It is good to see that the first time there was Cabinet discussion on the subject a different decision was reached to that reached by the Department of Trade and Industry.

However, having now decided the principle the Government go on to say that they are continuing, and advising the company to continue, its proposals in regard to the merger that was the subject of the noble Lord's Statement on Monday last. We should have thought, applying the principle that we should develop British industry and that we should stick up for Britain, that the first part of the deal would also be annulled. It is quite clear that the Government have considered, not having discussed it in Cabinet—and we have it on record in the other place—and have decided, presumably at today's Cabinet meeting or one held last night, that they cannot at this stage back out of the General Motors deal. This is clearly something on which we shall have further debate. There must be a debate in this House in which this whole matter can be ventilated.

The Statement makes no mention at any point about the negotiations in regard to the buses. The noble Lord referred to it himself in his Statement on Monday last. He said: Separate discussions are taking place with the Laird Group, who own Metro Cammell Weyman, about the future of Leyland Bus."—[Official Report, 3/2/86; col. 906.] To turn to today's Statement, Leyland Bus is still in limbo. We shall be glad to hear any further information the noble Lord has about that because it has not been mentioned.

The noble Lord referred in both Statements—there was a Statement in another place and in the debate there yesterday—to a merger affecting these other interests, including Land Rover. Does the noble Lord mean "merger" or does he mean "take-over"? Which? If there is a merger on, that implies a degree of shared capital risk. Are we sure that the Government wish to continue with a shared capital risk in something which, according to their speeches, they are quite prepared to flog off to United States' interests?

Will the noble Lord enlarge further on this and will he state categorically whether, in the light of previous undertakings that have been given by General Motors in regard to the maintenance of the British components, the Cabinet consider that it is likely to maintain the British component in the latest deal with which the noble Lord has made us acquainted?

Viscount Chandos

My Lords, on behalf of the Alliance Benches, I also should like to thank the noble Lord, Lord Lucas of Chilworth, for repeating the Statement on the future of British Leyland and its key subsidiaries. I think that these Benches greet the Statement with a mixture of relief, continuing apprehension and absolute stupefaction.

I am surprised that the Statement omits to reveal that the Government will be offering a new testing ground for British Leyland on the Road to Damascus. There is stupefaction that the Government have allowed the preliminary discussions proposed by the Ford Motor Company to be pursued and yet, as soon as this sad and unworthy secret became known, they can declare that the uncertainties that were created justified breaking off the negotiations. British Leyland is still a public company quoted on the London Stock Exchange and sooner or later the deal that the tiny circle of Government Ministers was prepared to consider would have had to have been circulated in detail to shareholders, employees and the general public, as indeed the Statement acknowledged.

Many public companies which propose mergers or takeovers, or are subject to takeover bids themselves, become affected by uncertainty: for the employees, the shareholders, the trading partners and customers. But where they believe that there are genuine commercial grounds for a link, they willingly tolerate the inevitable uncertainty and speculation in order to achieve their aims. In the case of the proposed acquisition or merger of Austin Rover with the Ford Motor Company, the hasty, undignified but still welcome retreat by the Government shows that a more balanced and less prejudiced assessment of Austin Rover's progress and prospects, and a more careful preliminary analysis of the effects of a sale to Ford, would have avoided the management of Austin Rover being forced into precipitate and commercially damaging negotiations.

The competence of this Government in exercising stewardship over nationalised industries, which in his book Sir Michael Edwardes compared unfavourably even with that of the last Labour Government—or should I say the incompetence of this Government?—is the best but possibly the only advertisement for continued privatisation. I suspect that the blushes of the Secretary of State for Trade and Industry are only spared by his ability to attribute this tragi-comic pas de deux to another misjudgment on the part of his predecessor.

As I said, the stupefaction is mixed with relief that the Government have at least pulled back from their ill-considered attempt to abdicate from responsibility for Austin Rover, but also with apprehension that the future of Land Rover Leyland is in the melting pot. There is universal recognition that Leyland trucks technology, products and facilities are now superior to those of Bedford, while Land Rover is a company coveted by companies and investors throughout the world. If this deal really makes sense, can the noble Lord assure the House that every effort has been made and will continue to be made to achieve a genuine merger of Land Rover Leyland with Bedford, as the noble Lord, Lord Bruce of Donington, also advocated, and not a sale of the company to General Motors, whatever conditions are attached?

