HL Deb 09 May 2000 vol 612 cc1387-96

4.10 p.m.

Lord McIntosh of Haringey

My Lords, with the leave of the House, and on behalf of my noble friend Lord Sainsbury of Turville, who is at this moment giving evidence before the Trade and Industry Select Committee in another place and therefore sends his apologies for his unavoidable absence, I should like to repeat a Statement which has been made by my right honourable friend the Secretary of State for Trade and Industry. The Statement is as follows:

"I should like to make a Statement concerning the latest developments at Rover. Earlier today BMW announced that they have agreed to sell Rover cars to the Phoenix consortium. Negotiations have been concluded and contracts signed.

"This is clearly welcome news—for the workers at Longbridge and the wider community in the West Midlands. I am sure it is news that all Members will welcome, especially my honourable friend for Birmingham Northfield, who is at Longbridge this afternoon and has worked hard to support the workforce during this difficult period. It will preserve volume car manufacture at Longbridge and will safeguard the majority of jobs there, and minimise the knock-on effects in the supply chain.

"I should like to add my personal congratulations to John Towers on the way in which he pulled the consortium together and brought what I know must have been difficult negotiations to a successful conclusion. He has been determined and dogged in the face of hostility and criticism. His personal strengths will be invaluable to the Phoenix consortium.

"Since BMW announced its decision to sell Rover, the Government's main concern has been with the workers at Longbridge, Rover suppliers, their families and communities. They have faced a considerable period of uncertainty over the past six weeks. It has been something of a rollercoaster for them—swinging between dismay and hope, as their future was decided in various negotiations with BMW. Today's news finally provides some welcome certainty for the Longbridge site.

"However, there will still be some redundancies. Our priority is to do everything we can to help those affected, to provide training and to attract new jobs to the area. That is the role of government: to manage change; to equip people for change; not to leave them to be the innocent victims of change.

"We have always been clear that the role of government is not to run the commercial negotiations between the interested parties. The Phoenix consortium has not sought government finance for its proposals. John Towers has always maintained that the Phoenix bid is viable on its own and would get funding from commercial sources. The Government have not played the old role of throwing money at a problem in the hope that it will go away. Nor have we adopted the laissez faire attitude of the previous government—just standing to one side and doing nothing.

"Instead, we have taken an active role to facilitate the commercial negotiations over the future of Rover and to provide support for those workers and companies adversely affected by commercial decisions. Our role has been to bring people together to look at how to move forward. It was the Government who brought John Towers and BMW together for their first face-to-face meeting on 10th April. And we have remained in contact with both parties throughout. We must now turn our attention to those who will be adversely affected by today's announcement.

"I am pleased that most of the workforce will be offered a future at Rover. But today our thoughts must be with those who will lose their jobs. The Government will be doing all they can to help with this situation. I can announce that the task force will remain in place, and I expect its continuing work will take account of all developments, including the consequences of Phoenix's plans for suppliers. It will produce its final report to me in June. My right honourable friend the Secretary of State for Education and Employment and I have already put in place measures to assist any workers made redundant, to help affected supplier companies, and to help attract new investment and employment.

"I am also able to confirm that the £129 million promised to the task force will remain available for good quality projects in the region which provide long-term economic regeneration and job creation.

"We must not underestimate the remaining difficulties ahead. The new owners of Rover will have to sell cars in a highly competitive market. The car industry is a fast moving global market going through major structural change. These are difficult times for vehicle manufacturers throughout the world. But there have been a number of recent announcements which show the strength of vehicle manufacture in the United Kingdom.

"Only last week, Vauxhall announced £189 million of new investment, which will create 500 new jobs at its Luton factory. Honda has announced 130 million of investment in Swindon to allow the production of a new model. Peugeot doubled its production in the UK in the past year. Jaguar achieved record sales and record production in 1999. And last month's sales figures showed that British built cars increased their sales, against the general trend.

"There will be many lessons to be learnt from Longbridge upon which we will need to reflect. However, it is clear that there can be no return to outdated interventionism. The corporate state has been tried and it simply did not work. But nor did a naive reliance on laissez-faire, which led to a crippling obsession with what Government should not do. The role for Government is to create an environment which encourages enterprise and creates wealth and jobs.

