(c) crown copyright

Catalogue Reference:PREM/19/259

Image Reference:0001

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PART

begins:

T O BE R E T A I N E D AS T O P E N C L O S U R E

Cabinet / Cabinet Committee Documents

Reference CC(80) 14"' Conclusions, Item 5 (Extract) CC( 80) 16"* Conclusions, Item 4 (Extract) Date 27/03/80 17/04/80

The documents listed above, which were enclosed on this file, have been removed and destroyed. Such documents are the responsibility of the Cabinet Office. When released they are available in the appropriate C A B (CABINET OFFICE) CLASSES

Signed

CMdo^ta*^-

Date

4 Mdy

P R E M Records Team

10 D O W N I N G

STREET

St>

cc Mr S t r a u s s / *

Mr Lanhepier*/
MR IIOSKYNS A BL - METRO PROJECT I saw BL's new Metro f a c i l i t i e s Although t h e r e were some e n c o u r a g i n g J
n A
r

-i H

^ ^

at Longbridge on F r i d a y .

I tend to d e s p a i r o f r e a l changes ever t a k i n g p l a c e at BL,

signs:
has been very highly
i n robot

(a) The manufacture o f the body s h e l l automated.

T h i s has meant a massive investment

w e l d i n g equipment, from Germany, France and e l s e w h e r e .

No l e s s than s i x c o m p e t i t i v e t e n d e r s were r e c e i v e d f o r
most o f t h i s equipment. a l s o means t h a t q u a l i t y Of course i t g r e a t l y s h o u l d be much more reduces It

manning l e v e l s p e r c a r , but at c o n s i d e r a b l e c o s t .

consistent.

(b) The work f o r c e was i n v o l v e d i n the d e c i s i o n t o buy h i g h t e c h n o l o g y f-om the o u t s e t , and have never been allowed to forget that. made. Maintenance workers f o r the robot equipment i t as i t was plants. were sent to France and Germany to l e . i .n abovt They a l s o saw i t i n use i n c o n t i n e n t a l

I was t o l d t h a t t h i s had opened t h e i r eyes t o new ways o f doing things.

( c ) Management have i n s i s t e d t h a t the n a t u r e o f m a i l t e n a n c e work

on the new robot l i n e s must be r e - d e f i n e d . around i n s t a t i o n s Instead of s i t t i n g
from which they emerge when r e q u e s t e d ,
and qua 1 i t y i s m a i n t a i n e d , hour b y

maintenance workers a r e a c t u a l l y r e s p o n s i b l e f o r e n s u r i n g
t h a t the l e v e l o f output hour. So they are p a t r o l l i n g these l i n e s l o o k i n g f o r s o u r c e s

o f t r o u b l e , b e f o r e they break o u t .
(d) Whenever a r o b o t l i n e i s s t o p p e d , the name o f the s u p e r v i s o r
r e s p o n s i b l e f o r s t o p p i n g i t - and h i s reason - a r e r e c o r d e d .
T h i s i s a l l p a r t o f an e x e r c i s e to make those r u n n i n g the
production l i n e s accountable level.

f o r both q u a l i t y and output

/(c)

(e) O

I was

t o l d t h a t the new working p r a c t i s e s document ( e v e n t u a l l y

around
Longbridge f a c i l i t y work e f f i c i e n t l y .
- by which

imposed as p a r t o f the l a s t pay round) had been designed the need t o make the new ( I t p r o v i d e s f o r much g r e a t e r f l e x i b i l i t y every change was

i n the deployment

of manpower, and ends the " m u t u a l i t y " p r i n c i p l e

by custom agreed with shop stewards.)

( f ) There i s l e s s scope f o r b i g r e d u c t i o n s i n manning when i t

comes t o t h e f i n a l assembly s t a g e - where a l l the b i t s p i e c e s are put on o r i n the body s h e l l . i n t e n s i v e work. lies The main scope f o r p r o d u c t i v i t y and

This i s labour
improvements

i n the d e s i g n o f the c a r and i t s components - which has

been g r e a t l y improved from a m a n u f a c t u r i n g p o i n t o f view.

(g) Only about 10 per cent of the work f o r c e are able t o work
overtime a t present.
The c a r i t s e l f r-eems a c o m p e t i t i v e e n t r y to the s m a l l c a r market. Obviously I

I t s s t r o n g p o i n t s are compactness, an e x c e l l e n t r a t i o of i n t e r i o r space t o e x t e r i o r s i z e , f u e l economy and ease o f maintenance. the p r i c e w i l l be determined by p r e s e n t I have not seen the f i n a n c i a l year a t l e a s t . i n f o r m a t i o n which would t e l l United much fairly f i e r c e market c o n d i t i o n s . us the i n the next

scope f o r making a p r o f i t - i t must be s t r i c t l y Nor can we p r e d i c t how

room the Metro w i l l

l e a v e i n the UK market p l a c e f o r the o l d m i n i .

18 June 1980

ANDREW DUGUID

CABINET OFFICE
Central Policy Review Slajf

With the compliment* of J . R . Ibbs

70 Whitehall, London S W i A 2AS Telephone 01-233 7765

siiciu-r

CABINET

OFFICE ^
1 >

Central Policy Review Staff

7 0 Whiteh all, London SWIA axs Telephone 01-233 7765 /torn; J . R. Ibbs Qa 05033

V-^j

22 May 1980

BL

From what M i c h a e l that the e x i s t i n g Edwardea t o l d us a t d i n n e r l a s t defined night I believe t o be

'BL P l a n ' ,

as a proposed s e t o f a c t i o n s input,

carried

out w i t h i n a s p e c i f i e d I t also appears

p a t t e r n o f l i m i t e d cash

i s now n o t the b e s t

possible. course

that. M i c h a e l

Edwardes b e l i e v e s

that

of action

i n the new c i r c u m s t a n c e s about

would be t o p u r s u e t h e and, i n the invest cash

collaborative rest ment.

deal

which he i s c u r r e n t l y n e g o t i a t i n g with

o f the b u s i n e s s , I t seems t h i s

to continue would e n t a i l

r e s t r u c t u r i n g and s e l e c t i v e

some a d d i t i o n a l a s y e t u n s p e c i f i e d

injection. To me i t seems i m p o r t a n t a t t h i s assessment o f the s i t u a t i o n , view It i s not necessarily because stage t o make a f r e s h course detached

the best

from B L ' s p o i n t o f viewpoint. (even

the r i g h t before

one from there

the G o v e r n m e n t ' s

i s i m p o r t a n t t o do t h i s to a p o t e n t i a l I am t h e r e f o r e

i s any e l e m e n t o f commitment

moral)

collaborator. a r r a n g i n g f o r some work t o be done t h a t a r e now r e a l i s t i c a l l y the i m p l i c a t i o n s o f each. i n t h e CPRS on open f o r Initially

defining

t h e range

of options

consideration this will have

and on s p e c i f y i n g to be done

i n qualitative

terms b u t some

quantitative will be needed

comparisons, as

p a r t i c u l a r l y i n respect

o f cash

requirements,

soon a s i n f o r m a t i o n i s a v a i l a b l e .

Sources

o f s u c h i n f o r m a t i o n w i l l be and a l s o revised

the a s s e s s m e n t b y Mr G r e n s i d e o f P e a t Marwick M i t c h e l l forecasts by B L .

The R t Hon S i r K e i t h J o s e p h B t MP Department o f I n d u s t r y A SI [DOWN HOUSE S W 1 1 SECRET

SECRET I should l e t you know t h a t I am p u t t i n g t h i s that work i n hand closely

I feel is

because i t

obviously desirable this. this

the CPRS s h o u l d work

w i t h y o u r Department on

am s e n d i n g a copy o f

letter

to the Prime M i n i s t e r ,

the

C h a n c e l l o r of

the E x c h e q u e r , and to S i r R o b e r t A r m s t r o n g .

d it IbbB

SECRET

SECRET: COMMERCIAL IN CONFIDENCE

-gsr

i?

few
22 May 1980

10 DOWNING STREET
From the Private Secretary

British

Leyland

As you know, the Prime M i n i s t e r h e l d an i n f o r m a l d i n n e r

l a s t n i g h t f o r S i r M i c h a e l Edwardes. The f o l l o w i n g were
a l s o p r e s e n t i n a d d i t i o n to your S e c r e t a r y o f S t a t e : the
Chance 1 l o r o f the Exchequer, S i r A u s t i n B i d e , Mr. David
Andrews and Mr. Robin Ibbs. The f o l l o w i n g i s a summary o f
the main p o i n t s which came up i n d i s c u s s i o n .
S i r M i c h a e l Edwardes f i r s t out 1ined the p r o g r e s s
which had been made at B.L. towards r e c o v e r y . A s t r o n g
Board and improved management team had been e s t a b l i s h e d .
S i n c e 1977, manpower had been reduced by some 30,000.
The c l o s u r e programme had been pushed ahead. Important
changes i n work p r a c t i c e s wt>-e b e i n g implemented. At a
time when o t h e r companies were s e t t l i n g f o r much more, B.L.
Cars had a c h i e v e d a pay d e a l a v e r n g i n g 7 i p e r c e n t . And
an e x c e l l e n t new p r o d u c t , the M i n i Metro, was t o be launched
i n the autumn - with a m a n u f a c t u r i n g f a c i l i t y up t o the
b e s t European s t a n d a r d s . In addi t ior., two important c o l
l a b o r a t i o n d e a l s - one w i t h Honda, the o t h e r with Z.F. were a l r e a d y i n p l a c e , and o t h e r major d e a l s were on the
horizon.
S i r M i c h a e l i m p l i e d t h a t , as f a r as those m a t t e r s
w i t h i n the Company's c o n t r o l were c o n c e r n e d , B.L. was
d o i n g as w e l l as c o u l d be e x p e c t e d . However, they f a c e d
a much worse t r a d i n g environment than had been assumed
when the 19S0 P l a n was p r e p a r e d , and even more so than had
been assumed back i n 1977. In p a r t i c u l a r , the U.K.'s h i g h e r
r a t e o f i n f l a t i o n and s t e r l i n g ' s a p p r e c i a t i o n had meant a
d r a s t i c d e t e r i o r a t i o n i n competi t i v e n e s s . (At t h i s p o i n t ,
Mr. Andrews handed out some g r a p h s , c o p i e s o f which I e n c l o s e . )
E x p o r t i n g t o some c o u n t r i e s , such as the U.S.A., was now
b e i n g done at a l o s s ; and even the export p r o f i t a b i l i t y o f
the Land Rover was b e g i n n i n g t o come under p r e s s u r e . B.L.
d i d not b e n e f i t much from lower import p r i c e s because n e a r l y
a l l o f i t s bought-in m a t e r i a l s came from U.K. s u p p l i e r s .
However, the Company were now l o o k i n g v e r y c r i t i c a l l y a t
the cost o f U.K. components, t a k i n g i n t c account i n p a r t i c u l a r the f a c t t h a t many s u p p l i e r s h a d cone l u d e d p a y set t l e n i e n t s of 15 p e r cent and more, and were t r y i n g to pass the e x t r a c o s t on t o B.L.. B.L. were c l e a r l y not i n a p o s i t i o n to pay u n c o m p e t i t i v e p r i c e s ; and although they had an i n t e r e s t / i n the s u r v i v a l
SECRET: COMMERCIAL IN CONFIDENCE

SECRET: COMMERCIAL IN CONFIDENCE

2 -

M \ \ in the survival of the U.K. components industry, they were now telling their suppliers that they would have to take into account the latter's pay settlements in deciding whether or not to agree price increases. ( S i r Michael handed over a l i s t of settlements in the components industry - copy enclosed.) In parenthesis, S i r Michael said that he wished Ministers would do more to educate the publie on the trade-off between high pay settlements and Jobs. The Government's policies were having a slower effect than Ministers must have hoped: their early success was essential for BL's success. Sir Michael went on to say that on the new economic
assumptions which they were using (and which were, i f anything,
at the optimistic end of the range) BL's cash flow would f a l l
several hundred million pounds snort over the Plan period. This
meant that there would not be funds for some of the new products
which had been planned . But even eliminating this expenditure
would s t i l l leave the company with a large cash s h o r t f a l l . They
would be able to live within the 300m cash limit for 1980, but the
El30m provisionally set aside for 1981 and the assumption that no
Government funding would be necessary thereafter were now unrealistic.
The BL board were not yet in a position to express a view as to
whether they could achieve long term v i a b i l i t y ; but they were clear
that more Government funding would be needed.
The most c r i t i c a l element in the Plan was the success or
failure of the Mini-Metro. If the Metro f a i l e d , the Plan would be
finished. The other crucial aspect - and this would affect the
amount of extra funding required - was whether BL could complete
an important collaborat ion deal wi th a major German manufacturer.
Sir Michael would not name the company, but said that B.L were
entering into urgent talks with a view to collaboration, including
an element of equity funding, in the Rover/Triumph and Four-wheeled
Drive product groups. 11 would offer the prospect of investment
savings for both companies. They should know by about mid-June
whether this was likely to come off; the prospects seemed quite
good. If a deal was completed, this could substantially reduce the
amount of extra funding required. Nonetheless, up to 500 million
extra could s t i l l be required over a three to four year period.
Against this background, the Government would be faced with
the p o l i t i c a l decision later in the year of whether to provide
additional funds, or to wi thdraw support; or as a further
alternative, though he realised this was largely hypothetical,
1
to impose i mport controls. I f the Government decided not to provide
the extra funding needed, he doubted whether the Plan could be
aborted with a "soft landing''. The prospects for selling most
parts of the business in the near future were not good, and the
costs of run down would be very substantial.
Sir Michael said that he had been doing everything
possible to explore the p o s s i b i l i t i e s for collaboration and
sale. As regards collaboration, the hoped-for deal with the German
company seemed the best prospect available. As regards
outright sale, there was no company in
/ the world
SECRET: COMMERCIAL IN CONFIDENCE

the w o r l d i n t e r e s t e d i n p u r c h a s i n g the business as a w h o l e . The

J a p a n e s e w e r e n o t i n t e r e s t e d b e c a u s e i t was cheaper to manufacture
v e h i c l e s i n J a p a n and e x p o r t t o t h e UK a n d E u r o p e ; t h e US companies
h a d e n o u g h d i f f i c u l t i e s a t home; a n d n o n e o f t h e E u r o p e a n c o m p a n i e s
were i n t e r e s t e d i n e i t h e r . I t was p o s s i b l e that the Japanese might
b e m o r e i n t e r e s t e d i f t h e r e was a r e a l t h r e a t of import controls.
As r e g a r d s s e l l i n g o f f p a r t s o f t h e b u s i n e s s , o n l y L a n d R o v e r
c o u l d be s o l d o f f a t a good p r i c e a t t h e moment; b u t i f i t w e r e s o l d , t h i s would remove BL's b e s t p r o d u c t and l e a v e t h e r e s t o f t h e business s e r i o u s l y weakened. The p r o s p e c t o f s e l l i n g o t h e r p a r t s o f the
b u s i n e s s w o u l d be b e t t e r i n a y e a r o r two's t i m e as the recovery
p r o g r a m m e moved a h e a d . S i r M i c h a e l mentioned t h a t the J a p a n e s e were
i n t e r e s t e d i n p u r c h a s i n g BL's Belgian plant or a l t e r n a t i v e l y , their
p l a n t at S o l i h u l l ; t h e r e were a t t r a c t i o n s f o r BL i n b o t h o f these
p o s s i b i l i t i e s , but t h e y a l s o had t o t a k e i n t o a c c o u n t t h e e f f e c t that " l e t t i n g t h e J a p a n e s e i n " w o u l d h a v e on t h e i r r e l a t i o n s w i t h European manufacturers. T h e r e was a c o n s i d e r a b l e r i s k t h a t - i f BL h e l p e d the J a p a n e s e t o s e t up a m a n u f a c t u r i n g b a s e - t h i s w o u l d s p o i 1 BL's
prospects of collaboration in Europe.

The P r i m e M i n i s t e r s a i d s h e h a d b e e n v e r y d i s t u r b e d by S i r M i c h a e l ' s l e t t e r o f 15 May i n s o f a r as i t f a i l e d t o c o n f i r m t h a t long-term v i a b i l i t y was attainable. A l t h o u g h S i r M i c h a e l and h i s team had even more c o n c e r n e d i n the l i g h t of a c h i e v e d a g r e a t d e a l , s h e was now S i r M i c h a e l ' s a s s e r t i o n t h a t e x t r a f u n d i n g w o u l d be n e e d e d . Whatever the causes f o r the d e t e r i o r a t i o n i n cash-flow, BL was f a i l i n g t o meet their plan targets. She c o u l d not accept that f a c t o r s e x t e r n a l to BJ. s h o u l d t a k e a l l t h e b l a m e ; a n d t o t h e e x t e n t t h a t t h e y w e r e r e s p o n s i b l e , BL w o u l d h a v e t o make t h e n e c e s s a r y adjustments in p e r f o r m a n c e and s c a l e o f o p e r a t i o n . W i t h h e a v y c a l l s on t h e Contingency R e s e r v e a l r e a d y i n p r o s p e t t t h e r e c o u l d be no p r e s u m p t i o n that a d d i t i o n a l f u n d s w o u l d be p r o v i d e d . S i r K e i t h a d d e d t h a t f o r t h e Governier.: t o p r o v i d e a d d i t i o n a l f u n d s w o u l d h s v e immense s i g n i f i c a n c e f o r i t s whole a p p r o a c h t o e c o n o m i c and i n d u s t r i a l policy: i t could only conceivably be d e f e n s i b l e i f f u r t h e r s i g n i f i c a n t p r o g r e s s c o u l d be demonstrated. The P r i m e M i n i s t e r s a i d t h a t the talks with s t o c k i n the l i g h t o f BL's w o r k b e i n g u n d e r t a k e n by Mr. Grenside t h e company w o u l d be preparing. Government would need to take t h e German c o m p a n y , t h e c o n t i igenc; and t h e r e v i s e d f o r e c a s t s w h i c h

F o l l o w i n g the d i n n e r , the Prime M i n i s t e r s a i d that M i n i s t e r s w i l l n e e d t o meet t o d i s c u s s BL a g a i n - c e r t a i n l y b e f o r e t h e summer recess. In t h e m e a n t i m e , t h e CPRS w i l l be d o i n g f u r t h e r w o r k t o r e f i n e t h e o p t i o n s f o r G o v e r n m e n t , a s n o d o u b t y o u r D e p a r t m e n t w i l 1. too.

I am s e n d i n g c o p i e s o f t h i s l e t t e r a short statement which S i r Michael left (HM T r e a s u r y ) , D a v i d W r i g h t ( C a b i n e t O f f In v i e w o f t h e s e n s i t i v e n a t u r e o f t h e d p l e a s e e n s u r e t h a t c o p i e s have the most and e n c l o s u r e s (including
behind) to John Wiggins
i c e ) and R o b i n I b b s (CPRS).
i s c u s s i o n , c o u l d you and they restricted c irculat ion.

T.K.C. E l l i s o n , Department of

Esq.,
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Industry.

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BL Limited From The Chairman's Office

Helen
JPL w o u l d l i k e MOE t o g e t t h i s tonight's dinner.
before

JPL s a i d t h a t t h e i n f o r m a t i o n comes f r o m
t h e company P u r c h a s e D i r e c t o r s i n A u s t i n
M o r r i s a n d LVL - t h e r e f o r e he c a n n o t v o u c h
f o r i t s a c c u r a c y - and hopes t h i s w i l l g i v e
MOE some i d e a o f t h e p a y s e t t l e m e n t s by o u r
suppliers.

P/22.5.

PAY SETTLEMENTS MAJOR AUSTIN MORRIS AND LEY LAND

SUPPLIERS VEHICLE?

NOTES:

1) A l l s u p p l y

Austin

Morris asterisk a l s o supp]y

2) Those marked w i t h Leyland Vehicles

Lucas E l e c t r i c a l

(notyet settled)

17-4% 16.5** 17-5#* 17-4%* 17.4^ J f 13.558 16.6%* 12.0$ 15.0%*15-0% 17.87%* 16.84%* 15-9% 15-0% 16.0% S . 8% I

Automotive Products Hardy Spicer

Lucas G i r l i n g - Heaters Triplex Safety Glass Garringtons RHP B e a r i n g s Hep w o r t h Dunlop Cam G e a r s Wilmot Firth Rists B r e a d c n Bumpers Furnishings Limited Castings Castings Co. and G r a n d age (Wheel D i v i s i o n )

Smiths I n d u s t r i e s - I n s t r u m e n t a t i o n

MgR

>1

Bromsgrove

Lay's M a l l e a b l e Qualcast

14-0% 19- 0^ 17.0% 16/19*

(Derby) L i m i t e d

Wilmot Breadcn Mechanisms ICI Limited (Darlaston) Supplies Foundry Division R u b e r y Owen Pianoforte GKN S a n k e y Gloucester Borg Warner T r a n s m i s s i o n s Vowles F o u n d r i e s Concentric Dartmouth Pumps Auto C a s t i n g s

j j

17.0%* .16 .0* 14.6$* 15 0/> 18.0% 10.0% 20.0* 15>0% 19.2%

$||

Kangol Magnet

Kay

H e t z e l e r
(Wingard)

18.0% 15.05 6 .0% on

18.0% on

B r i t ax ftipauits

1.10.79
I.5.8O

Smethwick Drop F o r g i n g
Jonas Woodhead
Jersey BSA J. Kapwood

17-3% 15-0% 16.0% 20.0% 17.5% 19-0% 15.4% 14-0% 20.0% 15-0% l8.5% 21.0% 17-5% 75%* 26.5% 17-0% 20.0% 16.0% 16.0%* 18.0% 17.0% 14.0%*
;f

S i n t e r e d Components
Burns (Glynwed P l a s t i c s )
(Vega)
(Bourne)

Britax A.C.

D e l c o

Autocast

M a r l e y Foam
B l n c k h e a t h Stamping
Holset Low and E n g i n e e r i n g
F l e t c h e r ( W i l l e n h a l l )

Condura F a b r i c s
Coopers F i l t e r s
Schlegal (U.K.)
M i l e s Redfern
RMI L i m i t e d
P r o d u c t s
Vandervell

G l a c i e r M e t a l
Ward and Magnatex
S t e r l i n g M e t a l s
Glynwed Screws and Carrington Co. F a s t e n i n g s
L i m i t e d
G o l d s t o n e

12.5/= l6.0%* 16 .0% 15-0%

S i l e n t Channels
S p e c i f l e x
John Stokes and Smith C l a y t o n Sons L i m i t e d
Forge

15.0% 11.0% 14 - 9 % *
18.5%

Rockwell Thompson
Bonnella Scottish Switches
Stamping and Engineering Co.

152%* 12.5% 15-0%

Radio M o b i l e L i m i t e d
George T a y l o r and Sons

Duport Foundries
Wolverhampton D i e C a s t i n g s
Yarwood Ingram
M e t a l l i f a c t u r e L i m i t e d
Metal Castings B a l l P l a s t i c s
GKN Automotive F a s t e n e r s
Aluminium Bronze Co.
B a r r a t t E n g i n e e r i n g
Bloxswitch Lock and Stamping Co.
Omers Faulkners
T . I . Cox L i m i t e d
Bescot Drop F o r g i n g s
Bridgetown I n d u s t r i e s L i m i t e d
P e r k i n s Engines
B r i t i s h S t e e l
(Worcester)

18.75% 1 8 . 4%
17 .5% 17-0% 16.0% 12.5% 17.0%* 16.0% 20.0% 16 .9% 15 -2% 14-9% 15 - 0%
16.0% 12.5%* 11 .0%* ( p l u s 4 -5% guaranteed bonus)

Public Water
Gas

Utilities
21 .4% 19 -5% 19.0%

E l e c t r i c i t y

SUMMARY

BUILDING A

VIABLE

BL

ON

SHIFTING

5AHPS

A f t e r I was a p p o i n t e d i n N o v e m b e r 1 9 7 7 , a n d t h e B o a r d and
t o p m a n a g e m e n t t e a m w e r e r e c o n s t i t u t e d , we took a l o n g , hard
look a t the company's p r o s p e c t s b e f o r e p u t t i n g f o r w a r d a P l a n
e a r l y i n 1978 w h i c h p r o v i d e d f o r B L ' s r e c o v e r y w i t h i n the
o r i g i n a l Government f u n d i n g l i m i t o f 1 , 0 0 0 m i l l i o n .
At fal or at t h a t time, the pound l; UK i n f l a t i o n w a s a l i t t l e lower; and 2^% p e r a n n u m .
s t o o d a t $1.80 and was forecast to
f o r e c a s t t o s t a y a t 10% p e r annum
GDP g r o w t h was forecast to continue

T h e n , a n d i n e a c h s u b s e q u e n t P l a n , we h a v e c o n s u l t e d t h e
Government about our economic a s s u m p t i o n s ; b u t on each
o c c a s i o n t h e a s s u m p t i o n s have h a d t o be r e v i s e d downwards
b e c a u s e t h e UK's own e c o n o m i c t a r g e t s h a v e n o t b e e n met.
T h e a s s u m p t i o n s we a r e now u s i n g t o p r e p a r e o u r 1981 P l a n a r e s i g n i f i c a n t l y more p e s s i m i s t i c t h a n t h o s e a c c e p t e d by the
G o v e r n m e n t i n o u r 1980 P l a n o n l y a few m o n t h s a g o . In
c o n t r a s t t o o u r 1 9 7 8 P l a n , we a r e now t a l k i n g about a $2.20
p o u n d f o r 19 8 1 ; n e g a t i v e GDP growth; a n d 14^% inflation,
i n a d d i t i o n t o t h e e v e n more s e r i o u s e c o n o m i c e n v i r o n m e n t
w h i c h we f a c e f o r t h e r e s t o f 19 8 0 .

i n b y l a t e 19 7 7 , i t i s r e m a r k a b l e G i v e n t h e m e s s t h a t B L was t h a t we h a v e m a d e s u c h i n t e r n a l p r o g r e s s a g a i n s t t h e d e t e r i o r a t i n g economic and c o m p e t i t i v e b a c k g r o u n d (see p a p e r A2). A new C h a i r m a n - o r i n d e e d a new o w n e r - t a k i n g o v e r B L a t

the p r e s e n t time would immediately seek a d d i t i o n a l external
funding (perhaps o f s e v e r a l hundred m i l l i o n pounds) t o
c o m p e n s a t e f o r t h e e c o n o m i c e n v i r o n m e n t i n w h i c h he was
expected to operate. But t h e p r e s e n t BL B o a r d h a s , and will
c o n t i n u e t o l o o k f o r a l l p o s s i b l e ways o f s a v i n g c a s h and
a d a p t i n g t o t h e UK's economic d i f f i c u l t i e s . The m a i n p l a n k s
of our s t r a t e g y are: 1. 2 . Seeking collaboration and any disposal opportunities. more c a s h t o
short term).
to keeping

R e s t r u c t u r i n g (even t h o u g h t h i s means fund r e d u n d a n c i e s and c l o s u r e s i n t h e Economising the minimum

3 .

on i n v e s t m e n t programmes ( s u b j e c t v i a b l e model range together).

(2) a n d (3) a n d p o l i t i c a l major shareholder to h e l p

But and

we n e e d f u n d s t o b a c k the confidence o f our

stability
us i n ( 1 ) .

21.5.1980

21 May

1980

TIM

LANKESTER

MICHAEL EDWARDES DINNER

I realise t h a t t h e P r i m e M i n i s t e r may have l i t t l e This opportunity i s just to study
one

the papers put t o her f o r t o n i g h t ' s d i n n e r . o r t w o b r i e f comments w h i c h y o u may 1.

t o make

be a b l e t o p a s s on t o h e r :
I f the
BL, we

The D o l b r i e f m i s s e s t h e w h o l e p o i n t o f t h e m e e t i n g . purpose of the d i n n e r were s i m p l y should not waste

t o make c o n v e r s a t i o n a b o u t

do an o r a l management a u d i t and g i v e a p a t r o n i s i n g pep t a l k , the Prime M i n i s t e r ' s time.

The d e t a i l e d q u e s t i o n s There i s l i t t l e as a r e s u l t

2 .

The CPRS p a p e r i s m o r e u s e f u l . are s t i l l Minister answers. to to "so what?" But they questions.

i n section of Edwardes
tries

that the Prime

and o t h e r s c o u l d d o d i f f e r e n t l y , are u s e f u l questions

t o put i f Edwardes

p a i n t too r o s y a p i c t u r e of BL's p r o s p e c t s . explore, starting risk

They a r e n o t ,
purpose, which i s

however, r e l e v a n t t o the Prime M i n i s t e r ' s r e a l

from the assumption t h a t B L s whole.

prospects

are

v e r y p o o r , how G o v e r n m e n t and BL management c a n w o r k t o r e d u c e t h e

downside 3. t o t h e economy as a

S e c t i o n 3 o f t h e CPRS p a p e r meet i n g , espec i a l l y quickly the l a s t can a f f o r d come f a i r l y

i s more r e l e v a n t t o t h e p u r p o s e o f t h e
7 1ines. However, I don't t h i n k We
suggests. as we

should

t h e r a t h e r o b l i q u e a p p r o a c h CPRS recommends. t o t h e p o i n t , as o u r p a p e r

Dol

seems t o h a v e s l i p p e d u n c o n s c i o u s l y with the evening t o Government, r a t h e r than i n i t s own

back t o i t s r o l e

sponsoring
to
two

or

Department, hold forth steps

s e t up t o g i v e E d w a r d e s an o p p o r t u n i t y f o r G o v e r n m e n t t o t a k e one and c o n t i n g e n c y planning.

forward

decision-making

I t w o u l d make t h e e v e n i n g "our side" so t h a t the Prime M i n i s t e r

much more f r u i t f u l

i f i t i s p o s s i b l e t o get
arrive
t o t h e o t h e r s what t h e

t o g e t h e r f o r 10 o r 15 m i n u t e s b e f o r e E d w a r d e s and c o . c a n make q u i t e c l e a r

r e a l purpose of the meeting i s .

JOHN HOSKYNS

W)

L I S T OF GUESTS ATTENDING THE DINNER TO BE GIVEN BY THE PRIME MIN 1 5 1 3 ON WEDNESDAY, 21 MAY 1980 AT 8.00 PM FOR 8.30 PM LOUNGE S U I T

The The -^The

Prime

Minister

R t . H o n . S i r G e o f f r e y Howe, MP
R t . Hon. S i r K e i t h J o s e p h , MP
C h a i r m a n , BL
Deputy Chairman

S i r M i c h a e l Edwardes Sir Austin Bide

Mr. D a v i d Andrews

E x e c u t i v e V i c e Chairman i n
charge o f Finance
CPRS

_r>

Mr. Robin

Ibbs

Mr. T i m L a n k e s t e r

r
l PRIME MINISTER

Mr. Tim L a n k e s t e r Mr. D a v i d Andrews ^*>**

^^jj^ The R t . Hon. S i r G e o f f r e y )

(^^irMichael \

Edwardes^)^^ ^^^S

The R t . Hon. S i r K e i t h Joseph

Mr. Robin

Ibbs

ENTRANCE

SECRET ^ PRIME MINISTER BRITISH LEYLAND - DINNER WITH. SIR

M a
2 0

1 9 S 0

Y ^ S

MICHAEL EDV.'ARDES
and a p o s s i b l e shape

T h i s minute suggests for the discussion.

the purpose of the d i n n e r

1. 1.1

BACKGROUND

agreed t o fund BL's Corporate BL i n the

a
made.
was

In December, M i n i s t e r s r e l u c t a n t l y P l a n on a "last chance" b a s i s . Edwardes s h o u l d be meant ime, but

Some M i n i s t e r s thougnt t h a t

l o o k i n g f o r an o p p o r t u n i t y t o s e l l

K e i t h has never t o l d Edwardes t h a t t h i s was s u p p o r t , because no c l e a r d e c i s i o n

c o n d i t i o n of f u r t h e r

1.2 1.2.1

What i s the Government's p r e s e n t Edwardes was

position?

asked t o s t a t e p u b l i c l y

t h a t h i s Board would withdraw

jeopardised. Ministers i f this
the

the P l a n as soon as i t s achievement was were determined t o respond by happened. We were always scept i c a l felt circumstances

a l l o w i n g BL t o c o l l a p s e

about the Board t a k i n g

.............

i n i t i a t i v e and 1.2.2 S i n c e t h e n , the UK deteriorated b a t t l e with little Plan. To the u n i o n s . We more p r e p a r e d T h i s may

might a r i s e i n which the Govern

economic out l o o k , i n f l a t ion p r o s p e c t s t h i n k Government s h o u l d now

e t c , have in h i s a the be

f u r t h e r , w h i l e Edwardes has made some p r o g r e s s t o l e t the BL Board s h i r k withdrawing

even mean f u r t h e r f u c d s at some s t a g e , p r o v i d e d relations. that the o u t s e t . brinkmanship i n done from

they can be seen as ;a reward f o r b e t t e r i n d u s t r i a l a c h i e v e t h i s , we must p r a c t i s e d e l i b e r a t e Edwardes, h i s Board and to p u l l keeping

h i s employees c o n v i n c e d

we're p r e p a r e d

the p l u g . - as K e i t h has

1.2.3

We

s h a l l have t o c o n t i n u e w a l k i n g now

along

this

t i g h t r o p e , but must
A

economic

start

l o o k i n g f o r f i r m ground on which t o s t e p o f f i t . Against the p r e s e n t would o n l y be p r e p a r e d

buyer c o u l d o f f e r t h i s p r o s p e c t . b a c k g r o u n d , we union d i s r u p t i o n was

t o abandon the t i g h t r o p e i f

unambiguously seen to b r i n g BL down.

1.2.4

There are three p o s s i b l e (aV "Success".

outcomes:

I
K

. . . . . . . . . . . , . . , . . . . . , . . . .
T h i s i s so u n l i k e l y t h a t i t i s best d e s c r i b e d

I j for Edwardes himself-

SECRET For Government, make of our only i t would a small

be

extremely bution to

welcome, solving

but the

would range

contri

problems.

(b)

"Failure"very

This

must for to

be

the

most

likely but would

outcome. crucial

It

is

unattractive continues

Government, believe we

i t is be

that to as face

Edwardes up to

prepared

i t i f necessary. to he the Edwardes has as

Failure i t is a

i s not to us.

necessarily He can We

unwelcome claim to that up

legitimately would have

fought

gallant

fight.

pick

pieces.

( c )

"Sell from

or BL

Merge". finding to a

There

i s

range

of

possibilities

here,

roughly sale.

equal We

collaborative Edwardes to Its two play own a

partner
is likely part to in are

through agree BL's bound deals

outright

think have

that future to be

collaboration will i f i t is to

big

compete. One or to

resources

inadequate. not this be

minor c o l l a b o r a t i v e
failure. The

would of

sufficlent is HMG

avoid the

essence for can BL be

outcome from

that to

main r e s p o n s i b i l i C y
party. to of If this

should

shift

another

achieved, Edwardes

i t i s extremely may see i t as an

attractive admission

Government, personal

though

failure.

2 . 2.1

PURPOSE

OF

THE

MEETING

in discussing BL's current performance. could have

We We

do

not

see

any

purpose i t is You

a l l know a

that

u n s a t i s f a c t o r y , but could in pay tribute

that to

no-one -

done to

better

job.

this

particularly to his
and

S i r Michael's and

success

out-manoeuvring By firm

opponents of

wages

conditions of

package.

skilful frontier

use of

ballots,

Edwardes

industrial

relations.

2 .2

The

real

aim

of

the

meeting

i s :

( a )

To

look a

further slim

into BL

the

what

chance

has

has
managed to push forward Che
future of and set Edwardes to
admit
eventual viability.

treatment

militants

SECRET
^) (b) Edwardes must understand that the v a l u e s different ( c ) To he p l a c e s on

the d i f f e r e n t outcomes f o r BL are i n e v i t a b l y from the v a l u e s we must p l a c e .

quite

i n c r e a s e , through Edwardes' u n d e r s t a n d i n g

and

c o - o p e r a t i on, our or Merge".

3. 3.1 HOW You THE

chances of the t h i r d outcome, " S e l l

DISCUSSION MIGHT

GO

might open the d i s c u s s i o n by p a y i n g t r i b u t e t o Edwardes'

above) and then e x p l a i n the main
then go on to.spell
one




This views be h i s Board on

achievement ( s e c t i o n 2,1 out

purpose of the meeting (2.2(a) above) and hand, and and Government on the o t h e r Edwardes
1

the d i f f e r i n g p o s i t i o n s of Edwardes and t o put

( s e c t i o n 2.2(b) a b o v e ) . forward h i s own the chances of i n the

w i l l g i v e Edwardes the o p p o r t u n i t y arguments. own should be probed. Does he r e a l l y

view on

"Success" ever car

b e l i e v e that BL w i l l league of

a b l e t o generate enough funds t o s t a y m a n u f a c t u r e r s , p r o d u c i n g new Government?

3.2 Edwardes i s a l s o l i k e l y (a) That i s i s not because BL's we finaneial (b) to argue:

models, without dependence on

cecesSLiy f o r e f f e c t i v e c o n t r o l of BL We t h i n k i t probably resources are so inadequate and

to

pass t o f o r e i g n hands. own

is_ n e c e s s a r y
because

are l o o k i n g to r e d u c e , and responsibilities.

p r e f e r a b l y e l i m i n a t e , HMG's

That i t would be b e t t e r to pursue t h i s o p t i o n t i m e , when BL has been more s u c c e s s f u l . We to be i t w i l l be more s u c c e s s f u l . attractive. And

i n two

years'

don't b e l i e v e
less

It i s l i k e l y to have l o s t
less possible

f u r t h e r market s h a r e , d e a l e r s e t c , and by then t h e r e w i l l be buyers around.

( c ) That simply failure time? to explore

the p o s s i b i l i t y of s a l e w i l l i n BL We

lead

to l e a k s which w i l l so undermine c o n f i d e n c e is precipitated. But we I f i t were t r u e , why would i t be

that

don't accept t h i s a n a l y s i s .
l e s s t r u e i n two managers years' and

b e l i e v e t h a t d e a l e r s and

e v e n t u a l l y even the work f o r c e - might v e r y w e l l 3

recognise

SECRET
t h a t t h e i r chances of s u r v i v a l and be 3.3 improved i f someone took over a b e t t e r f u t u r e would
BL.

It i s worth spending q u i t e a l o t of time d i s c u s s i n g these

arguments to see how them than we t h a t he and for d e s i r e to run w e l l they stand up. There may be more to
volunteer

their have r e a l i s e d . t h e i r own HMG. I d e a l l y , Edwardes s h o u l d i n the way progress

h i s s e n i o r managers would not s h i p stand If any

be prepared to see

of a b e t t e r outcome
chances

BL employees and

i s made i n t h i s d e b a t e ,

i t would be worthwhile t u r n i n g to ways of e x p l o r i n g the of e a r l y s a l e or 3.4 We for partnership.

- already

t h i n k that BL i t s e l f

known to be e x p l o r i n g the to e x p l o r e the

scope

c o l l a b o r a t i v e d e a l s - i s best p l a c e d t h i s , he may

chances
help.

of s a l e - under the c o v e r of c o l l a b o r a t i v e d e a l s . i s p r e p a r e d to do

If Edwardes

t h i n k t h a t Government can

3.5

Edwardes may

say

that no-one would want t o buy towards buying BL c o u l d be

BL.

But

the stop large of BL's

strongest motivation UK d e a l e r network and

a d e s i r e to prove

someone e l s e gett ing i t - s i n c e i t does s t i l l useful gradual in overseas markets. F o r d , who

have a very

a number of p r o d u c t s which c o u l d

are d o i n g w e l l out

d e c l i n e , would hate L O see i f they can get

a Japanese company take i t . it. I d e a l l y , we should

They have e f f e c t i v e l y asked t o have f i r s t o p t i o n , which at p r e s e n t c o s t s them n o t h i n g stimulate 3.6 i n t e r e s t on the p a r t of more than one buyer. (or overt)
Edwardes

Could a Japanese company be m o t i v a t e d by v e i l e d may have o t h e r end.

i d e a s about how Government and

t h r e a t s from Government about f u t u r e import c o n t r o l s ? to t h i s 3 .7

BL c o u l d work

If Edwardes i s t o t a l l y u n w i l l i n g t o f o l l o w our g e n e r a l t h i n k i n g , we assess w i l l at l e a s t know t h a t ; and of h i s f e e l i n g s , and him moving i n our you w i l l be the s t r e n g t h

l i n e of
able to

pertiaps d i s c o v e r what

i t would take t o get I have c o p i e d fop\Industry,

direction.
of State

t h i s minute t o the C h a n c e l l o r , S e c r e t a r y and t o Robin Ibbs.

JOHN HOSKYNS

tov E J * . . -Jtn. s e i ^ e e r

W^^r^ai\
X^JxJFJ^ \^*&?^J
1

c
)

A
INDUSTRY HOUSE STREET ASHDOWN 123 V I C T O R I A LONDON

D E P A R T M E N T OF

SW1E 6RB

Secn.ary of Sw,e forestry

TELEPHONE DIRECT LINE

01-211 3301

SWITCHBOARD 01-211 7 6 7 6

Tim Lankester Esq ^ 2 O May 1980 Private Secretary to the Prime Minister fMki & 10 Downing Street
SW1 .

BL: BRIEF FOR THE PRIME MINISTER'S DINNER ON

21 MAT
... As promised, I enclose a copy of the brief
prepared for my Secretary of State for the
Prime Minister's informal dinner with Sir
Michael Edwardes tomorrow evening. You may
wish to note that the general lines of the
brief have been discussed with the Treasury.
You may also like to know that Sir Michael
is calling on nry Secretary of State at 3.00pm
tomorrow, when he may take the opportunity to
indicate the subjects which he w i l l seek to
raise at the dinner. These are expected to
include the recent achievements of BL, the
tasks ahead, the prospects for the business,
unfair competition from imports and international
collaboration.
I a m copying this letter to Martin Hall, Robin
Ibbs and David Wright.

CATHERINE BELL
Private Secretary

IsiA

SECRET

BL:

BRIEF FOR

PRIME MINISTER'S DINNER ON WEDNESDAY 21

MAY

Introduction
Thc purpose of the d i n n e r i s to enable the Prime M i n i s t e r to have
a g e n e r a l t a l k with S i r Michael Edwardes about how BL'o a f f a i r s arc;
p r o g r e s s i n g and on thc p r o s p e c t s f o r the f u t u r e .
2 Other guests b e s i d e s the S e c r e t a r y o f S t a t e a r e .the C h a n c e l l o r . Mr David Andrews ( E x e c u t i v e Vicc-Chairman of BL) and A A u s t i n Bide (who has j u s t r e p l a c e d Br MacGregor a s Deputy Chairman of BL a .id who i s a l s o Chairman of Glaxo L t d ) . Mr Robin Ibbs of the CPRS and Mr Tim Lankester (one of the Prime M i n i s t e r ' s P r i v a t e S e c r e t a r i e s ) w i l l a l s o be p r e s e n t . 3 The S e c r e t a r y of S t a t e ' s P r i v a t e O f f i c e c i r c u l a t e d to No 10 and t o other P r i v a t e O f f i c e s on 16 May a copy of S i r M i c h a e l Edwardes' r e u l y of 15 May, to the S e c r e t a r y of S t a t e ' s l e t t e r of 15 A p r i l about BL's cash p o s i t i o n ( c o o l e r of. these l e t t e r s ar-iv at AL'LIIO; . A to t h i s b r i e f ) . S i r M i c h a e l ' s l e t t e r c o u l d be used as a b a s i s f o r d i s c u s s i o n a t the d i n n e r . Background
4 I t was noted a t the M i n i s t e r i a l meeting h e l d at No 10 on 17 A p r i l t h a t the Prime M i n i s t e r would c o n s i d e r meeting S i r M i c r a e l Edwardes, a l o n g with the S e c r e t a r y o f S t a t e , a f t e r the S e c r e t a r y
of S t a t e ' s meeting w i t h him on 22 A p r i l and i n the l i g h t c f S i r M i c h a e l ' s r e p l y to the l e t t e r of 15 A p r i l about BL's cash p o s i t i o n .
S i r M i c h a e l says t h a t he w i l l be i n a p o s i t i o n a t the d i n n e r to
e l a b o r a t e on h i s l e t t e r , as n e c e s s a r y .
5 S i r Michael has arranged to see the S e c r e t a r y o f S t a t e d u r i n g the a f t e r n o o n of 21 May i n order to t e l l him about an imports . new c o l l a b o r a t i v e venture which BL has d e c i d e d to pursue and about which he intends to t e l l the Prime M i n i s t e r over d i n n e r . The nature of t h i s p r o p o s a l has not been d i s c l o s e d to o f f i c i a l s . 6 Two important o c c a s i o n s f o r BL a t the end of l a s t week were the company's Annual General Meeting on 15 t'^ay and the debate o.i
the S e c r e t a r y of S t a t e ' s statement of 20 December 1979 on BL's 1930 C o r p o r a t e P l a n , which took p l a c e on 16 May. S i r M i c h a e l Edwardes p l a c e d c o n s i d e r a b l e emphasis i n h i s speech a t thc AGM on adverse
" e x t e r n a l " f a c t o r s i n 1930 which would be o u t s i d e BL's c o n t r o l ; and t h e r e was some p r e s s u r e from the O p p o s i t i o n d u r i n g the debate
f o r some k i n d of import c o n t r o l s on c a r s . Both s u b j e c t s are covered
later in this brief.
Contd...

