HL Deb 17 February 1986 vol 471 cc422-30

3.42 p.m.

Lord Lucas of Chilworth

My Lords, it may be for the convenience of the House if I repeat in the form of a Statement an Answer being made in another place in relation to British Leyland. The Statement is as follows:

"The aim of the Government and of the BL board is to secure an internationally competitive United Kingdom commercial vehicle industry, and to improve the long-term prospects for BL's constituent businesses.

"As I informed the House on 3rd February, discussions are at an advanced stage between BL and General Motors in respect of Leyland Trucks, Land-Rover, Freight Rover and certain related overseas operations. Discussions are also taking place with the Laird Group about the future of Leyland Bus.

"I can confirm to the House that, of the companies that are willing to have their interest in the businesses made public, Lonrho are in contact with BL concerning Land-Rover and Freight Rover; Aveling Barford have expressed an interest in Land-Rover and Leyland Bus; and Volvo have expressed an interest also in Leyland Bus. Proposals for a management buy-out are also expected to come before the board.

"As my right honourable friend the Prime Minister confirmed in the House on 11th February, the other proposals will be considered on their commercial merits in relation to the future of BL as a whole".

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 having repeated the Statement, which we are afraid does not take us very much further. The noble Lord will recall that on the last occasion when I had the pleasure of questioning him on the matter he was not, even at that stage, prepared to say whether the various deals he had in mind were going to be mergers or take-overs. Today what he has said is that there are a number of companies which are interested in taking over the Land-Rover interests, the buses and so on. Previously there was Volvo. Now there are Lonrho and Cammell Laird. If all these various companies are competing so hard to acquire these various interests, why on earth are the Government trying to get rid of them? Are they not interested? Is the noble Lord aware that the impression given by the Government all the way through this business is that they are prepared to put great sections of British industry up for auction?

Is the noble Lord further aware, and will he convey to his colleagues, that it is known today that General Motors, who were interested in Range Rover, are on the Stock Exchange at this time busily acquiring shares in Jaguar because they want to build up their ultimate control of that company? When is this sordid business going to stop? When are the Government going to take very seriously their responsibilities as trustees of the British public and of the British taxpayer? If they have not got the capability of doing that, why can they not find those who have?

In the meantime, is the noble Lord aware that his Statement will do nothing to allay the very grave anxieties in the West Midlands at the present time which have been increasingly expressed by the employees of all the companies concerned? In view of that, will he take steps to ensure that this matter is taken before the full Cabinet on Thursday next?

Lord Diamond

My Lords, may I, on behalf of these Benches, say how very much we appreciate the courtesy of the Minister in repeating the Answer to the Private Notice Question asked in another place? I wish I could go further and thank him for the content of the information he has given, but, alas! one cannot do that because we are no wiser now than we were before.

The noble Lord will remember that I myself pressed him—and I was not by any means the only one—when he was making a Statement a few days ago to say whether the intention of the negotiations was to achieve an amalgamation, by which I had in mind the kind of partnership which helped both partners, or whether what he had in mind was a take-over which merely removed from the Government the responsibility for producing further cash, if that was necessary in the interests of the company. It is not right to say that we got no answer at all, because the Minister was very clear in saying that he was not going to say one word more on that topic. We are still in the same situation.

A great deal of interest is expressed in these sections of Leyland. We now know, of course, that the heart of Leyland is secure: the Government have rapidly backed off that ridiculous, unpatriotic, uncommercial and irresponsible idea because we all know that volume car business is central to the economy of any industrial country. We are delighted that the pressure, mainly from our own Back Benches, has meant that the Government rapidly backed off that one. So what we are now dealing with are peripheral, very important, activities which are not central to the business itself. Please can we be told what is in the Government's mind with regard to these? The information that the Minister has given so far is totally inadequate. We must look forward and see what is the protection for the employees in this industry, and by that I mean not only in Leyland, but in the industry as a whole.

So far as car manufactures are concerned, the figures are now very clear and the position is well established. Whereas when the industry was in wholly British hands one had above 90 per cent. of an individual car being made in this country, now that Ford, General Motors and so on have taken over the proportion has been reduced to somewhere below 40 per cent., and in one case to 22 per cent. That is the situation in which all those in the allied parts of the industry are interested. We had a most valuable speech, I might almost say without discourtesy, by the noble Lord, Lord Lucas, on the occasion of the last question and answer session which brought this out very strongly.