"But today belongs to John Towers, the Phoenix consortium, the workers at Longbridge and the people of the West Midlands. Through adversity they have demonstrated great strengths and we look forward to working with them to meet the challenges that lie ahead".

My Lords, that concludes the Statement.

4.16 p.m.

Lord Mackay of Ardbrecknish

My Lords, perhaps I should first say how pleased I am that the noble Lord, Lord McIntosh of Haringey, has made the Statement. Given the fact that he does so much work, it seems only fair that he is allowed to give the good news as well as sometimes deal with some of the more difficult issues.

I am sure that everyone shares the Government's relief at this outcome. But, equally, I am sure that it is nothing to the relief which is being felt in the West Midlands. The whole House will wish John Towers and his consortium well in what will not be an easy task. I noticed that the Minister did not make light of the difficulties that will be facing the consortium. As the Secretary of State has received an accolade from no less a person than the Prime Minister for brokering this deal, will he be keeping a close eye on the progress of the deal and trying to solve some of the difficulties that will come through as the months pass?

That is particularly important when it comes to the number of people who will be made redundant. Various numbers have been speculated about—1,000 or 1,500. Can the Government help in that regard and give an indication of how many may be made redundant, not just in the car company itself but how that might produce a knock-on effect in some of the component companies?

Even though the task force may not have the uphill struggle it sometimes looked as if it might have to face, it will still have a difficult task in order to find jobs for those who are made redundant. I very much welcome the fact that the £120 million which has been pledged to the task force is to remain available. Has that been cleared by the European Commission?

On the subject of the European Commission, Ministers will recall that the Government had promised £150 million to BMW, although clearance had not been received from the Commission by the time BMW decided that enough was enough. I heard the Minister say that John Towers and his consortium had not asked for that £150 million. But perhaps I may ask whether it would still be available to them if they did ask for it.

BMW had planned to spend £1 billion on retooling the plant in order to produce a new generation of models. Is the Minister satisfied that the consortium can get access to that amount of money? It is hugely more than the £200 million mentioned in the Statement and already coming from an American bank. If it cannot get access to that kind of money, will it be looking for some kind of joint venture to provide the investment which Longbridge undoubtedly needs? I read on what we must now call the "Web" rather than the tapes that a production worker in Birmingham, Mr Roger Voice, is quoted as saying, It's magic news"— none of us would disagree with that— but I would have to say what is the long-term plan?". Will the Minister give some indication of the longterm plan?

BMW also owns a body plant at Swindon, which I gather employs some 3,500 men. I wonder what the position of that plant is. Phoenix has said that it has "an option on the plant". What exactly does that mean? Are there plans for its continuation?

I turn to the £500 million which the consortium will receive from BMW. What exactly is that money for? Some of it, but it is to be hoped not the whole amount., will clearly be used to fund redundancy. Do I detect that what is not required for redundancy payments may well be needed for pension fund provision, to make sure that the pension fund as it is handed over to Phoenix is in a proper state of health? I should be grateful if the Minister would clarify the position. Although it is important to have money available to fund redundancy, it is important also for the workers to know that their pension funds are secure.

While Rover sales have recently been very encouraging, do the Government accept that the rate of the euro against the pound does not help British car companies to export into Europe? Perhaps the Minister can help John Towers by having a brief word with the Chancellor of the Exchequer about this difficult problem.

Finally, perhaps I may repeat my welcome for this news and give my best wishes and those of this side of the House, and I am sure the whole House, to John Towers and his Phoenix consortium for the success of what I believe is a brave venture.

4.21 p.m.

Lord Razzall

My Lords, I should like to join in the congratulations given by the noble Lord, Lord Mackay, and I am sure Members on all sides of the House, not only to the Government on bringing forward the Statement but also to the Towers consortium. Clearly, they have pulled off a remarkable effort, contrary to every expectation in the financial world and the financial press and to the questions about whether it was capable of being done.