^ ^

SECRET

Talking Points
7 ( i ) BL's Cash P o s i t i on: S i r Michael's l e t t e r o f 15 Hay, which seems to have bee;) c a r e f u l l y thought o u t , r e p e a t s h i s e a r l i e r assurance t h a t BL do not envisage s e e k i n g e x t r a cash from the Government above the agreed f u n d i n g l i m i t s f o r 1980 ( i e 3 0 0 m i l l i o n although margins are very t i g h t . He notes t h a t BL are c a l l i n g f o r funds d u r i n g 1980 somewhat e a r l i e r than was o r i g i n a l l y envisaged. T h i s i s a r e f e r e n c e t o a r e q u e s t made by BL to the Department on 15 May f o r a drawing of 7 5 m i l l i o n of e q u i t y c a p i t a l from the NEB
b e f o r e the end of Hay, i n accordance with the agreed arrangements
f o r drawings f r o m / c r e d i t f a c i l i t y r e f e r r e d to i n the S e c r e t a r y of
S t a t e ' s statement of 20 December 1930. BL had e a r l i e r envisaged
t h a t t h i s money would not be needed u n t i l June. However, the
f i n a n c i a l margins i n BL'smediujn-term l o a n agreement with the
C i t i b a n k consortium would be breached i f payment were delayed u n t i l
t h e n . O f f i c i a l s of the Department o f I n d u s t r y and the Treasury
w i l l agree to BL's r e q u e s t , but are c o n s i d e r i n g whether there are
ways of a v o i d i n g t h i s s o r t of t e c h n i c a l d i f f i c u l t y i n f u t u r e .
M i n i s t e r s may wish to enquire i n t o the reasons f o r the statement
i n the second paragraph of S i r M i c h a e l ' s l e t t e r t h a t the Board of
BL i s a t t h i s s t a g e o f 1930 q u i t e unable t o express a view a:; to
whether i t i s p o s s i b l e t o a t t a i n the o b j e c t i v e o f long-term
viability. BL s t a f f have had the d i s c u s s i o n s which they d e s i r e d
w i t h Treasury and Dol s t a f f oa economic assumptions f o r the p e r i o d
of the Corporate P l a n . There was not a great d e a l of d i f f e r e n c e
between the assumptions proposed by BL and the Treasury f o r e c a s t
p u b l i s h e d a t the time of the l a s t Budget, and Treasury o f f i c i a l s
take the view t h a t EL's assumptions combine prudence w i t h r e a l i s m .
'-'fly/, t h e r e f o r e , does S i r Michael not f e e l a b l e to exnrer.s sort
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(ii) BL C o n t i n g e n c i e s : S i r Michael says i n h i s l e t t e r thatBI

are c o n t i n u i n g to cooperate with the Government i n contingency plan
n i n g , t o the extent p o s s i b l e without j e o p a r d i s i n g the e x i s t i n g busi
ness*
S i r Michael and [ilr Andrews have a l r e a d y met Mr Grenside of Peat,
Marwick and M i t c h e l l , who r e c e n t l y undertook an enquiry f o r the
Government on c o n t i n g e n c y p l a n n i n g . O f f i c i a l s from the Dol have
a l s o had c o n t a c t s with Mr Grenside and h i s c o l l e a g u e , Mr Dunkerley. Mr Grenside has been asked t o submit a t l e a s t an i n t e r i m r e p o r t
by m i d - J u l y .
As t h i s work i s i n hand, i t .; would not appear to be nececss-ry f o r
1 .mi s t o r s jjj>~ralse J Q J 1 - - ' O? H I . ; -.bin u ir Michael"
( i i i ) E x t e r n a l ? a c t o r s : Although he does not r e f e r to t h i s i n h i s l e t t e r , S i r Michael i s l i k e l y to p l a c e some emphasis 0 . the imoact on BL of e x t e r n a l economic f a c t o r s - both the depressed world t r a d i n g s i t u a t i o n and the pressures a r i s i n g from the Government's economic p o l i c y . He i s l i k e l y to c o n f i r m h i s i n t e . i t i o : of l i v i n g w i t h i n the cash c o n s t r a i n t i n 1 9 80/ Si, but may arg\'2 Contd...
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that the t i m i n a of r e c o v e r y and achievement of f u l l v i a b i l i t y under his plan i s matte d i f f i c u l t t o p r e d i c t by those c i r c u m s t a n c e s outside his c o n t r o l . He may draw a t t e n t i o n t o the impact on the r e s t o f p r i v a t e m a n u f a c t u r i n g i n d u s t r y o f the c o r p o r a t e l i q u i d i t y p r e s s u r e s caused by the Government's monetary p o l i c y , ' a n d imply
t h a t w h i l e BL c a n f a i r l y be judged by i t s response t o i n t e r n a l
problems, i t s chances o f u l t i m a t e v i a b i l i t y s h o u l d be judged only
a f t e r making f a i r allowance f o r e x t e r n a l f a c t o r s .
M i n i s t e r s could arh.-iowled-'c t h a t t h e r e is some t r u t h j n what Zir ' : . . . . i ,;

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(iv) BL' s Ac ' 1 i ev emcirts : BL has scored some rcajor achieveme.r I i n r e c e n t months, the most n o t a b l e of which i s implementation of the pay and working p r a c t i c e s package. The workforce has accepted a pay r i s e a v e r a g i n g o n l y and new working p r a c t i c e s a r e b e i n g i n t r o d u c e d . C l o s u r e s o f works a r e g o i n g ahead as planned, and the Triumph p l a n t a t Canley i s b e i n g c l o s e d e a r l i e r than planned. Two new t r u c k s have been launched by t h e commercial v e h i c l e s d i v i s i o n of BL, and t h e c o l l a b o r a t i v e venture w i t h Honda t o produce the 'Bounty' c a r a t Cowley i n 1981 has gone ahead. Agreement i n princi-.I H has a l s o been reached w i t h Aston Hartin-Lagonda f o r t h e d i s p o s a l o f the I ; : G business. M i n i s t e r s may wish t o c o n y r a t n l a t e S i r n i c h a c l on these s i . - : i i f l e a n t acvelo . : . ^ . . i
_ : _ . nvr.__-i / I I

(v) P r o s n e c t s andruturo Tasks: A l o t s t i l l has t o b e

done by BL t o improve market share per cent i n t h e f i r s t f o u r I
months of t h i s y e a r ) , p r o d u c t i v i t y and p r o f i t a b i l i t y . A loss
b e f o r e i n t e r e s t and t a x o f about 1 0 0 m i l l i o n i s f o r e c a s t f o r 1930,
d e s p i t e which BL expect t o s t a y w i t h i n t h e i r cash l i m i t s . S i r
M i c h a e l ' s l e t t e r r e f e r s to a review o f proposed a c t i o n s which BL
w i l l be making d u r i n g the next few months; the LC10 (new medium-car
p r o j e c t ) i s s p e c i f i c a l l y mentioned. BL w i l l be l o o k i n g a t the
investment r e q u i r e d f o r t h a t programme with a view t o improving the product and d e v i s i n g a programme which w i l l c o s t l e s s . There r_=yM be a role f o r some i n t e r n a t i o n a l c o l l a b o r a t i o n . Ministers may wish to ask S i r i'jchsel t o r i v e his views on the any f u r l - . c r d i s p o s a l s or now ion . M -:.- M,. ....;' y . . -

(vi) U n f a i r Imports o f Cars: S i r L'ichael has corresponded

i n r e c e n t months with'tne b e c r e t a r y o f State f o r Trade about what
he sees as u n f a i r c o m p e t i t i o n from c a r s imported from S p a i n ,
E a s t e r n Europe and J a p a n . BL have n o t , however, asked f o r import
c o n t r o l s t o be i n t r o d u c e d . As major exporters o f v e h i c l e s (about
Contd...

SECRET

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250,000 each y e a r ) , they r e c o g n i s e the r i s k o f r e t a l i a t i o n a g a i n s t ^ f l the UK not o n l y i n t h e v e h i c l e s f i e l d but i n the components market, and a l s o more w i d e l y , i f such a couroc were f o l l o w e d . But they f e e l at a c o m p e t i t i v e disadvantage v i s - a - v i s imports as a r e s u l t of ^Lm the e x t e r n a l economic f a c t o r s mentioned e a r l i e r i n t h i s b r i e f , and t h e y a r e r a t h e r r e s e n t f u l about the way i n which F o r d managed t o make a p r o f i t l a s t year by making c a r s on the C o n t i n e n t and i m p o r t i n g I them i n t o the UK. M i n i s t e r s c o u l d nay
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best_ v.-.'iy.. " J fo'r-' : L :. L. >; n i,:.Lvr;_ y.v.i the i :r. 0 t -.jrj. They c o u l d add t h a t the motor i n a u s u r y
i s e x p e r i e n c i n g problems worldwide ( e x c e p t i n Japan) p a r t i c u l a r l y the bic American companies ( C h r y s l e r , Ford and G e n e r a l Motors); BL i s by no means a l o n e i n s u f f e r i n g from c o m p e t i t i v e p r e s s u r e s .

Department o f I n d u s t r y 22 May 1980

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*' o* , ' > . 35-30 POHTMAN SQUARE LONDON W I N ODN

F n o M s> M . C H A UE e w M D E t

-15th

May 1980

The R t . Hon. S i r K e i t h J o s e p h , B t , MP, Secretary of State f o rIndustry, Ashdown House, 123 V i c t o r i a S t r e e t , London SW1.

1 "i-V. | ^ T. ' w t o c U v ! ' ( / . ; ; . ijjn^ : ~ . \ ,^ .. ' M*(U/\.rti_iA.

I have now h a d t h e o p p o r t u n i t y o f c o n s u l t i n g ray Board about your l e t t e r o f 15th A p r i l . F u r t h e r work has a l s o been ooTO" t i n c o n j u n c t i o n w i t h y o u r Department and t h e T r e a s u r y ) t o i d e n t i f y a p p r o p r i a t e economic a s s u m p t i o n s f o r t h e p e r i o d o f the P l a n . jl [I I ' [ While we s t i l l e x p e c t t o o p e r a t e w i t h i n t h e a g r e e d Government cash l i m i t i n 1980, t h e Board i s a t this s t a g e q u i t e u n a b l e to-express n vinw 1-n whfl ;)ipr i 1 i ^ pos"sJ5Te t o attairOIh o b j e c t i v e o f a c h i e v i n g long-term v i a b i l i t y . We have t h r e e main r e a s o n s for c a u t i o n : 1. T h e r e a r e wide v a r i a t i o n s i n t h e economic a s s u m p t i o n s which a r e b e i n g , made by v a r i o u s e x p e r t s f o r t h e p e r i o d o f t h e PI a n . In p a r t i c u l a r the p o s s i b l e v a r i a t i o n s i n t h e r a t e o f i n f l a t i o n , the exchange r a t e and t h e l e v e 1 o f demand p r o d u c e a very wide range o f p o s s i b l e outcomes for BL i n terms o f p r o f i t and cash f l o w . F o r example, we could say w i t h r e a s o n a b l e c o n f i d e n c e t h a t , on t h e economic f o r e c a s t s o f t h e London B u s i n e s s S c h o o l , we s h o u l d be a b l e t o keep b r o a d l y t o o u r f u n d i n g l i m i t s and return a p r o f i t i n 1981. But o u r p r o j e c t e d r e s u l t s a r e h i g h l y s e n s i t i v e t o the s u b s t a n t i a l d i f f c r c n c c s between t h e LBS f o r e c a s t s and less f a v o u r a b l e a s s u m p t i o n s , so i t would be unwise t o rush i n t o a f i r m a s s e s s m e n t , b e f o r e we a r e even h a l f way t h r o u g h 1980. We a r e now r e f i n i n g o u r own w o r k i n g a s s u m p t i o n s f o r the 19 81 C o r p o r a t e P l a n i n t h e l i g h t o f d i s c u s s i o n s w i t h DOI and T r e a s u r y o f f i c i a l s . Cont inued

/ Thc \/l 2.

R t . l l o n . S i r K e i t h J o s e p h , Bt,IIP. Page 2.

\jM

Secretary of State f o r Industry.

15th'May 1980

. Much depends on p r o g r e s s i n 1980, not o n l y on i n d u s t r i a l r e l a t i o n s , b u t i n o u r new p r o d u c t launches - p r i n c i p a l l y Roadtrnin (already launched), the Morris I t a l ( f a c e l i f t e d Marina) i n t h e summer and Metro i n the autumn - and on c o l l a b o r a t i o n w i t h o t h e r m a n u f a c t u r e r s . We have had a
complex s i t u a t i o n t o d e a l w i t h , and we need t o s o l v e
f u r t h e r major problems and s e i z e the o p p o r t u n i t i e s o f
1980 b e f o r e wc c a n form n c l e a r e r view o f t h e p r o s p e c t s
f o r 1981 and b e y o n d . , * . * ,

j MM

3.

The 19 80 P l a n i s composed o f hundreds and even thousands o f a c t i o n s , many o f which may be s u b j e c t to c o n s i d e r a b l e revision. A l t h o u g h the b r o a d s t r a t e g y remains i n t a c t , we have a l r e a d y r e v i s e d the P l a n i n c e r t a i n i m p o r t a n t r e s p e c t s , i n c l u d i n g b r i n g i n g f o r w a r d the c l o s u r e o f C a n l e y
a t f u r t h e r c o s t t o 1980. The complex p r o c e s s o f p r e p a r i n g
o u r 1981 P l a n i s j u s t b e g i n n i n g .
D u r i n g the n e x t few months, we s h a l l have the o p p o r t u n i t y
o f r e v i e w i n g o u r p r o p o s e d a c t i o n s i n the l i g h t o f o u r p e r f o r m a n c e and p a r t i c u l a r l y t h e f o r e c a s t a v a i l a b i l i t y o f cash; i n p a r t i c u l a r we a r e now c o n s i d e r i n g o p t i o n s on the LC10 programme w h i c h might e n a b l e us to s p r e a d o u r c a s h needs v/i t h o u t f u n d a m e n t a l l y c h a n g i n g the s t r a tegy.-

Hj I

j" j j \ J ^ j

WM |

I t would t h e r e f o r e be a m i s t a k e , i n o u r v i e w , t o t r y t o make p r e d i c t i o n s now b a s e d on l o n g - t e r m f o r e c a s t s which may have l i t t l e o r no v a l i d i t y by the time t h a t we submit o u r 1981 Corporate Plan f o r your c o n s i d e r a t i o n . * I must, however, r e i t e r a t e the f o l l o w i n g a s s u r a n c e s a l r e a d y g i v e n about o u r s h o r t e r - t e r m p o s i t i o n : a. w h i c h I have

MM

Mm

In t h c p r e s e n t c i r c u m s t a n c e s we do n o t e n v i s a g e
s e e k i n g e x t r a c a s h from the Government .above t h e
a g r e e d f u n d i n g l i m i t s f o r 1980, a l t h o u g h o u r margins
a r e v e r y t i g h t , e s p e c i a l l y i n re1 a t i o n t o the r a t i o s
i n o u r medium-term l o a n agreement. As you know, we
a r e c a l l i n g f o r funds d u r i n g 19SO somewhat e a r l i e r t h a n was o r i g i n a l l y e n v i s a g e d

, WM

Continued

'i^l

/ /

The Rt.Hon. S i r K e i t h J o s e p h , Bt,MP, .Secretary of State f o r Industry. 15th May 1980 Page 3.

j
b. I j Hone o f t h e a c t i o n s v/hich we a r e t a k i n g i n 19 80 i s e x p e c t e d t o damage o u r p r o s p e c t s o f l o n g e r - t e r m v i a b i l i t y - i n d e e d they a r e i n t e n d e d t o make a p o s i t i v e c o n t r i b u t i o n towards l o n g term as w e l l as s h o r t - t e r m o b j e c t i v e s . Your Department w i l l c o n t i n u e t o be k e p t i n c l o s e touch w i t h o u r f i n a n c i a l f o r e c a s t s and with the p r e p a r a t i o n o f o u r C o r p o r a t e l ^ l a n , so t h a t you would r e c e i v e e a r l y w a r n i n g o f any u n a v o i d a b l e cash p r o b l e m s .
The B o a r d adheres t o t h e a s s u r a n c e s I have g i v e n
you t h a t , s h o u l d we c o n s i d e r i t n e c e s s a r y t o
abandon the P l a n , we would i n i t i a t e immediate
d i s c u s s i o n s w i t h the Government b e f o r e t a k i n g
any a c t i o n .

c .

i d.

F i n a l l y , we a r e , as you know, c o n t i n u i n g t o c o o p e r a t e w i t h the Government i n c o n t i n g e n c y p l a n n i n g , s u b j e c t t o t h e r e c o g n i t i o n t h a t t h e r e a r e l i m i t s t o t h e a c t i o n s which c a n be taken p r i o r t o t h c e v e n t w i t h o u t j e o p a r d i s i n g t h e c h a n g e s o f s a v i n g the existing business. I u n d e r s t a n d t h a t we s h a l l meet a t a n i n f o r m a l d i n n e r next week, . when I s h a l l be i n a p o s i t i o n t o e l a b o r a t e on t h i s l e t t e r as necessary.

IA

/&

I
i

/sT(fov\
I ^ ' ^ v S ] '

D E P A R T M E N T OF INDUSTRY ASHDOWN HOUSE VICTORIA. STREET L O N D O N SW1E 6RD

1 2 3

j B ' H

T E L E P H O N E D I R E C TL I N E

0 1 3 1 1 3J01

S W I T C HM OA R D 0l-7.ll 7 * 7 6 Srvtomry of SIBUI tot Irduslry

\ \ Bar M i c h a e l Edviardes
H I I Chairman EL Limited
3l>-?8 Portman Square London W1H OBN . "

V ^ . A p r i l 1980

. -I

I
Thank y o u f o r y o u r l e t t e r s o i 1 0 March and 28 M a r c h . I have a l s o seen t h e 1 9 8 0 f o r e c a s t p r e p a r e d on 2 1 M a r c h and supplied t o o f f i c i a l s here. I c o n c l u d e t h a t i n y o u r B o a r d ' s v i e w , h a v i n g completed y o u r review o f c a p i t a l e x p e n d i t u r e and. n o t w i t h s t a n d i n g t h c d i s t u r b i n g l o o s now f o r e c a s t f o r 1 9 8 0 (which y o u r second l e t t e r i n d i c a t e s s h o u l d n o t be t a k e n a s e v i d e n c e t h a t any i n c r e a s e w i l l he needed i n t h c c a s h c o l l on Government during 1980/81) i t i s . s t i l l p o s s i b l e f o r BL t o achieve t h c o b j e c t i v e o f l o n g term v i a b i l i t y ; r e m a i n i n g w i t h i n agreed f u n d i n g l i m i t s i s , o f c o u r s e , a c o n s t r a i n t r a t h e r t h a n an objective i n i t s e l f . A i As r e g a r d s 1 9 0 1 onwards, I r e a l i s e t h e s e n s i t i v i t y o f a n y l o n g e r term p r o j e c t i o n s t o v a r i o u s r a n g e s o f economic
a s s u m p t i o n s , p a r t i c u l a r l y about i n f l a t i o n , t h e s i g n i f i c a n c e
of w h i c h y o u s t r e s s e d t o me when we met on 2 1 M a r c h . O f f i c i a l s of t h i s Department and t h e T r e a s u r y a r e ready t o d i s c u s s these and t h e i r i m p l i c a t i o n s w i t h your s t a f f and t o p r o v i d e any h e l p they c a n . " f o r w a r d s p e e d i l y so t h a t y o u

WM[

I H am t

"J

I hope t h i s work c a n b e c a r r i e d

can l e t me have y o u r B o a r d ' s c o n c l u s i o n s a s soon a s p o s s i b l e .

I I s h o u l d mention t h a t I have j u s t r e t u r n e d from h o l i d a y , and t h a t t h i s l e t t e r was p r e p a r e d on my i n s t r u c t i o n s w h i l e I was away and does n o t t a k e a c c o u n t o f t h e l a t e s t s i t u a t i o n o f E L .

/ /

r
THE PRIME MINISTER

lO D O W N I N G S T R E E T

*
20 May 1980

Thank you BL's are business i m p o s e d on I am likely

f o r y o u r l e t t e r o f 7 May with I r a n and

the the Iran.

about the

extent

of

e f f e c t on

i t i f trade

sanctions

keenly

aware o f

detrimental

effect

sanctions you, the

are

t o h a v e on B r i t i s h has

f i r m s s u c h as B L

which have t r a d i n g
tell
in
have to felt

interests i n Iran. hostage s i t u a t i o n c o n j u n c t i o n w i t h our o b l i g e d t o embark on secure the hos t a g e s '

H o w e v e r , as

I need h a r d l y

become i n c r e a s i n g l y g r a v e ; and E u r o p e a n C o m m u n i t y p a r t n e r s , we on the

a range of measures, i n c l u d i n g trade

Iranian authorities release.
had been a b l e t o a v o i d afraid the going down

sanctions, to bring pressure

I s i n c e r e l y w i s h we this route. But and despite other UK c a u s e f o r BL continued our now of

the problems i t w i l l c o m p a n i e s , I am us w i t h no help i s s u e and

undoubtedly Iran's need t o We early

intransigence over t h i s have l e f t t h a t our

support
must
release

American a l l i e s the h o s t a g e s , so

alternative.

hope t h a t t h e s e measures w i l l

to secure the

t r a d i n g r e l a t i o n s h i p s are

only

temporarily interrupted.

Sir

Michael

Edwardes

lO DOWNING S T R E E T

From the Private Secretary

MR

IBBS

Prime M i n i s t e r ' s Dinner w i t h S i r M i c h a e l Edwardes

on 21 May
I have asked the Department of I n d u s t r y f o r a b r i e f
f o r the Prime M i n i s t e r ' s d i n n e r w i t h S i r M i c h a e l Edwardes
\ ' on Wednesday. I f you would l i k e to put i n something
y o u r s e l f , that would be very welcome.
I e n c l o s e a copy of S i r M i c h a e l Edwardes' l a t e s t to S i r K e i t h Joseph, which was to o t h e r M i n i s t e r s or to the Cabinet I am Office.
letter

sent to us but not - i t seems

sending a copy of t h i s note and e n c l o s u r e to

S i r Robert Armstrong.

19 May

1980

I l

JH ,

f \ (S^J'Q \ Z ^ & j y PS/ Seventy of Stars to, Industry

1 J

DEPARTMENT ASHDOWN
1 2 3

OF INDUSTRY HOUSE STREET SW1E 6RB

VICTORIA

TELEPHONE DIRECT LINE 0 1 2 1 1 33OI

S W I T C H B O A R D 0 1 1 1 31 6 1 6
Nay 1980

LONDON

Tim L a n k e s t e r Esq
P r i v a t e S e c r e t a r y t o the
Prime M i n i s t e r 10 Downing S t r e e t
London SW1

...

As you r e q u e s t e d i n your l e t t e r o f 8 Nay, I a t t a c h a d r a f t r e p l y

f o r the Prime N i n i s t e r t o send t o S i r N i c h a e l Edwardes about
trade sanctions against I r a n .
Copies o f t h e d r a f t go t o S t u a r t Harapson (Trade) and P a u l L e v e r (FCO).

CATHERINE BELL
Private Secretary

DRAFT LETTER FOR

THE PFJME MINISTER TO SEND TO

S i r M i c h a e l Edwardes
Chairman
BL L i m i t e d
35-38 Portman Square
London. W1H OHQ

Thank you f o r your l e t t e r o f 7 May

about the extent

of BL's

business

w i t h I r a n and the e f f e c t on i t i f t r a d e s a n c t i o n s are imposed on I r a n . I ^ \ * I ls-4M, hoV

u (

I am k e e n l y aware o f the s c r i o u g n c o o

o f ouoh ctops

end of the d e t r i m e n t a l

e f f e c t -th*y eey/have on B r i t i s h f i r m s such as 1 B L which have t r a d i n g |___ . LA^. cvwi^l) interests i n Iran. However, \ t h e / s i t u a t i o n a act grave- fehot the

V^nfr-zr

ftovoTnacntm

c o n j u n c t i o n w i t h our European Community {jollaagues,

have f e l t o b l i g e d t o ciTle{ on a range of measures, i n c l u d i n g ^ * * * - 'Lhra^r'-of t r a d e s a n c t i o n s , M I ua a l l u i i i u l to b r i n g pressure on the

I r a n i a n a u t h o r i t i e s t o secure t h e ^ r e l e a s e * o f the American hootogoa* Ettg^her discrtes4nns hprwppn European POTgtgn rUiiib Lb-rhs hav*? f a k i j i r thic with wookond, The I r a n (Temporary Poworo) Aot 1Q00, flnttogether

t h p Tmpn -fh, Tvy-porf nprl r . n a + r ^ a P m . (p^f^ifp) r r i t ;

1 Q?? y p sanctions

e n a b l i n g measiirpR t o gi yp the GflSgEDmanj; pnwers t o impose en Ir-ap-= .haw- u l i l l

^"

n. i - n .

..in \ ,

-4-i ^
H

Dr-nr^ ^

CouaeaJ

wteoh

l u lit d j f a J l r i d .

/ ' IM"

'

I
I

JU

m%

(^^kwL\
1
\ C^f^J N^^^/ /

/^^>\

D E P A R T M E N TO FI N D U S T R Y A S H D O W N
1 2 3

H O U S E

V I C T O R I AS T R E E T 6RB

L O N D O N SW1E

T E L E P H O N E D I R E C T L I N E SWITCHBOARD ui : i : isifi jj pg J Secretary of Stare for Industry

0 1 2 1 2 5 3 0 1

^ Tim Larikester Esq

P r i v a t e S e c r e t a r y t o the
Prime M i n i s t e r
10 Downing S t r e e t
London SW1

Hay 1980

/
... I e n c l o s e a copy of S i r M i c h a e l Edwardes' r e p l y of VlyMay t o my S e c r e t a r y o f S t a t e ' s l e t t e r of 1 5 A p r i l , which you may wish t o draw t o t h e a t t e n t i o n o f t h e Prime M i n i s t e r .

CATHERINE BELL
Private Secretary

4B) /CT+T^X
/ / \

D E P A R T M E N T OF INDUSTRY ASHDOWN
1 2 3 V I C T O R I A

HOUSE STREET

LONDON

SW1E 6 R B

TELEPHONE DIRECT LINE 01-1II J301 S W I T C H B O A R D 01-112 H11

Soaalary of Stato for Industry

/S
A J Wiggins E s q
Private Secretary t o the
C h a n c e l l o r of t h e Exchequer
HM Treasury
Parliament Street

May

1980

swi

wjm

ft
You c o p i e d t o Ian E l l i s o n here your l e t t e r o f ^ May t o Tim
L a h k e s t e r i n which you suggested one or two minor d r a f t i n g
p o i n t s on t h e new terms o f r e f e r e n c e which might be g i v e n
to t h e BL Board i n t h e event o f t h e P l a n b e i n g withdrawn.
T h i s i s t o l e t you know t h a t my S e c r e t a r y o f S t a t e i s
content w i t h the changes to t h e terms of r e f e r e n c e which you
propose.
I am c o p y i n g t h i s l e t t e r t o Tim L a n k e s t e r , David W r i g h t ,
E o b i n Tbbs and John Hoskyns.

CATHERINE BELL
Private Secretary

n
Mi

B L ANNUAL GENERAL

MEETING

MAY 15TH 1 9 8 0

REMARKS BY THF C H A I R M A N . S I R

NICHAFI

FDWARDFS

K E E P REMARKS AS B R I E F FOR Q U E S T I O N S .

AS P O S S I B L E TO ALLOW AMPLE T I M E

D I V I D E STATEMENT

INTO TWO P A R T S :

1)

S P E A K OF E F F E C T ON B L ' s

OF S E V E R E E X T E R N A L

ECONOMIC

SITUATION

CURRENT AND P R E D I C T E D

PERFORMANCE.

2)

REVIEW THE THE

PROGRESS W I T H I N B L OVER THE PAST YEAR CONDITIONS.

IN

FACE OF WORSENING T R A D I N G

BEFORE T H A T ,

SHOULD T E L L YOU OF CHANGES TO THE B O A R D , WHICH YEAR.

HAVE OCCURRED T H I S

IAN HACGREGOR (AS I M SURE YOU ARE AWARE) HAS ACCEPTED THE JOB OF CHAIRMAN OF BRITISH STEEL AND AS A CONSEQUENCE IS LEAVING THE BOARD AT THE END OF THIS A G H ,

1
\

THE BOARD WOULD LIKE TO PLACE ON RECORD ITS APPRECIATION FOR THE' MAJOR CONTRIBUTION MADE BY I AN MACGREGOR DURING HIS 5 YEARS AS A DIRECTOR, IN THE LAST 2 /i YEARS IN HIS ROLE AS NON-EXECUTIVE

DEPUTY CHAIRMAN, HE HAS BEEN A STAUNCH SUPPORTER OF THE COMPANY'S EFFORTS TO BRING ABOUT THE RECOVERY OF THE BUSINESS.
I AM SURE THAT SHAREHOLDERS WOULD WISH ME TO THANK HIM FOR HIS
CONTRIBUTION TO BL'S AFFAIRS,
I AM PLEASED TO ANNOUNCE THAT SIR AUSTIN BIDF HAS BECOME
NON-EXECUTIVE DEPUTY CHAIRMAN, H E HAS BEEN A MEMBER OF THE

BOARD SINCE NOVEMBER 1977, AND IS CHAIRMAN AND CHIEF EXECUTIVE

OF GLAXO HOLDINGS. EFFECT.
HE SUCCEEDS IAN MACGREGOR WITH IMMEDIATE

THE BL BOARD (WHICH IS SMALL BY ANY STANDARDS) HAS RECENTLY BEEN STRENGTHENED BY THE APPOINTMENT OF SIR RORERT HUNT (CHAIRMAN AND CHIEF EXECUTIVE OF THE DOWTY GROUP) AS A NON-EXECUTIVE DIRECTOR, VALUED, His ENGINEERING KNOWLEDGE WILL BE PARTICULARLY

WE ALSO INTEND TO APPOINT M R JOHN MAYHFW-SANDFRS. CHAIRMAN AND

CHIEF EXECUTIVE OF JOHN B R O W N LTD, TO BECOME A NON-EXECUTIVE
DIRECTOR,

FXTFRNA1 FACTORS
1979 WAS ONE YEAR IN BL'S TURBULENT HISTORY WHEN THE COMPANY
COULD CLAIM WITH SOME JUSTIFICATION THAT IT WAS NOT THE SOLE
AUTHOR OF ITS MISFORTUNES.

FXTFRHAI. STRIKFS

BL'S A

INTERNAL DISPUTES RECORD IMPROVED DRAMATICALLY ( i N 1979

IT WAS TWO

52 R E D U C T I O N IN THE NUMBER OF HOURS LOST),

EXTERNAL, NATIONALLY INSPIRED S T R I K E S , THE ROAD HAIJI AGF AND

FNGINFFRING S T R I K E S , WHICH BETWEEN THEM COST;

OVER 60 MILLION IN LOST PROFIT

10 MILLION LOST HOURS OF PRODUCTION

70,000 LOST VEHICLES

THIS YEAR THE STEEL STRIKE DIVERTED MANAGEMENT TIME AND EFFORT
FROM THE RUNNING OF THE BUSINESS AND THE RECOVERY PROGRAMME,
THE MAIN PRIORITY SWITCHED TO ENSURING CONTINUITY OF SUPPLY
AND MANUFACTURE.

I
RESOURCEFULNESS,

THE.FACT THAT BL DID NOT LOSE MANY SALES THROUGH LACK OF STEEL IS A MEASURE OF MANAGEMENT INGENUITY AND

BOTH OF WHICH WOULD HAVE BEEN MORE USEFULLY EMPLOYED IN

MANAGING THE RECOVERY PROGRAMME.

YESTERDAY'S SO-CALLED DAY OF ACTION WAS A FURTHER EXAMPLE OF

EXTERNAL PRESSURE WHICH WE COULD WELL DO.WITHOUT.BUT IT IS A TRIBUTE TO THE RESPONSIBLE ATTITUDE OF THE VAST MAJORITY OF OUR EMPLOYEES THAT, OF OUR AND LIVERPOOL COULD NOT 57 PLANTS IN THE UK ONLY ALBION . PRODUCTION YESTERDAY,

START

IT IS PARTICULARLY GALLING AND FRUSTRATING TO FIND THAT HAVING

MOVED SUBSTANTIALLY TOWARDS PUTTING OUR O W N INDUSTRIAL RELATIONS

AFFAIRS IN SOME ORDER AND HAVING THE COMMITMENT AND SUPPORT

OF OUR WORKFORCE, OUR POSITION IS JEOPARDISED BY EXTERNAL OR
NATIONAL DISPUTES,

INTERNAL OR EXTERNAL - THE RESULT IS THE SAME - A WEAKER NOT A

STRONGER BL, AND STRIKES IN 1979 OUTSIDE OUR POWER TO RESOLVE HIT THE COMPANY EXTREMELY HARD,

THE SECOND - AND TO SOME EXTENT MORE WORRYING FACTOR - is THE QUITE DRAMATIC AND SEVERE DROP IN OUR ABILITY TO COMPETE
PROFITABLY BOTH AT HOME AND ABROAD,

WE ARE NOT ALONE IN THIS - ANNUAL REPORTS INCLUDING OUR O W N ARE

LITTERED WITH REFERENCES TO THE EFFECT THAT THE CONTINUING
STRENGTH OF THE 6 . IS HAVING ON ALL SECTIONS OF BRITISH INDUSTRY.

BUT PEOPLE CANNOT AFFORD TO BE BORED BY THESE COMMENTS, BECAUSE EVERYONE IN THIS COUNTY SHOULD HAVE A CLEAR PICTURE
OF WHAT THE COMBINATION OF HIGH INTEREST RATES, A HIGH E AND HIGH INTERNAL INFLATION DOES TO OUR ECONOMY. IT MEANS MORE IMPORTS.
IN SHORT

UK HARKFT GOOD FOR A l l FXCEPT THE BRITISH!

IT MEANS THAT AT THIS MOMENT THE U K IS PROBABLY THE MOST PROFITABLE MARKET IN THE WORLD IN WHICH TO SELL VEHICLES THAT IS IF YOU ARE MAKING YOUR PRODUCTS ANYWHERE ELSE AND SHIPPING THEM OVER HERE! (ESPECIALLY IF YOUR HOME CURRENCY IS A HEAVILY DEVALUED YEN!)

FOR THE UK CAR AND TRUCK MANUFACTURER - (AND MAY I REMIND YOU BL IS THE LAST MAJOR INDIGENOUS ONE LEFT) - THE SITUATION IS EXTREMELY SERIOUS.

: 6:

AN IMPORTER'S BONANZA

THE PROFIT MARGINS FOR IMPORTERS INTO THIS COUNTRY ARE EXTREMELY ATTRACTIVE. COUPLE THIS WITH A WORLD-WIDE MOTOR UK MARKET BEING THE LAST TO

INDUSTRY RECESSION WITH T H E

REFLECT T H E GENERAL DECLINE AND IT IS LITTLE WONDER NATIONAL NEWSPAPERS H A V E FOREIGN VEHICLES! IN T H E P A S T YEAR, TAKING INTO ACCOUNT EXCHANGE RATE MOVEMENTS P A G E AFTER P A G E OF ADVERTS FOR

AND RELATIVE INFLATION, WE CALCULATE T H A T T H E PROFIT MARGINS OF SELLING IN T H E UK H A V E :

DOUBI FD FOR FRENCH & GERMAN MANUFACTURERS

flUADRIJPI

FD FOR

THE

JAPANESE

' 5"

THE SIGNS ARE THAT LAST YEAR'S BOOM IN THE U K MARKET HAS
DAMPENED D O W N AND MONTHLY SALES ARE LIKELY TO BE SEVERELY
DEPRESSED FOR THE REST OF THE YEAR. (APRIL CAR MARKET ONLY

115,000 COMPARED WITH 162,000 IN APRIL LAST YEAR),

So BL FACES A PERIOD OF INTENSE COMPETITION AT HOME.

FFFFCT ON EXPORTS
ABROAD THE SITUATION IS AS EVERY BIT AS SERIOUS. TO REMAIN

COMPETITIVE WE MUST ABSORB THE PENALTIES OF THE STRONG

U K INFLATION AND RISING COSTS AND OVERHEADS TO PRICE OUR

VEHICLES IN LINE WITH OUR COMPETITORS,

THIS MEANS THAT IN SOME MARKETS OUR MARGINS HAVE N O W BEEN REDUCED
TO THE POINT WHERE THERE IS NO PROFIT AND WE ARE BARELY
COVERING OVERHEADS. AND IT IS NOT AN EASY MATTER TO DECIDE

WHETHER WE SHOULD VIEW THE CURRENT TERMS OF TRADE AS A TEMPORARY

PHENOMENON AND JUST SOLDIER ON IN UNPROFITABLE MARKETS OR
W E

WITH UNPROFITABLE PRODUCTS UNTIL THE SITUATION CHANGES,

CANNOT IGNORE THE FACT THAT WE ARE ONE OF BRITAIN'S LARGEST

THE STRENGTH OF THE E. WAS A MAJOR CONTRIBUTING FACTOR TO THE
E122 MILLION LOSS WE INCURRED LAST YEAR AND WHICHEVER ECONOMIC

FORECAST YOU TURN TO PAINTS A BLEAK PICTURE FOR THE NEXT

TWO YEARS,

I
TNTFRNAI PROGRESS
THAN WE WOULD LIKE. PUTTING ITSELF IN ORDER,

'

8:

DESPITE THIS SOMBRE EXTERNAL PICTURE THERE HAS BEEN ENCOURAGING

AND POSITIVE PROGRESS WITHIN B L DURING 1979,

WE HAVE MUCH TO DO AND IN MANY AREAS WE HAVE HAD LESS SUCCESS

NEVERTHELESS, B L HAS MADE PROGRESS IN

LET ME TOUCH ON SIX AREAS WHERE SOME SUCCESS HAS BEEN ACHIEVED:

1,

INDUSTRIAL RELATIONS

RFCOVFRY PI AN BAI I OT - 877. EMPLOYEE SUPPORT

57. WAGF DFAI 8 WORKING PRACTICES REFORMS FINALLY AGREED LAST MONTH AFTER 6 MONTHS NEGOTIATION FOR MOST B L CARS EMPLOYEES-WITH 10", FOR SKILLED PEOPLE.

HAN HOURS LOST DUE TO INTFRNAI DISPUTES DROPPED

BY 52% FOR 1979 AGAINST 1978. IN THE FIRST

QUARTER OF 1980 MAN HOURS LOST THROUGH INTERNAL

DISPUTES WERE D O W N BY AROUND 30Z ON THE FIRST QUARTER OF 1979.
|

; 9 :

2.

RESTRUCTURING

EEMAUHETJ

BY 18,500

JOBS,

Ci OSIIRFS

- DURING

T H E YEAR

T H E SOUTHALL AND STREAMLINING

PARK ROYAL P L A N T S WERE OF CAR O P E R A T I O N S CASTLE ARE ON BROMWICH

CLOSED.

A C C E L E R A T E D CANLEY A N D (WE

RUN-DOWNS ON S C H E D U L E . T H E BROAD AGREEMENT

H O P E F U L THAT

REACHED

HG W I L L B E I M P L E M E N T E D , )

RATIONAIISATION MANUFACTURER 15 WORKING

OF MANUFACTURE

- ROVER. B O D Y

TRANSFERRED

TO COWLEY I N

DAYS.

TRIUMPH

TR7

PRODUCTION

TRANSFER TO SOLIHULL

(EXAMPLES TEAM

LIKE

THESE

SHOW T H A T BL'S M A N A G M E N T
WHEN I T HAS T H E
T H E J O B OF

CAN B E VERY

EFFECTIVE

OPPORTUNITY MANAGING

OF G E T T I N G

ON W I T H

THE BUSINESS.)

_ l

MFH FACTIITIFS - METRO AT LONGBRIDGE, TRUCK

ASSEMBLY HALL, LEYLAMD, PROVING GROUND FOR BL TECHNOLOGY ALL COMMISSIONED, THE TECHNOLOGY

N O W EVIDENT IN N E W BL FACILITIES IS UP TO BEST

WORLD STANDARDS,

3.

N E W MODEL INTRODUCTIONS

NEW RQADTRAIN, LANDTRAIN TRUCKS LAUNCHED,

REVISED MODELS OF JAGUAR/DATHI FR RANGE, MINT.

flLLRfl, ROVER, CONVFRTIRIF TR7, AND LAND ROVFR V-8

INTRODUCED.

NEW MORRIS TO BE LAUNCHED IN JULY TO REPLACE MARINA.

MINI METRO O N SCHEDULE FOR OCTOBER LAUNCH.

THESE N E W MODELS ARE THE RESULT OF THE REVISED PRODUCT

AND FACILITIES PROGRAMMES THAT WERE AGREED IN JANUARY
' .1978 - JUST OVER 2 YEARS OF W O R K WHICH BY MOTOR INDUSTRY
TIME SCALES IS VERY FAST W O R K INDEED! (THE MINI METRO i

AND LEYLAND ASSEMBLY PROJECTS HAVE BEEN COMPLETED

IN RECORD TIME.)

:1 1 :

I),

COLLABORATION

THE HONDA PROJECT WAS SIGNED AT CHRISTMAS AND

W O R K IS ALREADY ADVANCED TO INSTALL NEW BODY
MANUFACTURING AND ASSEMBLY FACILITIES AT COWLEY,

BL HAS SIGNED THE JOINT RFSFARCH CODNCII AGREEMENT WITH OTHER MAJOR EUROPEAN MANUFACTURERS TO
COLLABORATE ON ADVANCED TECHNOLOGY AND TO POOL
RESEARCH RESOURCES ON A NUMBER OF C O M M O N PROJECTS,

LEYLAND VEHICLES COMPLETED A LICENSING AGREEMENT

WITH ZE THE WEST GERMAN TRANSMISSION MANUFACTURERS
TO PRODUCE A GEARBOX FOR OUR LIGHT/MEDIUM TRUCKS,

OTHER COLLABORATIVE VENTURES ARE BEING ACTIVELY

PURSUED. IT IS THE COMPANY'S FIRM BELIEF THAT

CO -OPERAriON AND COLLABORATION WITH OTHER MANUFACTURERS WILL BE AN ESSENTIAL ELEMENT IN BL 's RECOVERY, PARTICULARLY BECAUSE OF BL'S SIZE IN RELATION TO OUR MAJOR COMPETITORS.

I
5.

:
HOLDING MARKET SHARE

1 2

WITH CONFIDENCE IMPROVING STEADILY PLUS OUR

BUY BRITISH CAMPAIGN, WE ARE HOLDING MARKET SHARE,
AFTER A SERIOUS DECLINE OVER TWO YEARS, IN MARCH

AND APRIL WE AVERAGED 2 1 ? FOR CARS, AND WE WILL

CONTINUE TO TRADE AGGRESSIVELY THROUGHOUT THIS
YEAR (MAXI AND MARINA PRICE REDUCTIONS WERE A MAJOR
MARKETING SUCCESS) TO HOLD OUR SHARE FOR THE MORRIS
AND METRO LAUNCHES.

ON THE SUBJECT OF MARKETING

W E WERE ASKED AT LAST YEAR'S AGM WHETHER
SHAREHOLDERS COULD RECEIVE A DISCOUNT ON THE METRO.
I SAID AT THE TIME THAT THIS QUESTION WAS BEING
RE-OPENED AND THAT WE WOULD BE LOOKING AT THE GENERAL
QUESTION OF H O W SHAREHOLDERS COULD BE ENCOURAGED TO
PURCHASE BL'S PRODUCTS.

N O W I K N O W THAT MANY OF OUR SHAREHOLDERS DO, WITHOUT

ANY FURTHER INCENTIVE, SUPPORT THEIR COMPANY BY
PURCHASING OUR PRODUCTS, INDEED, THE SAME COULD BE ) j

SAID OF PEOPLE THROUGHT BRITAIN,

6.
B O O

BUT THIS IS NOT UNIVERSALLY TRUE.

FOR THIS REASON

W E LAUNCHED OUR "BUY BRITISH" PROGRAMME AND AS PART

OF THE DEVELOPMENT OF THIS MARKETING PROGRAMME W E
ARE N O W ACTIVELY EXPLORING POSSIBLE WAYS OF MEETING
THE REQUEST FROM SHAREHOLDERS. I MAKE N O PROMISES

BUT I CAN ASSURE YOU THAT W E WILL EXAMINE THE

POSSIBILITIES FULLY BEFORE METRO IS LAUNCHED.

G O V E R N M E N T

FUNDING

THE CONSERVATIVE GOVERNMENT HAS CONTINUED THE ALL-PARTY

SUPPORT AND ENCOURAGEMENT TOWARDS B L WHICH HAS
MADE RECOVERY OF THE COMPANY POSSIBLE. (OUR
RELATIONSHIP WITH BOTH GOVERNMENTS AND WITH THE N E B HAS BEEN EXTREMELY GOOD. WHETHER THERE WILL BE A CHANGE IN OUR REPORTING RELATIONSHIP IS CLEARLY A MATTER FOR THE GOVERNMENT TO DECIDE, THEY ARE UNDER NO PRESSURE FROM US EITHER WAY.)

IN DECEMBER THE SECRETARY OF STATE ANNOUNCED THAT UP TO

MILLION WOULD BE MADE AVAILABLE TO B L DURING
WITH FURTHER FUNDS REQUIRED BY THE 1980 ;

1980/81

KILL PROGRESS CORPORATE BE DEBATED THIS PLANYEAR. TO IN BE THE THE CONSIDERED HOUSE DECISION OF COMMONS IN HAS THE BEEN LIGHT TOMORROW. MADE OF BUT BL'S

HOWEVER, THESE FUNDS ARE SUBJECT TO A STRINGENT CONDITION THAT

THE COMPANY'S PROGRESS TOWARDS RECOVERY MUST NOT BE HINDERED
BY ANY DISPUTE, INTERNAL AND EXTERNAL OR ANY FACTOR WHICH CAUSES
A SIGNIFICANT SHORTFALL IN CASH FLOW.

THIS CONDITION WAS SET OUT BY YOUR BOARD IN A LETTER TO THE

SECRETARY OF STATE ON 19TH DECEMBER LAST, AND IT IS THE
CORNERSTONE OF OUR RECOVERY STRATEGY.

SO FAR THE REALISTIC ATTITUDE THAT HAS PREVAILED AMONG THE VAST
MAJORITY OF OUR EMPLOYEES HAS AVERTED THE DANGER THAT THE
RECOVERY PROGRAMME WOULD BE ABANDONED,

THE PROGRESS IN THE SIX AREAS I HAVE OUTLINED TO YOU IS VERY

ENCOURAGING,

THERE HAS BEEN A SIGNIFICANT TURN-AROUND INSIDE BL IN TERMS OF

ATTITUDES AND ACHIEVEMENTS,

' UNFORTUNATELY WE CANNOT CONTROL THE EXTERNAL FACTORS WHICH BY AND LARGE ARE ALL UNFAVOURABLE, IN THESE CIRCUMSTANCES WE SHALL NOT BE ABLE TO JUDGE SUCCESS IN
1980 BY PROFITABILITY. THE CRUCIAL TEST WILL BE WHETHER W E CAN I

MAKE PROGRESS WITH THE PHYSICAL ACTIONS IN THE PLAN AND AT THE
SAME TIME ACHIEVE OUR CASH FLOW TARGETS,

W H A TA R FW E DOING?
B RIEFLY : THE MANAGEMENT TEAM HAS ALREADY TAKEN ACTION TO

MINIMISE THESE ADVERSE EFFECTS AND FURTHER ACTION WILL BE TAKEN

DURING THE REST OF THE YEAR,

SPECIFIC

ACTIONS ARE AS FOLLOWS:

LAY OFFS

IN FEBRUARY AND MARCH WE CUT BACK PRODUCTION OF SOME MODELS TO REDUCE STOCKS . (SOME EUROPEAN COMPANIES ALL THE U S A MANUFACTURERS

HAVE NOW FOLLOWED OUR EXAMPLE. HAVE DONE SO TOO,) LAID OFF IN THE U S A THERE ARE TODAY.

210,000

AUTO WORKERS

ii
RESTRUCTURING FACTORY CLOSURES AND DEMANNING ARE BEING BROUGHT FORWARD, ALBEIT AT COST TO THE PRESENT.

: 16 :

C O N T A I N I N G - C O S T S
W A G ES E T T L E M E N T SB E L O W ' T H E UK N O R M IN BL C O M M E R C I A L
VEHICLES A N D BL CARS WILL H E L PT OC O N T A I NC O S T S /
N E WW O R K I N G M E T H O D S WILL L E A DT OI M P R O V E M E N T S IN
EFFICIENCY A N D PRODUCTIVITY.
RATIONALISATION O F FACILITIES WILL GIVE M O R E C O S T
EFFECTIVE M A N U F A C T U R EA N DR E D U C E O V E R H E A D S .
M U C HT I G H T E RI N V E N T O R Y C O N T R O L A N DP U R G EO N U N E M P L O Y E D
ASSETS.
AGGRFSSIVF MARKETING
U RP R O D U C T S A G G R E S S I V E L Y
W E WILL C O N T I N U ET O SELL O (AS W I T H MAXI A N D MARINA),
N E W M O D E I S
THE N E WM O D E L P R O G R A M M E WILL O B V I O U S L YP U TN E W LIFE
I N T OT H E BUSINESS, C O N T I N U I N G IN A C O U P L EO F M O N T H S
W I T HT H EN E WM O R R I SA N DT H E NM E T R O IN O C T O B E R , F O L L O W I N G
T H EH I G H L Y SUCCESSFUL L A U N C HO FL A N D T R A 1 N , R O A D T R A I N
A N D TR7 C O N V E R T I B L E EARLIER THIS YEAR,

FT

C O I . I ARORATI ON
I UNION CO-OPFRATION WITH OUR EMPLOYEES AND UNIONS.
THE 1980's is JOBS

W E CONTINUE TO MOVE TOWARDS GREATER COLLABORATION

AND CO-OPERATION WITH OTHER MANUFACTURERS AS AN

ESSENTIAL PART OF THE RECOVERY PROGRAMME.

W E SHALL ALSO CONSOLIDATE AND STRENGTHEN OUR RELATIONSHIP

IT IS CERTAINLY NOT THE POLICY OF THE COMPANY TO

CONFRONT UNIONS OR EMPLOYEES BUT TO USE EVERY METHOD
TO PERSUADE AND REACH AGREEMENT TO REBUILD BL.

I HAVE BEEN SAYING FOR SOME TIME - THE MAIN ISSUE OF

PROFITABI F JOBS

l l J

O W WE RECREATE A SELFH o w WE MAINTAIN EMPLOYMENT, H RESPECTING MOTOR INDUSTRY AND H O W WE MEASURE UP TO

j t j

INTERNATIONAL COMPETITION ARE MATTERS THAT MUST UNITE, MOT DIVIDE, MANAGEMENT, EMPLOYEES AND UNIONS, WE MUST SPEND LESS TIME ON POST MORTEMS OF WHETHER It MAY WAS A DAY OF ACTION OR INACTION AND MORE TIME BUILDING BRIDGES,

Y O UC A N BUILD B R I D G E SW I T H O U T SACRIFICING PRINCIPLES!