In a genuine merger British Leyland could retain a stake—a substantial one—and the employees could acquire a stake, and still General Motors, as a joint venture shareholder, could provide its international marketing network. Can the noble Lord, Lord Lucas, assure us that this approach, which any competent, commercial management would have pursued, has not been ignored in the Government's rush to pass one more buck for a few more quick ones?

Finally, can the noble Lord also assure us that in the future in its actions, its propaganda, its policies and its leaks, the Government will actually assist Austin Rover-BL and its constituent parts to achieve the aims of developing their business to which this Statement I hope sincerely referred.

Lord Lucas of Chilworth

My Lords, I acknowledge the receipt of this Statement by the noble Lord, Lord Bruce of Donington, and the noble Viscount, Lord Chandos. I think that there is very little to which I have to respond and perhaps I shall do it best by saying that the Government have responded quickly to both public and parliamentary opinion as expressed yesterday—as properly they should—and have come to the Houses of Parliament with the conclusion of that decision. I am surprised that there should be any criticism of the Government on that score.

The noble Lord, Lord Bruce of Donington, asked specifically about the position of the buses. I have nothing more to add to the statement and comments that I made on the 3rd February when I repeated a Statement made in another place that negotiations with the Laird group for the bus arm of Leyland were proceeding. That position remains the same three days later.

As regards the General Motors truck division and the Leyland truck and Land Rover arm of British Leyland, noble Lords will appreciate from Monday's Statement that this is quite a different matter from Austin Rover group and Ford. I said on Monday that negotiations were in an advanced stage. If I may just repeat this afternoon's Statement, it is the Government's intention that, subject to satisfactory terms and conditions, and the receipt of firm undertakings from General Motors on their manufacturing and sourcing intentions, these negotiations should be brought to an early and successful conclusion. That remains the position.

Other than that, I would remind your Lordships that for some many years now General Motors truck subsidiary, Bedford, has had its European headquarters, its European research and development arrangements and its manufacturing arrangements centred in the United Kingdom. General Motors have put in £1.2 billion worth of investment over the past 10 years; it employs 27,000 people; local content for 1986 will be 60 per cent. on its car and truck operations, and it is on target to meet the commitment which was made last year. I do not believe that one should criticise General Motors for being anything less than supportive of the United Kingdom's manufacturing industry. I say the same of Ford, whose interest in investment, employment and development in their area of industry is second to none in so far as support for the United Kingdom is concerned.

We are disappointed—the Statement says so—that the discussions between Ford and ARG were not allowed to proceed so that a calm and careful analysis could be made of any proposals. As regards assisting BL, the Government remain committed to British Leyland, the Austin Rover Group, in securing all the opportunities for that group to prosper and to achieve their fair share of the domestic and overseas market. One would look for the board of Austin Rover Group to continue with their collaborative arrangements and perhaps make others, such as with Honda, Peugeot, or VW-Audi, in a variety of ways, and that is how they would probably be able to succeed.

5.30 p.m.

The Lord Bishop of Birmingham

My Lords, I shall be brief. I thank the noble Lord for the Statement that he made. As he said, it will do a great deal to alleviate the deep anxiety and distress in my city of Birmingham about the future for employment. I wonder whether he can say something about the consultation that will be taking place with the workforce before further arrangements are made, because of the consternation that will be caused among the workers on hearing that arrangements are being made, as it were, over their heads.

What I want to ask the noble Lord most of all is this. In the arrangement that he spoke about concerning Land Rover, Unipart and Leyland Trucks, the West Midlands is likely to be affected as a centre of component making. That is an important part of the industry. We have to consider not just the assembly of the cars and the trucks but the components and the service industries that depend upon them. I think that the people of my diocese will ask themselves what effect the arrangements for these other parts of BL will have on employment. In my diocese I have one ward with an unemployment rate of over 41 per cent.; in another it is over 35 per cent. There will be deep anxiety that the arrangements may cause more unemployment. Anything that he can say to give people confidence will be greatly welcomed.

Lord Lucas of Chilworth

My Lords, I am most grateful to the right reverend Prelate for his contribution and indeed for his questions. As I explained on Monday, and I thought this afternoon, the Leyland Trucks, Land Rover and General Motors negotiations are at an advanced stage. I think that the House will agree that it would be wrong of me to pre-empt the result. However, we believe that an arrangement between two of the largest truck makers in the United Kingdom would be in the best long-term interests of the people employed in the truck industry. Across Europe that industry is in decline and there is massive over-capacity.To join the activities of those two important companies would be in the best interests of the industry. It would make it better able to compete in the European and the world markets to the long-term advantage of those employed in that sector.