Many of us have not yet seen the detail, if we ever shall, of the "boiler plate" of the transaction, but there are obviously third party organisations which are to be congratulated on their participation in the consortium. Presumably, the much vilified BMW deserves just a slight paean of praise for its participation in the financial transaction that has resulted in the Statement; as do the American banks or financial institutions which have been induced, as we are led to believe from reports in the press, to put up the £200 million of overdraft finance that the UK clearers were not prepared to put up.

I share the feelings of other noble Lords about the Statement. Its tone is absolutely right so far as the Government are concerned. This is not a self-congratulatory Statement or one in which they blow their own trumpet. All noble Lords will be grateful for that. The Government will recognise, notwithstanding the criticism that the Secretary of State has had piled upon him in the past month or two, that it would indeed be tempting for him to make the proverbial gesture with two fingers towards his critics at this moment. I am glad that he has not chosen this opportunity to do so. I listened to him making the Statement in another place. A Labour Member behind him said that there should be drinks and dancing in the streets. The Secretary of State is wise enough to realise that this is not necessarily a moment for dancing in the streets. Perhaps a modest sherry might be appropriate rather than a vintage cru. He will be the first to recognise, as will the House, that there are significant difficulties ahead for this operation. As we all know, and as many Members on the other side of the Chamber demonstrated the last time we debated the matter, there is significant surplus capacity for mass market vehicles in Europe at present. That problem has not been waved away by this transaction.

There are suggestions that, particularly at Longbridge, productivity is not what it might be. That is certainly the case in comparison with a large number of competitive mass-market plants in Europe. Dare I say that the Rover mark is not necessarily the hottest mark if you want to buy a modern mass-market car? As the noble Lord, Lord Mackay, has indicated, a massive investment programme is still necessary as regards Longbridge and to turn Rover cars into the mass-market vehicles which the consortium clearly wants them to be. There must be a question mark over where that funding will come from.

That said, I do not want to carp. This is clearly a very good day for Britain and for the motor car industry. Noble Lords would not expect me to sit down without saying—I anticipate the groans that will come from my left, or should I say my Right?—that not only is this an opportunity for the Government to think longer term about the problems of the West Midlands; it is the moment for them to take time to reflect on the damage that the exchange rate is doing to manufacturing industry and the damage that Britain's failure to join the euro is doing to manufacturing industry and to come up with a policy to get us in there as soon as possible.

4.25 p.m.

Lord McIntosh of Haringey

My Lords, I am grateful to both noble Lords for the way in which they have responded to the Statement and for the unequivocal support they have given to the result of very difficult negotiations over the past month. I am particularly grateful to the noble Lord, Lord Razzall, for his remarks about the tone of the Statement. Certainly, although we rule out the policy options both of interventionism and of laissez-faire, nevertheless, it would be easy to be triumphalist about this. Although my right honourable friend the Secretary of State deserves a great deal of credit for having brought the two parties together for the first time on 10th April, he has shown great restraint in the way he has phrased his Statement.

To respond to the noble Lord, Lord Mackay, the Secretary of State will certainly be keeping a close eye on progress in so far as it is proper for him to do so; in other words, in so far as he is not interfering with the commercial relationships of the two companies.

The noble Lord asked me whether I had any further information about the numbers of likely redundancies and likely knock-on redundancies in the West Midlands other than at Longbridge. I am afraid that I do not have any further figures. I heard the figures quoted by the noble Lord, but no doubt these issues will become clearer in the next few days.

The noble Lord, Lord Mackay, asked also whether the task force money, which will continue, has been cleared with the European Commission. Perhaps I should make it clear that the £158 million that was originally proposed in assistance included the £129 million of task force money for the West Midlands. That money was never intended to go to Rover, whether under Phoenix or any other arrangement. It is money that is largely regional assistance to the West Midlands for retraining, skills training and so on, and is therefore not subject to any European Commission regulation.

The noble Lord asked also whether there are likely to be any further joint ventures. I am afraid that it is too early for me to give any response to that question. The noble Lord is right in saying, as did the noble Lord, Lord Razzall, that there will have to be longer-term plans for the future of the Longbridge site and they must include not only the production and sale of existing models but the development of new models. In the motor car industry, firms cannot simply stand still.

The noble Lord asked what the future of the Swindon plant will be. Swindon will stay with BMW, which will no doubt make announcements about the Swindon plant in due course. I am not aware of any threat to employment at the Swindon plant.