RIGID MILITANT M A N A G E R S A R EA SM U C H O FAP R O B L E M A S
INFLEXIBLE MILITANT S H O P S T E W A R D S .
BL's M A I NH O P EF O R. 1 9 8 0 IS T H A T W EC A NB R O A D E N T H E R E C E N TA G R E E M E N T SA N DU N D E R S T A N D I N G SB E T W E E N M A N A G E M E N ' A N DU N I O N SI N T O A POSITIVE S T R A T E G YF O R C Q Q P F R A T T O N A N DU N I T E DE F F O R TA N D FINISH W I T H C O N F R O N T A T I O N O N C EA N DF O R ALL. SUPPLIERS COMPETITIVENESS
TURNING N O W T OO U T S I D E BL W ES H A L LB EL O O K I N GF O R W A Y S
O FI M P R O V I N G COMPETITIVENESS.
O R INSTANCE, N O T T O
W ES H A L LE X P E C TO U R SUPPLIERS, F H A T R E S U L TF R O M H I G H
PASS O NI N F L A T I O N A R Y PRICE RISES T W A G E SETTLEMENTS. W EW I L LP R E F E R BRITISH P R O D U C T S ,
B U TW E WILL N O TB U YT H E MW H E N T H E Y A R E CLEARLY
UNCOMPETITIVE. To D OS OW O U L D BE G R O S S L YU N F A I RT O ALL
O U RO W N E M P L O Y E E SW H O H A V EH A DT H E REALISM T O S E T T L E
M O D E S T L Y ,T H E YW O U L D B E ENTITLED T O FEEL A G G R I E V E D
IF THEIR O W N C O M P A N Y PAID T H E PRICE O FT H E I N F L A T I O N A R Y

TENDENCIES OF OTHERS. j

Iff
WORI D-WIDF RFCFSSION

THE STEPS W EA R ET A K I N GA R EI N T E N D E DT OC O P EW I T H T H E PECULIAR DIFFICULTIES O FO P E R A T I N G IN A N DO U TO F BRITAIN -

IN A W O R L D RECESSION. AT THIS M O M E N T W EE S T I M A T E T H A T
A R O U N D AT H I R DO F A MILLION C A RW O R K E R S A R O U N D T H E W O R L D
A R EE I T H E RO NS H O R T T I M EO R LAID OFF.

19

IN T H EM A J O RI N D I G E N O U SE U R O P E A N INDUSTRIES T H E R E
A R EP R O D U C T I O N CUT-BACKS, SUBSTANTIALLY R E D U C E D
PROFITS A N D IN S O M EC A S E S LOSSES.
THE O N L YE X C E P T I O NT O THIS P A T T E R N IS JAPAN W H E R E 1979
E X P O R T SR O S EB Y 11 A N D THIS Y E A R THE JAPANESE WILL
P R O B A B L YP R O D U C E M O R E VEHICLES T H A NT H EU N I T E D STATES.
JAPAN IS E X P O R T I N G ITS P R O B L E M SA N D U N E M P L O Y M E N T
A L O N GW I T H ITS CARS, A N D IT IS A M O O T P O I N TH O WL O N G
T H EW E S T WILL A C C E P TT H E RESULTING I M B A L A N C EO F TRADE.
ALL THIS A D D SU PT OAC O N T E S TO F SURVIVAL O NA W O R L D
W I D E SCALE. F O R BL T OC O M E T H R O U G H WILL R E Q U I R E
E V E R YO U N C EO FS U P P O R TA N DC O O P E R A T I O NT H A T G O V E R N M E N T ,
UNIONS, EMPLOYEES, SUPPLIERS, DEALERS A N DT H E BRITISH
PUBLIC C A N GIVE.
GIVEN T H A TS U P P O R T A N DT H EM E A S U R E ST H EC O M P A N Y IS
TAKING, I BELIEVE B L WILL H A V ET H ER I G H T S T R U C T U R E ,
T H ER I G H T ATTITUDE AND, A B O V E ALL, T H ER I G H TM O D E L S
T OC A R R YT H R O U G H ITS R E C O V E R YP R O G R A M M E , I

mm

M A N YO FO U RP R O B L E M SH A V EB E E NO FO U RO W N M A K I N G , .
W EA R E BEAVERING A W A Y A TT H E S E - LET U SH O P E T H E
E C O N O M I CE N V I R O N M E N T D O E S N ' TU N D O ALL T H EE F F O R T S BEING
OS A V E BL.
P U T IN T

EiBIHER L O S S E S . . I N 198Q

IM U S T TELL Y O UT H A TE X T E R N A LF A C T O R S A L O N E WILL M E A NT H A T B L
WILL SUSTAIN F U R T H E RL O S S E S THIS YEAR, T H EE X T E N TT O W H I C H
W EW I L LB EA B L ET OO F F S E TT H E M WILL B ED E T E R M I N E DB Y H O W
S U C C E S S F U LW EA R E IN MAINTAINING T H EM O M E N T U M O F P R O G R E S S
W I T H I N B L ,
RIGHT N O WO U RT O P PRIORITY IS T OC O N T R O L O U RC A S HT OE N S U R E W E
G E TT OT H EM E T R OL A U N C H IN O C T O B E R IN O N E PIECE! I M U S T
E M P H A S I S E AGAIN - C A S HF L O W WILL BE T H E CRUCIAL T E S T O F
P E R F O R M A N C E IN 1980,

T H A N KY O UF O RC O M I N GT O D A Y ,


SECRET

*
9
C A B I N E TO F F I C E
Central Policy Review Staff 70 Whitehall, London SWIA 2 AS Telephone 01-333 7765 From: J. R. Ibbi Qa 0^021
13 May 1980 British Lovland
M r Ibba has s e e n a copy of your letter of 9 May to Tim Lankeater and has asked me to say he believes the minor drafting points to widen the to m i s of reference, proposed by the Chancellor, are desirable. I am sending a copy of this letter to Tim Lankes_terj_
Ian Ellison, David Wright and John Hoakyns.

1** |
1
v

c
G B Spence U
A J Wiggins Esq
PS/Chancellor of the Exchequer
UM TREASURY S V1 . SECRET

10 DOWNING STREET
PRIME MINISTER
This i s a l e t t e r take i n t o account BL's s a n c t i o n s wi th I r a n . from
to

Michael Edwardes a s k i n g you i n r e a c h i n g a d e c i s i o n on they have some cont i n u i n g

business which w i l l not a f f e c t e d "by does appear that BL w i l l be

position trade Although

the l e g i s l a t i o n , i t
lose

some s u b s t a n t i a l b u s i n e s s as a
r e s u l t of s a n c t i o n s - f o r
example a E40 m i l l i o n f o r buses. r e p l y , and contract
You w i l l want to
I w i l l get a d r a f t .

8 May

1980

lO D O W N I N G STREET
From the Private Secretary
g u & y lg8

I would be g r a t e f u l f o r a d r a f t r e p l y t o the e n c l o s e d l e t t e r which the Prime M i n i s t e r has r e c e i v e d from S i r M i c h a e l Edwardes about trade sanctions against I ran. Please could I have the d r a f t by F r i d a y 16 May at thc l a t e s t ? I am s e n d i n g a copy o f t h i s l e t t e r
and i t s e n c l o s u r e t o S t u a r t Hampson
(Department o f Trade) and t o Paul Lever
( F o r e i g n and Commonwealth O f f i c e ) .

I . K. C. E l l i s o n , E s q . ,
Department o f I n d u s t r y .

'It

'

I lO DOWNING STREET

From the Private Secretary

May

1980

In Che absence o f the Prime M i n i s t e r , who i s at present i n B e l g r a d e , I am w r i t i n g to thank you f o r y o u r l e t t e r o f 7 May. I w i l l l a y your l e t t e r b e f o r e the Prime M i n i s t e r on h e r r e t u r n and she w i l l w r i t e
t o you as soon as p o s s i b l e .

S i r M i c h a e l Edwardes.

S E CR E T
_ ,

-,

I
I

Treasury Chambers, Parliament Street. SW1P 3AG

01-23S 3 0 0 0
9th May 1980 T.P. Lankester E s q .
10 Downing S t r e e t
LONDON

f%
, j

|SfM*x

The C h a n c e l l o r was encouraged to l e a r n from Ian E l l i s o n ' s

l e t t e r to you o f 7 May that S i r Michael Edwardes had. agreed
to co-operate with a s p e c i a l Government consultant,and
that Mr John Grenside o f P e a t , Marwick, M i t c h e l l and Co
had been appointed to take on t h i s work. I b e l i e v e Martin
H a l l has l e t you know that the C h a n c e l l o r was content with
the proposed terms o f r e f e r e n c e f o r t h i s appointment, but
expressed the hope that Mr Grenside might be asked to
r e p o r t by m i d - J u l y .
The S e c r e t a r y o f S t a t e f o r Industry's minute o f 30 A p r i l
to the Prime M i n i s t e r r e f e r r e d t o new terms o f r e f e r e n c e
which might be g i v e n to the BL Board i n the event o f the
Plan being withdrawn. We have no q u a r r e l with these i n any
s u b s t a n t i v e way, but there are one or two minor d r a f t i n g
p o i n t s we would p r e f e r to see i n c o r p o r a t e d . These are
designed to widen the context o f the terms o f r e f e r e n c e ,
and they a l s o have the advantage that they avoid naming
i n d i v i d u a l departments.
There would be no need then to d e f i n e r o l e s f o r the
Department o f Industry and the Treasury i n the e x e r c i s e .
Our p r e f e r r e d v e r s i o n i s a t t a c h e s to t h i s l e t t e r .
Regarding the Corporate Plan and i t s f u t u r e , the Prime
M i n i s t e r may be i n t e r e s t e d to know that BL economists
have now d i s c u s s e d background assumptions with Treasury
I t seems that the
and Department o f Industry o f f i c i a l s . meeting was q u i t e u s e f u l and that there was not a great
/ d e a l o f

S E C R E T

S E C R E T

d e a l o f d i f f e r e n c e between the assumptions proposed by BL

and the T r e a p u b l i s h e d at the time o f the
1
s u r y f o r e c a s t Budget. B L s maj or concern i s the f u t u r e course o f the
exchange r a t e . G e n e r a l l y , T r e a s u r y o f f i c i a l s take the
view that BL assumptions on t h i s matter combine prudence
with r e a l i s m .
I am copying t h i s to Ian E l l i s o n , David W r i g h t , Robin Ibbs
and John Hoskyns.

A.J. WIGGINS
Private Secretary

S E C R E T

direct the (XJ^O-I.^ ^

B L ' s a f f a i r s ^ i n e u c h a vay a s t o m i n i m i s e : expenditure c o s t s (whether borne through .if'";'

public

3l o r d i r e c t l y jUiA-Sl \ , economic industrial

by t h e G o v e r n m e n t ) ; including

and t h e w i d e r on o t h e r UK

HH

effects

the effect

activitj.ee,

1 , . i.

'

To

this

end t h e B o a r d w i l l

maintain close

liaison

with

tlMU.;

fab

l,ta
't h e G o v e r n m e n t o v e r t h e f o r m u l a t i o n and i m p l e m e n t a t i o n l c r 115 o r
V \ C " l ^ ^ ' ^ P^-^ ^ c l o s u r e and/or d i s p o s a l of BI business.
v ,v

^-L 'v.,\V v-S\'(-V

^^^^

Mm

__ ^ ^ *

FnOM Sin MICHAEL ED WAR DEB

35-38 PORTMAN SQUARE LONDON W 1 H OB N

7 M a y 1 9

^, *V*>

1
I

80

The R t Hon M r s M a r g a r e t T h a t c h e r , MP
10 D o w n i n g S t r e e t
London SW1

U^fi^ -t.
IRAN - P O S S I B L E TRADE SANCTIONS A l t h o u g h BL's major i n v o l v e m e n t i n I r a n has a l r e a d y been
r e g i s t e r e d w i t h the Departments o f I n d u s t r y and Trade,
I am t a k i n g t h e l i b e r t y o f w r i t i n g t o y o u d i r e c t t o e m p h a s i s e
our concern about t h e impact o f p o s s i b l e s a n c t i o n s , s i n c e
the u l t i m a t e d e c i s i o n i s bound t o i n v o l v e s t r i k i n g a b a l a n c e
between f o r e i g n p o l i c y and d o m e s t i c p o l i c y c o n s i d e r a t i o n s .
Our c o n t i n u i n g b u s i n e s s w i t h I r a n - i n v o l v i n g t h e s u p p l y o f
Land Rover k i t s and t r u c k and bus c h a s s i s t o two l o c a l
assembly p l a n t s , p l u s s u b s t a n t i a l s a l e s o f spare p a r t s w i l l b e w o r t h some 2 m i l l i o n p e r month t h i s y e a r . I n
a d d i t i o n , there are s u b s t a n t i a l bus orders i n prospect,
i n c l u d i n g one f o r 1000 s i n g l e - d e c k b u s e s w o r t h 4 0 m i l l i o n ,
and we n e e d t o b u i l d u p L a n d R o v e r b u s i n e s s i n I r a n a s o u r
e x p a n s i o n programme b e g i n s t o t a k e f u l l e f f e c t f r o m 1 9 8 1
onwards.
You w i l l r e a l i s e t h a t , a s we s t r u g g l e t o o v e r c o m e t h e i m p a c t
o f a s t r o n g pound a n d h i g h d o m e s t i c i n f l a t i o n o n o u r
c o m p e t i t i v e n e s s , B L c a n n o t a f f o r d t o p a s s up a n y o p p o r t u n i t i e s
of p r o f i t a b l e business. As one o f t h e UK's l e a d i n g w o r l d w i d e
e x p o r t e r s , we a r e a l s o c o n c e r n e d a b o u t t h e i m p a c t o n o u r
s t a n d i n g i n o t h e r m a r k e t s i f we a r e s e e n t o b r e a k c o n t r a c t u a l
o r l o n g - e s t a b l i s h e d s u p p l y c o m m i t m e n t s . W i t h s o much
t a x p a y e r s ' money i n v e s t e d i n B L , we w o u l d hope t h a t G o v e r n m e n t
p o l i c i e s i n r e l a t e d f i e l d s w i l l not c o n f l i c t with the o b j e c t i v e
o f t h a t i n v e s t m e n t , w h i c h i s presumably t o g i v e us t h e b e s t
p o s s i b l e chance t o s u c c e e d .

rL

- 2 -

The

Rt

Hon

Mrs

Margaret

Thatcher,

MP

7 May

1980

P a s t e x p e r i e n c e o f s a n c t i o n s and o f o t h e r t y p e s o f i n t e r
n a t i o n a l a g r e e m e n t h a s s h o w n t h a t t h e UK a d h e r e s t o s u c h
a r r a n g e m e n t s more r i g i d l y t h a n do o u r m a i n overseas
competitors. I n t h e c a s e o f I r a n , e n f o r c e m e n t w o u l d be
p a r t i c u l a r l y d i f f i c u l t , a n d we k n o w t h a t c e r t a i n competitors are a l r e a d y w e l l p l a c e d t o evade s a n c t i o n s , f o r example
through t h e i r operations i n Turkey.

E v e n i f s a n c t i o n s were e n f o r c e d w i t h e q u a l s t r i c t n e s s by a l l
i n d u s t r i a l i s e d c o u n t r i e s , I d o u b t w h e t h e r any o f them w o u l d
enter i n t o t h i s arrangement with such a v u l n e r a b l e industrial
b a s e a s t h a t o f t h e UK. If t h e r e i s a n y q u e s t i o n o f our
h e l p i n g our a l l i e s w i t h N o r t h Sea o i l to overcome the effect
of s a n c t i o n s , I wonder whether they i n t u r n would s u p p o r t our
m o t o r i n d u s t r y o r o t h e r UK m a n u f a c t u r i n g i n d u s t r i e s w h i c h
w e r e h a r d h i t by l o s s o f e x p o r t s . Or w o u l d t h e y simply
r e j o i c e t h a t s a n c t i o n s a g a i n s t I r a n had h e l p e d t o t i p a n o t h e r
competitor over the edge?
I am s u r e t h a t y o u a l r e a d y h a v e a l l t h e s e p o i n t s o n board,
a n d I r e c o g n i s e t h e n e e d t o show s u p p o r t f o r o u r A m e r i c a n
allies in their difficulties. B u t I am e q u a l l y s u r e that
I am n o t a l o n e i n B r i t i s h i n d u s t r y i n h o p i n g t h a t we can
make p r o g r e s s w i t h I r a n by b u i l d i n g o n t h e e x c e l l e n t o u t c o m e
of the London s i e g e , r a t h e r than e n t e r i n g i n t o a trade
s a n c t i o n s o p e r a t i o n w h i c h seems most u n l i k e l y t o s u c c e e d and
w h e r e f a i l u r e w i l l be f e l t m o s t k e e n l y i n t h e a r e a w h e r e
we c a n l e a s t a f f o r d i t - i n t h e j o b s a t p r e s e n t p r o v i d e d by
UK e x p o r t e r s s u c h a s BL.
I am sending Nott.
copies of this letter to Keith Joseph and

John

7 May

1980

MR

/
LANKESTER REFERENCE FOR GOVERNMENT ADVISER ON BL
TERMS OF 1.

Ufa
'

S i r K e i t h ' s m i n u t e t o t h e P r i m e M i n i s t e r o f 15 A p r i l "I Sir am a t t r a c t e d by the suggestion

said:

i n S i r Robert Armstrong's minute a p p r o a c h someone l i k e any additional I should were related might be way, taken. t h a t we and not

o f 28 M a r c h t h a t t h e G o v e r n m e n t s h o u l d precautionary still going be 2. this. still consider t o do a c t i o n which could i t essential and

H e n r y B e n s o n f o r a d v i c e on w h e t h e r t h e r e was should to t e l l S i r Michael in this

t h i s , but

i f expressed

specifically

t o d i s p o s a l ( p a r t i a l o r c o m p l e t e ) I t h i n k he

persuaded to accept i t . " a little Grenside s i n c e he as an wrote

S i r K e i t h ' s i d e a s h a v e o b v i o u s l y moved on But the e s s e n t i a l p u r p o s e o f g e t t i n g Mr t o s e e w h e t h e r t h e r e i s any stage". seems t o be

adviser planning

"precautionary

o r a c t i o n t o be u n d e r t a k e n a t t h i s 3. t o me I f we a r e a s k i n g s u c h an way. I am

open-ended quest i o n , not

i t seems last

important paragraph that

t h a t the terms of r e f e r e n c e s h o u l d i n any a little

restrict this.

the t h i n k i n g

process

concerned that the must n o t

o f t h e p r o p o s e d t e r m s o f r e f e r e n c e m i g h t do reasonable to s t i p u l a t e that the impression t h e G o v e r n m e n t has 4. It

It i s perfectly
be g i v e n

a b a n d o n e d hope o f t h e P l a n i s that nothing

succeeding.

What i s l e s s r e a s o n a b l e the p r o s p e c t s

s h o u l d be d o n e w h i c h w o u l d
of the present of by the Plan. idea of

lessen

of s u c c e s s f u l implementation

seems q u i t e p o s s i b l e t h a t t h e and t a k i n g out

a d v i s e r m i g h t come up w i t h an likelihood do this against the p o s s i b i l i t y

which c o u l d i n v o l v e a t r a d e - o f f between the Plan succeeding it I 1 I

1

present

insurance

not d o i n g

so.

In a s e n s e , any resources Of course,

action w i l l

diverting
between now, and

either

financial

o r s c a r c e management t i m e t o e v e n c o n s i d e r i n g i f t h e r e was a major c o n f l i c t t h e BL taking precautionary action Board

what m i g h t h a p p e n . making the present Ministers. But we

P l a n s u c c e e d and

t h i s would r e q u i r e very t h a t t h e y must n o t

s e r i o u s c o n s i d e r a t i o n - by these lines.

w o u l d be w r o n g t o t e l l even t h i n k a l o n g

t h e a d v i s e r s i n advance

5. I therefore suggest that we could delete the phrase "lessen the

prospects of successful implementation of the Corporate Plan, or . . ."
6. However, I have no doubt this last paragraph has been put there to keep BL happy. If the advisers do not themselves feel constrained by this sentence, then i t may not matter. At the very least we should ask whether they are happy with i t . Ideally i t should be deleted. A second best would be to express i t slightly less categorically.

ANDREW DUGUID

/"^fe^X
( VV^^/ \ ^ ^ ^ S 1 1

D E P A R T M E N T O F INDUSTRY
ASHDOWN
1 2 3 V I C T O R I A

HOUSE STREET 6RB

LONDON TELEPHONE

SW1E

DIRECT LINE 01-212 3301 SWITCHBOARD 01-212 76T6

PS/

SeH^tt/KrfSttw tor

1Tim L a n k e s t e r Esq
P r i v a t e S e c r e t a r y to the Prime M i n i s t e r
10 Downing S t r e e t LONDON SW1

May 1 9 8 0

...

As foreshadowed i n h i s minute to the Prime M i n i s t e r of 30 7ff A p r i l , my S e c r e t a r y o f S t a t e has i n v i t e d John Grenside of / / P e a t , Marwick &. M i t c h e l l to a d v i s e the Government i n s t r i c t ^ confidence about whether t h e r e i s any/contingency a c t i o n which should be taken a g a i n s t the p o s s i b l e withdrawal of the BL p l a n . Mr Grenside has accepted the i n v i t a t i o n . He proposes to i n v o l v e
one o f h i s s e n i o r p a r t n e r s , Mr George Dunkerley, p a r t l y because
he h i m s e l f has to be abroad a c e r t a i n amount i n the coming
weeks, and a l s o because he t h i n k s t h a t "two heads are b e t t e r
than one". Mr Dunkerley i s not a s s o c i a t e d w i t h the l i q u i d a t i o n
s i d e o f Peat's b u s i n e s s . A p a r t from Mr Grenside and Mr
D u n k e r l e y , no one at Peat's w i l l be i n v o l v e d . S i r Michael
Edwardes has no o b j e c t i o n to Mr fjunkerley b e i n g a s s o c i a t e d with
the t a s k and my S e c r e t a r y of S t a t e has t h e r e f o r e a g r e e d .
Mr Grenside has asked to be g i v e n w r i t t e n terms o f r e f e r e n c e and I a t t a c h a note which my S e c r e t a r y o f S t a t e proposes to g i v e him. He i s to have a f i r s t d i s c u s s i o n tomorrow, 8 May, w i t h and the terms o f r e f e r e n c e w i l l need to be handed over b e f o r e c l o s e of p l a y t o d a y . I should t h e r e f o r e be g r a t e f u l i f you and the o t h e r r e c i p i e n t s would l e t me know by 4 - pm whether they have any comments on the terms of r e f e r e n c e . Copies of t h i s l e t t e r go to M a r t i n H a l l ( T r e a s u r y ) , E o b i n (CPRS) and John Hoskyns.
Ibbs

BL

I K G ELLISON
Private Secretary

I
I
W I I W % I I PROPOSED TERMS OF REFERENCE FOR GOVERNMENT ADVISER ON BL
To c o n s i d e r and a d v i s e the Government (as h o l d e r o f more than 99% o f the BL e q u i t y ) whether f u r t h e r p r e c a u t i o n a r y p l a n n i n g or a c t i o n c o u l d u s e f u l l y , or s h o u l d , be undertaken at t h i s s t a g e , i n order: (i) to put the Government i n a b e t t e r p o s i t i o n to respond r a p i d l y i f the BL Board should d e c i d e t h a t a s i t u a t i o n had been r e a c h e d , when, i n the context of the Chairman's l e t t e r of 19th December 1979 (copy a t t a c h e d ) , i t would be necessary s h o r t l y to withdraw the 1980 Corporate P l a n ; ( i i ) t h a t i n t h i s event, the r e s u l t i n g rundown of the company
c o u l d be managed i n such a way as to minimize the
consequences f o r p u b l i c e x p e n d i t u r e and f o r the UK economy generally.

I t i s e s s e n t i a l t h a t n o t h i n g should be done which wouldClessen

the p r o s p e c t s o f s u c c e s s f u l implementation o f the Corporate P l a r Q or g i v e the i m p r e s s i o n w i t h i n BL or elsewhere t h a t the Government had abandoned hope of the P l a n s u c c e e d i n g .

mm

, m^R LANKESTER BL
1.

1 May 1980

i f

S i r K e i t h ' s minute of 30 A p r i l seems t o be s u g g e s t i n g that the I

q u e s t i o n of a meeting between the Prime M i n i s t e r and S i r M i c h a e l Edwardes need not be f u r t h e r c o n s i d e r e d u n t i l the BL Board p r o v i d e s an " i n t e r i m view" of BL's prospects - a f t e r 2. t h e i r meeting of 14 May.

J u s t b e f o r e the Prime M i n i s t e r ' s l a s t meeting on BL, John Hoskyns

t h a t the Prime M i n i s t e r should meet Edwardes as soon as
the immediate c r i s i s brought
One of the main purposes of t h i s
withdrawal

suggested

p o s s i b l e - though n o t , of c o u r s e , unt i l about by s t r i k e a c t i o n was r e s o l v e d .

meeting would be t o e x p l o r e w i t h Edwardes h i s a t t i t u d e t o the o p t i o n o f

seeking t o s e l l BL b e f o r e t h i n g s d e t e r i o r a t e d so much that of the Plan became i n e v i t a b l e . o n l y t o be c o n s i d e r e d by Plan. Of course Dol and BL as a response As matters s t a n d s , t h i s o p t i o n seems
t o withdrawal o f the
t o take any i n i t i a t i v e i f

i t would be very d i f f i c u l t

S i r M i c h a e l opposed i t , but a proper d i s c u s s i o n of the o p t i o n with him

would be worthwhile.
sees v a l u e i n a d i s c u s s i o n of t h i s
crisis

3.

I f the Prime M i n i s t e r s t i l l

k i n d , i t would be best f o r t h i s t o take p l a c e b e f o r e t h e next i n t e r v e n e s t o prevent i t .

E X w ^

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ANDREW D U G U I D

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J H

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SECRET

|2

PRIME MINISTER

BL MEETING:

MEETING WITH SIR MICHAEL EDWARDES

on 17 A p r i l , i t was agreed t h a t when I met a b i l i t y to fulfil
28

At our meeting on BL

S i r M i c h a e l Edwardes I would d i s c u s s w i t h him BL's

t h e i r planned o b j e c t i v e s , i n the l i g h t of h i s l e t t e r s of 18 and March. I t was a l s o agreed t h a t I should d i s c u s s with him the

p o s s i b i l i t y o f the Government c o n s u l t i n g a l e a d i n g expert about

whether t h e r e was contingency I am now a n y t h i n g more we should be doing now by way of

p l a n n i n g a g a i n s t a p o s s i b l e withdrawal of the BL P l a n .

w r i t i n g to r e p o r t the outcome.

S i r Michael Edwardes s t r e s s e d the s u b s t a n t i a l achievement with BL workforce over the acceptance o f the wages package, which I acknowledged. to s t a t e BL's He t o l d me

the

fully

t h a t h i s l e t t e r s had been m a i n l y concerned

current
prospects

p o s i t i o n as f a r as cash requirements f o r the BL had s t i l l

year were concerned.

to r e - a s s e s s l o n g e r term

and c o u l d make no c a t e g o r i c a l statements about l o n g e r term u n t i l the 1981 Corporate P l a n was drawn up l a t e r this year.

viability
Whilst

the cash s i t u a t i o n would be v e r y t i g h t i n 1980/81 BL's

assessment

remained t h a t they c o u l d s t a y w i t h i n the l i m i t s without p r e j u d i c i n g

the e s s e n t i a l s o f the p l a n . S i r M i c h a e l added t h a t the company were

t a k i n g e n e r g e t i c s t e p s t o reduce c o s t s , and i n one case ( t h e

a c c e l e r a t e d c l o s u r e of the Triumph works at Canley) had forward expenditure brought

i n t o the c u r r e n t year which would save money i n

He assured me He the
that

f u t u r e years at a h i g h e r c o s t i n the p r e s e n t one.

they would take s i m i l a r a c t i o n whenever o p p o r t u n i t y o f f e r e d . . a l s o p o i n t e d out t h a t as a matter o f normal b u s i n e s s p r a c t i c e Corporate P l a n was

s u b j e c t to m o d i f i c a t i o n i n the l i g h t o f changing
/circumstances . . .

SECRET

circumstances

(though without p r e j u d i c e t o the main s t r a t e g y ) .

He t o l d me again t h a t BL's assessment o f t h e i r a b i l i t y t o achieve the

o b j e c t i v e o f l o n g term v i a b i l i t y w i t h i n f u n d i n g p r o v i s i o n s foreseen i n
the 1980 Corporate P l a n depended h e a v i l y on the Government's inflation. success
The BL

with i t s economic s t r a t e g y p a r t i c u l a r l y as regards

Board w i l l be c o n s i d e r i n g t h i s f u r t h e r a t t h e i r meethg on 14 May and

S i r M i c h a e l w i l l then l e t me know t h e i r i n t e r i m view o f the p r o s p e c t s .

In the meantime arrangements have been made f o r BL t o d i s c u s s w i t h the

Treasury the economic assumptions t o be used i n the review o f the
Corporate Plan. When I have r e c e i v e d h i s l e t t e r we s h a l l be a b l e t o

c o n s i d e r whether any f u r t h e r i n i t i a t i v e i s c a l l e d f o r on the l i n e s

we d i s c u s s e d on 17 A p r i l .

I explored w i t h S i r M i c h a e l the q u e s t i o n o f b r i n g i n g i n a s p e c i a l
Government a d v i s e r on a c o n f i d e n t i a l b a s i s ; and i n doing so I was
I t o l d him t h a t we had

guided by Robin Tbbs h e l f u l minute o f 1? A p r i l . it

i n mind t o c o n s u l t such an a d v i s e r on the p r e c a u t i o n s which the

Government, as owners, ought t o be t a k i n g now t o minimise the damage,

i f the worst happened, so t h a t we should have the b e s t chance o f b e i n g
able to rescue as much as p o s s i b l e o f BL and o f the s u r r o u n d i n g fabric. I s t r e s s e d t h a t the a d v i s e r would a c t i n s t r i c t economic

confidence

and h i s appointment would be kept s e c r e t ;

the a d v i s e r would make

I mentioned the

c o n t a c t w i t h BL o n l y through the Chairman h i m s e l f .

names o f John G r e n s i d e , s e n i o r p a r t n e r i n P e a t , Warwick, M i t c h e l l & Co.,

P e t e r G o d f r e y , deputy s e n i o r p a r t n e r i n E r n s t and Whinney, and I a n Hay
Davison, managing p a r t n e r i n A r t h u r Andersen & Co.^as p o s s i b l e
He r e a c t e d

c a n d i d a t e s whom the C h a n c e l l o r and I had c o n s i d e r e d .

p o s i t i v e l y t o my s u g g e s t i o n , and a f t e r c o n s u l t i n g members o f h i s
Board i n f o r m a l l y , has now t o l d me t h a t t h e y have no s p e c i a l

m ^

^vr-Qvrn

^^^^^^

/preference . . .

SECRET

(H|)

p r e f e r e n c e amongst these t h r e e . So I propose to approach

John Grenside about the p o s s i b i l i t y o f h i s t a k i n g t h i s assignment.

I s t r e s s e d to S i r M i c h a e l Edwardes the importance of c o n t i n u i n g to

p r e s s on w i t h c o n t i n g e n c y p l a n n i n g a g a i n s t the p o s s i b i l i t y t h a t the
P l a n might have to be withdrawn. I s a i d t h a t i f the P l a n were
terms of r e f e r e n c e

withdrawn I envisaged g i v i n g to the Board new

(which I o f course s a i d I had y e t to d i s c u s s w i t h other c o l l e a g u e s

concerned) on the l i n e s o f :

"In the l i g h t o f t h e i r d e c i s i o n to withdraw the Corporate P l a n :

1980

to d i r e c t BL's

a f f a i r s i n such a way

as to minimise
funding

the c o n s e q u e n t i a l adverse

e f f e c t s on p u b l i c

(whether through BL or d i r e c t l y by Government Departments)

and on o t h e r UK industrial activities;

to m a i n t a i n c l o s e l i a i s o n w i t h the Department of I n d u s t r y
(and the T r e a s u r y ) over the f o r m u l a t i o n o f p l a n s f o r
d i s p o s a l o f the BL business and of t h e i r implementation.!'

S i r M i c h a e l ' s immediate response was

to welcome t h i s

approach.

I am

c o p y i n g t h i s minute to the C h a n c e l l o r o f the Exchequer, the

to

S e c r e t a r y o f S t a t e f o r Employment, Robin I b b s , John Hoskyns and

/Sir...

^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^

 < s > '

SECRET

S i r Robert Armstrong.

I
1980

Department o f I n d u s t r y Ashdovm House 123 Victoria Street

K J 3 o April

I
SECRET

50 WRsO

mm

/'m^-Sl \ Aj^ilfp^

^^^^^1/
I PS/Secretary of Stata for Industry

D E P A R T M E N T O F A S H D O W N 1 2 3

I N D U S T R Y H O U S E 6 R B

V I C T O R I A S T R E E T DIRECT LINE 01-112 J J O l SWITCHBOARD 01-212 7 6 7 6

L O N D O N S W 1 E TELEPHONE

Z2> A p r i l 1 9 8 0 N i c k Sanders E s q Private Secretary to the Prime M i n i s t e r

10 D o w n i n g S t r e e t
London SW1

j /

BL I w r o t e t o y o u o n 17 A p r i l a t t a c h i n g r e p o r t s a n d
accounts f o r BL over the past f i v e y e a r s .

. . . I now e n c l o s e B L ' s r e p o r t p u b l i s h e d o n 22 A p r i l .

and accounts

f o r 1979

CATHERINE B E L L
Private Secretary

I
UK.

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SUB-DIVISIONS

OF B L ' s BUSINESS

G ( G ( ( 2 , r L r A R J , L 0 o a o u a o e .u n up s 5 v g y u P p d t p e . u l p i r a 1 R n 1 2 r 4T n 9 6o d 8 v M r D ^ 0 e i o a Vr u r i e m r m hp L i l ih t s e cd r l. L C ) e i) t a sd r. s L) td.) a p F e t R P w M f b T o D c a P U fo r n r n e i a u r o a l n f u i w a r g o t e d d m s t u o e ir a m i h n s c s t m pL r a n t l e r t k a l o n T a d w r e i l b u c ew r t s e i n h s i g w e s l c y o t u h r t d e l e s h k a a l e s a e y y . c s i e n u r d s a n r n l o o z e p s c a R r e n d . w M e v p R o l a b , a o l a d n e s d o d u r a s b n o v n e t r v d r s s u g o S e t d r r i e i s e c r ns o v r n i v e e d h a b A l . s . e g v e s b n u v f n ,e a o S g s o e d tv a v D i 1 c n s C l X -c n s o e -2 e 1 a n o e h d i J h a r g e d a n m C C r f S i s r L s n a g o 4 3 'o , c C m s . l s g i n f v t 0 5 l I a , i a e i n r B D e i d n e O r t s o n n a c os w r k m T g t r L l i n d t a i e e R r i e f m a r b t t e 7 s t 2-3 y o l l G yh , r a p r l i r u d e sR a e o m a . s s d e o r Ca 5 n s r r e e , m l w t l n g 2/3

t s d e L i i b g e s t i -a a p m u e l L i h m r r N a s li r J V o e c a x i e n t a R e u L a s t , n kr T o g r s e i e l e v 4 s u i n o r s o s e a 5 n t a o sr r n a . e , k / g l . ie n
g
o u

'

A.2.

A2:

AREAS OF

PROGRESS

TOWARDS

RECOVERY

1.0

A strong, predominantly has been e s t a b l i s h e d .

non-executive

Board

2.0

3.0

A s t r o n g , u n i t e d management team i s i n t h e
s a d d l e a n d i s s t i l l b e i n g s t r e n g t h e n e d . 32 o u t o f
top 200 s e n i o r e x e c u t i v e s r e c r u i t e d i n l a s t 2 y e a r s .
T h e g r o u n d w o r k h a s now b e e n l a i d f o r a
s i g n i f i c a n t improvement i n p r o d u c t i v i t y
f r o m 1981 o n w a r d s 3.1 Industrial relations policies are
c l e a r - c u t a n d much more d i s c i p l i n e d
i n a p p l i c a t i o n than pre-November 1977. I n t e r n a l d i s p u t e s c o s t 52% l e s s man h o u r s i n 1979 t h a n i n 1 9 7 8 , w i t h
f u r t h e r 30% f a l l i n f i r s t q u a r t e r o f
1980.
We h a v e r e d u c e d m a n p o w e r b y s o m e 3 0 , 0 0 0 since end-1977, without major s t r i k e s
resulting. Demanning w i l l r e a c h 42,000 by t h e end o f 1980.
We h a v e s t a r t e d t h e c l o s u r e p r o g r a m m e w i t h some s u c c e s s - S p e k e 1978, S o u t h a and Park R o y a l 1979, agreements s i g n e d o n C a n l e y a n d C a s t l e B r o m w i c h 19 8 0 .
I n N o v e m b e r 1979 b a l l o t o n r e c o v e r y P l g a v e 7-1 e m p l o y e e s u p p o r t f o r t h i s
programme.

ll

3.2

3.3

an

3.4

We h a v e a c h i e v e d a p a y d e a l i n B L C a r s
a v e r a g i n g 7^% a t a t i m e o f n e a r l y 2 0 %
i n f l a t i o n , a n d a t t h e same t i m e c l e a r e d
the way f o r i m p l e m e n t a t i o n o f new working
p r a c t i c e s , w h i c h , t o g e t h e r w i t h t h e new
i n c e n t i v e s c h e m e a n d t h e new manufacturing
f a c i l i t i e s , are the p r e - r e q u i s i t e s f o r
competitive levels of productivity.
I n p u s h i n g t h r o u g h t h e new p a c k a g e a n d i n
the d i s m i s s a l o f D . R o b i n s o n , we h a v e m a d e
a s i g n i f i c a n t dent i n the power and
c r e d i b i b i l i t y o f m i l i t a n t shop s t e w a r d s .
This w i l l help responsible national union
o f f i c i a l s a s w e l l .as m a n a g e m e n t .
We a r e r e a d y t o l a u n c h a n i m p r e s s i v e M i n i
M e t r o i n t h e autumn w i t h b o d y - b u i l d i n g
facilities t h a t a r e up t o t h e b e s t E u r o p e a n
standards.
T45 {& T 4 3 ) t r u c k s a l r e a d y l a u n c h e d best truck manufacturing f a c i l i t i e s Europe.
with
i n

3.5 , J
.

3.6

3.7

Continued

Page
4.0

2.

C o m m e r c i a l , b u s i n e s s and p r o d u c t strategies
a r e more c l e a r l y d e f i n e d t h a n e v e r b e f o r e .
The o v e r a l l p r o d u c t and f a c i l i t y p l a n s hammered
o u t i n J a n u a r y 19 7 8 , a s r e v i s e d b y t h e c l o s u r e s
a g r e e d u p o n i n A u g u s t 1979 ( a f t e r exchange r a t e s
had moved a d v e r s e l y ) a r e a l l on target.

5.0

Collaboration
5.1 BL C a r s ' d e a l w i t h Honda and Leyland V e h i c l e s ' d e a l w i t h 2F c o m p l e t e d and in operation.
Two and other major one f o r LVL deals - s t i l l

5.2

one f o r BL Cars
t o be consummated.

2 0 . 5 . 1 9 80

^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^

^ A3: AREAS OF INADEQUATE ACHIEVEMENT 1. P r o d u c t s a r e i n many c a s e s n o t c o m p e t i t i v e i n s t y l e and q u a l i t y . Some o f o u r o l d e r c a r products have been more r a p i d l y o u t p a c e d by c o m p e t i t o r s than share. was h o p e d and h a v e f a i l e d t o h o l d m a r k e t Some o f o u r l a r g e r p r o d u c t s , such as Rover (though new) h a v e b e e n h i t b y t h e e n e r g y c r i s i s . Only from 1981 onwards w i l l B L have t h e o p p o r t u n i t y t o test i t s new s m a l l e r c a r s a g a i n s t t h e c o m p e t i t i o n Metro, Bounty, Morris I t a l .

2.

Products are becoming u n c o m p e t i t i v e i n cost. I n f l a t i o n a n d c u r r e n c y d i f f e r e n t i a l s h a v e made us much l e s s c o m p e t i t i v e t h a n a v e r a g e E u r o p e a n and Japanese manufacturers at current exchange rates. UK p r i c e l e v e l s f o r c a r s a r e n o w 14% h i g h e r than Europe on a v e r a g e ; importers margins have doubled i n the l a s t year from France and Germany, and and the combination of quadrupled from Japan; r e l a t i v e i n f l a t i o n and exchange r a t e movements since 1977 has r e d u c e d the U K ' s c o m p e t i t i v e n e s s against J a p a n by 50%, a g a i n s t t h e U S b y 40% a n d a g a i n s t E E C c o u n t r i e s by w e l l o v e r 20%.
1

These factors a r e common t o UK m a n u f a c t u r i n g industry generally. Ford, etc. have compensated by i m p o r t i n g 50% o f U K s a l e s , and B L ' s s h a r e o f UK c a r p r o d u c t i o n has stayed broadly constant a t o v e r 40% d u r i n g t h e l a s t 10 years. ( F o r p r o f i l e o f F o r d o f B r i t a i n ' s 1979 p r o f i t s , see paper A . 4 . )

3.

We h a v e d i f f i c u l t y i n funding the business. Despite cooperation of workforce, speed o f restructuring cannot immediately offset d e c l i n e i n p r o f i t and cash flow a r i s i n g from r a p i d f a l l i n sales volumes. Immense cost o f restructuring (the need f o r w h i c h was not a n t i c i p a t e d by R y d e r , o r i n d e e d by anyone f u l l y u n t i l 1979) cannot be f i n a n c e d from B L ' s own c a s h flow.

20.5.1980

A4- FORD OF BRITAIN'S 1979 PROFIT PERFORMANCE Ford of Britain produced a spectacular profit performance in 1979. Sales totalled 3193 million, profit after taxes 347 million aO.9% of sales). This memorandum attempts three tasks:
(1) to estimate the source of those profile by UK produced and imported vehicles to compare Ford of Britain's results with those of the rest of Ford's European operations (as published in the parent company's report and accounts) to examine why It would be in the Ford corporate Interest to optimise profits earned in Britain - to see If there were any special factors operating in 1979 to encourage Ford of Europe to optimise profits earned in Britain, consistent with Its obligations to the other European countries In which it operates.

(2)

(3)

Source of Profits
Ford produce no data of their source of profits. It is therefore necessary to estimate. This is complicated by the fact that revenues generated by car imports, totalled as much as 650 to 700 million In 1979 - for little investment or operating cost to Ford of Britain, except that required to market them. This was over half the car revenues generated on the UK domestic market and about 20% of all revenues. As UK price levels are higher in the UK than in Continental Europe (reinforced by a strong ) these sales were a very significant source of profits (and substantially tax free). The estimated composition of Ford of Britain's profits is: Sales of own production Sales of imported vehicles Sales of exported components Sales of parts Interest income Tax Net Income 100 million 100 29 100 57
(39)

347 Million

This estimate reflects two benefits, in particular, from Ford of Britain's

participation in the larger Ford of Europe.
The first is the benefit to the British company of large economies of scale
shared across a European market. The second is the benefit obtained from

Continued

I *
S o u r c e o f P r o f i t s (cont.) for s a l e In the U K . the following table Total F o r d Year Registrations (000) I j 1 1976 1977 1978 1979 324.4 340.1 392.2 485.6 Market Share (Percent) 25.2% 25.7% 24.7% 28.3% Imported Registrations (000) 28.6 86.5 138.4 236.8 M a r k e t Share (Percent) 2.2% 6.5% 8.7% 13.8% T h i s is a r a p i d l y d e v e l o p i n g t r e n d as is e v i d e n c e d In

'
4

Page

2.

i m p o r t i n g an i n c r e a s i n g l y l a r g e n u m b e r o f b u i l t up c a r s f r o m the Continent

Imported Content (Percent) 8.8% 25.4% 35.3% 48.8%

C o m p a r i s o n W i t h T h e R e s t of F o r d ' s E u r o p e a n O p e r a t i o n s In the parent c o m p a n y ' s r e p o r t and a c c o u n t s , a c o n s o l i d a t e d statement of F o r d of E u r o p e ' s r e s u l t s is g i v e n . T h e effect o f the c o n s o l i d a t i o n i s to e l i m i n a t e w h i c h i n c l u d e s a l e s to E u r o p e a n a f f i l i a t e s . intra c o m p a n y s a l e s in E u r o p e , so that they a r e not d i r e c t l y c o m p a r a b l e with F o r d of B r i t a i n ' s p u b l i s h e d s a l e s , In o r d e r to c o m p a r e the two it is n e c e s s a r y to deduct f r o m F o r d of B r i t a i n ' s s a l e s the e s t i m a t e d value of s u c h i n t r a c o m p a n y s a l e s to p e r m i t c o m p a r i s o n of p r o f i t m a r g i n s . likely range. for 1979 N e t Income Sales Revenue F o r d of E u r o p e - T o t a l F o r d of B r i t a i n (a) A s p u b l i s h e d (b) L e s s 5 0 0 m s a l e s (c) L e s s 7 5 0 m s a l e s Rest of Europe P e r a l t e r n a t i v e (b) above P e r a l t e r n a t i v e (o) above 3146 million 3396 million 207 million 207 million 6.6% 6.1% 5839 million Net Income 572 million A s % O f Sales 9.8% F o r the p u r p o s e s o f t h i s s t u d y , two l e v e l s of i n t r a company E500 m i l l i o n and 7 5 0 m LI l i o n . T h i s c o v e r s the emerge s a l e s have been e s t i m a t e d ,

Talcing these e s t i m a t e s into a c c o u n t the f o l l o w i n g r e s u l t s

3193 million 2693 million 2443 million

347 million 347 million 347 million

10.9% 12.9% 14.2%

T h i s a n a l y s i s c o n f i r m s that i n 1979 F o r d o f B r i t a i n e a r n e d f a r m o r e absolute net i n c o m e than the r e s t of a l l of F o r d ' s E u r o p e a n o p e r a t i o n s put together. It is also p o s s i b l e that F o r d o f B r i t a i n ' s net i n c o m e m a r g i n on s a l e s revenue

Continued

Page

C o m p a r i s o n W i t h T h e R e s t o f F o r d ' s E u r o p e a n O p e r a t i o n s (cont.)
c o u l d have b e e n as m u c h a s double o r m o r e the m a r g i n In the r e s t o f
Europe. T h i s e v i d e n c e s t r o n g l y s u g g e s t s that the r e s u l t s o f the B r i t i s h
A l t h o u g h it i s not p o s s i b l e
c o m p a n y w e r e a b n o r m a l l y high In 1979 a n d w e r e r e i n f o r c e d b y the
s u b s t a n t i a l v o l u m e o f continental i m p o r t s . to c o m p a r e d i r e c t l y the p u b l i s h e d F o r d o f B r i t a i n a n d c o n s o l i d a t e d
F o r d o f E u r o p e r e s u l t s , f o r the r e a s o n s d i s c u s s e d a b o v e , it i s o f
Interest to c o m p a r e t r e n d s o v e r the p a s t five y e a r s w h i c h a r e a v a i l a b l e .