So can we be told, first, what the Government are doing to secure the future employment of all those engaged in the industry as a whole in relation to these negotiations? Are the Government seeking merely to get rid of their financial responsibilities? One can understand that if finance is continually required, the business needs looking at. You have to look at some method whereby you improve the business so that the continual call for finance ceases to be made. Is the noble Lord purely concerned with that, or is he doing what we hope he is doing, which is to see that by arrangements of a partnership kind made either with employees and management—which we would naturally prefer—or with other interested manufacturers who have commmercial outlets, the position of this company will be improved to the extent that more of these units will be made and sold in larger parts of the country, with greater employment therefore resulting both for the direct employees and for the employees in allied industries? Those are the matters with which we are particularly concerned, but I am sorry to say that we are really no wiser now than we were when the matter was last raised.

Lord Lucas of Chilworth

My Lords, the Statement which I have made is, as I am sure noble Lords will appreciate, in response to a Private Notice Question. It was, as I said earlier this month, the intention of the Secretary of State for Trade and Industry to make available to Parliament any new issues that arose, and that is exactly what my right honourable friend has done.

The noble Lord, Lord Bruce of Donington, will recall that we made it abundantly clear that British Leyland would be returned to the private sector as soon as was possible, and that is exactly what is being done. The noble Lord, Lord Diamond, asked what the Government are doing to secure the long-term future. At the beginning of my Statement, I said that it was the aim of the Government, and indeed of the British Leyland board, to secure an internationally competitive United Kingdom commercial vehicle industry, and to improve the long-term prospects for BL's constituent businesses". It is against that background that the conversations are taking place not only with General Motors but with others whose identity I have made known this afternoon.

Your Lordships will recall that I said last week that in the commercial vehicle field there is a worldwide over-capacity. There is a loss in both General Motors and British Leyland on their commercial vehicle activities. General Motors have come along with a number of proposals. Subject to certain assurances being given, it was our intention, with the advice of the British Leyland board, to accept those proposals. Since that time other companies have entered the field. Due consideration will be given to those proposals which they are making to the British Leyland board and we will take note of what they have to say in regard to that.

As regards the point made by the noble Lord, Lord Diamond, about overseas interest in our motor manufacturing industry, all I can remind your Lordships about is that both the Ford Motor Company and General Motors have been operating in this country for a great many years with great success. General Motors have given an assurance that they will raise their local content to 60 per cent.; Peugeot, the newest entrant, have said 65 per cent.; and then comes the Ford Motor Company, in that order. At the end of the day it is the wish of the Government to secure for the motor vehicle industry a viable internationally competitive industry, through which will be secured the jobs of those who are employed in that industry.

Baroness Fisher of Rednal

My Lords, coming from the West Midlands, I must say that what the noble Lord has said this afternoon is no encouragement to that part of the world. It seems amazing that in the second month of this Industry Year the Government are having detailed talks—the noble Lord said they are at an advanced stage—about selling off our manufacturing capacity. The noble Lord must realise that the West Midlands, which had the largest manufacturing base in the country until it was destroyed, again finds itself in a difficult position. Surely it is hypocritical of the Government to have an Industry Year and, at the same time, to be selling off parts of industry.

The noble Lord said that component parts will still be manufactured in this country. As the noble Lord, Lord Diamond, said, British Leyland have a high reputation in the field of components and up to 90 per cent. of the components they buy are manufactured in this country. I can tell the noble Lord of two very large factories that were closed down three years ago when Vauxhall and Ford decided not to use the components they were manufacturing, with the result that 3,000 jobs were lost there. I must say to the noble Lord that his words this afternoon give no encouragement for the employment prospects of not only the Midlands but elsewhere in this country.

4 p.m.

Lord Lucas of Chilworth

My Lords, I am most grateful to the noble Baroness for her views, which I do not share, since a number of different views emanate from the West Midlands. People there know very well the grave danger which the industry is in at the present time, particularly with over-capacity throughout Europe. The fact that the West Midlands find themselves in a difficult position again is unfortunate and regrettable. It is certainly a result of the world and, more particularly, the European position. I should perhaps say that Industry Year is, of course, an initiative by the Royal Society of Arts and not of the Government. In fact, it is an awareness campaign rather than a direct campaign.

With regard to British Leyland's local content, the noble Baroness with her knowledge of the West Midlands will appreciate that British Leyland has undertaken a number of associations with overseas companies—notably Honda, in regard to research and development and some manufacturing processes; and with European companies such as VW and Audi and also Peugeot with regard to gearbox and transmission design and production—so British Leyland itself knows the importance of collaboration and of joining in one form or another with other companies in order to reduce the extraordinarily high cost of further development in various products.

With regard to the noble Baroness's question concerning the component manufacturers in relation to Vauxhall Motors and the Ford Motor Company, however harsh it may sound one must ask the question: why did those two companies place component procurement in other places? The answer is that the other places were more competitive. That is what this motor industry is about—it is highly competitive—and it is British Leyland's wish as well as that of the Government to ensure that there is a continuing company particularly in the truck business, which is why the company has encouraged discussions with a number of companies to see how best this long-term viability may be sustained.