Lord Bruce-Gardyne

My Lords, can my noble friend tell us what is Austin Rover's current share of the United Kingdom market in its respective class? Can he also tell us whether it is now the intention of Her Majesty's Government to put the £1.5 billion guarantees to British Leyland into the category of public expenditure, since it must be likely as a consequence of today's Statement that that guarantee could be called?

Lord Lucas of Chilworth

My Lords, speaking from a fairly reliable memory, I can tell my noble friend that the Austin Rover group has 18 per cent. of the United Kingdom domestic car market and a rather small share of the European market; but one hopes that it is expanding. If my memory serves me right, it has 19 per cent. of the truck market in the United Kingdom. The Government stand behind the so-called Varley-Marshall arrangements.

Lord Bruce of Donington

My Lords, may I press the noble Lord a little further? I asked him whether he would confirm that the arrangements, which he says are at an advanced stage, so he ought to know the form, are strictly merger or take-over? Exactly the same considerations apply to his statement about the Cammell group. He referred to separate discussions taking place with the Laird group about the future of Leyland Buses. Are those discussions with a view to merger or take-over? Surely he knows which term applies, even at this stage.

Lord Lucas of Chilworth

My Lords, I am not in a position either to agree with the noble Lord or disagree. I have said that the Leyland-General Motors negotiations are in an advanced stage, but the detailed arrangements as to how they may be completed and put together have not been arrived at. The Laird group discussions are not at such an advanced stage. I should certainly not wish in either case to prejudice the negotiators, particularly those of British Leyland, in suggesting in any way from this Dispatch Box how they should proceed or what should be the outcome.

Lord Thorneycroft

My Lords, is my noble friend aware that far from being criticised, his Secretary of State is to be commended, after only a few days in office and one debate, on having responded to some of the views expressed to him? It would indeed be a sorry day for Parliament if Ministers were to be bitterly criticised every time that they respond to arguments put forward in this House or in another place.

Will my noble friend continue to bear in mind that the danger to jobs in the motor vehicle industry is just as great or greater if we do nothing whatsoever than if we move out and try to expand and enlarge the size of the operating units? Will he press upon the noble Lord, Lord Bruce, that the simplistic and intensely nationalist view that he had been putting forward from that Bench, and indeed the fears of the right reverend Prelate, should not be allowed to weigh too much with us, for if we took that simplistic and nationalist view not only in the motor industry but in many others the damage to jobs in this country would be incredibly large?

Lord Lucas of Chilworth

My Lords, I am most grateful to my noble friend for his questions. I am sure that your Lordships will share my admiration for his great knowledge not only of parliamentary affairs but of business and commence. It is in the light of that experience that he asks such apposite questions. There is a great danger to jobs if we fail to recognise the importance of investment, both internal and from overseas, in our industries. The investment comes not only with money but with technical expertise and a whole range of other advantages to our industry.

The noble Lord, Lord Bruce, quoted fairly extensively from what my right honourable and honourable friends from the Department of Trade and Industry said in the debate in another place last night. He will remember that it was said that the motor industry is moving at a fast pace across the world; no longer can we build cars plainly for the domestic market, nor indeed for the European market. We need to build for world markets. Collaboration is vital if our manufacturing base is to be secured and, as I said to the right reverend Prelate, jobs in the industry preserved in the long term.

Lord Hatch of Lusby

My Lords, the noble Lord the Minister said in his original Statement that the negotiations over Austin Rover are to come to an end. Most Members of the House, I believe, welcome that. Can he tell us, though, what has changed since yesterday? Is it not the case, as the noble Lord, Lord Thorneycroft, has suggested, that the Minister has been influenced by the voices from another place—and quite rightly so? But how does it come about that the debate in the other place took place yesterday? What would have happened if there had been no leak about these negotiations? Can he tell this House whether the Government intended to pursue those negotiations, if possible to a conclusion? Can he also tell the House where the leak came from which was the occasion for the debate on which, apparently, the Government, and particularly the Department of Trade and Industry, have completely reversed their policy? What has happened since yesterday, and why?