Total F o r d of Europe

F o r d of B r i t a i n
Net Sales Net. Income Income A s % of FOB Share of Income
1

j H j
! '
H

Year

Sales Revenue (millions)

Net I n c o m e (millions) 38 169 34S 303 572

Net Ineorrjc A s % of Sales 1.7% 4.7% 7.1% 6.1% 9.6%

Revenue

F O E Net i f

( r o i l l i o n s ) ( m l l l i o n s ) Sales 1146 1628 2253 2363 3193 7 59 116 144 347 0.6% 3.6 5.1 6.1 10.9

1975 1976 1977 1978 1S79

2202 3570 4910 4957 5839

18.4% ' 34.9 33.3 47.5 60.7,

The s i g n i f i c a n t change w h i c h o c c u r r e d i n the U K i n 1979 d o e s not a p p e a r to have been

m i r r o r e d e l s e w h e r e in F o r d o f E u r o p e ' s o p e r a t i n g r e s u l t s . d i s s i m i l a r f r o m the p a s t two y e a r s . consolidated European b a s i s ) . 1976/77 to 6 0 % in 1979.
A s the e a r l i e r a n a l y s i s
i n d i c a t e s , t h e r e s t o f E u r o p e a p p e a r e d to e a r n a r o u n d 6.1 to 6. 6 % o n s a l e s , not v e r y
F o r d of B r i t a i n , b y contrast, made a
s u b s t a n t i a l g a i n f r o m 6.1 to 1 0 . 9 % o n s a l e s (and to a r o u n d 13 to 1 4 % m a r g i n o n a
T h e c o n s e q u e n c e i s that F o r d o f B r i t a i n ' s s h a r e o f
total net i n c o m e e a r n e d i n E u r o p e b y F o r d h a s gone u p f r o m a r o u n d a t h i r d in

T h e F o r d C o r p o r a t e Interest In M a k i n g P r o f i t s In the U K
T h e r e w e r e s e v e r a l r e a s o n s why F o r d ' s f i n a n c i a l p l a n n i n g s h o u l d f a v o u r t h e U K i n
1979 as a c o u n t r y to m a k e s u b s t a n t i a l p r o f i t s .
(1) T a x r a t e s a r e l e s s i n the U K , b e c a u s e s u b s t a n t i a l a l l o w a n c e s w e r e a v a i l a b l e i n the c a p i t a l e x p e n d i t u r e p r o g r a m m e (up b y o v e r 1 0 0 % to
3 3 4 m i l l i o n ) and o n the s t o c k a p p r e c i a t i o n ( s t o c k s u p b y 3 5 % to
617 million). T h e e f f e c t i v e tax r a t e w a s 1 0 % o n p r o f i t s b e f o r e tax
T h i s i s a l m o s t c e r t a i n l y the
(and j u s t o v e r 1% o f s a l e s r e v e n u e ) . s e n s e to take advantage o f i t .

l o w e s t tax c h a r g e a v a i l a b l e to F o r d t h r o u g h o u t E u r o p e , s o it m a d e

Continued

T
W 9 T h e F o r d C o r p o r a t e I n t e r e s t In M a k i n g P r o f i t s In t h e U K (cont.) (2) T h e U K consistently offered higher interest It t h e r e f o r e rates on surplus cash than G e r m a n y o r the U S A , i f F o r d o f E u r o p e h a d s u r p l u s benefit o f enhanced U KInterest rates. cash. p a i d to e n s u r e It t u r n e d u p i n B r i t a i n t o o b t a i n t h e This could readily be achieved through the transfer p r i c e m e c h a n i s m because (a) there w a s a substantial volume o f transactions B r i t a i n a n d the r e s t o f E u r o p e on w h i c h m a r g i n s could be earned (b) p r i c e l e v e l s i n the U K tended to b e higher than i n G e r m a n y and this was r e i n f o r c e d by the of sterling. gains. (3) D u r i n g 1979 the strengthened significantly against the U S $ . This strengthening exchange If the G e r m a n c o m p a n y b i l l e d i n D M between substantial then the B r i t i s h company earned effortless

1
Page 4.

m e a n t that w h e n the U S p a r e n t c o n s o l i d a t e d the r e s u l t s o f Its U K o p e r a t i o n s a n d t r a n s l a t e d t h e r e s u l t f r o m s t e r l i n g t o d o l l a r s It p r o b a b l y r e c o r d e d a substantial g a i n i n the p a r e n t c o m p a n y b o o k s . In s u m m a r y to a U S m u l t i n a t i o n a l i n 1979 t h e U K w a s a h a r d c u r r e n c y t a x haven offering l o w tax rates and high interest r a t e s o n s u r p l u s c a s h . would b e s u r p r i s i n g i f these benefits escaped the attention o f F o r d It management

o r that they f a i l e d to t a k e h i l l advantage o f the o p p o r t u n i t i e s open to t h e m .

20.5.1980

A6: USA

MOTOR INDUSTRY SITUATION REPORT

GENERAL MOTORS
1979 e a r n i n g s f e l l b y 1 7 % t o $ 2 . 8 9 b n w i t h Q4 i n c o m e
a t $426m c o m p a r e d t o $1 b n i n Q4 1 9 7 8 .
E a r n i n g s i n Q l 1 9 8 0 w e r e down t o $155ra f r o m $1260m Q l
1979 a n d a q u a r t e r l y l o s s i s f o r e c a s t f o r Q2 1 9 8 0 .
Ql 1 9 8 0 d i v i d e n d h a s been r e d u c e d t o 6 0 c e n t s p e r s h a r e
f r o m $ 1 . 1 5 f r o m Q2 1 9 7 9 a n d f r o m $1 f o r t h e p r e v i o u s
six quarters.
F u r t h e r l a y - o f f s o f 10,000 have j u s t been t a x i n g t h e t o t a l t o 136,000.
Unit sales FORD
US a u t o m o t i v e o p e r a t i o n s p r o b a b l y l o s t o v e r $1 bn i n 1 9 7 9 .
down 2 7 % i n A p r i l announced

1980 from A p r i l 1 9 7 9 .

US p a r e n t b o r r o w e d 2 2 9 m f r o m p r o f i t a b l e UK o p e r a t i o n
i n 1979 and a l s o r e c e i v e d 1 3 5 m i n d i v i d e n d p a y m e n t s .
F o r d US l o s t $473m i n Q l 1 9 8 0 a n d a n a l y s t s f u l l y e a r US l o s s e s o f $ 2 . 2 - $2.5 b n .
suggest

L a y - o f f s were announced i n F e b r u a r y a t F o r d s Transmission P l a n t , p r i m a r i l y because o f f a l l f o r a u t o m a t i c t r a n s m i s s i o n s f r o m US.

Bordeaux
i n demand
capital

F o r d h a s a n n o u n c e d a c u t o f $ 2 . 5 bn f r o m f o r e c a s t s p e n d i n g o f $16 bn b y 1 9 8 4 .
Ford o f f e r i n g model.

c a s h r e b a t e s o f b e t w e e n $ 1 0 0 and $ 5 0 0 p e r

U n i t s a l e s down 4 1 % A p r i l CHRYSLER

1980 c . f . A p r i l 1979.

US G o v e r n m e n t h a s a u t h o r i s e d $ 1 . 5 bn l o a n g u a r a n t e e s t o
C h r y s l e r a n d e x p e c t t h e Company t o l o s e $ 1 . 0 5 bn i n 1 9 8 0
compared t o l o s s o f $ 1 . 1 b n i n 1 9 7 9 .
A l o s s o f $449m was d e c l a r e d sold). U n i t s a l e s down 4 1 % i n A p r i l f o r Q l 1980 ($600 p e r v e h i c l e
1980 compared t o A p r i l 1 9 7 9 .

' _ ^ AMERICAN MOTORS i

A.6. Page 2

E a r n i n g s f e l l to $1.3m i n Q l 1980 compared t o $32m i n

Q4 1979, d e s p i t e impact o f m a r k e t i n g agreement w i t h
* Renault.
IMPORTS M a i n t a i n e d a market s h a r e o f 27% and Honda s a l e s down 10% and 17% t o A p r i l 1980 as TIV falls.
i n A p r i l but Toyota
r e s p e c t i v e l y compared
/

EUROPE
FIAT
P l a n s to l a y o f f 78,000 o f 114,000 work f o r c e f o r 4 t o
7 days i n June - J u l y because o f d e c l i n i n g e x p o r t demand.
But I t a l i a n c a r s a l e s i n c r e a s e d t o 462 thousand u n i t s
in Ql 1980 compared t o 428 thousand i n Ql 1979. Fiat's
market share i n c r e a s e d from 50% t o 52%.

CITROEN
Announced p l a n t c l o s u r e s f o r f i v e days i n May two day c l o s u r e i n F e b r u a r y .
following

P r o f i t s f e l l by 21% (on comparable b a s i s ) i n 1979 to

1978 w i t h a l l the d e t e r i o r a t i o n o c c u r r i n g i n second h a l f .
TALBOT
L o s s e s f o r 1979 (European) i n t h e r e g i o n o f FF 580m.
with decline

French r e g i s t r a t i o n s dropped 7.5% i n 1979 i n market share from 10.7% t o 9%.

Working hours reduced i n f i r s t f o u r months o f 1980 i n

a d d i t i o n to f u l l p l a n t c l o s u r e o f 6 d a y s . P l a n t s were
a l s o c l o s e d f o r 12 days i n December/January, o v e r Xmas
period.
T a l b o t UK l o s s e s f o r 1979 t h o u g h t t o be c . f . to 2 0 m i l l i o n i n 1978.
about 4 0 m i l l i o n
i n January

PSA P e u g e o t - C i t r o e n i n j e c t e d $167m i n t o T a l b o t to cover l o s s e s .

Continued

'^RENAULT Wtm) _ Q\f

--

Page o 3.

S u c c e s s f u l y e a r i n 1979 i n terms o f s a l e s r e v e n u e ,
u n i t s a l e s aDd F r e n c h market s h a r e - p r o f i t s not known
but expected to be a break-even.

FORD
S u c c e s s f u l 1979 f o r F o r d UK but i n t e r m i t t e n t s h o r t time
working a t a number o f f a c t o r i e s has been d e c l a r e d i n
Ql 1980, e.g. Halewood t r a n s m i s s i o n , En f i e l d , B e l f a s t and
Dagenham KD. (see paper A 4 ) . Granada p r o d u c t i o n stopped f o r
6 weeks ( i n January) towards end o f 1979.

DAIMLER-BENZ
I n c r e a s e d p r o f i t i n 1979 - v e h i c l e o u t p u t up by 7%.
However, o r d e r books have been r e p o r t e d t o have reduced
very s u b s t a n t i a l l y .
VOLKSWAGENAUDI NSu), BMU, VOLVO, SAAB
A l l r e p o r t e d s u c c e s s f u l y e a r s i n 1979. a more d i f f i c u l t year i n 1980.
W) have f o r e c a s t

JAPAN
TOYOTA
At b e g i n n i n g o f y e a r , T o y o t a Motor S a l e s f o r e c a s t i n c r e a s e
i n e x p o r t s i n 1980 o f 11% compared t o 3% growth i n 1979.
T h i s r e f l e c t s p a r t i c u l a r l y t h e d e c l i n i n g v a l u e o f Y e n , down
to 232 p e r d o l l a r from a 175 p e r d o l l a r peak i n 1978.
3 4 4 m p e r y e a r t o be s p e n t on p r o d u c t i o n f a c i l i t i e s ,
i n c l u d i n g e x p a n s i o n , o v e r next t h r e e y e a r s .

HONDA
S u c c e s s f u l y e a r i n 1979 w i t h 69% o f s a l e s g e n e r a t e d by
exports. P l a n s announ ced f o r an assembly p l a n t i n
the US.
:

20.5.1980

COVERING SECRET - Cu:.!"LltCIAL

IN CONFIDENCE

r,

TrTH

^ t

c f
Mi
1980

. 10 DOWNING STREET
From Ihe Principal Private Secretary 18 April

British

Leyland

I a t t a c h the r e c o r d o f t h e meeting which the Prime M i n i s t e r

h e l d y e s t e r d a y to d i s c u s s B r i t i s h L e y l a n d . In view o f t h e great
s e n s i t i v i t y o f the matters d i s c u s s e d , I should be g r a t e f u l i f
no f u r t h e r c o p i e s were made o f the r e c o r d .
S i n c e y e s t e r d a y ' s meeting t h e Prime M i n i s t e r has seen a
copy of Robin Ibbs' l e t t e r o f 17 A p r i l t o your S e c r e t a r y o f S t a t e
i n which he e l a b o r a t e d on some o f the p o i n t s he had made at the
meeting, and she has commented t h a t she t h i n k s that we s h o u l d "be
guided by Robin Ibbs' a d v i c e .
The Prime M i n i s t e r has a l s o seen John Anderson's l e t t e r o i
17 A p r i l p r o v i d i n g t h e i n f o r m a t i o n which Mr. P r i o r undertook at
the meeting to l e t her and h i s o t h e r c o l l e a g u e s have.
I am s e n d i n g c o p i e s o f t h i s l e t t e r and o f the r e c o r d t o
John Wiggins (HM T r e a s u r y ) , John Anderson (Department o f Employment).
D a v i d Wright ( C a b i n e t O f f i c e ) and Robin Ibbs (CPRS). May I
r e i t e r a t e t o them my request t h a t no f u r t h e r c o p i e s s h o u l d be
made o f the r e c o r d .

t
Ian E l l i s o n , E s q . ,
Department o f I n d u s t r y .

COVERING SECRET - COMMERCIAL IN CONFIDENCE

D E P A R T M E N T OF T R A D E

J VICTORIA STREET

L O N D O N SW1H OET

TelephoneOl-215 7877

Fro mthc Secre tarv of State

Mike P a t t i s o n Esq Private Secretary 10 Downing S t r e e t

I* V

London, SW1

] / A p r i l 1980

FORD EXPORTS
My S e c r e t a r y o f S t a t e mentioned i n Cabinet t h i s morning the i n f o r m a t i o n which BL had g i v e n him on the net exports o f Ford (UK) L i m i t e d . BL say that o f Ford, u n i t s a l P A i n t h e UK l a s t y e a r the f o l l o w i n g p r o p o r t i o n s are imported:Fiesta Escort Capri : 8 1 % -*
9% 36%

Cortina -

- 100%

Granada - 100% ^
In t o t a l o v e r h a l f the Ford c a r s s o l d i n the UK l a s t y e a r were
assembled abroad" falthough they would o f course i n c l u d e UK components).
BL estimate that Ford's imports l a s t y e a r t o t a l l e d 8 4 0 m i l l i o n ,
which should be s e t a g a i n s t t h e i r 1 . 0 0 0 m i l l i o n exrports. T h i s
f i g u r e t a l l i e s with a r e c e n t statement by S i r Terence Beckett t h a t
Ford's net c o n t r i b u t i o n to the b a l a n c e o f payments was about
2 0 0 m i l l i o n . T h i s compared with BL's net exrports i n excess o f
7oTj m i l l i o n .
I am c o p y i n g t h i s l e t t e r o f Ian E l l i s o n ( I n d u s t r y ) , Richard Dykes
(Employment) and David Wright (Cabinet O f f i c e ) .

S HAMPSON
Private Secretary


Present:

BRITISH LEYLAND: NOTE OF A MEETING HELD AT 10.15 AM ON THURSDAY 17 APRIL 1980

10 DOWNING STREET AT

Prime M i n i s t e r
C h a n c e l l o r of the Exchequer
Secretary of State for Industry
S e c r e t a r y of S t a t e f o r Employment
Mr. R. Ibbs
Mr. J . Hoskyns
Mr. P. Le Cheminant )
Mr. D.J.L. Moore ) Secretariat Mr. D.R. Instone )

The meeting had b e f o r e i t a minute dated 15 A p r i l d e s c r i b i n g recent developments at B r i t i s h L e y l a n d

from

the S e c r e t a r y of S t a t e f o r Industry to the Prime M i n i s t e r

(BL).

The S e c r e t a r y of S t a t e f o r Industry s a i d that as a r e s u l t

o f the i n d u s t r i a l a c t i o n supported by the T r a n s p o r t and General
Workers Union (TGWU) the BL management had they would be d i s m i s s e d . informed i t s workforce
April,


the

that u n l e s s those on s t r i k e r e t u r n e d to work by Wednesday, 23 T h i s course had been approved by I f the workforce BL Board at i t s meeting the p r e v i o u s day. i t was

f a i l e d to respond, BL c o u l d f a c e an immediate c r i s i s , w i t h a patchy had a f u l l response to the management's l i n e . He

although had not

e q u a l l y p o s s i b l e t h a t a confused s i t u a t i o n would

r e p o r t of the Board's meeting the p r e v i o u s day; to withdraw t h e i r 1980 Corporate

h i s understanding was not yet necessary

that they h e l d to the view that i t was

Plan.

In d i s c u s s i o n the f o l l o w i n g main p o i n t s were made: a. I t was important f o r the Government not

to be drawn

i n t o p u b l i c c o n t r o v e r s y at t h i s stage about the d i s p u t e .

M i n i s t e r s s h o u l d take the l i n e t h a t i t was management to s e t t l e ; and comment on i n t e r - u n i o n r i v a l r y . o b j e c t i o n to responding But a matter f o r
no

i n p a r t i c u l a r , they s h o u l d not
there would be the

to q u e s t i o n s by i n d i c a t i n g

Government's concern over the present s i t u a t i o n .

^ _
develop
but
The


note. b.

SECRET - COMMERCIAL IN CONFIDENCE - 2 -

S e c r e t a r y o f S t a t e f o r I n d u s t r y would c i r c u l a t e a speaking

BB I t would be h e l p f u l i f the S e c r e t a r y o f S t a t e f o r the

Employment would inform M i n i s t e r s f o r background purposes of the l e g a l p o s i t i o n on the d i s m i s s a l of s t r i k e r s , consequences which flowed from d i s m i s s a l and any still which would a r i s e s h o u l d i n d i v i d u a l s t r i k e r s wish to r e t u r n to work w h i l e the s t r i k e was c. i n progress. already But problems

The S e c r e t a r y o f S t a t e f o r Industry had

r e p o r t e d , i n h i s minute o f 3 A p r i l to the Prime M i n i s t e r , Ford's Ford's apparent l a c k o f i n t e r e s t i n t a k i n g over BL. formal statement to the Government might be as a t a c t i c a l measure, and i t should not necessarily their They had a l r e a d y i n d i c a t e d

designed

be taken at i t s f a c e v a l u e .

i n t e r e s t i n a c q u i r i n g c e r t a i n p a r t s o f BL; and at some stage i t might be p o s s i b l e to use t h e i r i n t e r e s t i n those p a r t s as a n e g o t i a t i n g weapon i n p e r s u a d i n g over o t h e r p a r t s i n which they had so f a r . For the moment, however, i t d i d not them to take interest look as though useful. not i n d i c a t e d any

f u r t h e r d i r e c t contact with Ford's would be

d.

The p o s s i b i l i t y of a p p o i n t i n g an a d v i s e r on the i n the S e c r e t a r y o f S t a t e ' s minute of 15 I t was

lines

suggested

April

s h o u l d be f u r t h e r pursued.

e s s e n t i a l , however, that that he should

the p r o p o s a l s h o u l d be f u l l y d i s c u s s e d w i t h S i r M i c h a e l Edwardes b e f o r e any d e c i s i o n s were taken and be i n v o l v e d i n f u r t h e r work on t h i s f r o n t . Such an a d v i s e r

should be i n a p o s i t i o n to g i v e a d v i c e to the Government as owners on whether any a d d i t i o n a l p r e c a u t i o n a r y a c t i o n s h o u l d be t a k e n , and should not be l i m i t e d i n h i s terms of r e f e r e n c e s p e c i f i c a l l y to the q u e s t i o n of d i s p o s a l s . At the same time he needed to be someone experienced i n company r e s c u e s and s a l e s . S i r Kenneth Cork and S i r Henry Benson l i q u i d a t i o n , the latter Nicholson H were probably u n s u i t a b l e , the former because of h i s c l o s e i d e n t i f i c a t i o n w i t h r e c e i v e r s h i p and on grounds o f age. Two o t h e r p o s s i b i l i t i e s were Mr. E.R. / and


and not e. clearly the for had taken for to

SECRET -

COMMERCIAL I H CONFIDENCE

Mr. Ian Davison.

T h e a p p o i n t m e n t o f an a d v i s e r n e e d
stage b u t c o u l d be h e l p f u l i n
action.

be made p u b l i c a t t h i s

showing a f t e r t h e e v e n t t h a t t h e Government had t a k e n a l l

p o s s i b l e reasonable precautionary

I t was a r g u e d t h a t t h e S e c r e t a r y enough t h e f a c t

of State f o r Industry's

l e t t e r o f 15 A p r i l forthcoming

t o S i r M i c h a e l Edwardes d i d n o t convey
t h a t t h e G o v e r n m e n t w a n t e d a more
o f 18 a n d
necessary

e x p l a n a t i o n o f t h e r e s e r v a t i o n s which S i r Michael
expressed i n h i s l e t t e r s the objectives of

Edwardes had e a r l i e r 1980 C o r p o r a t e

28 M a r c h a b o u t B L ' s a b i l i t y t o f u l f i l Plan. n further letter t o be sent

I t m i g h t t h e r e f o r e be

once t h e p l a n n e d d i s c u s s i o n s
These d i s c u s s i o n s The S e c r e t a r y should,

p l a c e b e t w e e n BL a n d o f f i c i a l s o v e r t h e e c o n o m i c
of State

assumptions u n d e r l y i n g BL's p l a n . t h e r e f o r e , be completed u r g e n t l y . Industry would c l e a r with colleagues before despatch.

t h e d r a f t o f any f u r t h e r l e t t e r
I t might a l s o be d e s i r a b l e
Edwardes.

c l e a r t h e t e x t i n advance w i t h S i r M i c h a e l

The his

Prime M i n i s t e r ,

summing up t h e d i s c u s s i o n , s a i d t h e
use the o p p o r t u n i t y o f
their planned
E d w a r d e s on 22 A p r i l t o

Secretary of State f o r Industry should planned meeting with S i rMichael question

t h e l a t t e r about BL's a b i l i t y t o f u l f i l The S e c r e t a r y o f S t a t e

objectives, i n the light 18 and 28 M a r c h . raise with S i rMichael The Secretary

o f h i s comments i n h i s l e t t e r s o f
f o rIndustry should also
o f t h e appointment

Edwardes t h e p o s s i b i l i t y

o f a n a d v i s e r on t h e l i n e s the Exchequer, should candidates. 23 A p r i l Edwardes t o g e t h e r w o u l d by t h e n

s e t o u t i n h i s m i n u t e o f 15 A p r i l .

of State, i n consultation with the Chancellor of

give f u r t h e r urgent thought t o p o s s i b l e
of State f o r Industry relations after
She h e r s e l f w o u l d c o n s i d e r m e e t i n g S i r M i c h a e l
with the Secretary of the i n d u s t r i a l s i t u a t i o n as i t
r e p l y t o t h e
information

i n the light

have d e v e l o p e d and o f S i r M i c h a e l ' s of State should

S e c r e t a r y o f S t a t e ' s l e t t e r o f 15 A p r i l . meeting the Secretary on BL f o r t h e l a s t 5 years and a l s o t h e i r

In preparation f o r that
current forecasts.
/ The

send h e r f i n a n c i a l

I
SECRET - COMMERCIAL IN CONFIDENCE
The meeting 1. 2. Took n o t e , w i t h a p p r o v a l , o f the summing up of
I n v i t e d the S e c r e t a r y o f S t a t e f o r Industry to

t h e i r d i s c u s s i o n by the Prime M i n i s t e r .
c o n s i d e r f u r t h e r w i t h the C h a n c e l l o r o f the Exchequer
p o s s i b l e a d v i s e r s ; t o r a i s e w i t h S i r Michael Edwardes
both the q u e s t i o n o f an a d v i s e r and BL's a b i l i t y to
d e l i v e r the o b j e c t i v e s o f the plan i n the l i n e s outcome.
3. I n v i t e d the S e c r e t a r y o f S t a t e f o r Industry to
p r o v i d e the Prime M i n i s t e r by 18 A p r i l with background
i n f o r m a t i o n about BL's f i n a n c i a l performance over the
l a s t 5 y e a r s and c u r r e n t f i n a n c i a l 4. targets.
I n v i t e d the S e c r e t a r y of S t a t e f o r Industry to p r o v i d e
to q u e s t i o n s
indicated
i n the Prime M i n i s t e r ' s summing up; and to r e p o r t the

members o f the C a b i n e t , i n c l u d i n g the Paymaster-General,

u r g e n t l y w i t h speaking m a t e r i a l i n response about B r i t i s h 5. Leyland.

I n v i t e d the S e c r e t a r y o f S t a t e f o r Employment to p r o v i d e
r e i n s t a t e members o f t h e i r

u r g e n t l y a note on the l e g a l p o s i t i o n governing BL's a b i l i t y

to d i s m i s s and subsequently workforce.

17 A p r i l 1980

COVERING SECRET COMMERCIAL IN CONFTDEMCE P.0244 MR VTHTTMOflE ^ ,J c c : Mr Ibba Mr Wright Mr Moore BL I attach a draft r e c o r d o f t h e m e e t i n g on BL which t h e P r i m e M i n i s t e r G i v e n that i t r e f e r s t o the Ford held before position Cabinet yesterday. you w i l l no doubt wish as b e f o r e , copied. i n c i r c u l a t i n g i t , to

ask that

i t Bhould not be f u r t h e r

2.

I have o m i t t e d from t h e l i s t

o f t h o s e p r e s e n t No 10 s t a f f

other

t h a n Mr H o s k y n s .

%
P L e CHEMLNANT

18 A p r i l 1980

10 D O W N N IG S T R E E T

AUWrJ"~J

'

\tJ-N*~*A>*~

JOM

n..

m
CABINET OFFICE

^C_ \\M
|
A r l 1

Central Policy Review Staff

70 Whitehall, L o u d e n S W I A a AS Telephone 01-233 7 7 5
6

( V

F m ; J. R. R > b i
COWERCIAL IN CONFIDENCE 1

9V

Lx*^ <s ,

VA***

British 1, set Following this

Leyland

(J

m o r n i n g ' s m o t - t i n g o f M i n i s t e r s i t may be h e l p f u l i f I facing the G o v e r n m e n t . T h e r e a p p e a r t o be two

o u t my v i e w o f the t a s k s ones: t h e need

principal (i)

f o r the Government as owners

to be a b l e

t o a s s e s s the

likelihood that have

o f t h e Company n o t b e i n g a b l e been a g r e e d , and hence

to operate

within the l i m i t s

the l i k e l i h o o d o f t h e Board h a v i n g to This assessment that should provide

request an

that

t h e P l a n be w i t h d r a w n .

i n d i c a t i o n n o t o n l y o f how l i k e l y i t i s but also of i t s possible

s u c h w i t h d r a w a l may

be n e c e s s a r y

timing;

(ii) for

the need f o r the Government as owners,

a n d i n d e e d as t r u s t e e s f o r the w e l l - b e i n g o f

both

the p u b l i c money i n v o l v e d and to a degree economic

t h o s e p a r t s o f the c o u n t r y ' s (notably that has some components

f a b r i c w h i c h depend on B L t o make c o n t i n g e n c y plans so i f the P l a n these which i f the

and s e r v i c e s ) ,

as much a s p o s s i b l e t o be withdrawn.

c a n be r e s c u e d from t h c s i t u a t i o n

Because o f t h e d i f f e r e n c e

i n viewpoint,

plans are not n e c e s s a r i l y the Company i t s e l f

i d e n t i c a l with the contingency plans of optimising,

may make w i t h t h e o b j e c t i v e as i t s e e s i t .

worBt h a p p e n s ,

the s i t u a t i o n

2. are

I believe

these

two t a s k s ones.

f o r the Government,although they I also believe that

inter-relate,

fundamentally separate i f possible On the f i r s t

S i r M i c h a e l Edwardes

should 3.

be i n v o l v e d i n b o t h . t a s k he i s o b v i o u s l y t h e man who s h o u l d p r o v i d e t h e a management about i n t e r p r e t a t i o n of i t . i t , not only to test I t i s e n t i r e l y proper t h e soundness of the

information and also that

he s h o u l d be q u e s t i o n e d

The

R t Hon S i r K e i t h J o s e p h MP
f o r Industry

Secretary of State ASIIDOWN HOUSE

S V I

1
C O N F I D E N T I A L

CONFIDENTIAL CQt-MERCIAL - IN CONFIDENCE

v i e w he i s

p u t t i n g f o r w a r d but a l s o the r i s k o f is

to a s s i s t

the Government to form an

possible timing.

u p - t o - d a t e view of 'i. On the

f a i l u r e and i t s

second t a s k i t

obviously right that

the Government s h o u l d collapse

be a c t i v e l y of

seeking advice while

d o i n g n o t h i n g t h a t would p r e c i p i t a t e aspects of t h i s that i a task, needed.

t h e Company.

On many, a l t h o u g h n o t a l l ,

S i r Michael

Edwardes i s 5. Sir

o b v i o u s l y the best it is

s o u r c e o f the a d v i c e

I believe

important that

i n any m e e t i n g t h a t

takes place

with

M i c h a e l Edwardes these two a r e a s o f d i s c u s s i o n s h o u l d be k e p t any heat

separate.

In p a r t i c u l a r ,

t h a t may be g e n e r a t e d d u r i n g q u e s t i o n i n g on the secure his assistance

first on

s h o u l d n o t be a l l o w e d the second. This

to o b s c u r e the g r e a t w i s h to

goes f u r t h e r than the

d e s i r a b i l i t y t h a t he and h i s

Board
be

s h o u l d manage the rundown i f

that proves necessary.

The d e s i r e ought t o

t h a t he s h o u l d c o n t r i b u t e f u l l y from now onwards t o b r o a d p l a n n i n g o f how

overall damage c a n be m i n i m i s e d i n the e v e n t o f rundown. T h i s does p u t
hut i t ia

aome a d d i t i o n a l burden on him o v e r and above n o t an u n u s u a l o r u n r e a s o n a b l e one. this second t a s k i s that it is

r u n n i n g the b u s i n e s s

A secondary m e r i t of r e d u c i n g the

i n v o l v i n g him i n
r i s k of p o l a r i s a t i o n danger t h a i raising \mm

a good way o f It

between the owners and the management.

should thus

reduce the

e v e r y d i s c u s s i o n w i t h him about the b u s i n e s s doubts about the owners' 6. confidence i n the

tends to be r e g a r d e d a s

management.

On the q u e s t i o n o f o b t a i n i n g a d d i t i o n a l e x p e r t a d v i c e on how to m i n i m i s e
if rundown becomes n e c e s s a r y , I think i t 'consult' would be a
somebody.

the damage and d i f f i c u l t i e s mistake to 'apppoint' at

this

s t a g e but i t m i g h t be wise to

My own v i e w iB t h a t

the r i g h t a d v i s e r would be a man w i t h s k i l l

i n rescuing

companies t h a t a r e no l o n g e r v i a b l e r a t h e r t h a n somebody s k i l l e d i n b u y i n g a n d selling them. T h i s c o u l d w e l l mean t h a t the a d v i c e of a v e r y experienced

liquidator BL i t s e l f , normal and

i s needed. the

B e c a u s e o f t h e n e e d to a v o i d u n n e c e s s a r y damage beyond
i n connection with a creditors such

task i s a w i d e r one t h a n would a r i s e is

l i q u i d a t i o n when the o b j e c t i v e

s i m p l y to do the b e s t f o r I suggest t h a t

o t h e r s w i t h a c l a i m on thc a s s e t s .

the a p p r o a c h to

a man s h o u l d n o t be "we have y o u i n mind to a c t as

l i q u i d a t o r " , but rather to be d o i n g now so to rescue

"What would you as an e x p e r i e n c e d l i q u i d a t o r a d v i s e us that if the worst happens we have

the b e s t chance o f b e i n g a b l e

as much a s p o s s i b l e , economic f a b r i c ? "

n o t j u s t o f the Company b u t a l s o o f the s u r r o u n d i n g I envisage at this s t a g e n o t h i n g more t h a n c o n f i d e n t i a l

CONFIDENT I A L COMMERCIAL IN CONFIDENCE

d i s c u s s i o n w i t h such a man, a f t e r into the p i c t u r e . I feel to

S i r M i c h a e l Edwardee has been b r o u g h t enquiries ~

he s h o u l d n o t embark on any e x t e r n a l

t h a t might g i v e

rise

s p e c u l a t i o n and rumour.

"

~ ~ ~ ~ ~

There i s have t h i s

no new thought

i n the

above b u t i t the

seems r i g h t t o l e t it

you

o v e r a l l s t a t e m e n t o f how I see t h i s morning. letter

s i t u a t i o n because

perhaps

emerged o n l y i n fragments

I am s e n d i n g a copy o f t h i s Chancellor of the E x c h e q u e r ,

t o the P r i m e M i n i s t e r ,

the

the S e c r e t a r y o f S t a t e

t o S i r R o b e r t A r m s t r o n g and Mr Q o s k y n s .

J R Ibbs

f o r Qnployment, and

CONFIDENTIAL
COMMERCIAL - IN CONFIDENCE

ps
^ ' CONFIDENTIAL

^/WfJ^i

^^^^^^
Caxton House Tothill Street London SW1H
Telephone Direr! Une 01-213- 6 4 0 0 Switchlwaid 01-21) 3000

9NA

Nick Sanders Esq

Private Secretary
10 Downing S t r e e t LONDON SW1

I /April

1980

BRITISH LEYLAND
My S e c r e t a r y of S t a t e undertook at t h i s morning's meeting to l e t the
Prime M i n i s t e r have answers to the f o l l o w i n g t h r e e q u e s t i o n s : 1 What has B r i t i s h Leyland t h r e a t e n e d to do?

The statement i s s u e d y e s t e r d a y by the Managing D i r e c t o r (Mr Horrocks)

to a l l employees of BL Cars L t d s t a t e s
"We t h e r e f o r e have to say t h a t u n l e s s those h o u r l y p a i d employees on s t r i k e r e t u r n to work by Wednesday, A p r i l 2 3 , t h e i r employment w i l l be regarded as t e r m i n a t e d . T h i s would mean they w i l l not get back pay or bonus and w i l l not
q u a l i f y f o r t e r m i n a t i o n or redundancy payments of any k i n d " .
L e g a l l y BL can d i s m i s s the s t r i k e r s with t h i s r e s t r i c t e d n o t i c e - they
have r e p u d i a t e d t h e i r c o n t r a c t s of employment by s t r i k i n g and i t i s
open to BL aa employer to accept t h i s r e p u d i a t i o n . ( I t seems u n l i k e l y
a l s o that an i n d i v i d u a l s t r i k e r c o u l d c o u n t e r - c l a i m t h a t i t was the
employer who f i r s t r e p u d i a t e d the c o n t r a c t by seeking to v a r y i t
u n i l a t e r a l l y , though t h i s i s a complex area cf law.)
I f not subsequently re-engaged the d i s m i s s e d s t r i k e r s would be e n t i t l e d
only to any a r r e a r s o f pay up t o the time of going on s t r i k e , but n o t ,
i t i s t h o u g h t , to the pay i n c r e a s e (of 5% or 10%) backdated to 1 November
nor to the p r o d u c t i v i t y bonus under the o f f e r made by the company but
not accepted by the s t r i k e r s . Nor would they be e n t i t l e d t o any
s t a t u t o r y redundancy payments nor (though t h i s would depend on the terms
of the c o l l e c t i v e agreement) a t e r m i n a t i o n payment from the company.
2 Who w i l l be d i s m i s s e d on the b a s i s of the t h r e a t ?

The BL statement r e f e r s s p e c i f i c a l l y t o "those h o u r l y p a i d employees

on s t r i k e . " The company d o u b t l e s s d e l i b e r a t e l y says n o t h i n g about i t s
i n t e n t i o n s i n r e g a r d to o t h e r c a t e g o r i e s (eg those l a i d o f f ) .

- 1

at**

CONFIDENTIAL

What happens to those who want t o come back again?

are d i s m i s s e d next Wednesday but

subsequently

I''. I
5

The company c o u l d decide whether or not to re-engage them and on what

terms. C e r t a i n l y they would not need to g i v e the pay i n c r e a s e or
p r o d u c t i v i t y bonus backdated to 1 November to those re-engaged and the
q u e s t i o n o f the employees' c o n t i n u i t y of s e r v i c e could a l s o be a matter
f o r n e g o t i a t i o n . But i n s i t u a t i o n s of t h i s k i n d i t i s v i r t u a l l y
u n i v e r s a l p r a c t i c e e i t h e r f o r employers not to c a r r y out t h e i r t h r e a t
to d i s m i s s or f o r c o n t i n u i t y of s e r v i c e to be p r e s e r v e d f o r those
re-engaged.
The company w i l l o f course have taken l e g a l advice b e f o r e i s s u i n g the
statement, but under the u n f a i r d i s m i s s a l l e g i s l a t i o n (Employment
P r o t e c t i o n C o n s o l i d a t i o n Act 1978) i f some of those now on s t r i k e have
r e t u r n e d b e f o r e next Wednesday, the s i t u a t i o n r e g a r d i n g the permanent
d i s m i s s a l of those s t i l l on s t r i k e , i f t h a t was d e s i r e d by the company,
would be u n c e r t a i n . C e r t a i n l y the company c o u l d not p i c k some and
exclude o t h e r s without l a y i n g i t s e l f open to a c l a i m f o r u n f a i r d i s m i s s a l . I am sending c o p i e s of t h i s l e t t e r to the P r i v a t e S e c r e t a r i e s to the
C h a n c e l l o r of the Exchequer, S e c r e t a r y of S t a t e f o r I n d u s t r y , S i r Robert
Armstrong, and Mr J E Ibbs.

J ANDERSON
P r i v a t e Secretary

Ej

17

April

1980

PRIME MINISTER BRITISH LEYLAND

Some comments on t h i s morning's d i s c u s s i o n ;

1 .

The he

need f o r an o u t s i d e a d v i s e r . " i s a f i n a n c i a l man But

I remain d o u b t f u l about t h i s . can only mean and

If one

( a c c o u n t a n t s or merchant bankers) he must be a n y t h i n g u n l e s s he can get around BL

kept c o m p l e t e l y under wraps, s i n c e h i s involvement thing. collect he can't do information.

At most, he c o u l d be c o n s u l t e d ; but t h i n k of someone w i t h broader have never taken we

appointment commercial

to the Board or appointment as an a d v i s e r would have d i f f e r e n t connotations. Edwardes. The I f i n s t e a d we one person we e x p e r i e n c e , then we are simply g i v i n g a vote of no c o n f i d e n c e i n a d v i c e from, as owners i t - Edwardes h i m s e l f . have h i r e d to run

of the b u s i n e s s , i s the man 2 .

I am s u r e you are r i g h t to go the present c r i s i s has not met Ibbs. before. i s over. so t h a t Edwardes i s not j [

f o r a meeting w i t h Edwardes as soon That meeting s h o u l d be very s m a l l you and K e i t h and too many p e o p l e , or o f f i c i a l s

as he

indeed

faced with necessary

I would suggest

perhaps Robin

It i s not s t r i c t l y

f o r G e o f f r e y or Jim t o be t h e r e . I

3.

I am s u r p r i s e d a t t a c h what we

at the l e t t e r

K e i t h e v e n t u a l l y sent to Edwardes.

o r i g i n a l l y proposed to K e i t h b e f o r e E a s t e r .

K e i t h does
If

not seem to r e a l i s e t h a t the whole purpose of the l e t t e r , f o r the

r e c o r d , i s t o show a l i t t l e
_

s c e p t i c i s m about Edwardes' comments. bad.

t h a t upsets~ Edwardes, that i s too

JOHN HOSKYNS

'

A p r i l 1980

^DRAFT

LETTER FOR SECRETARY OF STATE FOR

INDUSTRY TO SEND TO

SIR MICHAEL EDWARDES Thank you f o r your l e t t e r s seen t h e 1980 f o r e c a s t o f 18 March and 28 March. I have also

prepared

on 21 March and s u p p l i e d t o my

officials.

The

forecast

loss

f o r 1980 i s v e r y d i s t u r b i n g .

I take i t from

what you say about t h e l a c k ' 'f-'"s\tJ*

n
1

of evidence t o the c o n t r a r y , that the

be no i n c r e a s e i n t h e cash requireIs t h i s

Boardj^still G ^ a n

there w i l l

ments from Government d u r i n g t h e 1980/81 f i n a n c i a l y e a r ? ' right?

.Your l e t t e r
(

of 18 March s a i d

t h a t t h e Board d i d not expect longer-term

changes

,\- i n c a p i t a l e x p e n d i t u r e t o j e o p a r d i s e t h e agreed o b j e c t i v e s o f the b u s i n e s s . * e x p e n d i t u r e was not then I note t h a t your

review of c a p i t a l

complete,

but am not s u r e whether you a r e intact.

sJ5'r\

now a b l e t o c o n f i r m t h a t t h e l o n g e r - t e r m o b j e c t i v e s remain J Is t h i s in f a c t t h e case? I realise

As r e g a r d s 1981 onwards, o f c o u r s e -any

the s e n s i t i v i t y of Officials

l o n g e r - t e r m p r o j e c t i o n s / * * economic a s s u m p t i o n s . be v e r y w i l l i n g

o f my Department and t h e T r e a s u r y w i l l t h e s e w i t h your this staff

to discuss
I hope

and p r o v i d e any h e l p t h a t they c a n . s o o n , as I am a n x i o u s

can be a r r a n g e d Board s t i l l

to receive confirmation

{that your

h o l d s t o t h e judgment t h a t , d e s p i t e t h e

deterioration

i n performance and t h e economic o u t l o o k , t h e P l a n

Achievement o f t h e P l a n t h e agreed i s , after a l l , the
i s only

remains a c h i e v a b l e . objective.

Remaining w i t h i n for survival.

funding l i m i t s

a precondition

^Jv~h ^V\

P R I V Y C O U N C I L O F F I C E WHITEHALL. LONDON S W 1 A 2 A T

17 A p r i l

1980

TO:

ALL MINISTERS

BL:

PUBLICITY DURING THE STRIKES

The S e c r e t a r y of S t a t e f o r I n d u s t r y has asked me to i n f o r m M i n i s t e r s t h a t our p o l i c y i s t h a t the Government s h o u l d d i s t a n c e i t s e l f as f a r as p o s s i b l e from the BL s t r i k e s , and t h a t i t s h o u l d t a k e the l i n e t h a t r e s o l u t i o n of the d i s p u t e i s a m a t t e r f o r the management o f BL and the t r a d e u n i o n s . Overleaf if they is a short d e f e n s i v e message w h i c h a l l about the dispute. M i n i s t e r s could use are questioned

ANGUS MAUDE

Please

turn

over

PMG NOTE 23-30

"

BL: D E F E N S I V EB R I E F I N GO NT H EC U R R E N T I N D U S T R I A LA C T I O N

RESPONSIBILITY FOR RESOLVING DISPUTES RESTS SQUARELY

WITH B L ' S MANAGEMENT AND THE UNIONS CONCERNED, THE GOVERNMENT IS IN NO WAY INVOLVED IN THE PRESENT
DISPUTE.
THE GOVERNMENT HAS EVERY CONFIDENCE IN SIR MICHAEL
EDWARDES AND HIS BOARD. DECISIONS HAVE TO BE TAKEN,
AND THESE SHOULD BE TAKEN BY THE COMPANY AND NOT BY
THE GOVERNMENT.

( Jffll | \ZM^0y
Secretary of State tor Industry

/"iTrfo^X

CONF IDENTIAL : D E P A R T M E N T O F INDUSTRY

ASH 123
DOWN HOUSE STREET 6RB
. /

VICTORIA

^>)

LONDON
TELEPHONE DIRECT

SW1E LINE

0l-2ll33O1
01 - 313 7476

SWITCHBOARD

n RES P r e s c o t t Esq
P r i v a t e S e c r e t a r y t o the
Rt Hon Angus Maude MP
Paymaster General
Privy Council Office
W h i t e h a l l S1

A p r i l 1980

BL:

PUBLICITY DURING THE

STRIKES

F o l l o w i n g a meeting o f M i n i s t e r s , c h a i r e d by the Prime

M i n i s t e r , which took p l a c e t h i s morning to c o n s i d e r the
a f f a i r s o f BL, I am l e t t i n g you know the d e c i s i o n which
was taken about p u b l i c M i n i s t e r i a l statements w h i l e the
present i n d u s t r i a l a c t i o n continues.
T h i s was t h a t the Government should d i s t a n c e i t s e l f as
f a r as p o s s i b l e from t h e s t r i k e s , and t h a t i t should
take the l i n e t h a t r e s o l u t i o n of t h e d i s p u t e is a
matter f o r the management o f BL and the t r a d e s u n i o n s .
... I a t t a c h some d e f e n s i v e b r i e f i n g which a l l M i n i s t e r s could use i f they are questioned about the d i s p u t e . I should be g r a t e f u l i f you would arrange f o r t h i s to be c i r c u l a t e d . I am copying t h i s l e t t e r to N i c k Sanders a t Ho 1 0 .

CATHERINE BELL
Private Secretary

1 )

BL: DEFENSIVE BRIEFING ON THE CURRENT INDUSTRIAL ACTION

Responsibility f o r r e s o l v i n g d i s p u t e s r e s t s s q u a r e l y w i t h BL's
concerned. The Government i s i n no
management and the unions way i n v o l v e d i n t h e present d i s p u t e .
The Government has every c o n f i d e n c e i n S i r M i c h a e l Edwardes and
h i s Board. D e c i s i o n s have t o be t a k e n , and t h e s e should be
taken by the company and not by the Government.

I
H

m
SECRET P.0242 PRIME MINISTER

BRITISH LEYLAND

BACKGROUND You a r e h o l d i n g a f u r t h e r s t o c k t a k i n g meeting on BL tomorrow. J o s e p h ' s minute o f 15 A p r i l provides the text. Sir Keith

2.

At y o u r l a s t m e e t i n g "before E a s t e r i t

was a g r e e d t h a t :

(a)

S i r K e i t h Joseph w o u l d a r r a n g e t o

sound out Mr L u t z o f F o r d t o

check t h e i r i n t e n t i o n s . just

A c c o r d i n g l y S i r P e t e r C a r e y spoke t o Mr L u t z in his
a good

b e f o r e E a s t e r and S i r K e i t h Joseph r e p o r t e d t h e outcome 3 April. In essence F o r d ' s a t t i t u d e thought.

ft minute t o you o f 1 1 d e a l more d i s t a n t

t o BL i s

t h a n we had p r e v i o u s l y

(b)

S i r K e i t h Joseph wo_uld r e p l y t o S i r M i c h a e l Edwardes' l e t t e r

of

28 March p u t t i n g on r e c o r d t h e G o v e r n m e n t ' s c o n c e r n about B L ' B prospects. A copy o f S i r K e i t h J o s e p h ' s resulting letter to S i r Michael been

Edwardes i s a t t a c h e d t o h i s minute o f

15 A p r i l .

T h i s w i l l not have its

r e c e i v e d by BL i n time t o be f o r m a l l y c o n s i d e r e d by t h e B o a r d at meeting today (Wednesday).

(c)

A decision

on t h e

appointment

o f an a d v i s e r s h o u l d be d e f e r r e d u n t i l The Group n o t e d however t h a t t h e to the type

Ford's intentions of

were c l a r i f i e d .

a d v i s e r r e q u i r e d would depend on whether he would be needed g i v e more g e n e r a l

negotiate a sale or simply to Government.

f i n a n c i a l advice to

HANDLING 3. You might first ask S i r K e i t h J o s e p h t o l i k e to focus r e p o r t on Wednesday's BL Board discussion on t h e following issues:

meeting.

A f t e r t h a t you might

SECRET

SECRET ( a ) Industrial Relations the e f f e c t s o f the o f an e a r l y c u r r e n t TGWU settlement?

What assessment can be made about s t r i k e a c t i o n on BL? He u n d e r s t a n d t h a t fairly depressed

What a r e t h e p r o s p e c t s

when Mr Lowry o f BL saw Mr P r i o r on Monday he was about t h e situation. What i s t h e latest information? eg by

And i s t h e r e

a n y t h i n g t h e Government s h o u l d be d o i n g t o a s s i s t

i n v o l v i n g Mr L e n Murray?

(b)

Ford's Sir

intentions minute o f 3 April i m p l i e s that Ford w i l l not

Keith Joseph's

t a k e any i n i t i a t i v e tactical? Are they

f o r t h e purchase o f B L . still interesting

How f a r i s t h e i r

coldness Is

i n a c q u i r i n g p a r t s o f BL? ( f o r t h e i r new model a s an

t h e i r a c q u i s i t i o n o f t h e Cowley s i t e alternative to P o r t u g a l ) entirely

r u l e d out?

C )

AJ. . a d v i s e r Should the p r o p o s a l be pursued o f an a d v i s e r to specifically on d i s p o s a l s ) , give general financial

advice

(as

opposed t o If

as S i r K e i t h

Joseph

suggests?

so s h o u l d he be seen b y M i n i s t e r s under t h e C h a n c e l l o r ? Even i f S i r M i c h a e l accepts

And s h o u l d S i r M i c h a e l Edwardes be warned? the position, would such an appointment

seriously

damage BL Management's

morale?

CONCLUSIONS

4 .

You may want t o r e c o r d c o n c l u s i o n s on:

(i)

Any moves on t h e

industrial relations

position;

(ii)

any f u r t h e r a p p r o a c h e s t o

S i r M i c h a e l Edwardes a n d / o r F o r d ;

. . . Cabinet O f f i c e 16 A p r i l 1 9 8 0 SECRET 2

'

"

P Le CHEMNANT

16 ^ PRIME MINISTER
BRITISH LEYLAND

A p r i l 1980

T h i s m i n u t e comments on K e i t h ' s n o t e o f 15 A p r i l ; present s i t u a t i o n ; 1. 1.1 B L ' s PROSPECTS

Keith's minute presents ( a ) He a p p a r e n t l y BL ( b ) pulling

briefly

reviews the
meeting.

s u g g e s t s t h e main p u r p o s e o f tomorrow's

a p i c t u r e w h i c h seems t o me q u i t e still feels

that there

unreal:

i s a good chance o f

through.