Lord Maude of Stratford-upon-Avon

My Lords, is my noble friend aware that there is really not much point in a company using 90 per cent. of British components if the end result is that it cannot hold its share of the market and has to rely on continuous subsidies from the taxpayer? Surely the answer is to find somebody who can manage this company profitably and successfully and ensure the future of the jobs there?

Lord Lucas of Chilworth

My Lords, I am most grateful to my noble friend who puts the matter so much more succinctly than I was able to do so in my earlier remarks.

Lord Mackie of Benshie

My Lords, I hope that the noble Lord will not abandon entirely the patriotic stance which one might expect from the Conservative Party. I trust that when the alternatives come up and when they are studied, instead of losing heart, selling to the highest bidder and getting out, they will study the fact that British enterprise has made a job of a number of companies (and indeed of nationalised industries) and will not turn tail and run away. It is no good saying that the alternatives will be studied by the board of British Leyland because the Government own the company and therefore they will take the final decision.

Lord Lucas of Chilworth

My Lords, I can assure the noble Lord that the Government have no intention of abandoning any stance, least of all that of procuring for the British-based motor manufacturing industry a continuity of production, a continuity of employment, a continuity of competitiveness in the European and world markets. It is those interests which are in the forefront of our minds; not necessarily the highest bidder.

Lord Marsh

My Lords, can the noble Lord give the House some indication of how much public money has been placed in British Leyland so far in an unsuccessful effort to keep it independent?

Lord Lucas of Chilworth

My Lords, in the past 10 years some £2.3 billion of public money has been put into British Leyland through all its companies. Guarantees of loans under the Varley Marshall understanding amount to another £1.5 billion, which is not an inconsiderable amount of money to support a British-based industry.

Lord Shepherd

My Lords, does the noble Lord understand that there is some concern when he speaks of the Government and the board of British Leyland having a common interest? It may be a common interest, but can the noble Lord give an assurance that the board of British Leyland will be free to make its own commercial decisions in this matter and that there will be no question of directions by the Government to the board that would in any way proscribe its acting commercially in reaching a decision?

Secondly, can the noble Lord give an assurance that so far as concerns the Government, all the new approaches that have arisen will be more than just taken note of by the Government, that they will be most actively considered, that there is no question that there is to be a commitment for the sale to General Motors, and that all the new people who have come forward shall have a free and fair opportunity to make their bids for the purchase of these parts of the organisation if that is what the board of British Leyland decides is right and proper to do?

Lord Lucas of Chilworth

My Lords, the noble Lord, Lord Shepherd, asks a number of questions. It is for the board of British Leyland to consider what is in the best interests of its company and recommend to the Government, who are after all on behalf of the taxpayer the principal shareholder, what it thinks is in that company's best interests. It is for the Government as trustees to ensure that the best interest of the country, the employees and indeed the future is taken account of in reaching a decision. Noble Lords will I hope forgive me for repeating this, but in the case of the proposals of General Motors one would be looking for the satisfaction of a number of assurances with regard to those matters and others before the Government gave any approval.

With regard to new approaches, bearing in mind what I have said, it would be in the best interests of the company and indeed of the Government on behalf of the taxpayer to ensure that those new approaches received all and proper consideration; and I think that I can give the noble Lord that assurance.

Lord Williams of Elvel

My Lords, will the noble Lord confirm that the opening offer price made by General Motors for the commercial vehicle division was zero on the grounds that if there were any value in the business it would be eroded by the cost of redundancies which it estimates at £400 million? Furthermore, will the noble Lord tell the House who are the professional advisers acting for the Government and for British Leyland in this matter?

Lord Lucas of Chilworth

My Lords, I do not agree with the noble Lord, Lord Williams of Elvel, that there was a zero figure attached. General Motors and British Leyland joined together in discussions to ensure the viability of a commercial truck industry. In those discussions British Leyland made it clear that the long-term interests were served by the proposals which have been made fairly clear, and fairly clear publicly. I am not, I regret to say, able to answer the noble Lord's other question, purely and simply because I do not know the answer.

Lord Hatch of Lusby

My Lords, the noble Lord has not yet answered the question put by my noble friend Lord Bruce of Donington. Is it not the case that British Leyland was taken over by the Government originally when the private sector was found to be incapable of sustaining it? Is it not also the case that British Leyland has been a success story since it was taken over by the Government, even if not as much of a success story as Renault in France, supported by the French Government? In view of its record and the forecast that its fortunes are now on the upturn, will the noble Lord answer the question put by my noble friend Lord Bruce of Donington? If all these private companies are so anxious to buy into British Leyland, why is it that the Government are not anxious to retain that national industry? Are the Government not interested in the future of British industry? Are they prepared to see this country as the only major industrial country without any indigenous motor car or motor vehicle industry?