The noble Lord asked me, quite properly, where the £500 million sweetener—I do not believe that he used that term—from BMW to Phoenix would go. My answer is that as little as possible should go in redundancy and pension payments because there should be as few redundancies as possible. As much as possible of that sum should be devoted to continuing the production, marketing and sales of vehicles produced at Longbridge. I am sure that that is the intention of the Phoenix consortium.

The noble Lord, Lord Razzall, made some welcome and helpful remarks about the role of the banks. Critical comments have been made in the past few days about the unwillingness of banks to support ventures of this kind. I do not have any further details about the banks which have contributed. However, they have made a valuable contribution, and the Government are grateful to everybody who has taken part in this matter. The noble Lord, Lord Razzall, is right to say that there is surplus capacity in the car market in Europe as a whole and large parts of the world. The fact that in this country in the past month Rover sales have gone up while those of BMW have reduced substantially is very welcome. That may simply be an emotional reaction, and perhaps Rover-Phoenix should not bank on that market share continuing in future months. I believe that it would be the first to say that Rover must deserve the continued increase in market share.

In expressing my gratitude to noble Lords for their appreciation of the significance of this Statement, clearly this matter is of importance not only to the Longbridge plant and the West Midlands but the country as a whole. If the noble Lord, Lord Razzall, wants to extend it to cover the exchange rate I suggest that he reads the Chancellor of the Exchequer's Meade Lecture at the London School of Economics last night.

Lord Clinton-Davis

My Lords, does the Minister agree, first, that the noble Lord, Lord Mackay of Ardbrecknish, is far more amenable to reason than his counterpart in the other place who expressed indifference to the idea that Rover should be saved in this way, albeit temporarily? Secondly, does my noble friend agree that Rover-Phoenix requires considerable support from either a British or foreign car manufacturer and cannot do it on its own? Therefore, that is a substantial reason for intensifying the search for a partner in the enterprise that Rover-Phoenix is undertaking at the present time. Can the Minister give an assurance that Rover-Phoenix is presently engaged in that search?

Lord McIntosh of Haringey

My Lords, I am not aware of what the Opposition spokesman said in another place in response to the Statement. At the time I was rather stuck to my desk here. I read a report of her response to this matter on BBC News 24 at 9.30 this morning. On the whole, the response was reasonably welcoming. She said that a good number of people would be relieved and that applications for funding would receive support. She confirmed, as we all agree, that there must be a viable business plan for the future.

In that respect I very much agree with the observations of my noble friend about the future. Perhaps this refers back to one point raised by the noble Lord, Lord Mackay. Mr Towers has said that the long-term future of Rover depends on collaboration and he will pursue that route in his long-term planning. I believe that that confirms the remarks of both my noble friend and the noble Lord, Lord Mackay, and the Government welcome it.

The Lord Bishop of Oxford

My Lords, obviously this is very good news. The agreement is a brave one. The new Rover 75 is a superb car and deserves to sell well not only in this country but abroad. I have one concern about Cowley. Longbridge has been mentioned a number of times. However, I am led to believe that production of the new Rover 75 as well as the old Mini will switch from Cowley to Longbridge. Cowley has been crucial to the economy of Oxford for many decades. Is the Minister able to share any information about the position of Cowley under 'the new Phoenix consortium?

Lord McIntosh of Haringey

My Lords, I hope that I am able to reassure the right reverend Prelate. It is true that Rover 75 production will move from Cowley to Longbridge. On the other hand, BMW has said that it will develop the new Mini at the Cowley site which it continues to own. I understand that that will continue to occupy the Cowley site and there will be no redundancies there.

Lord Naseby

My Lords, as I understood the position this morning, the £200 million from the American bank was subject to due diligence. First, is the Minister able to clarify whether or not that major restriction has been waived? Secondly, I understand that the £158 million and £129 million for the task force have nothing to do with Europe. Is the Minister able to confirm that none of the money that is to go to the new consortium requires approval by Europe?