He r e p e a t s make o v e r t by

t h e Catch-22 t h e s i s - that moves t o s e l l that s e l l i n g

t h e moment y o u

BL, t h e whole t h i n g c o l l a p s e s .
a l a r g e company i s ,

T h i s amounts t o s a y i n g defin ition,

imposs i b l e .
as a s i m p l e b l a c k and
will
a
resign.

( c )

He p r e s e n t s stay;

withdrawal of the Plan

white s i t u a t i o n . i f we i n s i s t

I f t h e Board withdraws i t they on i t s w i t h d r a w a l t h e y w i l l

T h e r e seems t o b e no r e c o g n i t i o n t h a t finely-balanced Plan should the P l a n . with it be w i t h d r a w n o r n o t . He seems t o t h i n k t h a t

i t i s already

and m a r g i n a l j u d g m e n t a s t o w h e t h e r t h e
He makes no a l l o w a n c e
t h e whole t h i n g c a n be
I don't think

f o r o u r p e r s u a d i n g t h e B o a r d t o s u p p o r t u s and t o w i t h d r a w
h a n d l e d a t arm's l e n g t h . t h e BL B o a r d i s impossible We h a v e t o g e t r o u n d a t a b l e

i f we a r e t o g e t a n y w h e r e .

f o r E d w a r d e s t o do h i s b e s t t o make t h e
t h e b e s t way o f p r o c e e d i n g horses. i f i t

P l a n work and c o n s i d e r fails.

He i s q u i t e c a p a b l e o f r i d i n g b o t h

( d )

He a l s o seems t o t h i n k t h a t no b u y e r w i l l until in t h e company i s f a l l i n g But t h e r e apart bought c h e a p l y . i sa risk

be i n t e r e s t e d
c a n be
buyer

and t h e a s s e t s

t o a p o t e n t i a l buyer

taking that route

- f o r example, a c o m p e t i t i v e

may move i n f i r s t , ( e ) 1 F i n a l l y , he i n s i s t s f to d r i f t
60.

and s o o n .
that t h e B o a r d w o u l d n o t a l l o w BL But they a r e already doing

away f r o m t h e P l a n .

word.

The

question manfully

i s whether i t f a i l s warned l a s t

a f t e r the trade unions (a not v e r y manage t o

have sell
as

co-operated

t o t r y and make i t s u c c e e d

s a t i s
or -

f a c t o r y o u t c o m e a s we seems i n c r e a s i n g l y p r o v o k e d by

S e p t e m b e r ) ; o r we

i t whole w i t h a reasonable likely trade union

industrial relations situation;

- there i s a l e s s o r d e r l y break-up
behaviour.

2. 2 .1

THE

PRESENT SITUATION MAY

BE AN

OPPORTUNITY

then t h e odium f o r Meanwhile, the

I f the present BL's the r i s k reality

TGWU a c t i o n p r e c i p i t a t e s be f i r m l y on

the end,

downfall w i l l

t h a t union

- no b a d

thing.

of t h i s happening i s at l e a s t w h i c h i t has

f o r c i n g D o l t o f a c e up t o

been s o r e l u c t a n t t o f a c e s o f a r , w h i c h i s

something. 2.2 I t may t h e r e f o r e be t h a t we will s o o n be f o r c e d t o make an overt

d e c i s i o n t o l o o k f o r b u y e r s and pieces.
2.3 We yFor c a n ' t make f u r t h e r p r o g r e s s example, w i l l t h e pay r e s i s t a n c e fades? i t r e s i g n en b l o c ? for a sale in this deals?
of these

o r d e r l y run-down o f any

unsaleable

u n l e s s we

a n s w e r a number o f

questions.

deal ever s t i c k Will

i n p r a c t i c e , even i f t h e
i n d i s p o s a l / r u n
Is ever

p r e s e n t T&G down o r w i l l

W i l l t h e B o a r d h e l p us industry?

t h e d e a l e r s h i p s h o l d up? Would t h a t s e c r e c y the M i n i Metro and

secrecy v i t a l be possible? collaborative 2.4 We We can't should

What a r e t h e l a t e s t v i e w s on

a n s w e r any can

questions

o r make any had

further

progress

u n t i l we

t a l k w i t h E d w a r d e s and seems t o h a v e a c c e p t e d i f they too were i d e n t i c a l i s convinced than

p e r h a p s some o f h i s B o a r d members.
p l e n t y of c o n t a c t objectives and
with
E d w a r d e s ' own to ours.

have done t h i s b e f o r e . as he

K e i t h has

Edwardes but strategy I b b s and

I have t a l k e d be t h e n e x t

t o Robin
step

that t h i s should u l t imatum has talking

(presumably a f t e r

the Horrocks

e x p i r e d ) . T h i s meet i n g
We may need

i s much more i m p o r t a n t

to independent o u t s i d e r s .

Edwardes i s t h e b e s t - e q u i p p e d

a d v i s e r at t h i s s t a g e

finaneial

experts

later.

3 ^ 3.1

THE PURPOSE OF TOMORROW'S MEETING

A r e we c l e a r that i f Moss E v a n s a n d h i s p e o p l e d o n o t b a c k down Could there retreat? for their n o t d o i n g s o i f t h e TGWU d o n ' t

t o t a l l y , we e x p e c t t h e BL B o a r d t o w i t h d r a w t h e P l a n ? be any j u s t i f i c a t i o n (I don't t h i n k 3.2 there can be.)

We must e x p l o d e t h e C a t c h - 2 2 myth t h a t , i f we a s k e d t h e B o a r d (who

are, after all, s i m p l y o u r h i r e d g e n e r a l managers, collapse.
because t h e
G o v e r n m e n t a r e t h e o w n e r s ) t o s e l l / r u n down B L , t h e r e s u l t w o u l d b e
i n s t a n t Board r e s i g n a t ion and o v e r n i g h t

3.3

We s h o u l d

a g r e e t o s e t up a m e e t i n g w i t h E d w a r d e s , a n d o t h e r BL B o a r d
T h a t i s t h e o n l y way t o make any
The a g e n d a , venue,
o n o u r r e a s s e s s
during

members, a s s o o n a s p o s s i b l e .

p r o g r e s s w i t h o u r own t h i n k i n g a n d p l a n n i n g . ment o f t h e s i t u a t i o n talks tomorrow the present 3.4 strike.

s e c r e c y , o r o t h e r w i s e , o f t h a t m e e t i n g would depend and t h e H o r r o c k s u l t i m a t u m .

f o l l o w i n g t h e outcome o f t h e Evans-Edwardes
I t c a n ' t happen

A l t h o u g h we f e e l t h a t opportunity rather at t h e m e e t i n g .

t h e p r e s e n t TGWU a c t i o n may p r o v e t o be an
i t s h o u l d be t a l k e d o f i n t h o s e t e r m s
(which might
fora

t h a n a p r o b l e m ( g i v e n o u r v i e w t h a t BL c a n n o t i n

t h e end r e c o v e r ) I don't t h i n k

That c o u l d e a s i l y g i v e t h e impression

a l s o be l e a k e d ) o f a d e s i r e by t h e G o v e r n m e n t f o r BL t o f a i l , "showdown w i t h t h e u n i o n s " e t c .

JOHN HOSKYNS

JjP^l^

SECRET

4/Tiwrt)^'/

^et+f^.

PRIME rTOTISTER

We are t o d i s c u s s E L on Thursday and I s h a l l t e l l you c o l l e a g u e s then how the Board now

and

view the p r o s p e c t s of

g e t t i n g the F l a n through.

They are meeting i n Birmingham

on Wednesday a f t e r n o o n , and S i r M i c h a e l Edwardes has been out of the country t i l l Tuesday. I was not a b l e to w r i t e to done so on the l i n e s
letter.

him b e f o r e the E a s t e r break but have now ...

proposed at our l a s t meeting and I a t t a c h a copy o f my A l s o s i n c e we l a s t met

there have been f u r t h e r d i s c u s s i o n s

w i t h Ford and I l e t you know the outcome i n my minute o f

3 April.

J u s t to c l e a r one f u r t h e r p o i n t .

There i s no q u e s t i o n of the
First they

Board d e c i d i n g on Wednesday to withdraw the P l a n . have the v e r y c l e a r commitment to g i v e me they do so; informed

advance warning b e f o r e

and S i r M i c h a e l has v e r y c a r e f u l l y kept me

of developments.

But i n any case they always expected

there would be problems i n g e t t i n g the wages and c o n d i t i o n s

package implemented; i n t e n s i v e d i s c u s s i o n s are proceeding
understanding

w i t h union l e a d e r s and there i s a good d e a l of about the predicament of the company; at

so i t would be wrong

t h i s stage to w r i t e o f f the p o s s i b i l i t i e s of t h e i r b e i n g
I n c i d e t a l l y S i r Michael r e c e n t l y

able to p u l l i t t h r o u g h . asked me

to c o n f i r m t h a t i n making the f u n d i n g a v a i l a b l e to
of the wages and
I of course
/said SECRET
...

BL f o r 1980/81 we had taken implementation

c o n d i t i o n s package as b e i n g e s s e n t i a l to the P l a n ;

HHIIIIIIIII ^IIIIIIIIIIIIIIIIIIIIIIIIIIIIMIIIIIII^ III^^^^^^^H

SECRET

s a i d t h a t t h i s was financial limits;

the case and t h a t I would he prepared helpful.

to
say so in. p u b l i c i f t h i s would he

I think
should
s t i l l agree t h a t BL take the view t h a t the
the

R e f l e c t i n g f u r t h e r on the problem t h a t c o n f r o n t s us, the fundamental i s s u e i s whether we

be g i v e n every chance to succeed - always s u b j e c t to the agreed

or whether we now

chances are so s l i g h t t h a t p o l i c y should be based on assumption t h a t i t w i l l fail.

I f we

take the l a t t e r view, I s h a l l have to t e l l the BL Board

that the Government, without w a i t i n g f o r the Board to r e a c h the

c o n c l u s i o n that the P l a n must be withdrawn, had t h a t i t c o u l d not succeed, and t h a t p r i o r i t y was taken the view
now to be

g i v e n to r u n n i n g down and b r e a k i n g up BL. the r e s i g n a t i o n of the Board;

T h i s would l e a d to

the Government's abandonment of

t h e r e would be an immediate

hope f o r BL would become apparent; crisia of c o n f i d e n c e ;

r a p i d and d i s o r d e r l y rundown would f o l l o w ,

expenditure.

w i t h major consequences f o r the economy and p u b l i c Even i f we

regard f a i l u r e as almost i n e v i t a b l e , the o n l y hope

be

of k e e p i n g the s i t u a t i o n under some degree of c o n t r o l w i l l

i f the Board remain w i t h the company to manage the rundown,

as they have undertaken to do i f they conclude must be withdrawn.
t h a t the Plan

Pears t h a t the Board w i l l a l l o w the s i t u a t i o n t o d r i f t downwards

without implementing the terms of S i r M i c h a e l ' s l e t t e r to
/of

me

...

SECRET

<)
o f 19 c o n s i d e r , misplaced; no l o n g e r prepared

SECRET

'

Plan are, I
Realistically,
present

December and withdrawing the Corporate

the non-executive members of the

Board would c e r t a i n l y not allow t h i s to happen.

the Government has no o p t i o n but to r e l y on t h e i r i n t e g r i t y or i t s e l f to p r e c i p i t a t e the c r i s i s by i n d i c a t i n g t h a t i t i s

to r e l y on the B o a r d .

Of c o u r s e , we must not miss any o p p o r t u n i t y t h a t may itself

of g e t t i n g another company to take over BL as a whole;

would was

but i t must be u n l i k e l y t h a t any p r o s p e c t i v e purchaser make a s e r i o u s move u n t i l i t was f a i l i n g and cheaply. t h e r e f o r e t h a t BL was apparent t h a t the P l a n

l i k e l y to he f o r s a l e
not

(As e x p l a i n e d i n my

minute of 5 A p r i l , Ford are

s e r i o u s l y i n t e r e s t e d , and would o n l y examine the i f pressed by the Government). Board now I f we

possibility
BL

e i t h e r p r e s s the

to seek p u r c h a s e r s , or t r y to do crisis.

so o u r s e l v e s , t h i s

would c e r t a i n l y p r e c i p i t a t e a

On the matter o f the Government a p p o i n t i n g an a d v i s e r S i r

M i c h a e l Edwardes t o l d S i r P e t e r Carey on 8 A p r i l t h a t the
appointment of an expert on d i s p o s a l s would be v e r y to l e a k w i t h f a t a l consequences; and likely
the

i t would be taken by

EL Board to mean t h a t the Government d i d not have i n them - a r e s i g n i n g i s s u e .

confidence

However I am

a t t r a c t e d by the s u g g e s t i o n i n S i r Robert

Armstrong's minute of 28 March t h a t the Government should

approach someone l i k e S i r Henry Benson f o r a d v i c e on whether
/there SECRET
...

Wft'.

SECRET

t h e r e was and

any a d d i t i o n a l p r e c a u t i o n a r y a c t i o n which could

I should s t i l l consider i t e s s e n t i a l

should be t a k e n .

to t e l l S i r M i c h a e l t h a t we were going to do t h i s , but i f

expressed i n t h i s way, and not r e l a t e d s p e c i f i c a l l y to
persuaded

d i s p o s a l ( p a r t i a l or complete) I t h i n k he might he to accept i t .

I am c o p y i n g t h i s minute t o the C h a n c e l l o r o f t h e Exchequer,

the S e c r e t a r y of S t a t e f o r Employment, Mr Robin I b b s , John Hoskyns and to S i r Robert Armstrong.
Mr

\ ^ A p r i l 1980

Department of I n d u s t r y
Ashdown House
123 V i c t o r i a Street

SECRET

mm

/^ivfe^\
f Ay-"^g V ^* S y ' )

CONPIDEHTIAL

D E P A R T M E N T OF ASHDOWN 123 VICTORIA INDUSTRY HOUSE STREET 6RB 01-211 5501

LONDON TELEPHONE

SW1E

DIRECT UNG

SWITCH BOARD 01-212 7M6 Secretary ol Stare tor Industry

V*5 . A p r i l S i r M i c h a e l Edwardes
Chairman
B L Limited
Z"y~38 Portman Square
London W1H OBN

1980

Thank you f o r your l e t t e r s o f 18 March and 2 3 J l a r c h . I

have a l s o seen the 1980 f o r e c a s r T p r e p a r e d on 21 March and
supplied to o f f i c i a l s here.
I conclude t h a t i n y o u r Hoard's v i e w , h a v i n g completed your
review o f c a p i t a l e x p e n d i t u r e and n o t w i t h s t a n d i n g the
d i s t u r b i n g l o s s now f o r e c a s t f o r 1980 (which your second
l e t t e r i n d i c a t e s s h o u l d not be t a k e n as e v i d e n c e t h a t any
i n c r e a s e w i l l be needed i n the cash c a l l on Government
d u r i n g 1980/81) i t i s s t i l l p o s s i b l e f o r BL to achieve the
o b j e c t i v e of l o n g term v i a b i l i t y ; remaining w i t h i n agreed
f u n d i n g l i m i t s i s , o f c o u r s e , a c o n s t r a i n t r a t h e r than an
objective i n i t s e l f .
As r e g a r d s 1981 onwards, I r e a l i s e the s e n s i t i v i t y o f any
l o n g e r term p r o j e c t i o n s t o v a r i o u s ranges o f economic
a s s u m p t i o n s , p a r t i c u l a r l y about i n f l a t i o n , the s i g n i f i c a n c e
of which you s t r e s s e d to me when we met on 21 March. O f f i c i a l s
of t h i s Department and the T r e a s u r y are ready to d i s c u s s these
and t h e i r i m p l i c a t i o n s w i t h your s t a f f and to p r o v i d e any h e l p
they can.
I hope t h i s work can be c a r r i e d forward s p e e d i l y so t h a t you
can l e t me have y o u r Board's c o n c l u s i o n s as soon as p o s s i b l e .
I should mention t h a t I have j u s t r e t u r n e d from h o l i d a y , and t h a t t h i s l e t t e r was prepared on my i n s t r u c t i o n s w h i l e I was
away and does not take account of the l a t e s t s i t u a t i o n of BL.

_i

c c Mr. Whitmore

PRIME MIH/fSTER

British

Leyland
evening

Jim P r i o r ' s p r i v a t e secretary telephoned this to s a y t h a t P a t Lowry had seen Mr. P r i o r a t BL. about

the industrial
t h e TGWU w e r e

relations position

M r . Lowry s a i d t h a t

g e t t i n g more a n d more d i f f i c u l t ; even to negotiate

Moss E v a n s was now u n w i l l i n g

" s e t t l e m e n t " and

on t h e b a s i s o f t h e c u r r e n t the whole question

wanted t o re-open Mr. Lowry's ^j-

of working p r a c t i c e s .

v i e w was t h a t when t h e BL B o a r d met on Wednesday

that they would consider withdrawing the

i t was h i g h l y l i k e l y

tJtX- p l a n .
W^*
1

J i m P r i o r h a s had a word on t h e t e l e p h o n e w i t h about to a l l o f t h i s , w i t h a view t o t r y i n g Len Murray t o persuade

Len Hurray Mr. Murray tomorrow

l e a n on Moss E v a n s .

i s s e e i n g Moss E v a n s

anyway, and w i l l

do h i s b e s t .

There

i s not a great deal of approach

o p t i m i s m f r o m t h e D e p a r t m e n t o f Employment t h a t t h i s will l e a d t o much. I have asked K e i t h Joseph's o f f i c e tomorrow e v e n i n g , i n advance

t o l e t us have a r e p o r t

o f t h e BL B o a r d m e e t i n g a n d y o u r m o r n i n g , s o t h a t we c a n s e e w h e r e

M i n i s t e r i a l m e e t i n g on T h u r s d a y we a l l s t a n d t o m o r r o w night.

ftt L n - 3

-UgW,;,- < ~ > ^

"

14

April 1 9 8 0 - 7 J ^

+Ut-

1U BL g^A M\\
a t s W

;R<>~,^ I

"SECRET/^

$* ~ ^ ^ " ^

COMMERCIAL IN CONFIDENCE

i f ^ i

lO D O W N I N G S T R E E T

The Prime M i n i s t e r was g r a t e f u l f o r

your S e c r e t a r y o f S t a t e ' s minute o f 3 A p r i l
about B r i t i s h L e y l a n d . She agrees t h a t
M i n i s t e r s most c l o s e l y concerned w i l l need
to meet again to c o n s i d e r the BL s i t u a t i o n
a f t e r the E a s t e r b r e a k .
I am s e n d i n g c o p i e s of t h i s l e t t e r to Mnrtin I f a l l (II.M, T r e a s u r y ) , H i chard Dykes (Department o f Employment), Gerry Spencc (CPRS), and to D a v i d Wright (Cabinet O f f i c e ) .

T. p. LANKESTES

I . K. C. E l l i s o n , E s q . ,

rfsp

Depur tinen t of

Industry.

pV-(lft> ~ tx. U - A - ^ r

Wfa

*'-

****

Urn

SECHET COMMERCIAL IN COITIIU-.N'CE

i|i ri .

cc H M T

K. \bti

lO D O W N N IG S T R E E T
From the Private Secretary

co
3 April 1980

The Prime M i n i s t e r h e l d a meeting at 15413 hours y e s t e r d a y

to d i s c u s s B r i t i s h L e y l a n d . The f o l l o w i n g were present i n
a d d i t i o n t o your S e c r e t a r y of S t a t e : C h a n c e l l o r o f the Exchequer,
S e c r e t a r y of S t a t e f o r Employment, S i r Robert Armstrong,
Mr, Robin Ibbs, Mr. John Hoskyns and Mr. l e Cheir.inant. They had
b e f o r e them your l e t t e r o f 1 A p r i l w i t h which you e n c l o s e d a copy
of S i r M i c h a e l Edwardes' l e t t e r o f 28 March and a note on p o s s i b l e
r e g i o n a l measures, and S i r Robert Armstrong's minute of 28 tfjirch
on the p o s s i b i l i t y o f a p p o i n t i n g an a d v i s e r on d i s p o s a l o p t i o n s .
S i r K e i t h Joseph s a i d t h a t the BL Board, at t h e i r meeting on
26 March, had reviewed the company's performance thus f n r i n 1980
and the o u t l o o k f o r the r e s t o f the y e a r . They had concluded r l i n r
they s h o u l d be a b l e t o s t a y w i t h i n t h e i r e x i s t i n g cash p r o v i s i o n
for 1980/81. T h e i r mark i t share had r e c o v e r e d i n March to 21J%
from the d i s a s t r o u s l e v e l s o f January and February and they appeared
so f a r to have been s u c c e s s f u l i n s t e r i l i s i n g union o p p o s i t i o n t c
t h e i r pay and work p r a c t i c e s p r o p o s a l s . There were u n l i k e l y to be
any p r o f i t s d u r i n g the coming y e a r , and the company were f a l l i n g
s h o r t of t h e i r o b j e c t i v e s as s e t out i n the 1980 C o r p o r a t e P l a n .
But, w i t h the launch of t h e i r new t r u c k and the launch o f the
Metro i n the autumn, and i f they were able to make c o n t i n u i n g pro
gress on work p r a c t i c e s and deinanning, t h e r e was s t i l l a p o s s i b i l i t y
t h a t the management would turn the company around. It would he
d i s a s t r o u s f o r the Government to withdraw i t s support at the p r e s e n t
tjme, or to f o r c e the management i n t o d i s p o s a l s : i f the company
c o n t i n u e d on i t s p r e s e n t c o u r s e , the d i s p o s a l p r o s p e c t s s h o u l d i n
any case improve.
In d i s c u s s i o n , i t was argued that S i r M i c h a e l Edwardes ana
h i s Team had performed I m p r e s s i v e l y : i n p a r t i c u l a r , the p r o g r e s s
they were making on work p r a c t i c e s and demanning was as gocri as
' c o u l d have p o s s i b l y been expected'. On the o t h e r hand, they were c l e a r l y f a l l i n g s h o r t of the P l a n t a r g e t s , and the s a l e s recovery in March was a t t r i b u t a b l e p a r t l y t o the v e r y low p r i c e s which the company were o f f e r i n g . There was a r e a l worry t h a t , w h i l e they might stay w i t h i n t h e i r cash p r o v i s i o n f o r the c u r r e n t f in a n d a l y e a r , the u n d e r l y i n g p o s i t i o n o f the company would s t i l l be d e t e r i o r a t i n g , and t h a t i n 1031 they would ask the Government f a r a l a r g e new casn i n j e c t i o n . ^ A l t e r n a t i v e l y . I f the Government were to r e f u s e to p r o v i d e e x t r a money, the CQpipWy might w e l l be heading towards a d i s o r d e r l y breakup In 1981 - which would be the worst outcome possible. S i r M i c h a e l Edwardes ( i n h i s l e t t e r o f 23 March) d i d not /appear to be

appear to be a l t o g e t h e r c o n f i d e n t t h a t BL would be able to stay w i t h i n i t s 1980/81 cash p r o v i s i o n : the r e l e v a n t paragraph was not as p o s i t i v e as i t might be, and h i s i n d i c a t i o n of the p r o s p e c t s f o r l a t e r years was h e a v i l y q u a l i f i e d by the r e f e r e n c e to "economic assumptions". It would be d e s i r a b l e to q u e s t i o n S i r M i c h a e l f u r t h e r on t h i s a s p e c t , and t o put on r e c o r d the Government's c o n c e r n . The Government had supported the 1980 P l a n not so much because M i n i s t e r s thought t h a t the P l a n would s u c c e e d , but because they wanted to keep the company going and thereby to improve the p r o s p e c t s of d i s p o s a l . Yet S i r M i c h a e l seemed u n w i l l i n g to con s i d e r the p o s s i b i l i t y of s e l l i n g the company. It might w e l l be necessary to put p r e s s u r e on S i r M i c h a e l to c o n s i d e r the d i s p o s a l o p t i o n s more s e r i o u s l y though i t would be important not to push him i n t o r e s i g n a t i o n . S i r M i c h a e l seemed to be w i l l i n g to c o n s i d e r s e l l i n g o f f p a r t s of the b u s i n e s s ; but t h e r e was a danger t h a t i f he pursued t h i s c o u r s e , the s a l e a b i l i t y o f the b u s i n e s s as a whole i n c l u d i n g Cowley and Longbridge would d i m i n i s h .

j j I ; i I 1 t i I I 1 ^.m 1 1

S i r K e i t h Joseph then s a i d t h a t he c o u l d see no immediate p r o s p e c t of s e l l i n g BL us a whole. The approach of Mr. L u t z (Chairman of Ford Europe) d i d n o t , a c c o r d i n g t o h i s own i n f o r m a t i o n , seem to have any b a c k i n g from D e t r o i t . Mr. Ibbs, however, r e p o r t e d that Mr. Ensor (who was Mr. L u t z ' s a d v i s e r on Government a f f a i r s ) had been to see him, and had s a i d t h a t the parent company i n D e t r o i t had been c o n s u l t e d and were p r e p a r e d to a l l o w Ford Europe to c o n t i n u e to e x p l o r e thc p o s s i b i l i t y of p u r c h a s i n g B L as a whole. Mr. Ensor had gone on to say t h a t Mr. L u t z was prepared to meet the Prvme M i n i s t e r or S i r K e i t h to i n d i c a t e how s e r i o u s l y he was i n t e r e s t e d i n p u r s u i n g an o u t r i g h t p u r c h a s e . He (Mr. Ibbs) had no reason to b e l i e v e t h a t Ensor's approach to him was not s i n c e r e . F u r t h e r m o r e , t h e r e were good reasons why F o r d s h o u l d be l o o k i n g s e r i o u s l y at BL. They wanted a new c a r p l a n t i n Europe, and w h i l e they were c o n s i d e r i n g b u i l d i n g a new p l a n t i n P o r t u g a l , the a c q u i s i t i o n o f Cowley might be a s u i t a b l e alternative. F o r d were a l s o concerned that the demise of B L would j e o p a r d i s e the UK components i n d u s t r y , and t h i s would damage t h e i r own i n t e r e s t s . S i r K e i t h Joseph s a i d t h a t t h e r e were a l s o s t r o n g reasons f o r b e l i e v i n g t h a t F o r d Europe were not i n a p o s i t i o n to pursue a t o t a l purchase: i n p a r t i c u l a r , the cash p o s i t ion of the parent company was very weak, and i t seemed u n l i k e l y t h a t they would be i n t e r e s t e d in Longbridge. In s h o r t , he doubted the c r e d i b i l i t y of Ensor's a s s u r a n c e s . However, the p o s s i b i l i t y of a Ford purchase should not be allowed to go by d e f a u l t , and he would be w i l l i n g t o meet Mr. L u t z to e x p l o r e the matter f u r t h e r . But he would have to i n f o r m S i r M i c h a e l Edwardes that he was doing s o . F i n a l l y , t h e r e was a b r i e f d i s c u s s i o n about the p r o p o s a l to appoin t an a d v i s e r to the Government on the d i s p o s a l opt i o n s . It was argued t h a t , w h i l e t h e r e was a c l e a r need f o r o u t s i d e a d v i c e , the type o f person to be appointed would depend p a r t l y on whether t h e r e was a r e a l p r o s p e c t of an o u t r i g h t s a l e to F o r d . A d e c i s i o n on who might be approached should t h e r e f o r e be d e f e r r e d . / Summing up,

1 $M - M ia|P] g 9 |s9

m m m u m m a u m m m u m u m u m a m u m u m u m a m a m a a a m

M a a

^
\

SECRLT -

COMMERCIAL IN CONFIDENCE

Summing u p , t h e P r i m e M i n i s t e r s a i d t h a t S i r K e i t h J o s e p h
s h o u l d meet M r . L u t z t o e x p l o r e t h e p o s s i b i l i t y o f a s a l e t o
Ford. He s h o u l d i n f o r m S i r M i c h a e l E d w a r d e s , b u t i t w o u l d be
f o r h i m t o d e c i d e w h e t h e r t o meet M r . L u t z a n d S i r M i c h a e l
jointly or separately. In a d d i t i o n . S i r K e i t h should w r i t e t o
S i r M i c h a e l a n d p u t on r e c o r d t h e G o v e r n m e n t ' s c o n c e r n a b o u t
BL's p r o s p e c t s a g a i n s t t h e o b j e c t i v e s s e t o u t i n t h e 1980 p l a n ,
n o t w i t h s t a n d i n g t h e management's e f f o r t s t o i m p r o v e t h e s i t u a t i o n .
I t was a g r e e d t h a t an a d v i s e r on d i s p o s a l s was n e e d e d , b u t a
d e c i s i o n o n who m i g h t b e a p p r o a c h e d s h o u l d be d e f e r r e d u n t i l
a f t e r S i r K e i t h ' s m e e t i n g w i t h Mr. L u t z . M i n i s t e r s s h o u l d meet
a g a i n i n about a month's t i m e t o t a k e s t o c k .
I am s e n d i n g c o p i e s o f t h i s l e t t e r t o M a r t i n H a l l (H.M.
T r e a s u r y ) , R i c h a r d Dykes (Department o f Employment) and D a v i d
Wright ( C a b i n e t O f f i c e ) , and a l s o t o Mr. I b b s . Given t h e extreme
s e n s i t i v i t y o f t h e m a t t e r s d i s c u s s e d , I must a s k t h a t no f u r t h e r
c o p i e s be made o f t h i s l e t t e r .

Mrs. C a t h e r i n e B e l l ,
Department o f I n d u s t r y .
1

SECRET 4|
^

J-

TOTAL COPIES fa.........

, ,
COPr No. I

COMMERCIAL IK COKPIDEHOE

,
I . _..

PRIME

MINISTER

0^-6

* * * " " * * * 1
^

*T r*""^
*

* '~

'"tw-!

I t h i n k I should l e t you

and c o l l e a g u e s know s t r a i g h t away

t h a t i t seems c l e a r t h a t Mr Ensor_has been s e r i o u s l y m i s l e a d i n g

the CPRS about the p o s s i b l e i n t e r e s t o f Ford i n BL.

S i r P e t e r Carey has ii \\situation.

spoken to Mr L u t z i n o r d e r to c l a r i f y

the

Mr L u t z made i t c l e a r t h a t Ford have no

positive

i n t e r e s t i n BL. a c q u i r i n g BL's

I t i s not the case t h a t they would l i i e to c o n s i d e r

c a p a c i t y as an a l t e r n a t i v e to c r e a t i n g a d d i t i o n a l
Indeed at the p r e s e n t time they probably

c a p a c i t y i n Europe.

have s u r p l u s c a p a c i t y i n Europe and

i n view o f the s e r i o u s

d i f f i c u l t i e s which they are themselves f a c i n g i n the United S t a t e s

they have no d e s i r e at a l l t o take on i n a d d i t i o n the problems
of B r i t i s h Leyland.

I f , however, the B r i t i s h Government s p e c i f i c a l l y p r e s s e s Ford to

c o n s i d e r the i d e a of t a k i n g over BL, then i n an e f f o r t to be
h e l p f u l , they are c e r t a i n l y prepared would p r e f e r not t o be asked to do to examine i t . But they

so.

T h i s i s q u i t e a d i f f e r e n t s i t u a t i o n from that which we were

. c o n s i d e r i n g y e s t e r d a y , and I t h i n k we need to c o n s i d e r i t a g a i n
a f t e r the E a s t e r b r e a k . Meanwhile I thought i t important that

t h e r e s h o u l d be no misunderstanding

about Ford's r e a l p o s i t i o n .

I am copying t h i s minute to G e o f f r e y Howe, Jim P r i o r , Robin John Hoskyns and to David W r i g h t . j^j K J SECRET 3 APRIL 1 9 8 0

Ibbs,

"I
mmm

is

CONFIDENTIAL

lO D O W N I N G STREET
3 April 1980 1-v

1 I
T h e R t Hon S i r K e i t h J o s e p h B t MP Secretary of State for Industry ( ^

I e n c l o s e a d r a f t l e t t e r f o r you t o send to M i c h a e l Edwardes. After

a g o o d d e a l o f t h o u g h t , we h a v e c o n c l u d e d t h a t a q u i t e s h o r t and simple
l e t t e r , which does not c o n t a i n a whole s t r i n g of accounting questions,
is sufficient.
The s e c o n d p a r a g r a p h o f t h e l e t t e r i s d e s i g n e d to interpret Edwardes' s l i g h t l y e q u i v o c a l c o m m e n t s a b o u t t h e r e b e i n g "no e v i d e n c e t o d a t e
which wouId s u g g e s t " an i n a b i l i t y t o l i v e w i t h i n t h e c a s h 1 i m i t s , i n
a more d e f i n i t e way.

The l a s t p a r a g r a p h i n v i t e s h i m t o c o n f i r m t h a t he s t i l l b e l i e v e s t h a t
the Plan i s a c h i e v a b l e . The r e f e r e n c e t o the a b i l i t y t o s t a y w i t h i n
c a s h l i m i t s a s a c o n s t r a i n t , n o t a s an o b j e c t i v e , i s a l s o d e l i b e r a t e .
I n E d w a r d e s ' l e t t e r o f 18 M a r c h ( e n d o f t h e f i r s t p a r a g r a p h ) , he says
t h a t he a g r e e d w i t h y o u t h a t t h e " o v e r r i d i n g c r i t e r i o n f o r j u d g i n g
i t s a b i l i t y to stay w i t h i n the approved
t h e c o m p a n y ' s p o s i t i o n was Governmen t fund i n g 1 i m i t s " . He s h o u l d n o t b e a l l o w e d to e l e v a t e the
cash c o n s t r a i n t to the s t a t u s of " o v e r r i d i n g c r i t e r i o n " . He c o u l d be
through the
a l o n g way o f f P l a n a n d s t i l l m a n a g e t o j u g g l e h i s way current year. T h e p o s i t i o n r e m a i n s t h a t i f he r u n s o u t o f c a s h , we
p u l l the p l u g . And i f he d e c i d e s he c a n ' t meet t h e P l a n , he pulls
the plug.

am

copying

this

letter

to

Robin

Ibbs

and

Richard

Bullock.

JOHN

HOSKYNS

HUllllllllllllHHilllHHHHH

3 A p r i l 1980
^ D R A F T LETTER FOR SECRETARY OF STATE FOR INDUSTRY TO SEND TO
SIR MICHAEL EDWARDES
Thank y o u f o r y o u r letters o f 18 M a r c h and 28 M a r c h . I have also

seen t h e 1980 f o r e c a s t officials.

prepared

on 21 M a r c h a n d s u p p l i e d t o my

The

forecast

loss

f o r 1980 i s v e r y d i s t u r b i n g .

I take i t from

what y o u s a y a b o u t t h e l a c k o f e v i d e n c e Board s t i l l believes there w i l l

t o the contrary, that the

r e q u i r e
Is this

be n o i n c r e a s e i n t h e c a s h year?

ments f r o m Government d u r i n g t h e 1980/81 f i n a n c i a l right?

Y o u r l e t t e r o f 18 M a r c h s a i d in capital

th at t h e Board d i d n o t expect longer-term

changes

expenditure t o j e o p a r d i s e t h e agreed I note t h a t your

objectives of the business. e x p e n d i t u r e was n o t then

review of

capital

complete,

b u t am n o t s u r e w h e t h e r y o u a r e
intact.

now a b l e t o c o n f i r m t h a t t h e l o n g e r - t e r m o b j e c t i v e s r e m a i n Is t h i s i n fact the case?

As r e g a r d s any

1981 onwards, o f c o u r s e

I realise

the s e n s i t i v i t y of
Officials

l o n g e r - t e r m p r o j e c t i o n s t o economic assumptions.

o f my D e p a r t m e n t and t h e T r e a s u r y w i l l these w i t h your this staff

be very w i l l i n g t o discuss
I hope

a n d p r o v i d e any h e l p t h a t t h e y c a n . s o o n , a s I am a n x i o u s

can be arranged Board s t i l l

t oreceive confirmation

t h a t your

h o l d s t o t h e judgment t h a t , d e s p i t e t h e

deterioration

i n p e r f o r m a n c e and t h e e c o n o m i c o u t l o o k , t h e P l a n
Achievement o f t h e P l a n i s , a f t e r t h e agreed funding l i m i t s a l l , t h e
i s only

remains a c h i e v a b l e . objective.

Remaining w i t h i n

a precondition for survival.

SECRET

- COMMERCIAL, IN

CONFIDENCE

R e f .

A01861 MINISTER

PRIME

B L BACKGROUND The main purpose left outstanding developments ( a ) o f t h e m e e t i n g o n 2 n d A p r i l i s to f o l l o w up t h e T h e r e have been points

f r o m y o u r m e e t i n g o n 24th M a r c h . then:

three

since

the B o a r d m e e t i n g on 2 6 t h M a r c h , letter of 28th M a r c h

recorded in Sir Michael

Edwardes's with their

( c i r c u l a t e d by the D e p a r t m e n t o f 1st April);

of Industry

Private Secretary letter ( b )

m y discussions with Sir Douglas Wass, about 'expert assistance',

M r . H o s k y n s and M r .

Bullock

r e c o r d e d i n m y minute of 28th M r . Lutz and Sir Michael

March;

( c )

further

discussions between

Edwardes.

HANDLING 2, A . Y o u c o u l d b r e a k up the d i s c u s s i o n i n t o t h r e e parts: thc B o a r d meeting? think

D o e s G o v e r n m e n t n e e d to do a n y t h i n g f o l l o w i n g

Sir M i c h a e l E d w a r d e s ' s letter of 28th M a r c h reports that they can s t i l l outcome conclude scrape t h r o u g h 1980: 'the

that the B o a r d a cash flow

Company forecasts cash

f o r 1980 w h i c h i s w i t h i n the t o t a l a g r e e d

call on G o v e r n m e n t ' .

They

t h a t ' t h e r e i s n o e v i d e n c e to d a t e w h i c h w o u l d s u g g e s t t h a t w e O n that b a s i s no e m e r g e n c y E v e n i f they do, a c t i o n i s c a l l e d f o r at whole story. y e t to be The

cannot present. situation

reach our objective'. Do Ministers agree?

this i s not the

could deteriorate could prove drift.

rapidly;

o r the l o n g e r - t e r m p r o s p e c t s , Some further (the

re-examined, to a v o i d be

weaker than

expected.

a c t i o n m a y be needed

P a r t of this i s i n hand already

work on " M e a s u r e s

which might of

taken i n response 28th M a r c h ) . B .

to a p a r t i a l c o l l a p s e " - the a n n e x to the D O I l e t t e r done? sales?

D o e s a n y t h i n g e l s e n e e d t o be seek further

S h o u l d the G o v e r n m e n t The idea canvassed

advice on

at y o u r l a s t m e e t i n g

was that the G o v e r n m e n t

should the was

supplement normal

the

'Management'

advice from Sir Michael Edwardes

by taking

' M e r c h a n t B a n k ' a d v i c e w h i c h any o w n e r uo u l d n o r m a l l y take i f he

I
SECRET - C O M M E R C I A L IN CONFIDENCE

publicity, C . The Sir T h e r e was, BL's Sir account, should CONCLUSIONS 3.

SECRET

- C O M M E R C I A L . IN C O N F I D E N C E M y note of 28th M a r c h r e c o r d s we t h i n k that i t i s that,

c o n s i d e r i n g d i s p o s a l of a m a j o r c o n c e r n .

h a v i n g e x a m i n e d a n u m b e r of p o s s i b l e to d e c i d e n o w o n a ' M e r c h a n t B a n k e r t a l k to a ' w i s e m a n
1 1

alternatives, adviser;

premature

but t h a t M i n i s t e r s m i g h t l i k e to to h e l p t h e m decide

l i k e H e n r y B e n s o n i n the f i r s t i n s t a n c e ,

w h e t h e r a n d w h e n to s e e k s u c h f u r t h e r d e t a i l e d a d v i c e . w o u l d be t o l d p r i v a t e l y i n a d v a n c e .

Sir Michael Edwardes no without

T h i s two-stage approach involves

a n d w o u l d a l l o w M i n i s t e r s the b e n e f i t of s o m e C i t y ' w i s d o m '

a d e t a i l e d e x a m i n a t i o n o f the s a l e s p r o s p e c t , it costs nothing, and buys t i m e .

I hope M i n i s t e r s w i l l accept it: there

T h i s w i l l be p a r t i c u l a r l y i m p o r t a n t i f

i s a n y t h i n g to r e p o r t u n d e r the n e x t h e a d i n g , T h e t a l k s with M r . Lutz. with

C P R S has l e a r n t p r i v a t e l y that M r . L u t z h a d a f u r t h e r talk T h e p r o s p e c t of o u t r i g h t sale was

M i c h a e l E d w a r d e s this week.

not

d i s c u s s e d (but S i r M i c h a e l E d w a r d e s s a i d that h e a n d h i s w h o l e

Board would back).

r e s i g n i f t h e y d i s c o v e r e d t h a t the G o v e r n m e n t w a s n e g o t i a t i n g b e h i n d h i s however, a u s e f u l new d e v e l o p m e n t .

F o r d and B L a r e apparently sale of B L trucks and J a g u a r

p r e p a r e d to t a l k a b o u t c o - o p e r a t i o n i n two a r e a s : c a r s through F o r d ' s continental outlets; big-car ranges.

a n d p r o v i s i o n of F o r d engines f o r such developments as a may

F o r d w o u l d no doubt see

u s e f u l w a y o f g e t t i n g a f o o t i n the d o o r i n c a s e B L c o l l a p s e s . be a b l e to r e p o r t f u r t h e r o n t h e s e t a l k s . K e i t h J o s e p h h a s h e a r d about t h e m . do M i n i s t e r s w i s h to e n c o u r a g e I do n o t y e t k n o w If h e h a s ,

M r , Ibbs whether

and can c o n f i r m this Do they agree above

B L along this path? sale,

that it d o e s not r u l e out a p o s s i b l e continue?

complete

a n d t h a t a c t i o n at B .

T h e c o n c l u s i o n s of this m e e t i n g m i g h t t h e r e f o r e

be: the

(i) T o a g r e e t h a t no a c t i o n i s n e e d e d f o r the t i m e b e i n g v i s - a - v i s B L Management itself,

( i i ) T o n o t e the c o n t i n g e n c y w o r k w h i c h i s i n h a n d i n D e p a r t m e n t s , the a s s e s s m e n t of the r e g i o n a l e f f e c t s o f a c o m p l e t e

including

collapse.

SECRET - C O M M E R C I A L , IN CONFIDENCE ( i i i ) T o a g r e e to i n v i t e S i r H e n r y B e n s o n to d i s c u s s confidence 28th ( i v ) the p r o b l e m s i n strict w i t h M i n i s t e r s o n the b a s i s s u g g e s t e d i n m y m i n u t e o f

March. what

T o a g r e e that S i r M i c h a e l E d w a r d e s s h o u l d be t o l d i n c o n f i d e n c e i s proposed.

(v) ( v i )

T o t a k e n o t e of t h e p o s i t i o n r e a c h e d i n t a l k s w i t h M r . L u t z . T o a g r e e that the S e c r e t a r y of S t a t e f o r I n d u s t r y s h o u l d e n c o u r a g e B L to c o n t i n u e t h e t a l k s o n p o s s i b l e c o l l a b o r a t i o n with Ford.

(Robert A r m s t r o n g )

1st A p r i l ,

1980

-3SECRET - C O M M E R C I A L IN C O N F I D E N C E

H
T
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ff^ A "\

D E P A R T M E N T O F INDUSTRY ASHDOWN } 123 V I C T O R I A HOUSE STREET

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I I

LONDON SW1E 6RB TELEPHONE DIRECT LINE 01-312 3301 SWITCHBOARD 01-211 7676

PS/Secretary of SxaO for Industry

| Tim L a n k e s t e r Esq P r i v a t e S e c r e t a r y to the

Prime M i n i s t e r 10 Downing S t r e e t London SWT

April

1980

BL As background f o r the Prime M i n i s t e r ' s meeting on Wednesday my S e c r e t a r y of S t a t e has asked me t o l e t you have the a t t a c h e d l e t t e r of the 28 March from S i r M i c h a e l Edwardes f o l l o w i n g l a s t week's meeting o f the BL Board; and a note by Department o f I n d u s t r y f o l l o w i n g d i s c u s s i o n s w i t h T r e a s u r y and the Department of Employment on p o s s i b l e r e g i o n a l measures. I am copying these a l s o t o M a r t i n H a l l ( T r e a s u r y ) , R i c h a r d Dykes (Department of Employment), G e r r y Spence (CPRS), David Wright ( C a b i n e t O f f i c e )as w e l l as John Hoskyns.

H...

CATHERINE BELL
Private Secretary

I I

35-38 PORTMAN SQUARE

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LONDON W 1 H

OBN

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The Rt Hon Sir Keith Joseph, Bt", MP, Secretary of State for Industry Ashdown House 123 Victoria Street London SW1E 6RB
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cc ; 7C J#L Hnqestodr' "'~r
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' *MY if
isY: IWrfttu I

As envisaged in m y letter to you of 18 March, I P H writing to confirm our assessment of our cash position fcllowing
our Board meeting on 26 March. The Board reviewed the
1
Company s performance thus far in 1980 and the outlook for
m pleased to advise you that the
the rest of the year. I a sales campaign which we launched in January has started to
show results in March. With market share running well
over 20% so far this month, we expect cash to be on budget
for the f i r s t quarter.
Our objectives for the year remain the same - to protect
the programmes which are fundamental to the future viability
of the business, and to ensure that we do not exceed the
agreed cash c a l l on Government during i t s 1980/81 financial
year. You w i l l recall that our 1980 budget took account of
an anticipated 50m deterioration against the starting
point assumed for the 1980 Corporate Plan. In the event,
the engineering strike made an even deeper impact on our
cash flow for 1979 and we started the year some C70m worse
than the Corporate Plan base. *mmmwass*

The

Rt Hon

S i r K e i t h J o s e p h , B t , MP

28 March

1980

/
N e v e r t h e l e s s the Company f o r e c a s t s a cash flow outcome f o r
1980 which i s w i t h i n the t o t a l agreed cash c a l l on Government.
T h i s f o r e c a s t r e f l e c t s the review of c a p i t a l e x p e n d i t u r e ,
the a c c e l e r a t i o n of the r e s t r u c t u r i n g and redundancy elements
of the r e c o v e r y programme and the v i g o r o u s m a r k e t i n g and
o t h e r a c t i o n s . We have p r o v i d e d your o f f i c i a l s w i t h the
d e t a i l s of t h i s f o r e c a s t , which as I i n d i c a t e d t o you i n
my l e t t e r of 18 March, assumes an e a r l y end t o the S t e e l
S t r i k e , * and that the u n i l a t e r a l implementation of our pay
and working p r a c t i c e p r o p o s a l s f o r Cars i s accomplished
without major d i s r u p t i o n .
I J fl J| 'I The Board r e c o n s i d e r e d t h i s f o r e c a s t at y e s t e r d a y ' s meeting and concluded t h a t , w h i l e the Company remains s u s c e p t i b l e to Il u n f o r e s e e n problems e r o d i n g the narrow margins we have, t h e r e i s no evidence to date which would suggest that we V cannot meet our o b j e c t i v e of s t a y i n g w i t h i n the agreed cash " C a l l on Government d u r i n g i t s 1980/81 f i n a n c i a l y e a r .
So f a r as 1981 onwards i s c o n c e r n e d , the Board w i l l review the outcome when, as we d i s c u s s e d i n our r e c e n t m e e t i n g , we have agreed with your o f f i c i a l s the economic assumptions

i .

which^we s h o u l d use f o r tTTe*post 1980 y e a r s . The cash 1/ o u t l o o k over the remaining" years o the Wan w i l l be h e a v i l y T dependent on the base economic assumptions which are u s e d . I am copying t h i s l e t t e r t o S i r A r t h u r K n i g h t .

//

c;

* i . e . over E a s t e r weekend.