Lord Lucas of Chilworth

My Lords, I am not prepared this afternoon to look back over 15 years.

Baroness Jeger

Why not, my Lords?

Lord Lucas of Chilworth

My Lords, because I do not believe that looking back over 15 years as to the reasons why British Leyland required the support of the taxpayer through government funding would be very helpful in meeting the challenge of the mid-1980s and 1990s.

That there has been a remarkable turnaround in the attitudes of and, to some extent, the success of British Leyland there is no doubt. However, at the end of the day the truck division has been losing millions of pounds quite consistently. It has lost something like £60 million a year for the past three years and a loss of around the same kind of figure is forecast for 1985. That is what the Statement is about: the bus and truck side of British Leyland.

Whether there is an upturn in the division's fortunes is perhaps debatable. Although it has achieved a somewhat larger share of the declining market for trucks, nevertheless that share still shows considerable losses. In regard to the noble Lord's final question, as to why it is that a number of companies are now coming forward wanting to buy various parts of the division and why the Government go along with that line, we made it clear when we came to office that it was our long-term intention to return that company to the private sector as soon as that was possible. It is now being made possible by offers from a variety of companies. We shall take advantage of offers that take into consideration those interests that I have outlined on more than one occasion this afternoon and which I outlined last week. If those interests can be satisfied then we shall go ahead with out declared policy. That is consistent.

Perhaps I may now reply to the noble Lord, Lord Williams of Elvel, as the answer to his particular question has come to hand. Baring's are advising Her Majesty's Government and Hill Samuel are advising British Leyland.

Lord De Freyne

My Lords, we are talking about the motor industry and about industry in general. We brought Mercedes here and we brought Volkswagen here. They were built here. I was one of the people who started that. We built it up and it was a big industry. Now what do we have? Nothing. Why do we not join with them? Why do we not go together—

The Lord President of the Council (Viscount Whitelaw)

My Lords, I must interrupt my noble friend, and I apologise for doing so. The House will appreciate that we have a very important debate before us. A large number of Members will be taking part in that debate, which, if I may humbly say so, was most admirably introduced by the noble Baroness, Lady Serota. Members wishing to take part have been waiting a long time, and there is another Answer to a PNQ to follow. I believe that the House will wish to consider how soon we may move on to the other de bates.

Lord Diamond

My Lords, perhaps I may ask for clarification of something that the Minister was kind enough to say in reply to a question of mine. I refer to the point that when General Motors took over Vauxhall, the proportion of British content in the cars manufactured dropped from 90 per cent. to about 22 per cent. The Minister has told the House that he is now making some kind of arrangement whereby 66 per cent. or some similar percentage of British content will be assured for the future. Can the Minister tell the House, first, how that is to be achieved; secondly, what steps have been taken to make possible an offer by the management—that is, by the management and the employees—for the purchase of that which it is proposed to sell? Finally, can the Minister assure the House that a statement will be made by the Government before any decision is taken on those matters?

Lord Lucas of Chilworth

My Lords, I thought that I had answered the noble Lord, Lord Diamond, last week, but I am happy to repeat that General Motors truck production has something of the order of 80 per cent. local content. That company has given an assurance of 60 per cent. local content. That company has given an assurance of 60 per cent. local content in regard to its car production in the United Kingdom. It is on target to achieve that figure this year. That was the assurance given last year.

So far as a management buy-out is concerned, due consideration commensurate with the interests I earlier described will be given to any proposal. In regard to a statement, I regret that I cannot give the noble Lord, Lord Diamond, the assurance he seeks. However, I have a feeling that matters of moment will be brought to the attention of Parliament one way or another.

Lord Bruce of Donington

My Lords, in view of the answer given by the noble Lord the Minister to his noble friend Lord Maude of Stratford-upon-Avon, will he make it clear that the Government have no criticism to offer of the existing management of British Leyland? It might be inferred from the Minister's assent to the implications of the question put by his noble friend that he associates himself with the criticism therein implied. Will the Minister also say whether it is the view of his department—or of the Government, if they know about it—that there is an over-capacity in the production of Range Rovers and Land-Rovers?

Lord Lucas of Chilworth

My Lords, the noble Lord, Lord Bruce of Donington, does trespass. He is putting words into my mouth. I answered my noble friend properly and fully in complimenting British Leyland on its recent success but at the same time saying that it has a long way to go in what is a hard and very competitive industry. I do not think that I should alter what I said earlier.

Lord De Freyne

No, my Lords. May I just—

Viscount Whitelaw

No, my Lords.