Lord McIntosh of Haringey

My Lords, in response to the first question, I am not aware of any clue diligence requirement by any bank. I do not believe that such details have been made public. As far as I am aware, they have not been made available to the Government. The noble Lord may be better informed than I am on that matter. As to the £158 million and £129 million, I confirm that little, if any, of the £129 million which is to go to the task force for regeneration in the West Midlands is in any way affected by the European Commission or requires approval by it. As to any money that may go to Rover, Mr Towers and the Phoenix consortium have not asked for any state aid for Rover and none has been offered.

Baroness Crawley

My Lords, as someone who represented Longbridge as a Member of the European Parliament for 15 years until June 1999, I should like to add my congratulations to the Government, to Phoenix, the trade unions at Longbridge, the Government Office of the West Midlands and those who are very much involved in the task force. If ever an RDA chairman had a baptism of fire, it is Alex Stephenson as head of the task force. Perhaps the Minister is able to give a little more detail about the way in which the £129 million will assist the priorities of the task force. My noble friend referred to retraining. However, I am aware that the task force wants to diversify the manufacturing base of the West Midlands and attract new investment into that area as well as retrain any workers at Longbridge who are made redundant. I suspect that tonight workers at Longbridge will have more than a little sherry.

Lord McIntosh of Haringey

My Lords, I am grateful for my noble friend's contribution. She asked specifically about the allocation of task force money. The report of the task produced last month set out in some detail the proposed allocation of that money under various heads: skills training, development of sites and so on. I am sure that in the light of the new announcement, which means that there are going to be many fewer direct or indirect job losses than were feared, the task force will be reconsidering its priorities and the way in which it wishes to use the money. The good news is likely to be that because less will have to go on "fire fighting", more will be available for the longer-term development of manufacturing capacity and manufacturing employment in the West Midlands. I think my noble friend and the Government must await the task force's review of its own recommendations.

Lord Islwyn

My Lords, will the Minister appreciate that this agreement will be particularly welcome in the British steel industry, which is a major basic supplier to Rover? There have been ugly rumours in recent weeks and months about the future of certain steel plants in this country. Would he further consider the fact that, prior to the BMW takeover, Rover had a very useful agreement with the Japanese company Honda? Does he feel that it would be a good idea if this connection could be resumed?

Lord McIntosh of Haringey

My Lords, on my noble friend's first point, yes indeed, I am well aware that there will be much relief in the British steel industry. In particular, although he did not name it, Llanwern will be very much relieved that its sales to Longbridge will continue. It is an important contract for it. It will be important to see that the contract continues and it must also be important to the continued success of Llanwern.

As to the issue of co-operation or joint ventures with Honda, or indeed others, I can only repeat what I said in response to the noble Lord, Lord Mackay: that Mr Towers and the consortium have made it clear that they do see their future, among other things, in joint ventures. Those may well include Honda, but I do not know what their specific plans are.

Lord Shore of Stepney

My Lords, this is certainly welcome news but the big question now, as I am sure my noble friend will agree, is whether this is a temporary reprieve or really a new lease of life. I hope very much, as he does, that it will be the latter. However, there are two points which I am sure must puzzle others as well as myself. The BMW company was running at a loss of £700 million a year in that plant. That was last year's figure. What new factor has arisen that really seriously challenges that appallingly heavy loss figure? Secondly, because it is such a relevant factor, what advice, guidance or assurance were ministers and the Chancellor able to give the new company about the exchange rate between sterling and the euro?

Lord McIntosh of Haringey

My Lords, I think I made it clear in my response to the noble Lord, Lord Razzall, that as far as I know no assurances have been given to Mr Towers or the new consortium about the exchange rate. I am sure that my noble friend will have read the Chancellor's statement—I know he does his homework—and he will have seen that the Chancellor takes a very realistic view of the effect of the exchange rate on manufacturing industry. He is aware of the problems that arise from the strength of the pound or the weakness of the euro, according to which way round you choose to put it.

Of course it is true that in a sense nothing has changed. There is still over-capacity in the car industry as a whole, and Rover will have to fight its own corner in that respect. I think the best indication I can give to my noble friend that it is more likely to be a successful operation than has been the case in the past is that both the Phoenix consortium and BMW have said they believe that this is a winning solution and can be made to succeed.