' *^^^)

CONFIDENTIAL

MEASURES WHICH MIGHT BE TAKEN IN RESPONSE TO PARTIAL COLLAPSE OF BL

I. 1.1 Background and assumptions

At the end o f 1979 B r i t i s h L e y l a n d

employed about 1 4 4 , 0 0 0 Scotland Swindon.

people of whom some 50% were l o c a t e d i n the West M i d l a n d s , 16% i n the North and Best estimates North West of England and and 14% i n Oxford and t o one ( L e y l a n d V e h i c l e s - LVL)

suggest a one

r e l a t i o n s h i p between BL as BL

employment and dependent employment g i v i n g a t o t a l of some 2 9 0 , 0 0 0 jobs at r i s k ; but the t o t a l c o u l d be g r e a t e r i f , has Some 45% - 50% of i s p o s s i b l e , the l o s s o f BL b u s i n e s s a disproportionate

e f f e c t on the v i a b i l i t y of s u p p l i e r s .

s u p p l i e r employment i s a l s o l o c a t e d i n the West M i d l a n d s . 1 .2

I t i s by no means c l e a r what w i l l happen to BL. saved and

Although

a t o t a l c o l l a p s e remains p o s s i b l e , i t i s perhaps more l i k e l y t h a t p a r t s of BL c o u l d be paper we Leyland and BL f o r the purposes of t h i s some a n c i l l a r y More than h a l f the have taken the o p t i m i s t i c assumption namely t h a t V e h i c l e s , Land Rover, Jaguar and

a c t i v i t i e s c o u l d remain to g i v e a t o t a l BL job l o s s of 7 9 , 0 0 0 an " a l l - u p " job l o s s area. t h i s paper only d e a l with the The r i p p l e s are bound to of first of some 1 6 0 , 0 0 0 . job l o s s e s would occur i n the West Midlands and 20% i n the

Oxford 1 .3

These assumptions and

stage e f f e c t s of a BL c o l l a p s e . ance of the market and, the e f f e c t on c o n f i d e n c e activities in particular. but seem l i k e l y to be

spread more w i d e l y both as a d i r e c t consequence of the d i s t u r b e q u a l l y i m p o r t a n t l y , as a r e s u l t i n i n d u s t r y g e n e r a l l y and engineering on

These e f f e c t s cannot be q u a n t i f i e d

such as to have a s i g n i f i c a n t impact

the e f f e c t i v e n e s s of Government i n d u s t r i a l p o l i c y as a whole.

- 1

(^^)
II. 2.1 or

CONFIDENTIAL
R e g i o n a l I m p l i c a t i o n s and a Regional Response
The assumptions

i n paragraph 1 . 2 above do not have

any

immediate e f f e c t on the North and North West r e g i o n s of England on S c o t l a n d , although subsequent r a t i o n a l i s a t i o n of an LVL could l e a d to j o b l o s s e s i n these r e g i o n s at The problems of South Wales would be and impact Even independent

a l a t e r stage.

exacerbated by BL job l o s s e s at L l a n e l l i and C a r d i f f s u p p l i e r redundancies but i t i s c l e a r that the main the most o p t i m i s t i c assumptions

would be on the West Midlands connurbation and O x f o r d .

about t h i s e f f e c t l e a d to the rapidly

c o n c l u s i o n that the l e v e l s of unemployment i n many West Midlands t r a v e l - t o - w o r k areas and i n the Oxford area would r i s e to more than double f i g u r e 2.2 The percentages.

t r a d i t i o n a l response to t h i s l e v e l of unemployment Were t h i s response at

has been t o g r a n t a s s i s t e d a r e a s t a t u s t o the r e g i o n concerned as was to way done r e c e n t l y i n the case of Corby. be adopted, the l e v e l s o f unemployment would suggest of quasi-automatic e l i g i b i l i t y

l e a s t Development Area s t a t u s with a l l t h a t t h a t i m p l i e s by f o r a l l q u a l i f y i n g manu f a c t u r i n g f i r m s f o r r e g i o n a l development g r a n t s at 1536, s e l e c t i v e f i n a n c i a l a s s i s t a n c e under S e c t i o n 7 of the I n d u s t r y Act and a Government F a c t o r y programme. 2.3 Such a response would be extremely c o s t l y ; i t i s however Regional required

the response which w i l l be most p r e s s e d f o r s i n c e i t o f f e r s the g r e a t e s t scope f o r p r o v i d i n g a s s i s t a n c e . 170 at Development Grant expenditure would be o f the o r d e r of 1 5 5 m i l l i o n a year^about 20 m i l l i o n a year would be peak (some 2 - 3 y e a r s a f t e r d e s i g n a t i o n ) f o r s e l e c t i v e I t would a l s o be necessary t o

f i n a n c i a l a s s i s t a n c e (SFA); and, about 25 m i l l i o n f o r a government f a c t o r y programme. c r e a t e a new of r e g i o n a l development g r a n t s ' o f f i c e w i t h a s t a f f staff

1 5 0 - 1 7 0 o r , more p r o b a b l y , t o expand the c a p a c i t y o f

e x i s t i n g RDGOs to the same extent w h i l e some 55 e x t r a

CONFIDENTIAL

would be r e q u i r e d i n t h e West Midlands (30) (5) regional o f f i c e s .

and South E a s t e r n

In a d d i t i o n 20 e x t r a s t a f f would be

r e q u i r e d at Headquarters whatever remedial a c t i o n was to be taken. 2.4 The areas concerned do however have c o n s i d e r a b l e g e o g r a p h i c a l a

advantages over the t r a d i t i o n a l a s s i s t e d areas; w e l l e s t a b l i s h e d i n d u s t r i a l i n f r a s t r u c t u r e s ; a wide range of l a b o u r s k i l l s ; proven h i s t o r y o f e n t r e p r e n e u r s h i p ; and, o u t s i d e the motor i n d u s t r y , a reasonable industrial relations record. In these c i r c u m s t a n c e s , although i t would be regarded c o n s i d e r e d as an a l t e r n a t i v e to DA s t a t u s . as a d e r i s o r y Area could be Costs would be much

response l o c a l l y , d e s i g n a t i o n as an Intermediate

lower (35-45 m i l l i o n p e r annum, at peak (SFA)iand 25 m i l l i o n f o r f a c t o r i e s ) and o n l y some 35 r e g i o n a l s t a f f would be needed (and the 20 at H e a d q u a r t e r s ) . for 2.5 the abandoned BL SFA c o u l d be used to a t t r a c t BL t a k e r s facilities.

A major i n c r e a s e i n the s i z e o f the A s s i s t e d A r e a s ,

e s p e c i a l l y of areas c l o s e to the South E a s t , would be bound t o reduce the e f f e c t i v e n e s s o f r e g i o n a l p o l i c y , i n v o l v i n g ai i t would an e x t e n s i o n o f the AA coverage to about 30% o f the working p o p u l a t i o n of Great B r i t a i n . of There would be a high probability the d i v e r s i o n o f investment from S c o t l a n d , Wales and the

North East and some l e s s harmful d i v e r s i o n from the South East and East A n g l i a ( i n c l u d i n g M i l t o n Keynes and, p o s s i b l y , dock land). The d i v e r s i o n a r y e f f e c t would be reduced s u b s t a n t i a l l y The r e g i o n a l response
results.

i f the areas were o n l y g i v e n IA s t a t u s . could n o t , of c o u r s e , be expected Ill 3-1

to achieve quick

I n d u s t r i a l Consequences and PJjjasible Responses Although t h i s paper does not c o n s i d e r the consequences o f o f payments, i t i s

the l o s s of BL's p r o d u c t i o n f o r the balance

r e l e v a n t to note t h a t the other major B r i t i s h based assemblers are u n l i k e l y t o be able to take up more than a s m a l l p r o p o r t i o n

* ( ^ ^ )

C.QNriDl'JTiAL

of

the l o s t BL market share from t h e i r UK

p r o d u c t i o n nor

are
I The

they l i k e l y to absorb much of the l a b o u r which BL r e l e a s e s or of the

c a p a c i t y which i s made a v a i l a b l e which i s shedding l a b o u r and secure than that of 3.2 BL.
the l o s s o f BL b u s i n e s s can be seen i n the s u p p l i e r i n d u s t r i e s . only other s i g n i f i c a n t assembler i n the West Midlands i s T a l b o t ,
i t s f u t u r e i s o n l y m a r g i n a l l y more

In these circumstances

as an a b s o l u t e l o s s of t h a t part which i t r e p r e s e n t s of the home market f o r the component supply and o t h e r s u p p o r t i n g industries. Taking account of in-house p r o d u c t i o n i n the m u l t i n a t i o n a l s and t h e i r p o l i c y o f dual s o u r c i n g , BL as a whole r e p r e s e n t s some 50% of the UK market f o r B r i t i s h component s u p p l i e r s and company's a c t i v i t i e s which paragraph 1 . 2 | lost. 3.3 GKN,
the be g r e a t e s t p r o p o r t i o n of t h i s i s r e l a t e d to those elements of the above i m p l i e s w i l l

Although major f i r m s i n the supply i n d u s t r y such as L u c a s , Associated Engineering and Automotive Products could be diversified individual circumstances

expected to s u r v i v e t h i s blow as a r e s u l t of t h e i r a c t i v i t i e s and overseas o p e r a t i o n s would be put i n v o l v e m e n t , many of t h e i r at t o t a l r i s k and i n such

they would be l i k e l y to respond by c l o s i n g down a number of t h e i r B r i t i s h o p e r a t i o n s and meeting the g r e a t l y reduced demand i n t h i s c o u n t r y from t h e i r C o n t i n e n t a l and o t h e r B r i t i s h S t e e l would be not seek to c o n s i d e r these facilities. s e r i o u s l y a f f e c t e d (but t h i s paper does e f f e c t s ) and a number of i n d u s t r i e s overseas industrial

a l r e a d y f a c i n g d i f f i c u l t i e s as a r e s u l t of f i e r c e f a s t e n i n g s and 3.4 The bearings.

c o m p e t i t i o n might be d i s p r o p o r t i o n a t e l y d a m a g e d eg,

o v e r a l l e f f e c t would be to undermine the UK motor i t would be necessary to c o n s i d e r

v e h i c l e component i n d u s t r y and be regarded

whether steps ought to be taken to support a c t i v i t i e s which c o u l d as e s s e n t i a l i n the l o n g term i n t e r e s t s of the economy. P a r t s of Lucas would come i n t o t h i s category and perhaps i n

I
*\ CONFIDENTIAL

p a r t i c u l a r the company's e f f o r t s to move i n t o the f i e l d of m i c r o - e l e c t r o n i c c a r management. To the extent that a high p r o p o r t i o n of the component i n d u s t r y i s l o c a t e d i n the West M i d l a n d s , a r e g i o n a l s o l u t i o n of the s o r t o u t l i n e d i n S e c t i o n 2 above would p r o v i d e scope f o r some a s s i s t a n c e but both w i t h i n and outwith these areas c o n s i d e r a t i o n c o u l d be g i v e n to the use of S e c t i o n 8 of the I n d u s t r y Act with some r e l a x a t i o n of the p r e s e n t c r i t e r i a t o p r o v i d e f l e x i b i l i t y . Midlands 20 m i l l i o n would be needed over a 4-5 I f the West some c o n n u r b a t i o n and Oxford were d e s i g n a t e d as DAs

y e a r p e r i o d ; i f they

become I A S t h i s f i g u r e i s l i k e l y to r i s e to 35 m i l l i o n , a n d of the o r d e r of 5 0 m i l l i o n i s l i k e l y to be r e q u i r e d i f they are not g i v e n AA development. IV. 4.1 Short Term Measures
A wide range of f i r m s i n the component supply and a s s o c i a t e d M and status. Some e x t r a expenditure i s a l s o product and process l i k e l y to a r i s e i n support of new

i n d u s t r i e s would be f a c e d with a p e r i o d of re-assessment r e - a p p r a i s a l , many, p a r t i c u l a r l y s m a l l e r s u b - c o n t r a c t i n g companies which are s u b s t a n t i a l l y dependent on BL's

volume trading;

c a r p r o d u c t i o n , would have no a l t e r n a t i v e but to cease

others would need time e i t h e r to a d j u s t t h e i r manning l e v e l s

and f a c i l i t i e s to a lower l e v e l of business or to seek a l t e r
native business. At the s m a l l e r end of the s c a l e the latter
would be i n the m i n o r i t y . In these circumstances t o be made.
limited

s h o r t term f i n a n c i a l support would p r o v i d e the b r e a t h i n g space f o r adjustments 4.2

A number of p o s s i b i l i t i e s e x i s t ; guarantees

l e n d i n g might be one

avenue but t h i s c a r r i e s with i t open-ended

commitments and s u b s t a n t i a l a d m i n i s t r a t i v e d i f f i c u l t y both i n i d e n t i f y i n g d e s e r v i n g cases and i n m o n i t o r i n g performance. S p e c i a l schemes c o u l d be c o n s i d e r e d under S e c t i o n 8 of the

essential

of bank

fj

(Jl)

C O N F I D E N T I A L

Industry A c t f o r p a r t i c u l a r s e c t o r s o f i n d u s t r y but the wide d i v e r s i t y o f s u p p l i e r s would make i t d i f f i c u l t t o i d e n t i f y a p p r o p r i a t e groups and to a d m i n i s t e r such schemes and they would not o f f e r quick h e l p . On b a l a n c e , i t seems best t o r e l y on the Department o f Employment's temporary short time working compensation scheme which appears to be i d e a l l y s u i t e d to a s i t u a t i o n i n which many companies would he f a c e d with a c h o i c e between immediate redundancies and a p e r i o d o f re-adjustment. A r e l i a n c e on t h i s scheme (which p r o v i d e s a s s i s t a n c e f o r a maximum o f 6 months) with some s t r e a m l i n i n g of a d m i n i s t r a t i v e procedures but without any changes i n i t s b a s i c guidelines On the b a s i s would not c a l l f o r any new l e g i s l a t i v e measures and a l l t h a t would be needed would be t o draw a t t e n t i o n to i t . of the o r d e r o f 50 m i l l i o n . the assumptions i n paragraph 1 .2 above, c o s t s might be i n Department o f Employment c o u l d This position other

p r o b a b l y cope with t h e i n c r e a s e d volume o f b u s i n e s s p r o v i d e d Department o f I n d u s t r y gave s p e c i a l i s t s u p p o r t . c o u l d change however i f the i n e v i t a b l e i n c r e a s e s i n unemployment p l a c e d an undue s t r a i n on Department o f Employment's services. 4-. 3 Most f i r m s w i t h a p r o s p e c t o f s u r v i v a l w i l l o f course r e l y

h e a v i l y on t h e i r banks to c a r r y them through the d i f f i c u l t p e r i o d a f t e r a BL c o l l a p s e . to In these c i r c u m s t a n c e s i t would seem d e s i r a b l e f o r the Government, through the Bank o f England, ask the C l e a r i n g Banks t o respond s y m p a t h e t i c a l l y w i t h i n the The banks would almost c e r t a i n l y seek i n difficulties l i m i t s of commercial prudence to t h e s h o r t term f i n a n c i n g needs of BL s u p p l i e r s . the r e t u r n an i n d i c a t i o n t h a t , t o the extent t h a t they d i d help o u t , Government would be sympathetic t o any r e s u l t a n t constraints. a r i s i n g under monetary p o l i c y

- 6

 ^ ^ ^ j

CONFIDENTIAL

V. 5-1

P r o t e c t i v e Measures
The l o s s of BL's volume c a r p r o d u c t i o n and the likelihood

that other UK

assemblers would be unable to make up f o r t h i s

w i l l undoubtedly i n c r e a s e p r e s s u r e
exerted
certain
Such p r e s s u r e i s l i k e l y to be

to any a p p r e c i a b l e extent f o r import c o n t r o l s .

b o t h by the c u r r e n t advocates of p r o t e c t i o n i s m and by elementsof the component i n d u s t r y . to see what such a course circumstances, Rome or the GATT.

I t i s d i f f i c u l t , however,
under the T r e a t y of
I

of a c t i o n would achieve i n these

even i f i t were p e r m i s s a b l e

The m u l t i n a t i o n a l assemblers c o u l d not respond

p r o d u c t i o n and would be most
to break from w e l l e s t a b l i s h e d p a t t e r n s
Although the Japanese might be

q u i c k l y by i n c r e a s i n g t h e i r UK u n l i k e l y to be prepared o f European i n t e g r a t i o n .

encouraged by such measures,to contemplate investment i n t h i s

country i n order to p r o t e c t t h e i r market share, such a response
would have no s h o r t term e f f e c t at a l l . In short the import
BL
c o n t r o l s argument seems r e l e v a n t o n l y i n the context of

s t a y i n g i n b u s i n e s s , p o s s i b l y as a means o f keeping up i t s
market share; i n the absence o f BL i t i s d i f f i c u l t to p e r c e i v e
any v a l u e a t a l l i n going down such a r o u t e .
VI. 6.1 Summary and The Conclusions

e f f e c t o f a p a r t i a l c o l l a p s e of BL from which L e y l a n d

V e h i c l e s , Jaguar and Land Rover s u r v i v e d with some l i m i t e d

s u p p o r t i n g a c t i v i t i e s would be to put a t o t a l of some 160,000
jobs at r i s k of which the l a r g e s t p r o p o r t i o n would be i n the
West Midlands and at O x f o r d . I t would represent an absolute
l o s s of a s u b s t a n t i a l p r o p o r t i o n of the home market f o r B r i t i s h
component s u p p l i e r s many of whom at the s m a l l e r end o f the s c a l e
would i n e v i t a b l y go out of b u s i n e s s while o t h e r s , i n c l u d i n g some
of our l a r g e s t companies, would be p l a c e d i n s e r i o u s d i f f i c u l t y
i n r e s p e c t of some of t h e i r d i s c r e t e a c t i v i t i e s . of the gap i n UK c a r a v a i l a b i l i t y and Other c a r
assemblers c o u l d not be expected to f i l l more than a small p a r t
substantial further
imports would t h e r e f o r e a r i s e .

- 7-

CONFIDENTTAL

6.2 We have been unable to identify any measures which would

be likely to make much impact on the resulting industrial and
regional consequences; but some contribution could be made
under support schemes and policies which already exist. It
is suggested that consideration could be given to:
a) A traditional regional response whereby assisted area status would be accorded to the West Midlands connurbation and Oxford. Likely levels of unemployment I suggest Development Area status which would however be extremely expensive and would certainly detract even further from the limited attractions of the peripheral areas of the UK for which the policy i s mainly designed; Alternatively and having regard to the geographical and other advantages of the areas a preferable approach would be to give Intermediate Area status. This would substantially reduce the diversionary effects and the potential costs; More flexible use of Section 8 of the Industry Act. To enable support to be given to key component suppliers capable of making a significant contribution to the economy whose activities would be put at risk by the loss of BL business and to seek to attract new capital intensive industry to the affected areas; Positive use of the short-time working compensation
scheme within the established criteria hut adopting
more streamlined administrative procedures to prevent
delays coupled with pressure on the clearing banks
to adopt a sympathetic attitude to the demands of
firms affected by the loss of BL business.

b)

I I

c)

d)

CONFIDENTIAL

The

r e g i o n a l response would r e q u i r e EEC

c l e a r a n c e as would any

significant

changes i n the g u i d e l i n e s f o r the a d m i n i s t r a t i o n of A d d i t i o n a l support c o u l d of EIB funds limit

S e c t i o n s 7 and 8 of the I n d u s t r y A c t .

a l s o be sought from the Community; g r e a t e r use would however r e q u i r e an i n c r e a s e i n the

200 m i l l i o n
A DA

set f o r 1980-81.
6.3 20 Cost estimates can o n l y be approximate. solution would c o s t about

135-190

m i l l i o n i n a peak f u l l year p l u s m i l l i o n f o r a Government IA s t a t u s would reduce years.

m i l l i o n under S e c t i o n 8 and 25

f a c t o r y programme each over 4-5 the peak annual spend to remaining at 2 5 m i l l i o n . S e c t i o n 8 f i g u r e to some 35 l i k e l y to cost about 50 of Employment expenditure these o p t i o n s . estimate

35-45

m i l l i o n but would i n c r e a s e the

m i l l i o n with the f a c t o r y programme R e l i a n c e on S e c t i o n 8 alone would be years. The Department of

m i l l i o n over 4-5 of c 50

m i l l i o n would a l l a r i s e from c u r r e n t

w i t h i n a y e a r of the c l o s u r e o f BL f a c i l i t i e s under any None of these sums could be met or PESC p r o v i s i o n s .

6.4

A p a r t from the r e g i o n a l s t a f f i n g i m p l i c a t i o n s o p t i o n and 35

(185-200
DOI to be not

e x t r a s t a f f f o r the DA Headquarters.

f o r an IA s o l u t i o n ) t h e r e extra s t a f f i n the

would a l s o be a requirement f o r about 20

Even the lower f i g u r e s would be d i f f i c u l t New t r a i n e d s t a f f c o u l d not

accommodate w i t h i n reduced manpower e s t i m a t e s and f i g u r e s c e r t a i n l y could not.

higher

p r o v i d e d q u i c k l y and i n the s h o r t and medium term a c o n s i d e r a b l e e x t r a burden would be imposed on e x i s t i n g s t a f f which c o u l d be s u s t a i n e d f o r l o n g . 6.5 As i n d i c a t e d i n paragraph 1-3, t h i s paper has o n l y sought

to c o n s i d e r the f i r s t l i n e e f f e c t s of a p a r t i a l BL c o l l a p s e and has not attempted to examine the wider i m p l i c a t i o n s f o r the

- 9

( a W f e l r i
significant

CONFIDENTIAL

economy as a whole or f o r i n d u s t r i a l p o l i c y .

T h i s i s c l e a r l y an

area o f great u n c e r t a i n t y but there cannot be any doubt t h a t

an i n d u s t r i a l d i s a s t e r of t h i s magnitude would have a
and damaging e f f e c t f a r beyond the company i t s e l f

I
DEPARTMENT OF INDUSTRY
31 March 1980

10

SECRET : COMMERCIAL-IN-CONFI PENCE

10 DOWNING STREET

From the Private Secretary

MR. WRIGHT
The Prime M i n i s t e r was g r a t e f u l f o r S i r Robert Armstrong's
minute (A01832) Wednesday.
She has commented on paragraph 2 o f the minute t h a t partial

f 28 March about B r i t i s h L e y l a n d , and she would

l i k e t o d i s c u s s i t a t the meeting which has been a r r a n g e d f o r

d i s p o s a l s are s u r e l y a matter f o r the s h a r e h o l d e r s - b e a r i n g i n

mind t h a t they would be l i k e l y t o a f f e c t the v a l u e o f the s h a r e s
and the l i a b i l i t i e s o f the s h a r e h o l d e r s . The p o s i t i o n might be
d i f f e r e n t i n her view i f B r i t i s h L e y l a n d were s e l f - s u p p o r t i n g .
I am sending c o p i e s o f t h i s minute t o M a r t i n H a l l Ian of Ellison Employment). (HM T r e a s u r y ) ,

(Department o f I n d u s t r y ) and R i c h a r d Dykes (Department

T, P. U A N K E S T E R

31 March 1980
SECRET : COMMERCIAL IN CONFIDENCE ~ \ ^ ^

"

) ^ P R I M E MINISTER BRITISH LEYLAND

2 8

March lS?-0

\ .

S^C^-tE^I

I enclose a paper i n p r e p a r a t i o n f o r your meeting on BL next week. I I f you t h i n k i t i s h e l p f u l , we c o u l d circulate I i t t o the people a t t e n d i n g that meeting.

JOHN HOSKYNS

^ _ I

mm
^

Setter
B R I T I S H LEYLAND
some o f t h e p o i n t s r a i s e d April. f o l l o w s - up f o r y o u r m e e t i n g on 2

_ ^

28 M a r c h

1980

PRIME MINISTER

at S i r and Robert
some
suggests

T h i s note

Armstrong's meeting yesterday, which I attended, l i n e s o f t h o u g h t

1.

WHAT. ARE

THE

P O S S I B L E OUTCOMES FOR

BL?

1.1 of

There i s a c o n f l i c t BL's h a n d , and

as r e g a r d s o b j e c t i v e s the o t h e r .

and
t h e r e s p e c t i v e v i e w s
one

p r o s p e c t s , b e t w e e n M i c h a e l E d w a r d e s and
h i s B o a r d , on t h e G o v e r n m e n t on

1 . 2 1.2.1

The

Government

View
certain t h a t BL w i l l n o t
r e c o v e r t o a p o i n t
The fear is

t h a t , i f we
time

C o l l e a g u e s seem f a i r l y w h e r e i t c e a s e s that the next t o be crunch

a c o n t i n u i n g worry t o Government. p o i n t c a n n o t be v e r y f a r away and

t a k e no a c t i o n , t h e P l a n w i l l and money l e f t

be w i t h d r a w n when t h e r e i s l i t t l e do.

t o d e c i d e what t o

1 .3 1.3.1

Edwardes' View Understandably, prosper. admitted, attained ' Edwardes s t i l l we maintains t h a t BL c a n recover and

Although

h a v e assumed t h a t t h e BL B o a r d w o u l d o f 18 M a r c h , t h a t t h e P l a n w i l l t h e B o a r d has away f r o m not for "drift" the Plan not

withdraw
i n ff.ct
be t o happen

t h e P l a n a s s o o n as i I I * in full

i t a p p e a r e d u n a t t a i n a b l e , E d w a r d e s has y e a r , but

in his letter this S i n c e any

proposed i t s is likely non-executive

withdrawal.

b i t by b i t , i t i s i n p r a c t i c e v e r y d i f f i c u l t Edwardes' assurance that they s h o u l d

d i r e c t o r s t o choose a p a r t i c u l a r p o i n t at which t o s t o p a c c e p t i n g
continue.

1 .^^2

The

Edwardes view b o i l s down to t h i s :

"Government must not

start

l o o k i n g f o r buyers because that would leak i n the c l o s e d motor industry world. recovery selling collapse. T h i s would p r e c i p i t a t e c o l l a p s e and undermine t h e T h e r e f o r e , Government cannot do a n y t h i n g i s withdrawn - i e BL i s approaching I b e l i e v e t h a t BL w i l l r e c o v e r , so to s e l l BL as a whole, i f i s that Edwardes i s risk His o b j e c t i v e s f o r h i m s e l f , at the The difficulty about programme. But

BL u n t i l - the P l a n

i n any c a s e ,

Government w i l l have a b e t t e r o p p o r t u n i t y i t wants t o , i n a year or two." r e a c h i n g f o r a b e t t e r outcome f o r BL and are not wholly a l i g n e d with o u r s and

of h e a v i e r p e n a l t i e s , f o r Government, i f he f a i l s . is also different.

h i s view of the l i k e l y outcome

1
1.3.3 Edwardes b e l i e v e s that e x t e n s i v e c o l l a b o r a t i o n may BL's future. We have some doubts about t h i s , as f o r a l a r g e company to c o n t r o l i t s own collaborators. But be the key to
it is difficult
f u t u r e i f i t i s simply
1 am not sure how for

a c t i n g as the p e r i p h e r a l agent of a number of l a r g e autonomous

t h i s needs f u r t h e r thought. l a r g e a part i t plays in h i s recovery s t r a t e g y . r e f e r e n c e s to c o l l a b o r a t i o n t a l k i n g to p o t e n t i a l buyers.)
(His p u b l i c

do, however, p r o v i d e a good cover

1.3.4

We

cannot say

t h a t judgment about the

1 i k e l y outcome, or about foots

the
the

p o i n t at which t h e P l a n should be withdrawn, " i s a matter f o r the

BL B o a r d , not Government". bill and h i r e d to run i t .
Government i s the owner and cannot l e a v e that judgment e n t i r e l y to the people i t has

2. 2.1 1

HOW

DO

WE

VALUE THE

OUTCOMES?

Recognising different what we

t h a t Edwardes' assessment o f the d i f f e r e n t outcomes i s

have to look at each outcome to be clear

from o u r s , we

are g o i n g f o r .

2.2

There are f o u r p o s s i b l e outcomes:

( 1 ) (2)

Sale o l BL,

complete. failure

O r d e r l y break-up and d i s p o s a l (perhaps f o l l o w i n g t o do ( 1 ) above ) . D i s o r d e r l y break-up and the P l a n ) .

BL recovers.

(3)

d i s p o s a l ( f o l l o w i n g withdrawal of

(4)

2.3

Which i s t h e best outcome? outcome? We

And which i s the worst i t was

acceptable and so

to

doubt whether outcome (4) - BL r e c o v e r y

- i s in fact

the best p o s s i b l e outcome, u n l e s s firmly-based b e i n g f u l l y comparable w i t h be s a l e of BL This i s l i k e l y t i m e , money and acceptable as a whole.

so s p e c t a c u l a r

that BL moved, i n the space of a c o u p l e of y e a r s , We

i t s major i n t e r n a t i o n a l c o m p e t i t o r s .
t h i n k the best outcome would
avoided at a l l
a "fire The sale".
worst
with
by The worst outcome, to be

T h i s seems i n c o n c e i v a b l e to us.

c o s t s , would be a d i s o r d e r l y break-up, f o l l o w e d market c o n f i d e n c e

f o l l o w i n g b e l a t e d withdrawal of the P l a n , r a p i d l y running out.

outcome would be o r d e r l y break-up and

d i s p o s a l , with

time and money i n hand.

3. 3 .1

CHOICE OF STRATEGY
Our r e a l concern i s t o m i n i m i s e the downside. sale. We t h e r e f o r e want

a s t r a t e g y which m i n i m i s e s the chance of outcome (3) - d i s o r d e r l y break-up and

3.2 ^

At p r e s e n t , we

have only

two

options.

We

can

e i t h e r take no a c t i o n
ground
simply we

BL,
be dangerous) and

( a p a r t from the p o s s i b l e use

of an expert to prepare the could

i n t e r n a l l y , which i s not e s s e n t i a l and can d e c i d e now

wait f o r BL t o turn-around or f o r the P l a n t o be withdrawn; or to l o o k a c t i v e l y f o r a buyer f o r the whole o f f o r c e us It may h e l p to d i s p l a y these two r e c o g n i s i n g t h a t t h i s c o u l d l e a k and break-up and against disposal. the d i f f e r e n t

towards an e a r l y
strategies

outcomes, as f o l l o w s :

^^^OUTCOMES Q T T ) j T r r T r q ^ \ STRA1LGILS ^--^ ^-^^

B L

(1) .. entire
s o l d

(2 ) O r d e r l y J break . 1 up and s a l e

(3 )
disorder ly
v
break-up and
,
sale Probable

A.

No Imraedi ate Act ion

Unlikely

Unlikely

B.

T r y t o S e l l BL Now

Possible.

Likely

Possible

Strategy B gives (3)

t h e h i g h e s t chance o f (1) and the lowest chance of

I have l e f t outcome ( 4 ) - BL r e c o v e r s - o f f t h i s

chart.

3.3

S t r a t e g y A - no immed i a t e act ion - i m p l i e s

the f o l l o w i n g :

It e f f e c t i v e l y r u l e s out the chance o f a s a l e o f BL as a

whole (though t h i s would be p o s s i b l e i f our view proves
wrong, and BL does get b e t t e r , i n s t e a d of w o r s e ) .
It i n c r e a s e s t h e chance t h a t e v e n t u a l s a l e w i l l be a f i r e
s a l e , f o l l o w i n g t h e w i t h d r a w a l of t h e P l a n .
By d e l a y i n g , i t makes i t l i k e l y t h a t t h e r e w i l l be fewer
p o s s i b l e buyers who have not a l r e a d y made o t h e r p l a n s .
It does not p r e v e n t BL's t u r n i n g steam i f i t c a n .
around under i t s own

3.4 Strategy B implies the following:

It e f f e c t i v e l y r u l e s out t h e chance o f BL r e c o v e r i n g
under i t s own steam, under Government ownership.
It i n c r e a s e s t h e chances of an o r d e r l y break-up and
d i s p o s a l r a t h e r than a f i r e s a l e .
It o f f e r s t h e best chance o f s e l l i n g BL as a whole.

3. ^ ^

Which s h o u l d we choose? if

The answer i s that you choose s t r a t e g y A

you're an o p t i m i s t , a b o u t BL, s t r a t e g y B i f you're a p e s s i m i s t .

4.

QUESTIONS WE

NEED TO

ASK

4.1

We

need t o ask a number of q u e s t i o n s b e f o r e we For example:

can d e c i d e which

route to take. (1)

Is i t n e c e s s a r y , or even p o s s i b l e , t o attempt t o s e l l BL
secretly? Have t h e r e been many - or any - cases of l a r g e
companies changing hands without anybody knowing? Are we
c l e a r i n our minds about what a " c o l l a p s e o f c o n f i d e n c e "
r e a l l y means i f such p l a n s leaked?
What Is the e v i d e n c e f o r the view t h a t the Board would
r e s i g n i f we d e c i d e d t o s e l l the company b e f o r e the P l a n
had been withdrawn? They must presumably be on the b r i n k
of withdrawing i t themselves.
What would the union r e a c t i o n be t o the s a l e o f BL, when
ever and i n whatever form i t happens? Would we be a b l e
t o e x p l a i n that our o b j e c t i v e i n s e l l i n g BL i s to a v o i d
c l o s u r e and h i g h unemployment, not t o p r e c i p i t a t e i t ?
If we take no a c t i o n now ( s t r a t e g y A) and the P l a n was l a t e r withdrawn, c o u l d we f ind o u r s e l v e s having to prop up BL w i t h Government money w h i l e we look f o r b u y e r s , and thus appear t o be d o i n g the v e r y U-turn we s a i d we would not do? Is Edwardes' i d e a of m u l t i p l e c o l l a b o r a t i o n l i k e l y succeed? Are we u n d e r e s t i m a t i n g the p o s s i b i l i t i e s to
there?

(2)

(3)

(4)

(5) (6)

Could BL i n s u r e i t s e l f a g a i n s t the r i s k o f a d e a l e r network

collapse during sale negotiat i o n s ? Could i t make the
1
d e a l e r s an o f f e r they c o u l d n t r e f u s e to keep the network
i n b e i n g over t h a t p e r i o d ?

5.

HOW

TO PROCEED

5.1 Whatever the c o n c l u s i o n s o f the 2 A p r i l m e e t i n g , i t would be h e l p f u l f o r c o l l e a g u e s to d i s c u s s t h i s whole problem with Edwardes and Sir a l s o w i t h someone l i k e S i r Henry Benson (as
I agree with S i r Robert's
t o do p r e p a r a t o r y work f o r a s a l e i s
Robert Armstrong has s u g g e s t e d ) . very

Michael

view that h i r i n g an expert not the r i g h t next s t e p .

5.^5

Such a d i s c u s s i o n would i t s e l f be p a r t of the p r o c e s s of coming t o a c o n c l u s i o n about whether we want t o s t a r t s e r i o u s l y l o o k i n g for a buyer now or whether we want to wait u n t i l the Plan i s preference i s f o r the former, then the sooner such Benson t a k e p l a c e the b e t t e r ; withdrawn. if If our

t h o s e discussion's w i t h Edwardes and i t i s f o r the l a t t e r , there d i s c u s s ions would c e r t a i n l y be

i s l e s s u r g e n c y , but helpful.

6.

CONCLUSION

6.1

I do not t h i n k t h a t t h e r e sell on BL o u t r i g h t and hand; and the one

i s a middle c o u r s e between d e c i d i n g

to

s e t t i n g t h a t p r o c e s s i n motion simply I f we still

immediately,

w a i t i n g u n t i l BL e i t h e r succeeds or
b e l i e v e t h a t BL i s q u i t e l i k e l y
I f we do n o t , then i t
i n advance
i s therefore
you ,
of proving

f a i l s , on t h e o t h e r . w i l l soon be too l a t e .

t o s u c c e e d , then i t i s too e a r l y to a c t . There i s no way which view i s r i g h t , and strong. Geoffrey As and Jim

the t e m p t a t i o n to do yet K e i t h ? ) f a i l and

nothing are

I u n d e r s t a n d i t from the meetings we (but perhaps not

have had,

virtually
anxious

c o n v i n c e d that BL w i l l i n the end

are t h e r e f o r e

to act e a r l y to p r e v e n t the worst outcome.

( W i
JOHN HOSKYNS

SECRET Ref. A0I832

COMMERCIAL

- IN CONFIDENCE , < ^ < U~<X r, </o V .

PRIME MINISTER

IVo -

*^ "

A t y o u r m e e t i n g o n 24th M a r c h 1980 I w a s a s k e d to c o n s i d e r h o w t h e G o v e r n m e n t m i g h t p r o v i d e i t s e l f with expert a s s i s t a n c e o n the question of d i s p o s i n g o f s o m e o r all o f B L ' s a s s e t s . Sir Mr. 2. Douglas Wass, M r . Hoskyns, I h a v e done this i n c o n s u l t a t i o n Carey) with

'^j-j

a n d ( i n the a b s e n c e of S i r P e t e r

B u l l o c k o f the D e p a r t m e n t o f I n d u s t r y . T h e B o a r d of B L . - o f w h i c h the n o n - e x e c u t i v e directors in particular Government's

are acutely conscious interest

of t h e i r d u t i e s as t h e g u a r d i a n s o f the

- i s i t s e l f u n d e r t a k i n g c o n t i n g e n c y p l a n n i n g with m e r c h a n t banking a d v i c e - e. g . o f t h e t r u c k d i v i s i o n , o r the L a n d R o v e r are concerned, t h a t i s a m a t t e r on w h i c h the

on p o s s i b l e p a r t i a l d i s p o s a l s "7 J-vJ-*-*^ ^ d i v i s i o n .
L

Where partial disposals

\ ^ ^ ^ ' - / j ^ J v e r n m e n t as the o w n e r o f the c o m p a n y h a s to l o o k to the e x i s t i n g m a n a g e m e n t ^" ^

J 0>

if**

a n t

* u n t i l i t l o s e s c o n f i d e n c e i n the m a n a g e m e n t a n d c h a n g e s i t . c l o s e l y i n v o l v e d i n this

Officials contingency

c J _ i ^ ^ ^ L ' o f the D e p a r t m e n t of I n d u s t r y a r e , h o w e v e r , *A "

p l a n n i n g , k n o w l e d g e o f w h i c h i s f o r o b v i o u s r e a s o n s b e i n g c o n f i n e d to a s m a l l of senior people i n B U

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\jur^
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T h e s a l e o f t h e w h o l e c o m p a n y w o u l d b e a m a t t e r f o r the s h a r e h b l d e r
the G o v e r n m e n t ) r a t h e r t h a n t h e m a n a g e n i e n t , a n d t h e m a n a g e m e n t

f^Jt^

c o n c e r n e d o n l y w h e n the G o v e r n m e n t h a d d e c i d e d t o s e l l ( e i t h e r f o l l o w i n g o r i n a d v a n c e o f a d e c i s i o n b y the B o a r d o f B L to w i t h d r a w the p l a n ) a n d n e e d e d management's a s s i s t a n c e i n the v a l u a t i o n of the v a r i o u s a s s e t s . The the

management

c o u l d n o t b e e x p e c t e d to p r o v i d e t h i s a s s i s t a n c e w h i l e i t w a s s t i l l c o m m i t t e d to t h e P l a n and had the G o v e r n m e n t ' s b a c k i n g for i t . w e r e i n i t i a t e d to p o s s i b l e p u r c h a s e r s , Sir and If, i n a d v a n c e o f t h i s , approaches

t h i s w o u l d ( i n the v i e w b o t h o f

M i c h a e l E d w a r d e s a n d o f the D e p a r t m e n t o f I n d u s t r y ) a l m o s t i n e v i t a b l y l o o k be t a k e n to m e a n that h o p e h a d b e e n a b a n d o n e d , a n d w o u l d be l i k e l y to In a n y c a s e the G o v e r n m e n t who m i g h t w e l l this was

p r e c i p i t a t e a c r i s i s a n d t h e w i t h d r a w a l of the P l a n .

c o u l d not m a k e s u c h a p p r o a c h e s b e h i n d the b a c k o f the B L B o a r d , take the v i e w that,

i f the G o v e r n m e n t w a n t e d s u c h a p p r o a c h e s m a d e ,

-1S E C R E T C O M M E R C I A L - IN C O N F I D E N C E

MMHHHlllMlilllllllMililllH

SECRET

C O M M E R C I A L - IN

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t a n t a m o u n t to a v o t e of n o c o n f i d e n c e i n t h e m . Sir

Nevertheless

(as

we k n o w ) of one

M i c h a e l E d w a r d e s i s i n p r i v a t e c o n t a c t w i t h the r e p r e s e n t a t i v e

p o t e n t i a l p u r c h a s e r who i s a l s o i n c o n t a c t w i t h the D e p a r t m e n t o f I n d u s t r y . If t h e r e w e r e a n y o t h e r a p p r o a c h e s , 4. t h e s e c o u l d be h a n d l e d s i m i l a r l y . advance

T h e G o v e r n m e n t w o u l d a l m o s t c e r t a i n l y get a c o u p l e o f w e e k s '

n o t i c e o f a d e c i s i o n b y t h e B o a r d o f B L to w i t h d r a w t h e p l a n .

In t h a t s i t u a t i o n process

t h e B o a r d w o u l d be w i l l i n g to m a n a g e o n b e h a l f o f the G o v e r n m e n t the of d e a l i n g w i t h the C o m p a n y ' s a s s e t s ;

c o n t i n u i t y o f d i r e c t i o n w o u l d be i m p o r t a n t The BL.

i n o r d e r to a c h i e v e a s f a r a s p o s s i b l e o r d e r l y d i s p o s a l a n d r u n d o w n . B o a r d w o u l d w a n t to s t r e n g t h e n t h e i r t o p m a n a g e m e n t t e a m by the

appointment

of o n e o r m o r e e x p e r t s i n d e a l i n g w i t h t h i s s o r t of o p e r a t i o n .

The Government and the

m i g h t n e e d to e m p l o y i t s o w n i n d e p e n d e n t a d v i c e i n that s i t u a t i o n ,

D e p a r t m e n t o f I n d u s t r y h a s c o n t i n g e n c y p l a n s f o r r e t a i n i n g the s e r v i c e s of a m e r c h a n t b a n k f o r t h i s p u r p o s e ( a d i f f e r e n t m e r c h a n t b a n k f r o m t h a t w h i c h the B o a r d of B L i s a l r e a d y 5. using). on B L i n c l u d e s a p a r t n e r

T h e D e p a r t m e n t of I n d u s t r y ' s t e a m o f o f f i c i a l s

f r o m T o u c h e R o s s on s e c o n d m e n t

to t h e I n d u s t r i a l D e v e l o p m e n t U n i t w h o c a n may

at s h o r t n o t i c e d i v e r t a s m u c h t i m e a n d e f f o r t o n to the p r o b l e m s of B L a s be 6. necessary.

T h e B o a r d i s s t i l l p r e s s i n g o n w i t h the p l a n a p p r o v e d b y M i n i s t e r s l a s t since they b e l i e v e t h a t t h e y c a n s t j l l s t a y w i t h i n the a g r e e d funding

December, limits.

It i s f o r t h e m to d e c i d e w h e t h e r a n d w h e n to w i t h d r a w i t .

It i s o f

course possible

that the B o a r d ' s n a t u r a l r e l u c t a n c e to a b a n d o n the p l a n m a y w i t h o u t c o m i n g to a p o s i t i v e d e c i s i o n , w e l l b e y o n d the p o i n t

l e a d t h e m to d r i f t ,

w h e r e t h e r e i s a n y h o p e of the p l a n b e i n g v i a b l e . the n o n - e x e c u t i v e For

T h a t i s a d a n g e r of w h i c h both conscious.

d i r e c t o r s a n d t h e D e p a r t m e n t of I n d u s t r y a r e a c u t e l y

t h e G o v e r n m e n t , t h e d i l e m m a i s a c h o i c e b e t w e e n two e v i l s :

the d a n g e r o f

the B o a r d d r i f t i n g a n d a t i d e b e i n g m i s s e d ; collapse which it is

a n d the d a n g e r o f p r e c i p i t a t i n g a For

s t i l l the p r i m a r y h o p e a n d o b j e c t i v e o f p o l i c y to a v o i d .

the r e a s o n s

g i v e n i n p a r a g r a p h 3, we t h i n k that the G o v e r n m e n t s h o u l d n o t f o r a s a l e of the c o m p a n y i n a d v a n c e of a d e c i s i o n b y the

initiate negotiations

-2SECRET C O M M E R C I A L - IN CONFIDENCE

SECRET

C O M M E R C I A L - IN

CONFIDENCE

B o a r d to w i t h d r a w the p l a n ,

u n l e s s the G o v e r n m e n t h a s c o n c l u d e d that the W e j u d g e that the B u t that v i e w c o u l d

drift

h a s r e a c h e d a p o i n t w h e r e the p l a n c a n n o t s u c c e e d . G o v e r n m e n t h a s n o t y e t r e a c h e d that c o n c l u s i o n .

change,

i f the G o v e r n m e n t t h o u g h t t h a t o p p o r t u n i t i e s to s e l l B L a s a g o i n g c o n c e r n w e r e a v a i l a b l e but c o u l d d i m i n i s h w i t h the p a s s a g e o f 7. time. or worth while to

W e h a v e c o n s i d e r e d w h e t h e r i t w o u l d be p o s s i b l e

e n g a g e a h i g h - l e v e l p r o f e s s i o n a l a d v i s e r - an a c c o u n t a n t o r a m e r c h a n t b a n k e r i n a d v a n c e o f a d e c i s i o n to i n i t i a t e a s a l e . T h e p u r p o s e o f t h i s w o u l d be to p u t shorten The

the G o v e r n m e n t i n a p o s i t i o n to b r i n g a s a l e to a s p e e d y c o n c l u s i o n a n d the i n e v i t a b l e p e r i o d o f u n c e r t a i n t y w h i c h t h e n e g o t i a t i o n s following considerations ( a ) are relevant: would create.

W h i l e the G o v e r n m e n t , a s o w n e r ,

w o u l d n e e d f o r the p u r p o s e s o f a s a l e

m o r e i n f o r m a t i o n r e l e v a n t to the v a l u a t i o n o f the a s s e t s t h a n i t h a s now, units this c o u l d o n l y be c o l l e c t e d within B L . by d e t a i l e d d i s c u s s i o n w i t h o p e r a t i n g now would have a In a n y

T o initiate such discussions

disastrous

e f f e c t w i t h i n the c o m p a n y a n d p r e c i p i t a t e a c r i s i s .

c a s e , i f a n d w h e n i t c a m e to t h e p o i n t o f a s a l e ,

that i n f o r m a t i o n w o u l d seller,

be r e q u i r e d by the p r o s p e c t i v e p u r c h a s e r a s w e l l a s b y t h e and the p r o c e s s of n e g o t i a t i o n

would i n e v i t a b l y take s o m e w e e k s .

T h e r e i s l i t t l e o r n o t h i n g a n a d v i s e r c o u l d d o w i t h i t n o w , i f h e got i t . (b) W e c a n see no w a y i n w h i c h t h e i n f o r m a t i o n c o u l d be o b t a i n e d f r o m the

c o m p a n y w i t h o u t the n a t u r e a n d p u r p o s e o f the i n q u i r y b e c o m i n g k n o w n , o r at l e a s t evident, guessed, to t h e c o m p a n y ; a n d the m o m e n t that w a s k n o w n o r

i t w o u l d at o n c e be a s s u m e d t h a t t h e G o v e r n m e n t h a d t a k e n i n a d v a n c e of the Board's

a s e c r e t d e c i s i o n to s e l l t h e c o m p a n y , d e c i s i o n to w i t h d r a w the p l a n .

W e do n o t b e l i e v e

that i t w o u l d be director,

p r a c t i c a b l e to a p p o i n t the p e r s o n c o n c e r n e d a s a n o n - e x e c u t i v e a k i n d of T r o j a n h o r s e : the c o v e r w o u l d n o t s t a n d u p ,

b e c a u s e he w o u l d director

be a s k i n g f o r i n f o r m a t i o n f o r w h i c h an o r d i n a r y n o n - e x e c u t i v e w o u l d n o t n e e d to a s k .

-3SECRET C O M M E R C I A L - IN C O N F I D E N C E

SECRET

C O M M E R C I A L - IN

CONFIDENCE

8.

W e c o n c l u d e that the G o v e r n m e n t s h o u l d not e n g a g e a f u l l - t i m e h i g h - l e v e l to i n i t i a t e a s a l e o r a definite

professional adviser in advance of a decision

a p p r o a c h f r o m a p o t e n t i a l p u r c h a s e r - a c o n t i n g e n c y w h i c h we f e a r w o u l d be r e m o t e u n l e s s a n d u n t i l t h e c o m p a n y w a s s e e n to h a v e and 9. t h e r e f o r e l i k e l y to be a v a i l a b l e cheaply. r e a c h e d the end o f the road,

W e n e v e r t h e l e s s s h a r e t h e v i e w o f M i n i s t e r s t h a t we a r e d e a l i n g w i t h which, b o t h by t h e i r n a t u r e a n d b y the s h e e r s i z e o f In that situation

p r o b l e m s and p o s s i b i l i t i e s

their potential consequences,

a r e u n f a m i l i a r to G o v e r n m e n t .