Lord Lucas of Chilworth

My Lords, really, I am so surprised at the noble Lord, Lord Hatch of Lusby. I made clear in repeating the Statement that the Government would have much preferred to have waited until the exploratory talks had clarified the difficulties and the opportunities that a merger might have created. Then we could have taken a decision in principle and discussed it on the basis of a considered analysis. However, because certain events took place—I have little doubt in an endeavour to embarrass the Government—speculation surrounding those talks rose and gave great uncertainty both to the public and, indeed, to the two companies. This was explored during the debate yesterday in another place. As a result of public expression and as a result of parliamentary expression, my right honourable friend the Secretary of State for Trade and Industry and colleagues decided that no useful purpose to the two companies would be served if a decision was prolonged. I have made that clear in the Statement. As to the question of what would have happened had this matter not been raised on Monday, since the matter was raised and since things did happen I can see no profit in speculation.

Lord Stoddart of Swindon

My Lords, may I ask the noble Lord a quick technical question on the issue of manufacturing and sourcing intentions of GM? The noble Lord mentioned twice in his answers that GM already had 60 per cent. United Kingdom content. Is that what the Government are thinking about? I would remind him that Nissan has given an undertaking of 80 per cent. United Kingdom content. Does United Kingdom content mean United Kingdom content or EC content?

Lord Lucas of Chilworth

My Lords, in fact, I did not say that General Motors had 60 per cent. United Kingdom content or, indeed, local content. What I did say was that we had received assurances that local content of GM's products across the range would reach 60 per cent. in 1986. On Monday, I said in answer to the noble Lord, Lord Bruce of Donington, who said it was 46 per cent., that it was, in fact, 48 per cent. They are on target to reach the undertakings that they gave. I might remind the House that in the truck area local content is 80 per cent.

Lord Diamond

My Lords, may I press the noble Lord further on an essential matter that he has not found it possible to answer? Is he aware that what the whole House is interested to know is whether the negotiations which are still going on—the details of which he naturally does not want to disclose—are negotiations aimed at securing a take-over or at securing an amalgamation?

Lord Lucas of Chilworth

My Lords, the noble Lord, Lord Diamond, can press me as much as he likes. I have said all I am able, or willing, to say about that matter other than repeating that the negotiations are aimed at securing a viable truck industry in this country and securing the long-term employment prospects of those engaged in it.

Lord Brookes

My Lords, the Minister will, I hope, allow me to express what I wish to say in the form of a statement rather than a question, because my remarks are rather difficult to phrase. I speak from some knowledge of the industry. The upside worth of the proposed deal with General Motors—it is very much upside for GM—can also be upside for this country. We are talking—and the Minister is talking—about trucks, as if Bedford and Leyland were common or similar. They are very different. Bedford produces trucks in the light to medium range and only touches the borders of the heavy range of trucks. Leyland was once, years ago, the great European leader, expressed in its lovely calendars of beautiful ladies—"To Leyland, she's a lady". I hope that the Minister will take care that the lady is not raped in the process of the situation. The great attraction for General Motors—it is not a disadvantage to our own country—is that General Motors badly needs a European base for heavy commercial vehicles. Leyland might well have a better future in such a circumstance than it is likely to have with any other partner.

The other great upside worth for GM in this deal is, of course, the Range Rover and the Land Rover—something which, I believe, is entirely missing from GM's international marketing package. So there are great advantages to General Motors in this situation. All that I pray is that the Government, influencing the use and power of their shareholding will ensure that there is substance, purpose and commitment in the local content—that is, British content so far as conditions permit—imposed as part of this deal. I believe that GM, faced with an attractive target like this, should be very willing to negotiate upon those aspects. The great danger when dealing with a multi-national in the car industry is—

A noble Lord

Speech!

Lord Brookes

My Lords, forgive me. May I ask the Minister to be mindful of the danger that if General Motors were to switch its castings and forgings to plants in Europe which it owns, merely to fill them up, that would not be fair competition. I am sorry for almost having made a speech, but I believe that it was worth saying.

Lord Lucas of Chilworth

My Lords, of course I recognise my noble friend's great interest in this industry, in which he has played an important part as principal of a component manufacturer. I would not wish this afternoon to comment in detail upon his remarks other than to say that nothing stands still, least of all the motor industry. It would be wrong for me to commit any company into an action several years hence. I repeat, however, that General Motors have demonstrated over many years very good faith in the United Kingdom, particularly in the truck industry. We have no feeling that they would change course from that which they have employed over so many years.