M i n i s t e r s m i g h t w e l l f e e l that i t w o u l d be h e l p f u l to r e i n f o r c e the

assessments

a v a i l a b l e to t h e m f r o m w i t h i n G o v e r n m e n t a n d the j u d g m e n t s t h e y m a y h a v e to make, by d i s c u s s i n g t h e m w i t h s o m e b o d y who h a s the r i g h t c o m b i n a t i o n of i n d e a l i n g with i n d u s t r i a l p r o b l e m s

q u a l i t i e s of w i s e j u d g m e n t and l o n g e x p e r i e n c e of t h i s l a n d .

If t h i s i d e a c o m m e n d s i t s e l f to M i n i s t e r s , we s u g g e s t t h a t a - say, Sir Henry Benson, who we

p o s s i b l e c o u r s e m i g h t b e to i n v i t e s o m e b o d y

t h i n k m i g h t b e t h e b e s t m a n f o r t h e p u r p o s e - to c o m e a n d s e e t h e C h a n c e l l o r o f the E x c h e q u e r a n d the S e c r e t a r y o f S t a t e f o r I n d u s t r y - a n d y o u , i f y o u w a n t to b e i n v o l v e d at t h i s f i r s t s t a g e ; t h e y c o u l d e x p l a i n i n o u t l i n e the p r o b l e m M i n i s t e r s w h i c h they w e r e l o o k i n g ; he c o u l d then be

f a c e d and the a d v i c e and h e l p for

b r i e f e d b y o f f i c i a l s o f the D e p a r t m e n t o f I n d u s t r y ; to c o m e to a m e e t i n g

a n d h e c o u l d t h e n be i n v i t e d the Secretary

with a s l i g h t l y l a r g e r g r o u p of M i n i s t e r s - y o u ,

C h a n c e l l o r o f the E x c h e q u e r , of S t a t e f o r E m p l o y m e n t .

the S e c r e t a r y o f S t a t e f o r I n d u s t r y a n d t h e

A m o n g s t other things,

y o u w o u l d be a b l e to t e a t w i t h

s u c h a m a n o u r j u d g m e n t t h a t the t i m e h a s n o t y e t c o m e to e n g a g e a f u l l - t i m e professional 10. adviser.

W e t h i n k t h a t S i r M i c h a e l E d w a r d e s w o u l d n e e d to be t o l d what M i n i s t e r s

w e r e p r o p o s i n g to d o a n d to b e g i v e n a n o p p o r t u n i t y o f l e t t i n g M i n i s t e r s k n o w his 11. and reactions. I a m s e n d i n g c o p i e s o f t h i s m i n u t e to the C h a n c e l l o r of thc E x c h e q u e r ,

to the S e c r e t a r i e s of State f o r I n d u s t r y a n d E m p l o y m e n t .

(R o b ^ - ^ r r n st r ong)

28th M a r c h . 1980
C O M M E R C I A L - IN C O N F I D E N C E

SECRET

I
I
British

fM

2 f March

1980

Leyland

T h i s i s t o c o n f i r m that t h e r e i s t o be a f u r t h e r meeting t o d i s c u s s B r i t i s h L e y l a n d on Wednesday, 2 A p r i l at 1545 hre at No.10. I am sanding c o p i e s o f t h i s l e t t e r t o M a r t i n H a l l (HM T r e a s u r y ) , R i c h a r d Dykes (Department o f Employment), Gerry Spence, (CPHS) and David Wright (Cabinet O f f i c e ) as w e l l as John Hoskyns.

C Stephens

(f

I K C E l l i s o n , Esq
Department o f I n d u s t r y

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j The Rt Hon S i r G e o f f r e y Howe QC MP C h a n c e l l o r o f the Exchequer HM Treasury /' 'treasury Chambers / Parliament S t r e e t el\v U - i London SW1 T

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U r a p p r o v a l o f the BL p l a n envisaged the c o n v e r s i o n o f 15031 loan t o e q u i t y , the i n j e c t i o n of. J50m o f new e q u i t y and a " f u r t h e r "line o f c r e d i t o f 150ni d u r i n g the f i n a n c i a l y e a r 1980/1. When I announced t h i s l a s t December I made i t c l e a r t h a t the new NEB Board which was only appointed towards the end o f November had not been able t o take p a r t i n the c o n s i d e r a t i o n o f the p l a n though o f f i c i a l s o f the NEB had been i n v o l v e d . a d v i s e d t h a t t h i s means the HEB w i l l r e q u i r e a I am d i r e c t i o n from me t o proceed with the f u n d i n g ! announced s i n c e they cannot l e g a l l y take r e s p o n s i b i l i t y " f o r a d e c i s i o n i n which they took no p a r t . I am t h e r e f o r e i s s u i n g the necessary d i r e c t i o n so t h a t the f u n d i n g can take p l a c e : t h e l o a n c o n v e r s i o n on g1 March, the f i r s t 150m o f e q u i t y on 1 A p r i l , and drawings irom the l i n e o f c r e d i t as they become necessary.

While t h i s i s l a r g e l y a t e c h n i c a l i t y I thought c o l l e a g u e s ought t o know what i s happening s i n c e the i s s u i n g o f a d i r e c t i o n may g i v e r i s e t o s p e c u l a t i o n about the l o n g term r e l a t i o n s h i p between NEE and 3L oh which we have y e t t o take a d e c i s i o n we do n o t E a v e power t o change the r e l a t i o n s h i p u n t i l the passage o f the c u r r e n t I n d u s t r y B i l l (end May/early \ J u n e ) . We do not need t o p u b l i s h the d i r e c t i o n u n t i l 23 days a f t e r i t i s i s s u e d and I propose t o take advantage o f t h i s . ' During t h a t p e r i o d I expect t o put p r o p o s a l s t o c o l l e a g u e s about the l o n g term r e l a t i o n s h i p o f NEB and BL on which we might then make an announcement at the time the d i r e c t i o n i s published.

/In v ...
RESTRICTED

RESTRICTED

In the meantime the i s s u e of the d i r e c t i o n does not pre-empt a d e c i s i o n on the l o n g e r terra r e l a t i o n s h i p s i n c e the requirement f o r the d i r e c t i o n s i m p l y r e l a t e s to the happenings of l a s t November/December. However I would be m i s l e a d i n g c o l l e a g u e s i f I d i d not say t h a t I am l i k e l y t o be recommending [| the severance of t h i s r e l a t i o n s h i p between NEB. and BL i n the
h- paper which I S h a l l be p u t t i n g round s h o r t l y a f t e r I have
completed my c o n s u l t a t i o n s w i t h the NEB and w i t h BL
0
I am c o p y i n g t h i s l e t t e r to the Prime M i n i s t e r , other
Members of E, S e c r e t a r i e s of S t a t e f o r S c o t l a n d and Wales ; and S i r Robert A r m s t r o n g .

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J^^^^^H
^Fj J ^mt^YM T I l A .I 1 ft^^. M M

BL Limited 3 5 - 3 8 Portman Square, London W 1 H OHQ. England, Telephone 01 -486 6 0 0 0 . Telex 2 6 3 6 5 4 . Cables: Leymolois London W 1 Telex.

P^kj~^^^l
JJl^H^^flH

K
From The Managing Director, Cars, B L

'13

25th

March

1980

- *

TO

ALL

HOURLY-GRADED

EMPLOYEES

IN

BL

CARS

>

1979/1980

NEGOTIATIONS

ON

PAY

AND

PRODUCTIVITY

The T r a d e U n i o n s i d e o f t h e JNC has rejected the Company's

pay o f f e r and proposals for raising productivity. They
have t a k e n the d e c i s i o n to c a l l s t r i k e a c t i o n w h e n we get
back to normal w o r k i n g from the p r e s e n t p o s i t i o n of layoffs
short-time working.
and At t h i s c r i t i c a l stage of a c t i o n w o u l d be suicidal, our and r e c o v e r y programme such would put jobs at risk.


lion

This i s the situation. The Trade Unions have not accepted our offer. We c a n n o t a f f o r d t o pay more. BL lost 122 m i l i n 1979. The Company d o e s not h a v e t h e money to pay out
wage i n c r e a s e s we have not e a r n e d - and nobody i s g o i n g to g i v e us money f o r pay r i s e s h i g h e r t h a n we have offered.
o n l y way t o e a r n more i s by changing working practices The o p e r a t i n g the incentive scheme.
and

We need the changes i n w o r k i n g p r a c t i c e s to r a i s e our

e f f i c i e n c y to c o m p e t i t i v e l e v e l s . W i t h o u t them t h e r e can
be no further i n v e s t m e n t i n new m o d e l s and new f a c i l i t i e s .
We are not a s k i n g f o r a n y t h i n g r e v o l u t i o n a r y . The working
p r a c t i c e s we want a l r e a d y o p e r a t e i n o t h e r more successful
p a r t s of BL. T h e y a r e common p r a c t i c e among o u r competitors.

What i s w r o n g w i t h r e a s o n a b l e m o b i l i t y and flexibility? Why

d o we n e e d t o h o l d on t o o u t - d a t e d r e s t r i c t i v e practices?
Why c a n ' t BL C a r s ' e m p l o y e e s make t h e i r c o n t r i b u t i o n to
e f f i c i e n c y w i t h o u t b e i n g h e l d b a c k by u n r e a s o n a b l e powers of
veto? Why c a n ' t we o p e r a t e an i n c e n t i v e scheme i n e a c h plant
b a s e d on f a c t u a l measures of e f f i c i e n c y , measures which can
be checked constantly by u n i o n r e p r e s e n t a t i v e s for accuracy?

&. MiBBSil..*. a Fio,, lmMK&o.

Housed in E n g j a r u l Ho

1 21 3 1 J 3 .

l
agreement

T h r o u g h o u t t h e n e g o t i a t i o n s t h e C o m p a n y h a s s t a t e d i t s c a s e p l a i n l y and h o n e s t l y . I t h a s o f f e r e d c l a u s e s i n t h e A g r e e - ment t o p r e v e n t u n r e a s o n a b l e a p p l i c a t i o n and t o p r o v i d e full o p p o r t u n i t y f o r e m p l o y e e s a n d t h e i r r e p r e s e n t a t i v e s t o b e involved i n a l l aspects of productivity development. W h a t i t has not been p r e p a r e d t o a g r e e i s t h a t e s s e n t i a l c h a n g e c a n b e v e t o e d .

*
*

not t o of the

invoke t h e P l a n t A u d i t c l a u s e s e x c e p t by management and U n i o n s i n a p l a n t ;

s u b j e c t t o t h e Agreement b e i n g a c c e p t e d , t o pay bonus

e a r n e d i n t h e p e r i o d 1 s t M a r c h 1979 onwards, even though t h e r e was no a g r e e d i n c e n t i v e s c h e m e o p e r a t i n g a t t h a t
time. with these f u r t h e r concessions, t o an a g r e e m e n t ,
we h a v e not been able to

T h e c o n t i n u i n g i n c o n c l u s i v e n e g o t i a t i o n s - a n d i n p a r t i c u l a r t h e t h r e a t o f a f u t u r e s t r i k e w h e n we s t a r t t o r e c o v e r - a r e h a v i n g a d i s a s t r o u s e f f e c t on m a r k e t s h a r e , d e s p i t e i n t e n s i v e
e f f o r t s b y BL C a r s a n d t h e D e a l e r s t o i n c r e a s e s a l e s . We c a n n o t a f f o r d more d e l a y . In a f i n a l e f f o r t to s e c u r e T r a d e U n i o n s u p p o r t , m e e t i n g s w e r e h e l d on 1 4 t h and 1 7 t h M a r c h t o which General S e c r e t a r i e s / N a t i o n a l O f f i c e r s of a l l Trade Unions representing hourly-graded employees were i n v i t e d . Regrettably, a t t h o s e m e e t i n g s we w e r e n o t a b l e t o come t o a n a g r e e m e n t . d e s p i t e t h e Company's e f f o r t s t o overcome any o u t s t a n d i n g U n i o n r e s e r v a t i o n s and even though f u r t h e r improvements t o t h e p a c k a g e were o f f e r e d . Since the Trade Union concessions to t r y to * b a l l o t , we h a v e m a d e a n u m b e r o f s i g n i f i c a n t reach agreement. We h a v e o f f e r e d : -

Even come

I n a l l o f t h e s e c i r c u m s t a n c e s , and a f t e r v e r y careful
c o n s i d e r a t i o n , t h e Company h a s d e c i d e d t o go a h e a d w i t h
implementing i t s proposals. Due n o t i c e o f t h i s d e c i s i o n has been g i v e n to the Trade U n i o n s ,

to reduce the t h r e s h o l d f o r bonus e a r n i n g s , g i v i n g more p e o p l e t h e o p p o r t u n i t y t o e a r n b o n u s m o r e q u i c k l y (14

p l a n t s h a v e a l r e a d y e a r n e d some b o n u s s i n c e N o v e m b e r under t h i s arrangement); t o s e t up a J o i n t W o r k i n g P a r t y on p r o d u c t i v i t y a n d i n c e n t i v e s t o s t u d y c o m p e t i t i v e p r a c t i c e and come up w i t h j o i n t recommendations f o r n e g o t i a t i o n s as p a r t of t h e N o v e m b e r 1980 A g r e e m e n t ; to limit the proposals on skilled trades flexibility;

O n 8 t h o r 9 t h A p r i l 1980 (depending upon P l a n t h o l i d a y timing)

y o u r e x i s t i n g t e r m s and c o n d i t i o n s o f employment w i l l be v a r i e d
by i n c o r p o r a t i n g t h e t e r m s and c o n d i t i o n s s e t o u t i n t h e
a t t a c h e d document i n s u b s t i t u t i o n f o r those o f your e x i s t i n g
t e r m s and c o n d i t i o n s w h i c h a r e i n c o n s i s t e n t w i t h t h e m . A l l
y o u r o t h e r terms and c o n d i t i o n s a r e not a f f e c t e d by t h i s c h a n g e ,
By c l o c k i n g i n f o r w o r k a t any t i m e o n o r a f t e r 8 t h A p r i l 1980
terms and
y o u w i l l a u t o m a t i c a l l y b e a c c e p t i n g t h e s e new conditions,
We b e l i e v e t h a t m o s t e m p l o y e e s a p p r e c i a t e t h e u r g e n t n e e d f o r
t h e Company t o become more e f f i c i e n t and w i l l e n d e a v o u r t o
Without f u l l c o - o p e r a t i o n the task of implementation
co-operate. w i l l be m o r e d i f f i c u l t . I t must t h e r e f o r e be c l e a r l y u n d e r s t o o d
t h a t a n y e m p l o y e e who t a k e s p a r t i n any f o r m o f d i s r u p t i v e a c t i o n
t o p r e v e n t i m p l e m e n t a t i o n o f t h e terms and c o n d i t i o n s a p p l i e d
w i l l be s u b j e c t t o d i s c i p l i n a r y action.
The Company r e g r e t s h a v i n g t o a c t w i t h o u t t h e a g r e e m e n t o f t h e
T r a d e U n i o n s b u t has no a l t e r n a t i v e i n a l l o f t h e circumstances. T h e c o n s e q u e n c e s o f no a c t i o n w o u l d be f a r m o r e s e v e r e and w o u l d l e a d t o t h e l o s s o f many h u n d r e d s o f t h o u s a n d s o f j o b s b o t h i n
BL C a r s and t h r o u g h o u t t h e U n i t e d Kingdom.

* *

to l i m i t the w o r k i n g , a n d to remove

e x t e n s i o n o f 3 - s h i f t and t o i n c r e a s e the payments about frequent

double d a y s h i f t f o r such working;

* *

concern

re-measurement; of

not t o use c i n e photography f o r purposes s t a n d a r d s a n d m a n n i n g l e v e l s ;

setting

to conclude j o i n t l y with the Trade Unions a d e f i n i t i v e l i s t of occupations (in a d d i t i o n to those proposed)

e l i g i b l e for dress-up/clean-up allowances;

We h o p e t h a t a l l o f o u r e m p l o y e e s w i l l u n d e r s t a n d t h e C o m p a n y ' s
p o s i t i o n , a c c e p t the d e c i s i o n , and c o - o p e r a t e fully. Only i n
t h a t way d o we h a v e a c h a n c e o f s u r v i v i n g a n d o f d e v e l o p i n g as
an e f f i c i e n t and h e a l t h y company. And t h a t c a n o n l y be good f o r
a l l o f u s who work f o r BL Cars,
^ -yi

RAY

HORROCKS

-*=^~^

imiiiiiiiMi^nmmHHHHHHUiiiiilH

FINAL DRAFT OF PROPOSED AGREEMENT ON BARGAINING, PAY, EMPLOYEE BENEFITS & PRODUCTIVITY
Covering Hourly Rated Employees in BL Cars
Rates o f Pay. The full details of the pay structures are given in section 6. But this table shows the grade rates.
% nAvouiFT DAY-bHin

lita^B

BL Cars

M A R C H 1980

I I I I

NIGHT-SHIFT Including shift premium

payments

GRADE 1 2 3 4 5

HOURLY RATE 2.45 2.245 2.20 2.02125 1.8375

40 Hours Grade Rate 98.00 89.80 88.00 80.85 73.50

Including Maximum Bonus 113.00 104.80 103.00 95.85 88.50

40 Hours Grade Rate 122.33 114.13 112.33 101.41 91.00

Including Maximum Bonus 137.33 129.13 127.33 116.41 106.00

Rates for other shift patterns, and pay structures for other categories of Employee, are
included in Appendix C.

1 2 3 4 5

S E C T O IN

6 7 8

RATES OF PAY DEFINITIONS INTRODUCTION OBJECTIVES PRODUCTIVITY Working Practices Industrial Engineering Techniques Incentive Pa v merit Scheme PAY AND B E N E F I T S COMPREHENSIVENESS ADMINISTRATION

P A G E I IA P P E N D X I
1 2 2 2 2 A B C D E
F

3 3 3

The Plants Agreed Benchmark List5-Grade Structure Rales nf Pay Standard Additional Payments, together with the
Principles applying lo their Application Crafl Apprentice Conditions of Employment Productivity and Incentive Payment Scheme ' Application of Industrial Engineering Standard Shift Arrangements and Multipliers Temporary Transfers, Trainees and Rehabilitation

P A G E
3 4 4
4 5 5 9 9 9
l

.,, 2.1 The Company means B L Cars :T',vr ,i H I , I H

2.2 JAC niton, he B L tars H b

yl^^*.' ^rC/W IIIMMK'IIITIICKIM Um . r, r

c . , h l i , h i u , n t of D n r i l v r a l e s employees where deemed to be Ihe most eesnd their representatives to b(inntified f I m - i n of a comefficient methodl of new or existing facili- prior to commencement of a study, to be m n n b v a i J D l i e d five g r a d e ties Where appropriate the job evalu- kept fully informed and involved in that structure alioo principles based on' the Benchmark process. Both Parlies recognise the i within list attached as Appendix B will applv. importance of fairness i n the establishh I , I T . i .nd-ird -irrnnm.mcnls ment of effort rating, and accordingly it i, which .ale-la ... I in *l The w eed sandar.l " l - " ' " ^ accepted tha, all work standard, should ^ n m '",, ' ,,i"V.m, hreflectnormal working condition, and the

>-f*V**

r e S P

C C

,,. , . . . (e) Apply allowance policies control of all categories of inventorymeans any form of collective action turn at plain level, may be referred by across BL Cars, as defined by the Opportunity will be given for the Trade which restricU and/or prevents either Party, through its channels, to the Industrial Engineering Policies and Unions to contribute their views. normal working. JNC for resolution. Procedures Manual -------------------------------- Sick Pay Fund: For t he period end- 8.2 Certain provisions o f this Agree (f) Ensure that no work methods ing 31 October 1980 the per capita ment, in particular the rates of pay in .p.c.lied infringe the requirements to be used fo, calculating Appendix C, are subject , annual review ofthe "Health Si Safely al Work Act" plant fund, will be 14.66 per on lNovembere.chyear.jointdiscu.sions

o m cm o n

LM?HBl!TOlMl RMKHMNft^HISH BfiMNilttMUIlH

^ ^ ^ ^ ^ ^ ^ ^ ^ ^ G E N E R A L PRINCIPLES

Sf&^SSZ.'SZSZ**. S ^ S S ^ f t S S & S Sf ^a ^S -i &S;

signatory trades u,os listed m S e C o n 1 of this Agreement. 2-t Tli.-fio.Kineans.ll those location. listed in Appendix A. 2.5 Unless stated otherwise Employees means hourly paid employees of the Company, including hoorlv paid youth establish f constancy in work standards; ,v,nn incentive scheme ,n all plant,

" ' .."",,,,1 .1,1, - - - t . n o r

I It

outlined

in Appendix J apply

with

,m experienced employee. , ^ , , , , , v,,,,,,..,,,', ,ht ofacceas at all timer, to

M 2 rlL

lg) Provide mutually agreed facilities for tra.n.ng a spec.LIed nomberf.hp (Mr;.,.,
y

quarter. . , Pre-Retirement II,, ' an,,., u , , , r

on which should begin at the August me.tCourses: To ,ng of the ,,NC each year The provision, nun, negotiations on me review nave been concluded.

, , Employe 1 co.:,,,.,*. ing to the shia patterns established. No

2 S S l t S * S S i .
.; V ..

...

/ h e Company and the Unions have a Jo,nl interest in making the Company '" T
U 1 1

^<^^X^.TS?t
ruin, ILIM to

* t i S ^ ^ T ^ l K

SLt J^.
Mv

oliunied.a

SSJKX t S ^ S t S S 5
. < , . , m y direct and indirect , . , . , , J I T V . * . , '"'Develop and implement estimated

' ' p l "be"stud ed and

1 ' s shop 7*7?"

through which improvements in i,,,dced oll.er than those included ,n productivitj will result in bonus ,|,e appropriate Appendices. In the case of payments to Employees; three shil . - , h i , o-l double-day shift (vi) continuous working; working, if the Trade Unions object to the

S a r d l o f t h e i n t e n iontec. rv out ,,' ' , ' , " ' : , wolk and the nornosTof IhS si, Hv w f f t.4

'l2!S&&%JS&

'eve'olte.nuneraleai . security id " " M l y recognised e . , he ir last .,, , mploym. I Uhile Ibal theCompany'sability to pay for such attend mg an authorised p e-re rernetit MJ.\j J J , ^ I ) improvement., depends upon its overall course, he em, 1,,, , , , , gmder.teof I ^ T h e C ^ a T

V&Z?J^^2i "'"^" ^Z^"mL

^i^^ mj^r^jiM^iMU ""414*41*1

1 INTRODUCTION

o er. ,orfra,ee,a1,d.ppren, s.nd

P S

, , , i , fu,, cooperation from Employees in

introduction of these shiftpattern, where

Pl,Z\f^ ^

I
1

&1&VS&'S . . . r T ^ f T *

S t ' t t d e r

^ S ^ ^ - T S S * T S S S
W o r U M
1

s i f s s r s s s

m o

r t ^ ' ^ T k l n f meThoSr- a s r i ' i S i t K

CmiMm

,
x e e p t

are included ,n this Agreement. justifying col,no,ng investment ,n exhausted and due notice given before modes/components. models facilities and equipment introduction lb) Develop temporary work standards 2.6 Apprentices means all those vouths serving an indentured craft apprenticewhich ' iniprov,- " product ivuv and ijj The m iintenance of a hieh oualilv of to cover those operations which, for a ship comDetitiveness 1 I in. n i n limited period, do not conform to the 2.7 i"07s means all those vouths being r. 7 -. .u . ,- r . u a a a , a i, , , | , 1 , . most economical planned method. I trained on the Company's Youth Furthermore it.s the .ntentionof the Accord ngly. ... ag'reed ihat all hnipliiy-i Investigate thc sequence and niellu^i I t Operator Trainee programme. a q ^ rev,-e. irri'Smenl" fir , of performing operations, and s u h - 2.8 He IHi. also mean, she/her. a. " " ' ' ' ' ",CnSfi V inInu, em-, I , , .1 1 or 1 >' standard,* appropriate possible which will secure authoritative nance and imp, ovi n, ,.l | U . lily lor bawd on the most economical and
U

n^!jT%'l ^Tj r '

:

7)

, I

M 4 The Company and the Un.ons accept lhal the techniques to be used to establish work standards are based on thoae recommended bv the Institute of Management Services, or the M T M Associntion, or the British Standard, Institute The most common techniques used are, a. follow,:- T i m e s t u d y .including pcrformnnce rating).

d Employee, ecunty. provided always - S p . c , a l W o r k i n , Condition, thai its financial posit ion so allows P a y m e n t s , there are certain special E h H is expressly sUted 6.3 The Parlies to this Agreement intermittent job requirement,, not otherwise, the provisions of this Agree, understand and accept that a major attached to a degree of skill or job grade, ment apply lo all hourly graded employ impact upon financial performance is which it is agreed should whenrequired by e e s who fall within the scope of the
made bv continuity of production the Company be recognised by an addi a , i a l entities known as BI.
6.4 The Union, for their part will do 0 ~ l Payment o, guarantee In c o . Cars Ltd. and BL Technology Ltd. All everything within their power to achieve quence. Appendix D l i s t , the agreed employees will be based at o r ,,,nt nuo.is production bv mean- of reducstandard arrangements in of tho.e ^ , a l e d with one of the following
w e r e o r g n i s

rlrren,

o-oek , .onrlnrd, mean. th.

" " B f ' " ' ^ "d 'epre.entat.on arrmgeP

example, theintroduct on ol II..2I. and in

g

prac, i.al methods,

M m

tL^X&Z^mZTj* ^J5tt^'325l Z5S!TXZ. , T , r 1^\Tr*, , \. .J S S ^ ^ ^ . ^ Z M ulioZfXTnlL'clr

"thePlant a" .n VPOIM of time industrial action. 2.10 Standard /lour, produced mean. Ihe value in standard hours of the total prod the Plant during a bonus Period 2.11 Bo,,c dour, the hours that make up the normid working w e e k , i.e. without overtime. ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^
I

S%**jSi V^SSTjTi < i p l . l . r k B ' " ' * * ""'""""f,\f ' ' assignment, locnsure the most elTec KZStoZ'Z'^ZlKZZ t.ve balance a, planned v o l u m c s . B
SlsTl, Iddil !,, l u ' i ,1 ',",! "Ill
U S

h^SS^^^ST^Mul

r e . p e c t

specified occasional payment, which w

esignaled

plants; which

in general

"'

"""I"*

d e r i

''

< "

. P r e d e t e r m i n e d motion time action' and other in future apply. The principle, of qualih^ ^ . t a ^ k . systems (including MTM). .,., ,| , . . , , , dlcal ion The ComM W " contained in Appendix D outline dories This list is not an exhaustive site . Analytical estimaling. tbeonlycircum.lance, in which payment, , number of location, will Activity sampling/rnted a c t i v h i e v e effective continuity of production, additional to the grade rates will apply. frequently fall within the one designa

^&TS5^'i^U,

co-oner in- iul'lv will, measure, and promethods and techniques in t h i s M rardure, which I he ' ',m , , - , , ! | , i . , t s to Agreement, improve and mainlai.. 11,e ip.alnv of (e) Review, audit and revise work s t a n - 51 I I is agreed thai (ho level or oroducvices i'provides to customers, d.rds and work a.s.gnments where , t W ^' , ' ^ ' S l 5.6 Full co-operation will be given to the possible to ,mprove them or where K , , ,| i it r I, ,bli ,|,ii -in ,nd ,.i| it-ni ,,,, ,,, changes h.ve occurred ... operating ,ad m t T i h i , l ,, J d "%%f conditions, e.g. to method,, facilil ies, and new facilities, plant, and equipment ^ ^ m ^ ^ ^ ^ m l ^ , ,,,, " oeacnievea uy. efficient methods of using available main materials, etc, (N.B. This clause 13 " "',"> ujnancercources including with training intended to provide the mean. o f S ' rnmrm'-"ind " where appropriate, .he identification of keeping standards up-to-date with nvcrlan area, between i.ade, which developing circumstances: 111, he """'ion that job. should be c . 3.1 This Agreement defines, for the onderatanding and observance of all t this ,\gr...ent of . W l h e trades involved: this is not intended to frequent remeasuremeni.) concerned, the principle, of bargaining " H * ? " ""'") " ** to undermine the essential skill, of anv i f Investigate and. if necessary, revise. f 'I|t"it icti ' trade. In .uch circum.iancelm<.,tic diwork .tondard, and work a g n . determination of pay. cond.t.ons o , "j l ' " K? rus .ion, will lake place and. where any ment, where an error , onnss.on haa employment, and measures to improve t V e e r
productivity wh.ch w.U apply from 1 I Z ^ J a,, ' 7 ' individual Trade Union considers lhat it, been made. , - , an , craftinterestsareaffectedbytheproposed tg'Measure the capacity/capability o f 3.2 1 he Agreement is in full and hnal uons h w ni, 11 art 11 1 jiisiiiicci e the right to raise the or refurbished plant and equip.etllemen! of a I outstanding claim,, Il > 1" n . i - '" " I" , | t e r at a specially convened Extended ment during its c o m m i s a i o n i n ^ i d Wt supersedes all o her agreements, custom, " ' ^ " 1 Plant Conference. ' it any time during it, p r o d u c t i l B S ^ B th, r , o n . r a m i , u p o n effecby the Parties that the " > " " " and pracl.ces re almg to the subject, contamed w.ih.n it. except those resulting m , op, ruling. reduction of overtime working i , a n maintain its designed production from relevant agreement between the t h e maintenance of efficient ' ' " priori^" both w Ih r S A to capability S e t Union, anuTl e t n e i n e e H K " m c i e n c y "fopetition of ""Ach'eve max.mum utiliaaUon of ^dZion t h r o u g h Ihe osl-,1,1 s'hnicnt of ' he business, and ,0 increasing ihe bonus plant nd equipmentFZL, Employers Federation. I n d u s t r i a I E n g i n oe r i n g earning poteniial of Emplovces. The (,l Operate relief procedures. I H t i t l l l O T W l ^ k H i a t H k M Techniou.t ""k""-" "' Unions underlake lo ensure lhal no where applicable, lo cover all or Ihe i m n l e m . n i , , ( f restrictive practices will b e applied lo part of relaxation allowance.. I - t 5 overlime, e.g. "one in. all in." guarantees 'i.'Where necessary, u s e relief ' i i i . E , s h L e ^ cover ,0 .tantially upon its productive efficiency, l e v e l , of productivity. eflacient b .s,.. T h i . would not preclude at, "dance I and thi., in turn, depend, significantly the efficient operation of dome.tic.lly f. X t i o n nroblem, and I upon the facility with which necessary g'eed overtime roU.. '''Wen ,1 pnduciion piohl " I change can be introduced in a harmonious "UiXIkJLWu P K A L l l L j E i S 5.8 Full co^perstion will be given to 5 W f ^ ""plemeo e.l.ad manner. The general principle, on work- 5-2 It is agreed that there will be full ensure the maintenance of work records, co.uige. in 1 n. iniu e .i 0 1 , v o ing practices outlined in this Agreement cooperation in the movement of labour including the regular booking of work. and maintaining the efficient uae 01 ate vitally necessary to the survival of the to ensure the efficient continuity of 6.9 Employees will contioue to record all resources. business. They are abo of considerable production I n consequence, any their attendance by means of clocking or 5.13 The Company accepts its responsihdKnnpioyee may be called upon to work in other appropriate procedures a s estab- 't.v to:importance to the achievemeot of bonus part of I,,, employ ,ng plant to lished in each plant Employee, will co, a, Ensure lhat as work standards are and I h u . l b . prosperity of employee,. T h . ' > out any grade or category of work operate with lo improve the es.ah , . | d 1 e v . ,11 based on appbcstion of the.e principle, will, where requited, be discussed at the appropriate wuhin the limits of his abilities and efficient utilisation o f the M l working i n r W m ^ T J J i i i lr* 1 3 I S ^ E m p l o y e e . w,l, co operate full
1 v

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WORKING PR ACTIfF*?

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improve continuously Ihe efficiency ' ' " > " "'"ne, ,-..arv ,-, etc. h T I J K CMqwv < < > > IW IHinnSTBUI . win. 1 , will enable I he ComINDUSTRIAL security of il. Employee,; "" lii.a comprehensive agreement on pay. tr.n.le, employee, heiween jobs ENGINEERING condition, and productivity based '<"\iTJ,^^Z^'"T'"^ TECHNIQUES 1 upon:, T l It u c
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on the British Standards Instilutc scale of rating. lc) Ensure that relaxation allowance. cove-nog ,.r. ,,d N !', iguc recovery and working cond lion, are inco,p,atedinthovvo,k..,.adardsor

, , _ PARITY BLNLP I I S A M ) , 6.5 T h - Partie .. this Agreemenl CONDITIONS OF 2 Afford & Alder undertake lo uphold the principles now E M P L O Y M E N T FOR 3 Beans Engineering established for oq.,,1 able t ,v dclerminaC R A F T APPRFNTICFS ' Beans Foundries accepted that "parity of pay" is L K A T 1 A r rttJtlN 1 5flordeslevGreen ,|e|-.,i , , h , . , . grade rale of pay for 6.11 Craft Apprentices will, additionally, Butec Electrics ,|. ..,,,,. given a consistent h.ve applied to them thc agreed common 7 Canlev Assembly and Engine, & standard of performance, conditions of employment included in Transmissions Plants U i, agreed that parity of pay can be Appendix E 8 Castle Bromwich Body established only when linked to a grade pjjjjjjjjjjjjjjjjjjaBiai^H a Common Lane structure which is based upon and mainl'i Coventry Engines ^ " d V ,o,md mutuaMy agreed job " Cowley Lsembly
.valuation principles. Five grade struc12 Cowley Bod)
, based upon the agreed B L Cars 7.1 Th.s con.prehens.ve Agreement on 13 Drews Lane Benchmark structure, included as Appenpay and conditions replaces and supcrse14 Dunstable Tool 4 Die dix B, have now been established in each de, all those provisions of previous 15 Jaguar Plants (including King-field O f - H I T 1U F plant. In the.e circumstances, the Com- agreement, (and the customs and pracRoad) I p , . , , f , h comprehensive Agreelice, relating ,0 ihemi the subject mal16 K D Operations, Cowley. 6.16 The measure, to improve labour ,cnt. and upon its full implementation, is ten, of which are contained within this 17 Liverpool pr ^-tivity referred to in paragraph 5,1 prepared lo establish ,he partly rales of Agreement. I- '"''"' " ablW will be supported by the operation pay defined in thi, Agreement in all non7.2 I his 'greemenl e all oat- 19 Llanelli Radiators of the Productivity and Incentive PayPBR plant, which have introduced their , , d i g claim, for, he equalisation of pay 20 London Service Centre ment Scheme detailed in Appendix F. The approved live grade structure. n d associoled end,I ion, of employment 21 I.oogbndge Operations Scheme links bonus earning, to improve- N n e w , , , , , , ariang.-mcnt., or p.v 22 Oxford Exhaust System. menu in performance the Bono. R A T E S O F PAY l a v d , ! ffin." aluced ottl.ide the term. 23 Parts Supply Operation. - Austin Threshold Target efficiency level set for . 7 Pay structure, fo, the categories of of this Agreement: except those resulting M m . . each esl.bli.hment. employee covered bv Ihi, Agreement a e r from relevant agreement, between the 24 Parts Supply Opera a m s Jagnaar. 5.17 A separate Bonus Threshold Target ic|d,,| i Appendix ( ' a o d .ubiect to ihc ( 'SHU and the E E F . " ' n u . n p h .excluding Cardiff) will be e.tabli.hed for each Manufacturing condition., liming, and other qualifies7.3 No action will be token by any of the -'5 Renrsby Components Plant, Service Centre and for Parts , included in that Appendix. Parties lo this Agreement in furtherance ^Cardiff neri.d, . . f o u r consecutive week, in each to 1 ^ m ^ 9 . , pnor m ^ S i r e e , a n ^ Lane, S " T t c l p . p r r k l , pe<>l><>d below. *J,*', ' , ^ S 7 c! 30 S U Fuel System, a Bono, Thrchold' 'I arget established at Kates for other shift pattern., and pay conces- 31 Swindon i h e i e d f ellieieocv which wa, required - " " : " " ' "' ' ' " . ' - " . " ' ,.,,), '2 \ .oi.l.-o PI,,. . ,nd P.ntv p h . , ' I , . It has now been Employee, ore included i n Append,, C. ^C7ln'',~' 1 . 1 Wellingborough Foundries agreed that for the period until 1 Novemtai7ii \.TI717TTPC : M West Yorkshire Foundries ^ ^ ^ O R I G M < 1 B O N U >
B U N t * 11 | I B i n T R R f T n H Threshold Target will be re-established a 6.8 The provisions of the Security of new Boo... Threshold Target will be set at Earnings Agreemenl will continue lo ^^gj^JtiM^IJglk^JIJ^IJijjJ^B the level of efficiency which was required apply as part of this Agreement with the . 9 1ANDLORD/TEN A NT to fund Stage II Parity. In the period 1 following lw changes:8.1 No mod,fic.t,ons or amendments - l ^ U ^ M U n t M A n 1 November 1979 to 31 October 1980 there Layoff Guarantee: T h i , Guarantee can be made to any of the provision, outPRINCIPLE fore the maximum nolential bonus will will not applv where the layoff has lined with,n this Agreement, except by the . ^ t ^ t t K S ^ j g ^ J u n ^ c t i o n Agreement, o, any que.tiun of K. applica 11-31, poiMs 75ppe,point | JoSJ 5*iS 6.20 Bono, will be paid 13 t i m e . , year as ," , authority. a supplement to earnings. 5=f 5.21 Where .he productivity measure. 40-hr H r l ,
contained in thi. Agreement fail lo JJ U Rate Rate
generate the required impiovemenl, ,n 2,45 98.00 73.00 1.825 ' SATELLITE

( W M | J > t j it s 6 M

ity sampling. Production studies (including performance rating). 1 2 2 , I M , horl s't.'.dv Method study. II i, agreed that cinephotogrophy will nol he used fo, the purpose of setting work standard, and manning level.. 5.15 Appendix G contains further agreed 1, a . , for guidance on the application of injJjVTinl engineering techniques, , , e , with agreed procedures for the resolution of problems arising from the application of work .tandard..

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INCENTIVE PA MENT bCHEME

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LOCATIONS , h a r d e n olant. will follow

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Company recognises the right of employ-

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November of each year.

nacludiag team working by hourly graded

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BENCHMARK LIST AGREED BY THE CENTRAL

I/inviT T A D PlfAf I1ATTAW rniYilHTTTPR' e J U l f N l > J U B r L V / \ L U / \ l l t J l \ i^xjiviivil J I t l L A Ml"!

TART 1 tr-ii-iaij * " "

RATES OF PAY - INDUSTRIAL GRADE

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Contractual * m r t m m j f one- hour at overtime P apply on the following

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Day will earn an entitlement to a constquential day of holiday for which normal holiday pay will apply unless previously

health and safety from the outset ol their career in the industry, and encourage this it has heen agreed that the Company w i l l during the period of training, provide three &ee pairs of overalls initially, and one replacement pair annually. All oyeralls will be cleaned and maintained free of cost The Company will also provide, when first recruited, a free pair of approved safely s h , s and

to

Efficiency is Payments. An Efficiency I n k s will

he calculated for each establishment each bonus period from the formula:
,
Efficiency Index =
Bonus Threshold Target
nre .noio target
Current Efficiency
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ENDORSED BY THE JNC

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GRADE 1 04 BUILDING T R A D E S M A N .Bricklayer) 58 C O A C H TRIMMER

, : S Stand ini Si.ii-.diiiL! Si, ill Working 3 Shill Working Overt ime Premium , sou a, ' 171 Hr B , p.,.!).,. G R A D E Hourly 40 Hour Rate . 7 ! Hour Rate BawIjM, Rate Day-shift Nightshirt- I s l a n d 3rd Hourly 40 Hours Shiftt Nighlshiftt _
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r u-r In minutes prior to start of shift, 15 minutes al beginning of main t*. 15 minutes prior to end of m a i n
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15 minutes after thc end of shift. J The above oyerlimc will he conlroc-

, r. . . - . . . B . S p e c i a l P a y m e n t s reflecting the needs of c e r t a i n plants for a v o l u n l a r y Arc b r i g a d e or first aid c o v e r PART TIME FIRE RnirAriK i s A l l trained o a r l - t i m e firemen " m . i ,
h

Vnnden Plaa

. 5
3

'

Bonus pay,,,,,,, will,., m m e n c e when

35 P A T T E R N M A K E R S M E T A L WORKER 60 WOOD MACHINIST GRADE 2 01 ARTIC DRIVER IHGV1) 03 B O D Y M A K E R i.i RUDY SFKAi E K ' F i n a l Colour! 1 1 ENGINE T E S T E R 14 FINISHER Hi FLOATER .Assembly. 19 F U R N A C E M A N 21 H E A T T R E A T M E N T OPERATOR 25 MACHINE Tool. S E T T E R 40 PRESS S E T T E R 22 PRODUCTION LAYOUT INSPECTOR 46 S E T T E R OPERATOR 51 S K I L L E D GRINDER .Production) 59 WELDING OPERATOR GRADE 3 0^ A S S E M B L E R / E L E C T R O N I C S o5 09 C R A N E DRPv-ER/SLINGER 24 DECOILER OPERATOR 13 F E T T L E R 15 FITTER A S S E M B L E R (Track Assembler) 20 G E N E R A L MACHINIST 31 K D OPERATOR 29 M O U L D E R 30 MOULDING M A C H I N E OPERATOR .Plastics Department) 33 PALNT OPERATOR 3-1 PARTS SF.HYIt INC OPERATOR 3B PLASTIC OPERATOR .Fabricator. 39 PRESS OPERATOR 42 PRODUCTION INSPECTOR

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Srfody
Cow eyBody BordelwGreen J.gnar - Browns Lane Longbridge Castle Bromwich Jaguar - Browns Lane Coventry Engines Jaguar-Browns Lane Solihull Coventry Engines Foundry Tyseley Coventry Engines Liverpool Tyseley Cardiff Tyseley Tyseley Butec Electrics West Yorkshire Foundry ciwleyBrfy " Swindon Beans Foundry Sohhull ' CardilT KDCowley BeansFoundn Llanelli Pressings Vanden Plas PartsSOi.AMl Vanden Plas Solihull Cowlev Assembly . I.'.. , S S t a . ^ S * ' * Ac k - G

*
101.06 91 88 1.54225 ' 11.125

>
61.59 52 SC.

2.0JK5 80.85 10141 5 1.8375 73.50 91.00 Rauis ndude shift p m i u m payments. Rates include shift payments.

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ment. and the employ has a contractual

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,np. ,,. 'Scswi, ,'he cf,edto those- required as a conseo.uece of

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S ^ v ' e t n c T e t h I tincreaS
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Repeated lateness where this guarantee necessary fire drills conducted outside applies will, in consequence, be subject to working hours will be paid for at the the usual disciplines. appropriate overtime rate.

S S J - ^ ments | MWfWWtfKft^Pmmmmi (c) Four week bonus nenods will UWWMWttilSttm quenllv b " e s . S b h e Z n u puhhshed
U o T u ' p . - ' t e r n m a V r apprentices

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1

EMPLO I EES

Overtime Premium Base 0. Kate Hourly 40 Hours

|Standard f-uanir u 1 GRADE Hourly Rate j 7=55

Standard Shift Working [ sou u. 40 Hour Kate Dayshift Nightshirt*

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? U** 9284 3 1.8376 73.50 9L00 4 1.7915 71.66 89.16 Rate, in lude shift premium payment.

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52.50 52.50 52.50

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I 1 Overtime Premium Base RM? BaaeRate Hourly 40 Hours m\ 0 821v5 3-> *W L09J 1 36875 1.6425 180625 | LoUo ^b 43.80 54 75 05 70 72 25 I

T A B L E 3 RATES O F PAY - A P P R E N T I C E S / Y O T S
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54T5 65.70 ^ 2 t T 1 *

3750

5~, Hourly Rate_ 0 9375

19

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Conditions 18 No payment will he made for atteuBjiJi'llJiUII'nl^

This guaranlee will only apply where dance a l competitions or Jem.mstrol ions W) Mil J VI M J L V e V l I SK'H B a d Week' Adjustment
excessive protective clothing is necessary FIRST AID A L L O W A N C E S BlRwSMtiTsSIII Shoold an Eificiency Index be drawn in circumstances where the work assign19 In circumstances where a full lime mmWWWmlMMlmMWmWM below 1.00 because of the impact of one
mcnt does not rellect the need for togging medical service cannot be provided and ixernnnr.rTTnM poor performance week in that bonus
nndfor cleaning and where production the Company, in consequence, has INI K O D U C I I O N periodwherethepoorperrormanceoHh.il
requirements are such that the employees required designated qualified First Aid- p . , resulted from supply problems
concerned are required to begin produc- ers to so acl on a part -time basis addi, T , , Annnnd .x records understand external to B L Cars, an adjustment will be
< I * ! * " * ! . >' lional to their norma] duties, then an ' ' modetoenableobonuspaymentlobegen shift half-shift and/or arc required ui work allowance will be paid at tin- i.i.e ol [V "'~ '''" ""' " , , , . ended The s.andard hnors in ,he w e e k
o n produnion l o the end o f the shift/half per a n n u m This allowance may be paid '"JJf ThSTJm h i " B l o w e s t labour elliciencv will be
shift Thus, i n circumstances where an wecklv or quarterly in advance as agreed S i , I I, tw, n . 1 1 1 0 I , " irn " live an Efficiency Index o f
individual ,s roqu.ml lobe ready li.r work i,i| . . d improvements in labour ' , , 'f'^" will Ihen be ,e tot h S rflS L , ' ,. P****** . , "h? m m m t I f t . l S f sh!?i ' l i g d a l ^ for abive 20 The Company will rotund Tees for the - i ~ c a and S whi !be guarantee will be Imnted to 30 mmutcs issue and renewaiof Hi IV driving licences ^hls'' appendix is of fundamental d r the Sunday dayshift. f " """ f Id ot I"m^in T h e r t ' ^ ' ! , , f )t .,red. as a part ol imporlnnce l o the future well-bemg P r o d u e t i v i l y Commitment t I 1 <T M " , , n whJ hift" J "" ofthe Company and ,ts employees. Its 6 The Parties agree that change, in mealbreak .,,1, , ., yh,-n- . s h i f t ,s ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ i ,n piemen tal ion will provide Correal Work Standards trom remeasure ,,.,] bu, y half nh,l, , k,-,la H H | | i a p a j B J J | employee, with a real and immediate m.nt, method improvements and non maximum ol . 1 1 1 minutea overtime | MMA JjJwCl IJ >.< -MM opportunity to share in the benefits p , d u c t related capilal investment will b e
guarantee will apply. If work ceases ^g"T\j7uH 1| a>y'B MIM ol' increased labour productivity and implemented at 1 he ,1 ol chance. This
douj^j a slid, and cannot be reeom- M | f B t m \ M T | | J A j s V j n H at the same time contribute 10 rais- change will n, , reflected in the Stan
m U I U "' " ^ IVBBJk ^V 'l Val -'i F I T ? L I I B P J H ing the competitiveness ot B L Cars dard Hours Produced'taken into the cal ,,,,,, is i ,v,,,l:,l,l ,-,,,,or ,,,ll ,c on,malendoT I culation ot the Current Efficiency until
,h,H. hall shilt.theu h,-guar.,,,.,.,- a. ,:.,<] l~ix-ix->t-t-t-t-t-t-t-t-t->t-it-it-it-it-i->->-^^H Scope ,,, three complete bunus periods following
ofsh,ft/holf shift will nol apply although , u has been agreed lhat craft appren- ' If* . ' " ' '"' "", , .he Current Work Standards change.
if appropr.nte o n extra 15 m.nutos at c n d i U o n a of employment ahotSd be scribed ,n lh,s Appen diy |,|,l-. " p _ . _ . grade rale vvdl he paul pnor to shut ou , d a r d , . s e d . Th, requires all craft ? f empl.yvees will,,, 7 s^iJndnrd Hours which are-surnlus'
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- qpsiFR 47 SEWING MACHINIST 49 SHOT B L A S T E R

s - H | 7 T h , n c , p l e will equally apply when . , - . , , guar -eunder ihiJi-cuntv ol Earnings Agreement has agreedn e a o v e pr

, . r.,.,1 hourly paid Unued kingdom ^^^*^' 3 S 'n ! ~ * * r < . > ! - j,

whose employ,, 1 s, .".lard Honrs which are surplus A.tochmea, I when abonus regardless ol their work location At.. nh- iliev litl the blbcieney Index above the

52 STOKER FIRST C L A S S Drews'Lane 50 W H E E L A B R A T O R Bean. Foundry GRADE 4 Dfi COMPRFSSOR HOIISF A T T F I M n A N T C.t~. F . ^ . II E l ^ I ' l ' - i v " %ih.l? l l i K Solihull 1 - FririiCMiTTiTnl,---.- n o . i n r n S i FOUNDIV 1 ' I , V T S 1BOIIRFP w T l ^ s . 26 \IA( j'liNF I) I F R LABOURER West Yorkshire Foundry 4 M X R I A L HANDLER Perr?Rnrr l"pAlNTMlv PerryBorr 41 S i T C F S S W O R k - F P i n p c n p a c i M r Common U n . 41 t R. a E s s U . .1,1,1 I, U K ,Kk ASING Jaguar - Browns Lane 43 PRODUCTION L A B O U R E R Llanelli Radiator, II H I - . F U S E , , , I I F , ' I , , R I , K I V I . I I Solihull Longbridge 07 SENIOR P R O G R E S S M A N Longbridge 53 S T O R E K E E P E R GRADE 5 !3 LIFT A T T E N D A N T G a r r i ^ n Street ,, S V F E P F R / O i l C F i ' I F A N F R SrcvR^ad Cowley Assembly 55 TOILET CI F A N F R

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K H W R t ^ r a t i o l B UW% i \ V u L / . . ^ n ^ o l j H | i ^ n n m i D E m I Eligil
3

district agreements reached with an 2 It has however been accepted Whe Engineering Employers' Assocalion. Company that there are circLs, then such obligations will continue lobe falling within one or .he three categories I honoured. This represents ihe only listed below, which should conlinue to be exceptiontothe application of the prer e c o g n i ^ as exceplio.,,,1 The qunlificamiumratesoutlinedoverlentShouldthe lions ollaching tothe arrangements listed I Company ceasetobe covered by National below represent the only circumstances in I or Distr,cl Agreements, only the Stanwhich additions to the rates listed in d.rd rate, will be applied. BetoretheComparagraph 6.11 ol the Agi-eement and W I" be so covered, discussions Appendix C will be paid, olher ihon those will lirsl takeplaee wilh the Trade Unions. which are expressly required to be honThe national minimum ran-, will be ured by the National Agreement bet* 1 ne uui o 1 1 1 1 ininimom r.ues win tie . ,-oirn u-sed from 1st November 1979. ,n the ween the E E F and the C S E U . | calculation ol premium payments and A Overtime guarantees because of the monetary guarantee of the Nalmnal j o b requirements which cannot he I Guarantee of Employment Agreement. satisfied d u r i n g n o r m a l w o r k i n g

UP/CLEAN ALLOWANCES j

UP

/ / 1

b, # kooght ellis:.. a) lhat the common hourly paid condi- men. 2 md.cales how employees w t o o j L2:, ceilmg may be earned over to the
1i Moos ou .l.ned , tins A r,.,.,en. ' " ' ""' Siaiidard Hours Produced carried for-
u chan un 1 m w will io accordance vWth should apply to a l l new entry craft i n g authorities should be treated. ^ ^ ^ ^ ,,.,
J N -Uioiial Agreement be naid at apprentices from 1st November , period's efficiency calculation Agreement, be p,,,d at 1979. and, before any had week adjustment being q T s ^ u X ^ , e e d that i n circumlb) that exislmg s a l t conditions ot " > " " ^ , i,.. employment w i l l be maintained 0 . 1 1 , Bonus will commence to be earned K T ' O - I ", ' , n'ur I t t l i 1 unce .he Bonos 'I'hresholdTarge, hasbeea P a r t , D i v i . i o n ^ ~ Z an ,ed once current apprentices have com- ^ , . Company originally ,'," 8 1he' following, arrangement, will production start time maintained. rtd beir apprenticeships ,, Threshold Tares, apply In Ihe Parts D.v.s ion . C H R I S T M A S DAY, BOXING * T * . following common conditions , as a ratio between standard In! The Efficiency S. heme u ill lie based D A Y A N D N E W Y E A R ' S DAY' will apply lo all craft apprentice, from l s l hours and clocked hours, would be eslabupon Pans D,v,s ,on as a whole. wnnHlNC. November 1979:H i .H in e,l, mnnolarinriiic establish 'hi A Parts Efficiency Index will be <:! WORKING , a l The cost o t Company approved J f ' J . . , e I ve " i " ,11 ' , , > Ii ' I, ,d i a l e d tor the Division 0. a whole ia Elioibllitv m m . and examination f e e . for ^yohed , 0 I'UIKI naritv plos T I'hiaccordance with tormola A below. ,o"\, i,ed that being required to apprentices will be borne b , Ihe ,' ','l,r -1, 1 w i whs ppropr,,,,--. I d A bonus payment will be generated Company, except where met by the S ^ t ^ r ^ ^ - i l O T U . when the Part, Efficiency Index New Year's Day. is ,>,irl,col.-,,le unsocial. Local Education Authority. Course 5.21 of the Agreement. It lias now bee,, exceeds 1.00.1 able I shows the bona. All employees therefore who are required fees will be paid for one retake,mil agreed l h a , for ihe period Iron, 1 Novem,,,yme^ palentially "lob. by Ihe Company to al lendtorwork during relevant exammat.on tees will be e r 1979 until 31 October 19S0 ihe Bonus Allowable hour, which are surplus
the 48 hours commencing a, midnight on reimbursed on proof of passing. Threshold Target will be established at " bonus calculation " m o d e m

C C T w l M

<*" ""
M 3 T h d e l el t p r s e d e d h b

EFFICIENCY SCHEME b [ ,tu

!Lm^ES^&%3Zft5l*
Christ mas Eve and ending at midnighl on

CLEANER -

cow .ey Assembly

lb. For text books approved by the

feyel of efficiency which w a . required

hat they hfl the Parts Efficiency Index above the 1.25 ceiling may be
carried over to the next boniu period.
Before bonus is paid 1 1 1 respect ot any bonus penod a minmiom sole, total mast be achievedtorthe Division. The minimum is 95', ot the total obtained by multiplying the Net Sales Valae per employee hour at the-Bonus Threshold Target level by the total

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1 The appropriate rates of pay and premium rates outlined in the tables 1. 2 and 3 will apply to all employees y this Agreement The rates covered b
willIbe payablefrom1st November 1979 with one exception; employees still on PBR systems of payment It had previously been agreed that all remaining PBR employees should convert to measured doywork by November 1979. Accordingly, where this b n . not occurred the appropriate grade rates outlined will applyfromthe date of actual conver.ion, but without retrospection. Compemsaoary-Paymep, 4 It is agreed thai all individuals 4

whose standard pre -parity rate or pay was above the appropriate originally agreed parity target rate will move to them appropriate grade rate or rate for age from l s l November 1979. Concurrent wilh this movement a payment in comI pensation will be paid which will be equivalent to 52 times the weekly .lifter-

Mj 3; ; |J WKfl ISlJlAVJ^Wt SffH i.Vfil UUbUWr ^T ^rY^ I U(UJLlM|j9|H I MB^fWJ fl (*f;V M l< IsiBBI I
I Introduction

W l l l U l B E l s I H f,'t\ a , 1 3 ; y J 1 1 |u

The following occupations will be | eligible lb, the contractual over,, me guarantee listed below if their working eircon.stancessatisfy thecondit.oos lislcd subsequently, where this is necessary to protocl the capacity and/or efficient workingtomeet production programmes:. . I a m i Sprayers

Boxing Day and during ihe 21 hour. Company a reimbursement ot 50%. , f d Stage II Parity. comment uie al ,i,i ,lni .-hl on New Year's up to a maximum of 10 tor first . Pviand endine al miilninht on New Year's year's books and 5to.subsequeo, Miinulactiiring Plants g" '\ ^ f , i",yn,ent : . ' books, oiav be claimed on 4 The.|ollrM-ing bonus arrangomenis to iitliiu>d beUw level. 0 1 payment proor or purchase. be called Efficiency Scheme will be sel up ' f fp ment ,el Public transporl costs will be reim- for each or the establishments identified i . c v e i 01 t-aymeni bursed and also second class rail in Altachment 1, with the exception of the a l en h'uiee will ',<',' the basis grade tares, i'flhey ore not already reim- Parts Division and Service Operations ntlendance will It. M l inenas.s grade by the appropriate Local Iseebelow).
V

eoee between their standard pro-parity rate of pav .including incomes policy supplement, and standardised plus pavmcnisi and their pre-November 1979 Final Parity Target rata. to
National Minimum Rates J Where the Company, for certain k-roops, has previously maintained a dillerenl .al over national minimum rales lor NMR purposes, either as a consequeace of,he terms of the National Agreemem or as a consequence of the terms of

1 The Parties have agreedtoa system JJ^CT"" fT job evaluation which lakes account ol Unoerseaiers . l , - , . a r i e . ,n working conditions Addi U-adbooth o p e r n l o r , tionally. the relaxation allowances built in A period of two calendar months from the job limes will reflect a recognition or dale or signing or this Agreement will be special working r,s,uirement and/or allowed during which, by joint agreement extreme-condition. In consequence, it has ot the J N C , this guarantee may be been agreed lhal all conditions, payments extended to cover other specific occupaand/or guarantee, in existence priortothe tions where it con be demonstrated thai, signing of this Agreement will lapse wilh within the spirit and intention of thia prothe implementation of the Firs, Singe of vision, an equal justification for ao doing Partly, and no new payment, will be exists. Thereafter, this guarantee will introduced apply without further addition or change.

I
f 1 I 1

' *

,Y,'| X I l ' u T"h!!ut' at ~ a ap ecini 1 1 , ,n , 1 o. ra. , i r , y rate. S Poymenl wall be for ".m " ^renter m'enoanee. w n n T L L nl C.r d 1

l-.h.
r

1 Aoil.o.u, I l-i , | a i - e o l l e e e s for training

( ( ] ) w

IL^JSi
w i l n a

B Y n m

^SSTmJSTJ,
n n 6

made un a. fXiw. JJ2 45 + 1 825 + 0 45 = 725 * minimum level of inlvaienl equivalent t o 3 X 6 725 = 20 175 14 In a d d l L any attendance on Christmas Day. Boxing Day or New Year's

apprentice has to rent lemooi irv icon, amdanoo 1 1 1 order to aUcod a collegefora period o l block release, the Company will refund the cost of C o m p a n y approved lodgings/accommodation against receipts. le) Bo,h the Company and the Unions consider it important tha. apprentices should be aware a( industrial
h e r c fln

i.,..'bag,- , 0 l.il .on, produc, iviti 1,-a hours pnlenlially available within a plant will he measured bv id) Allowance will be made for the sen eaimparing labour elliciency in the son .l nature of the P . r U Division bonus period ,the current efficiency, business when calculating the Parts with lhat sel by the Bonus Threshold Efficiency Index Bonus pointswill be
Target. the weekly average over the eiweek
period which e n d . Ihe last dayol
Current Efficiency = ihe bonus period I be ,,onas periods
\ctual 1 lours (Direct and Indirect! " purposes ol .a .cu .aimg nanus
in I he Bonus Period payments wall be ibe Accounting
. . 0^1..^ Periods .which apply in Parts u,y, ^ t f f sion These are of four o,fiveweek.
I 1 duration.
5
f r Q

UlowableHours | l-'OHMI I.A A , n r . The Allowable Hours total isdetenmned by the loliowing tonnuia: , 11 M NetS.leaV.lu. Stockcounted Value Parts Efficiency Index =
V

TABLE

1
B U M U S 1 Bonus Payment Potentially Available to Each Adult Employee ~ ~ ^ O r t " 4 Week " * * " , '"" "' (Pence) 37 5 j ^ J J 33
7 5 H

ADULT HOURLY RATED EMPLOYEES T r v r v nnVl O

1-IllilN U I

AUow.bl.Hour,-

e . Sale, Value peremployee T.rgetlevel

Valueofstock counted per employee level

9 9 1

Tl

full access to theae procedures and will be entitled to scrutinise 1 heir operation in accordance wilh paragraph 21 below Joint Verification Committees 21 Joint Verification Committees may b e t u p in , n e , l , t a l , L Sud, Comm

(e)The 'standard hour produced' taken into the planl bonus calcul: the area will be the product of multiply ng the 'standard

JMW
I

I^MffW9?W9^WOT^I^I^HMBH^I^IWI^I^IH
.^tjULtJ+Ill^

S S S l t " '
< < )

^ll^^l ^^^M ^T ^n 'urvSr^rT?^ EMPLOYING AUTHORITIES - EFFICIENCY

SCHEMES
Employeeswhoseemployingauthorityis listedbelow willbenefitfrom
the Efliceocy Scheme a ^ o c t e d work location. AUSTIN MORRIS LIMITED
e

tout

i Z T S

ha.

K S L t ^ I K

w.S

,bet .u.hor,,., regardle,, of the.r

BJ=H.
N.te AUy^u w llbeclcul.ted.tco t.nt.i.e..|.nuan., 7 pnces. I lei The Productivity Commitment pro- lined in Table. 1.2 and 3. Payments will be vi.ionsdc.scribcdinparagraph6will made as soon as possible; this will not norippK within Pots H I M mallv he more [hon four weeks after the
; m i m

publishment Efficiency

~ Bonus
P

5^

" 25
2 4 3 2

, os Maximum ,
2 3

Bonus Period ( 60 87 54

5^L_
6

(1 7500 7L25 50
7

. S S ^ r " - Adjustmentsto Actunl H o u r .

dXmined Standi^Hour.Produced. A d j u s t m e n s to S t a n d a r d

"ffiSSESESSlSK

^ S * . ,
Plan, Director. Coventry E i e Plant Plant Director, I nwlcv Assembly Plant Opcrnltons Director. Longbridge Coventry Enmne Plan, Cowley Assembly Plant
Longbridge Operation.
^ . " B S S " . i
r u n g . Norton, Bargoed,

will be taken into the plan, bonus

Bonus entitlement.. T h c C u r r e n t Eftieiency Index. (bl Satisfy themselves that calculations

Surplus Manpower Conce.sion 26 In circumstances where surplus manpower has been generated within the Plant by changes to programme

P i - , , . i \ . . . , . , . H m . . ITK N t s l , . X e w u l b e adjusted so astoexclude direct shipment. from plants and Autopnme (UK). Adjustment, to Actunl Hours Thcfollnwingaclualhnurswillbe excluded from efficiency calculalions: lilHoursexpendedonaulhorised capital orcnpitol related work orders, (ii) Hours worked bv Craft Apprentices/Youth Operator Trainees, S u r p l u s Manpower Concession The arrangements described in paragraph 26 will apply within Parts Division Change Situation

firmed that bonus calculations have been - a d e accurately and in .eeord.nee with * proves,., of. h Agreement Bonus Supplement 11 Bonus will he paid as a n hourly suppiemen, upon all basic hour, worked in a bonus period. Apart from the exceptions o supplegiven in paragraph 12 below, n menl will be paid on any hour a n employee is absenl from work. Boous payments will not be paid unless they are earned. Compensntioo will not he given for the loss of opportunity to earn bonus. Absence without reduction in bonus supplements 12 A bonus supplement will be paid on each basic hour an employee , . released from hts/her normal work under the terms o f this Agreement or the appropriale Company policies

,, ; , . 1.15 114 1.13 1,12

H

1.10 1,09 ] ,08 1.07 1.06 105 1.04 1.03 1.02 1.01 1.1)01 Threshold to:

1 . 1 1

,o ? ,6 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 0,1 '

WK g f * 20.625 18.75 16.875 15.0 13.125 11.25 9.375 8.126 6.875 5.625 4.375 3.125 2.5 1.875 1.25 0.625 0.0625
4

-iq 33 30 27 24 21 18 15 13 11 9 7 5 4 3 2 1 0.1

407*. S 41.25 37.50 33.76 30.00 26.25 22.50 1875 16 25 1375 11.25 8 75 6 25 5.00 3.75 2.50 1.25 0.125

Committee is satisfied in this respactl. ic.Act a, a channel for sntisrying employee, question, an, queries upon the operation o f the scheme (di Discuss unresol.ed queries and difficulties wilh the appropriate specialists from payroll or other activities. Such meetings will be arranged through the Personnel Manager. 2 2 The number o f shop stewards upon ihe Committee shall be delermined domestically. The method of selection o f shop stewards shall be determined by the Unions. Review Arrangement. 23 The Company and the Union, will regularly monitor the effectiveness, accuracy and operation of the procedures and records underlying bonus arrangements. Employees will ...is, and co-operate with themonitoring exercise a, necessary. H

as surplus to continue to benefit from bonus arrangements " E ude for-anJ J 'Xula u t , S ,di,c> cuculating plain i i n u nc.y indices . These concessions will not be introduced or continued should there not be co-operation wilh those measure. n,ch seek to aid reduction in the manpower surpluses and maximise the effective utilisation o f labour. Adjustments lo A c t u a l H o u r s 27 The following actual hours will be excludedfromEfficiency calculations: Hi Hour, expended on authorised cnpilal related Works Orders including the manufacture o f new Body Tool.. W , , . . , Hi I Hours clocked by employees on ... non-adult scales

O j j ^ D ^ k D ^ ^ ^ ^ & S r k . ' & ' Plan, Director. Drew, Lane Plant Director Abandon Assembly Plant 1 lant Director, Abingdon Assembly Plant JAGUAR LTD. Manufacturing Director

ana DHCKI ems W e S n M e T u . Service Westorn Avenue Service Drews Lane Plan, Ahimmnn Assembly Planl Abingdon Assembly Planl

if?!, j Note: Includes Browns Lane Radford. Kingfield Road

CardilTPlant Solihull Cars Plant Note: Includes Garrets Green M,d and. Service Centre Canley Plant Nona. Includes Tile H,ll and Radford
P

ROVER TRIUMPH LTD. Plant Director. ( ordill Plant Plant Director. Solihull Cars Plant

Midland. Service Centre Manager Plant Director, Canley Planl

The arrangement described attend n course of studies in in paragraph 25 will apply to ci r c u m s t i , n c e . w h e r e t h e the Part, Division Efficiency Company maintains payment. Scheme when appropriate. carry out public and community T h e ^ i d l a n d and L o n d o n Serine. . duties^ ^ ^ ^ ^ 9 The following arrangements will c i r c u m s t a n c e , where the apply lo the Midland and London Service Company has agreed to maintain Centres:earnings, la) A Service Centre's efficiency wall be Retirement measured by comparing- ~ 13 Employees who retireduringa bonus ill Actual' Achievement i e the period will benefit from the bonus proportion o f Ihe total actual paymentmadeduringlhatperiod. hours sold during the bonus Death in Service period with: 14 The estate o f an employee who dies (iilThe Achievement set as the will benefit from the bonus pavment Bonus Threshold Target level generated in the boou, period in which Ibl An Efficiency Index will be calcu- the death occurs The payment to the lated in accordance wilh the follow- estate will be a full four weeks bonus a s ing formula generated bv the scheme that applied Service Actual Achievement theemployee. Efficiency" R , T W hold T , , Termination Index Achieremen Employees who complete a full bonus M T . b l . I . h w. .he , h period but ternnnale priortothe normal (c) Table 1 show, the maximum bonus J ymei,t date lor bonus will have their paymenLs potentially available to f | c u l , e d on an emergencv SerxiceCenlre employees , _ .if r,l'T .P"P " f " " y calculated from b Ihe best data ay 1 0 1 T h f I'I 1 he Serv ice Cenl res. the time and includrf ,n the termination I.) The following adjustmenls will be made when calcolating a Service ,.,' .
1 5 0 P i U e m e M c a b a s j s T b h e m m w M | b r k i a c k A v

The Efficiency Index will be rounded logive the nearest decimal pari o f a bonus i,. Amounts shown to be multiplied bv 40/37' 1 , 0 give bonus pel hour for SIM hour 3 shift workers. ^ h i . o n l y apphe, in Par,. Division.

TABLE 2
V A I ITf? O f ? D I P T V r t h U L U r r A w l rt? A H t i N I I C P O T O T U FA B U l i U o f U l l i l B O N U S P A Y M E N T P E R HOUR (pence) kW 0_6 g-10 11-25 (25pvalue (50pvalue (75pvalue perpoint) perpoint) per point) 05625 ,5 0.4375 ??!
2 5

BONUSP01NTS 9'f - '

7

to

J "
*

JfJJ.
"S.= .
5 1

1.125 LOO 0.876 9?

25

ilt
i
2 5 1 1

H S ,
0 9 3 , 5

1.6875 1.5 1.3125

"

S ' l f o s
9 i
2 5

3 7 5 1 8 7 6

l 9? _ l e T A B L E 3

9 'f' J>

9f= 2
9' . T

H o u r , allocated to , i , k , . i k i n g where , t , . k i a k , o g nol part of the " J " <* " con,. , p ,. u . ^ A D J U S T M E N T S TO recZJeanK H U U K S pliers outside o f B L Cars Limited. C h a n g e Situations New and Adjusted S t a n d a r d H o u r s 24 In order to provide a n opportunity 28 Standard hours will be adjusted to . for bonus earnings to be maintained, the reflect all Engineering Changes, includarrangements described in paragraph mg new models, facelifts, major new 25^26 and 27 will apply when one of the component, and .sub assemblies, every 4 l o s i n g significant changes occurs - a weeks at the commencement o f a Bonus mo^product launch or facility action Period. facelift or line speed change which is Standard hour, will be adjusted to likely to affect the Efficiency Index by reflect sourcing changes and transfers as more than 0(12 in any bonus period they occur. L a u n c h , F a c e l i f t , a n d F a c i l i t y Quality Changes 29 Actual hours worked correcting 25 These changes will be treated in the quality defect, will be included in the same way. . . . . . . Efficiency calculations If the defective III A programme will be established unil has been counted once for bonus settmgout the required role ofclimb calculation purposes it will not be ol production to meet the planned counted again when the defects have completion dale. This will be dis- been corrected o , ^ , . h the P l a n ; / o r k . p , , , , Committee o r equivalent. It will set Attachment 3 describes an Audit r , u . . , procedure which is lo be brought , n , o (a) Timing for Ihecomplelion of Ihe , Company from January * , 9 8 0 , This procedure cannot be actioned i b i T h e manpower allocation, . both Msnacement and Unions
d the fc t

. _ , _ , LAW ROVER LTD General Manager, Bordesley Green Plant

r m B f f l l

Borte.levGreen r w w ~ J O . . , l

plant Director, Solihull 4 a 4 Planl

ZZlXA

Plant Director. Acocks Green

psp
Planl Director, Cowley Body Plan, Plant Director, Castle Bromwich Body Plant Plant Director. Liverpool Plan, Planl Director, Swindon Planl Plant Director. Llanelli Pressings Plonl HI COMPONENTS LIMITED cj D , W G e n e K a . g e r Afford and Aide,

Solihull 4 x 4 Plant Note: Includes Land Rover, Range Rover, Garrison Street and Clay Lane Acock. Green Plant Note: Includes Tyseley 1 and 2. Acocks Green, Percy Road. Tyburn Road.
Perry Barr. Solihull
North Works lAxle
Assembly) Cowley Body Plant Note: Includes Milton Castle Bromwich Body Plant Note: Includes Witton Liverpool Plant Swindon Planl Llanelli Pressing. Plant

<

h e

Centre Efficiency Index: ' S r a r r a n . described in Tf'fic'ton'?;:

Ib'Tmplovees

h , Iranafer between

M S
s o n H

i K ^ ^ ^ i ^ h ^
w o r

C R A F T A P P R E N T I C E S A N D Y O U T H O P E R A T O R TRAINEES EFFICIENCY BONUS

PenientogeofAppropriate

including any temporary excess

. J ^ U ,

" p p f o p r i . l e to invite the

' ' ' M ^ ^ ^

pr grLme'
b ! a C h

"

t^f^T^'S
te.m into t h T p l a V

S^^^TpZ. &f
P r [ s D | v i i o

Afford and Alder Oxford Exhaust Systems Plant Llanelli Radiator. Plant Butre Electrics SU fuel Systems Rearsby Component, Pari. Division Note Includes Eynshnm, Chalgrove, Stanton Harcouri. Honey bourne Baginton
Pengam and St. Mellons
Cowley and Fletchamstead Depots Wellingborough Foundry West Yorkshire Foundry
Note: Includes
Keighley Beans Foundries

S a g e r . Ll.nell. Radiators

Scheme, when appropriate. bonus arrangement whichever ,s the Adult Bonus Payment Surplus M a n p o w e r C o n c c '''''er Bonus entitlement will be 20 95* i calculatcdfromthesumoflhehasichours 19 90% The arrangements described in k e d in the releasing and receiving 18 75% paragraph 26 applytothe Service " *> " "" ]l * Cenire, Efficiency Schemes. J * Adjustment, lo Actual H o u r s ""EMr.nt, I 1 The prove,ions described in paraEmployees who join the Company P a y m e n t s a n d Status o f B o n u s points nor will supplfint-nis arising from graph 27 apply within the Service a1i,. ihe start of a bonus period will Earnings the requirementsof public pay policy. Centres. eligible to benefit from bonus 19 Bonus earnings will be paid through (0 The provisions of paragraph 6 apply "I "omenta immediately. the usual payroll procedure ;md will be A d m i n i s t r a t i v e P r o c e d u r e s n ' P P n t i c e s a n d Youth liable to income tax, National Insurance and Count Points to the London Service Centre. DAviiL.n*ui.iDVT "jwrator Trainees deductions and pensions deductions. 20 The Company will determine the BONUS PAYMfeiN 1 Employees on non-adult scales will Bonus payments will be taken into administrative procedures (including ADMINISTRATION i 1 ' " incentive payments except account when calculating holiday pay. count points) necessary to operate the when they are completing periods of Otherwise bonus payments will be bonus arrangements. The Plant Works Frequency murium " U U n l , ,,| i|. Company and are separ.ite from other earnings and will not Committee or the equivalent negotiating " ,,ing a , d by B L Cars. Their be consolidated into base pay for any body will be given the opportunity to fully 10 Bonus payments will be paid loeligible employees thirteen times a year in - ninitnum which is a proportion ofthe purpose. discuss these administrative procedures w o p n a i e adult bonus scale is shown in Changes lo base/grade rates will not when first established. The Joint Verifiaccordance with the Efficiency Index achieved for the period in question as outisoiej. | negotiated r bonus cation Committee will subsequently have
l l 1 6 4 5 % r D e 1 A r p K l t l c f r P a l T e c t [ h e V J 1 u e f i or

target vnlumel ciency, and. Plant id.The planned rate of climb of fh) working ,n accord with the IndusGeneral Manager. Butec Electrics production over the change trial Engineering provisions of this General Manager. S U Foel Systems period Agreement, to be evaluated aod General Manager, Rearsby Camponents (ii I Each bonus period, the contribution considered for the introdoc,,on ofthe DIVISION of the change area to ihe maintenlternafive incentive arrangements ^ ',";,,. , nance of bonus earnings will be outlined in Attachment 3. Managing Director. Parts Divi.ion calculated in the following manner: Establishments with P B R elements I (a) The actual standard hours pro- in their payment systems duced per man hour clocked. 31 Beans Engineering, Hurst Lane, will (b)The target standard hours pro- not. be covered by the Productivity and duced per man hour clocked as Incentive Payments Scheme until it has scheduled in the change prog- converted to a Hat rale system of payment ramme. aligned with the remainder of the ComBL FOUNDRIES iciThe proportion thnt ii ia> forms pany. Similarly, the PBR Sections at CowGeneral Manager of ii lb). The proportion may ley Body Plant will not he covered by the Wellingborough Foundry
exceed 1.00. terms of this scheme until their wages sysGeneral Manager (d)The proportion that the direct tern is revised to a flat rate system. The , Yorkshire Foundry actual manpower forms of the timing and nature of that process is nol direct manpower allocation at affected by the principles outlined in this General Manager Beans Foundries the final target volume Appendix. I .
W e s

'

Incentive Working Party 34 Should the Unions wish to give one 32 It isagreed that an incentive working month's notice of termination of the party of the J N C will be established Incentive Payment Scheme they would immediately following signature of the first raise the matter for discussion within Agreement, its terms of reference to exam- the JNC. inethe wholequestion of productivity and related incentives with a view to coining to ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ I joint recommendationB which could be put to the JNC for negotiation at the time of ^ ^ K M M I ^ I l l f L 4 K I I I | ^ * ^ M , h e N o v e b e , , O a n l , , v i . . . B M P i n V P P f l T Termination 33 The Productivity and Incentive Payment Scheme may be terminated by one month's notice ii lis operation is judged by the Company to be counter-productive. Before leirnmatmg the Incentive Payment Scheme the Companywould raise ihe mailer for discussion wilhu, the .JNC The Compuiy will judge the scheme counter-productive should its operation:(ajtaere.se industrial action: Iblbefouodlole.d.olheinampulalion of record, and data or other indusf, , , . the "chievem on o n , , h e qua tv of pro land 0 2app.,ed?ocPst,ers. or of product

TABLE
.

- BONUS B A S E D ON BL C A R S W E I G H T E D A V E R A G E E F F I C I E N C Y INDEX
p..,,..,,,.,..-,,, r U N C I ION _ Advanced Technology Training (Cars Staffs)

LOCATION Gaydon Haseley Manor

"

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V '.V ^W

" . , , ,
1

E M P L O Y E E S NOT DIRECTLY COVERED RYFSTARI 1 1 H M F N I T

"

I^ H fRHinSnH HUaUUIaUI^H M.I.IJ.I.IllM J* ' H l i M t i a i i i ^

^ S ^ " ^
. OTA . .

Manning Table i CMTicb.uiL.es.

, I

Emnlovee, whose work location and J '' p 1 ! V . noi din-Sh' , . ' ' ' , on '-" *, ' " m M m ^ m m ^ t M ^ l ^ sucn groups ofemployee, and . Plant for example, common site or similar localion common bargaining unit employr P E

L t J?1C1EINC > S C H E M E S

o^,x,VV.o

AUDI 1 E D PLAIN I
TIT'S a i / \ l U O A n Audited Plant i . one that is opera! ing wilh Work Sluodnrds ,r, accord t l h the BL Cars Industrial Engineering Agreement and with defined manning levelson bolh Direct and Indirect Labour. , udi,ad , statu, y _ , , u)E m potential of a Plan, operating a? "*> levels of efficiency is protected. * ' * Progressive introduction o f = , o a eflie.ency baae across in Indirect and Dnect relationships rest.lt.ng Irom change, to model mix. laciIuies, and operating patterns to he recognised. 2 An Audited Plant will be able to earn bonus on a scheme based upon audited work standards and manning levels for Direct and Indirect Labour, and not Best Period 1977. The Audited Planf
A P n l n r a s s a r l o :

S5T%L^^-S .{t?U
l

h a

b o

(d) impede the implementation of changes to work standards or work assignments and manning allocst ions or otherwise prevent the Industrial Engineering clauses in this Agreement Irom being operated; (e) oiherw.se threaten the efTiciency and economic viability of the Company. T A o i i . " "i D n x i T i
1

r=,r"" ""
d

ihoT will h a j f t h j ^ ^ ^ 0 0 , 1 i t men, as employees utThe linked P a i t

^ ^ Z Z ^ T ^

^ ^ T & w ^ g X 5 S

<2TW

3 The following procedure will b, adopled:- (a) Management will request lhat a PtoM be audited by the B L Cars Central Audit Team (b )The audit will eslablish (through an examination of a represenlative sample):- . , , . , I* S t a n d a r d B a e for D r a t . A n Off Standard for the par. o c u l a r Plant under review. based on the age. size, facility and manufacturing process of the P l a n l . A n Indirect M a n n i n g Level al . p e c j c volurne d m x
a A H B n

/
?
&

^ ' S S S S ^ ' t ^ ^ S r t l S t S t o * ' " " " iwSSiK.^XmStiwdi

B

^ j ^ . ^ ' S S

. . , " V ' ^Puit and intention f o l i f ? t , ' t v e *K * Procedure for d e a l i n g w i t h P r o b ,i In"" >-1th Work S t a n d a r d s a n d guidance. Assignments Oneratina Conditions Work standards will be established on 4-< Wben problems wilh work alanthe basis of specified opcral i ng eon.li, " ' tions. Change, to operating condition. '""""'log procedure w i l l apply: may arise from the following:(a) Where an employee experiences difla] R e a r r a n g e m e n t o f f a c i l i t i e s / ficulty in working to any work equipment. standard or wnrk alignments and ibl Change of work flow pattern. wishes to query it. application, he icl Installation of new and/or tempershall discuss the problem wilh his , r y facilities/equipment. foreman, who will implement the prcXrVdeLSMcTrhe employee w ,ll continue lo work ,o " > > ^ f ^ f a o change in the prescribed method and Ihe work > work eonten standard or work , , . . , = , : , wlul.l , , R a t i o n of production process or the resolution procedure ,s in operacomponent manufacturing' tion ,h. Changes to method ib. The foreman will check that the

' ' ' P procedures, recording procedu res etc. <vil Operating under the conditions of provisional/temporary work standards, in the event of conditions not allowing a permanent work standard to be set.

t i o n s

"S"\t

XT^H

TABLE

I OCATION rADingoon imlnrHw, ACOCKS ureen BrownsLane

1 SpeciallUning n.^iir' n u m p i
FUNCTION

1 - BONUS B A S E D ON ,1

Efficiency Index T h e l m W h n l have been^tablishedin this manner, are described in Table 1 below. Where such links have not been identified (see Table 2) employees will receive a bonus based on the weighted average of (he efHceney indices gonera ted by each of the establishments listed in Attachment 1. C A o n n ^ . m , .

clard, showing variable a n d semi-variable manpower. N o n - p r o d u c t i o n overtime requirement 4 (i)Having established the criteria a n Audited Buse ffflci'-nev' can' be obtained, at a ,pecilied volume and mix from the following formula-
A

^!IlS33V*^ Industrial engineers will confirm

standards as and when necessary toensurethatcorrect operating conditions exist

^ S ^ T t ^ those- upon which the work standard

(d) If the performance is still inadequ- 5 In some plants there has been a
ate, the foreman will notify and practice of payment for meal reliefs to
issue written confirmation to the three shift workers. It is intended to
employee in the presence or the shop standardise such arrangements in a wuy
steward, a n d a further period for which will ensure consistency. In conse improvement will bo allowed - this quence, such a payment will only be
period not. to extend beyond four made i n future where there ie a genuine
weeks. A t this time the senior need for Standby duties. It has, however
manager lor the department arid the also been agreed that where a genuine
plant p e l . . g e , - 1 be ^ ^ f c j j r * . ndonncj. the ha f hear meal break will be at grade (e) If, after the second period set for >"* PP">P"te overtime pre. improvement b a a elapsed, the employee's performance is slill P a i d A b s e n c e G u a r a n t e e . inadequate the foreman will notify 6 In respect of entitlemenl to paid his senior manager. absence for reasons covered by this Agree |f| The senior manager will arrange to " " " " ' " U K " * * ""*l"i Dm transfer the employee to more suit- period for which p a y m e n t m a d e will not
able employment in his own are,, exceed the biuuc hours of the appropn.te
h e this is ool praclicable ihc shift. The Company is. however prep.red
p e r s o n n e l m a n a g e r w i l l be to accept that in respect of three-shifl informed. w k e , s _ who work a standard , I, hour
P " ' Personnel manager will men, will 'apply'.!'"ougn , h . worS 'a
stsek lo redeploy the employee to normal basic S hour shift,
more suilable employment within
the plant Where this is no; possible ^ M M M * Personnel manager will discuss W ^ ^ ' f ' j M J
, d ^ Z d r a a c l r a e d t o deetL the
n r a M m l u m W e r

. I

J,7mTnS

I Hi*\W'.^tUP
j C ^ I - j j ^ l L m ^ ^ l

J^lMl^tWlM
v ; T h e i c , l n t l b o l o w

PLANT

. I FORMULA

r-

M N K F D PI ANT B P H P M P k i f L A N T S C H E M E Abingdon

t^iauty

JJoduct Engineering
Product Engineering t T ' l u i , ,, . Marketing (Austin Morris) Qu'ildy (Joguarl Product Engineering (Rover/Triumph, SalesfirMarketing lAustin Morris! Systems iCarsStaffs) Quality (CarsStaffs) Body Engineering IPSE! Sale. & Marketing (Austin Morris) iWarranlvft Service) Tool & Die Plant Pr.duc,Engineering 'Rover/Tr.umph,

Acocks Green dagu.r Limiled Jaguar Limited , ,- Jaguar Limited JaguarLimited Canlev Canley Canley Canley Cowley Body Parts Division Swindon

Audited Work Standard Hours Generated + Audited Off Standard Hours - Audited Indirect Variable Labour Hours . Audited Base Efficiency = Audited Non-production Overtime Hours Audited Work Standard Hours Generated Audited Base Efficiency = 20 Bonus Points | Therefore, the Aud.led Plan, threshold . ,.2 , Audiled Base E.nceacv
1

mm*

1
' f j

T n e ^ Pny original p r o p o s a l . 7 5 p per pomt up t o . maximum of 20 points ( i l b l

/ ,., jjjjj^j, ^ - ^ ^ I ' righ.Ua:...

Basic Understanding Experience has shown that certain I aspects of industrial engineering practice I misunderstanding at the work-place being studied. The 'arrangementa for Trade Union involvement in p a r a p h 5.11 of this Agreement should h e l P , minimise this. To further reduce the possibility of misunderstanding the following points of clarification are I agreed:c a n g e [ l e r a l e

or work assignment was established , d ,hat the employee understands a n d is s u f f i c i e n t l y ex p e r i eneed/trained to be able to undertake the task. If for any reason, any of these factors are not as specified arrange for the necessary corrective action to be l^ken. The fon>man-. mvevngat .on * ' normally be competed with.n \ - > *^ ' "^">^ raising the matter Ic) Should the foreman's investigation fail to identify an omission or mistake, or establish that some other
a r l h e f o r e r a a n W , U

I I

VEuJWHnU^mfP^H BByfi ^fI ' / i ^ ' f Vfi* ^limTT ^Ll

Introduction
- agr^d principles out ' biu e bec-n developed in order
Bf?fillWlHWlIM^KHCyilvllel to ensure that flexibility with equity
I |jj|ffiTtt|L _ H T 9 C ^ H H which will assist the Company to main ^ ^ g t H M l U U l M H H tain production and the continuity of
employment.
1 l i n e c l

|^PKVVIPIP^I|VBVH|HH

tit
d

n T 2

A l l hours of shift working, with the , , | U.rer s||, working, will be paid i n accordance with multipliers established by the C S E U - E E F National Agreement. Thus. hoursofstandardnightshifi.work.nl; will be paid for a t grade rate plus wil, b ^ p i d
e x c i o n r d o u b l f c a v a n t h e

l n

Z^J^e
^ l

P y Transfers , - rate of p:,y which will apply to employees temporarily (.-..n^/rred w i l l be determined by reference to the follow S criteria. UK When an individual is required to
perform work of a higher grade level

r h l

^ f Z ^ ^ i & X

S.tSSSSfl
industrial engineer u t d , if the employee . requests, a shop sleward "*"' Id) The investigation will be completed normallv within two weeks and may involve industrial engineers conducting further studies and investigations (e.g. method or production study), The shop steward directly concerned mav be present at anv such studies or re-sludie.. , ,TI, .. =,i (el The coo ,,. I g , - . a reque.t to a , o l , ....- rom any tudie> concerned to tne Union involved. (ft If the above procedure fails lo eradicale the problem, the mailer will be
D d m m a n a D a a n n 2

Z Z ^ Z \ l f J T ^
form port of required on the job
training, and the lime spent on the

EXAMPLES
. . , , , . , ,~ III! A u m e d UorkSUindiird Hours/Unit aa'fai i A? Auoiteo indirect Manning
u c

Canley

CowleyBody CowleyParta Dunstable Dra.vtonRoad 1

k

J-,_JXI r. - ^ Audited Non-Production Overtime _ Volume S" ^ , Work Standard Hours Cener.ted - 6x 1000 = 5000 Hour, OfTStandard Hours Lenerated = 25K.X5000 - 1250 Hours Variable Indirect Hours Generated - 60x40 - 2400 Hours Non-Production Overtime Hours Generated - 250 Hours 5000 + 1250 + 2400 4 250
1

=5 " = 90-40 Hour Men 160 Variable & 30 Semi-Vuriablel - 260 Hours/Week = 1000 Units/Week
2 5 %

_ ( , Have access lo work situation. Mf ill Develop improved methods. T i i i l Use any recognised industrial engineering tlehniques includi n | performance rating to evaluate work content (iv) Develop work assignments based on estimated work standords pending a full work study. Iv) Study as many cycles a . ore required lo 1,1,.1, eciuitable work standard ,b) SUndard time, are not a matter for negotiation. Ic) Work standards esUblished on individual sh.fl. w applied lo any olher shift performing the same operation/task Id, In'establishing work standards, if ,s accepted that the Unions and their members will co-operate lo the full by:r-.iir i it u-i a I,) Work,ng normally while under observation by i n d u s t r i a l engineering personnel (li) Discussing the content of their job wilh supervision, management, industrial engineering or other personnel and demonstrating the whole or part of the job as required. ' n f o r m i n g their superior of any conditions which may prevent achievement of the work ,tandard. (iv)Trying out and assisting wilh revised and/or new production methods, equipment and materials. . lv| Using such production aids for momtoriog working procedures and systems , are required bv the managemenl lo ensure the smooth running of the opera-

mium for Sundays _ .. ,. , The Parties recognise that an important contribution to the d l i n c . . . ' oflbeCompany could be generated by ihe greater utilisation of both existing and new facilities and equipment. Accordingly, the Company will shortly be tabling within the JNC proposals f o r ihe extension, and payment, of shift working outaide normal standard shift patterns The principles established in ibis Appendix therefore are agreed witliou, prejudice lo the outcome of these discus- v . , 3 It , . .greed that there will be a restrictions placed upon Die allocation "I empl,,, e. - lo ,,,,,,,,-,,].,, .lulls 1 , hi

' ; ' ' " ,'; ' ,

than one-hall ol a working snilt.
ib] When an individual is required to
perform work of a lower grade level than normal, he will retain the appropriate higher grade rate and higher premium rate except wheie the change has been made at the individual's own request, or the chaoge has been made because of the ind.yalu.dV inah.litv lo perform the
higher graded work
, . . ,
Ic)The same principles as Ihose above apply to moves required during overtime hours with Ihe one excep
fc

SX"
Longbridge Longbridge Jaguar Limited Longbridge These activities will be linked to the Solihull Cars Plant or Solihull 4x4 Plant in line with the service, they provide to these plants C.nley Longbridge Canley Oxford Exhausts Acock. Green

Therefore. Audited B .

EITieiency .

| 7 , , , , T 1.78 x 1.2 - 2.136

= 1.78

3 S S S ^ 5 X | 2 ^
Si ion rear' . , ~ ' k T I discussions will lake pl.ee on how this will
o

'

. a

and the Audited Plan, Threshold Audited f l a n l lhre.hold -

is not less lh:, ooe-halfof,, working shift ..dropped, and payment will he made for the overtime hours worked. , ^ . ub Temporary changes lulling within die scope of these arrangements will normally apply only for periods of lime up to a maximum of two working weeks, and the above princules would not apply where a permanenl grade change occurs.
11

Longbridge

Product Engineering (Austin Morris. Systems (CareStalTs) Radford Product Engineering (Jaguar, Redditch Product Engineering lAuslin Morris) Solihull Product Engineering (Rover/Triumphl Product Engineering iCarsSloff.) Sale. & Marketing lAustio Morris) Duality ,Rover/Triumph) Springfield Road Product Engineering (Rover/Triumphl Studley Sales & Marketing (Austin Morris) Templar Avenue Product Engineering IRover/Triumphi Thame S U Butec,Warehouse! WebbLane Quality ICar. Staff.)

Umon representative, tor resolu . 4.2 Should Ihe performance of an employee consistently fail to meet requirements, the following procedure will apply: la) The approprmfe shop steward will be consulted m order lo iry lo resolve the problem h.lore recourse tothe formal procedure outlined below. (b) If still necessary, the foreman will di.usslh, 1,1 heemployee in Z * ?Z .hop ..award and if appropri.le will arrange for the employee to receive further troiniu..
C 0 K

(ml Using the example m order U, c.ilculole Authorised Hours at the Audited Plant Threshold for different volume levels EXAMPLE: Volume 900/Week Work Standard _ Hours Generated " aOO x 5 - 4500 Hours Authorised Hours nenn Semi Voriohle AtThreshold " 0 0 x 2.13b)+ 1J0 x 40) ]ndi e,-is Authorised Hours At Threshold = 9612 + 1200 = 10,812 H o u r . . . (ivl BONfIS POINTS C A 1 c m A T I C M l r t u . l O m C J U M J t l W " " UnitsWeek Actual Hours - 10.330 then 10,330 - 130 x 40) Semi-Variable Indirects , , . = 9130 Hours Standard Hours Generated - 4600 Hours Therefore Current Efficiency - 9130 - 2.028
, 4 5 r W 0

, . m p i m y has made a specific commitment in relation to introducl ion of double day and three shift k , n . ,,! i h , |,,.,| i paragraph 5 4 f the Agreement
p m e p t a c t i c e T h C r

'

,.,.. , , tfticiency Index Bonus Point. Earned

4500 2-136 = TT^g ='

1.06

(c) If the performance is slill madequale the foreman will notify the employee verbally in the presence ol his shop steward and a reasonable penod for improvement will be arranged. This period will not exceed four weeks.

Double Day and T h r e e Shift Working 4 In relation to double day and three k i n g . where the C S E U - E E F | Agreementestablishes houraof y m e n t , a different arrangement has been agreed. In return for acceptance by Stocktaking the Unions that double day and three '"V j,'' ,' "T" 11 ,, -lull working are the sole exceptions to cooper .it,,n lo ensu, o thai al I necessary the principle, outlined in paragraph r ^ S S ^ J S ^ ! ^ above, and that such working will noi } >"*' , *T. , ..,,, deviate from the hours indicated below. Jel uicd tin,, o 111,, v,. r 1 o.,, i .iallv annu the Company has agreed that all such ally) as p a r i ol t o i l . phv .ical mven hours will be paid for at the appropriole ton. - J 1 " '''"'med e .ilier .luring the grade rate. In consequence, Ihe following -'>"'"' ,"' "' c" paymenls will apply for a normal double required by I he t ompi.n.1. w-i 1 1 be paid lor day or three shift week of 117 5 hours,,((.radc-4 rale 1 inchntnic, ,1 ;,|,propriaie, 0 0 an, u, 2 oo the Grade 4 premium r u e , or the 2 0 .0 pa, u 0 .0 .0 pm is keen,., f'.Z n u employees normal rate, whichever i . the
1 00 0 pm t o 60 0 am 50 hours at grade rote greater.

g M r t w o r N u L l 0 n u pa 3 l 1 nc 6 p m h o l l

Adults in T r a i n i n g 1 In principle, it is agreed that all adult employees will receive the rate for the job. including new recruits and existing employees transferring into a higher graded occupation. This does not preclude local discussions and domestic agreement on a training rate of pay which is below the grade rate where this is agreed to be appro priate to local circumstances. The accept ance in principle, by the Company of the rate for the job in all circumstances in no way changes the practice of probationary

periods. Emplovees who do not reach an acceptable standard of performance after four working weeks in the new job would be subject to joint domestic discussions in accordance with plant practices and pro cedures. New employees who, after joint domestic discussions, continue to fail to meet the required standard of perform ance after a further four weeks on the trainingrate.maybetransferredtoalower grade if work is available, within their capability, or be dismissed after consultation.

Incapacitated and L o n g S e r v i c e Employees 6 It is recognised by the Company that, in certain medically approved cases, employeesmaynotbecapableofachieving standard performance. In consequence, the Company and Unions have agreed lhat, where possible without prejudicing production requirements, such employees who are experiencing temporary or per manent incapacity which, while limiting their abilities, would not totally prevent them working, should be permitted to

return lo, or be retained at, work on their normal rale of pay. This arrangement, once established, will be kept under review, and from time to time it may be necessary for such employees to submit themselves for a medical inspection by a Company doctor. It is part of the spirit and intention of this Agreement that employ ees will be prepared to transfer to suitable alternative work in order to make avail able vacancies for such incapacitated employees,

Lithographed in England by The Nuffield Preu Unutrd, Coutty. Oi/urd.

1 *

10

10 D O W N I N G S T R E E T
From the Private Secretary 25 March 1980

The Prime M i n i s t e r h e l d a meeting yesterday evening to

d i s c u s s the s i t u a t i o n at B r i t i s h L e y l a n d . The f o l l o w i n g were
p r e s e n t i n a d d i t i o n to your S e c r e t a r y of S t a t e : the C h a n c e l l o r
of the E.xchequer, the S e c r e t a r y of S t a t e f o r Employment, S i r
Robert Armstrong, S i r Kenneth B e r r i l l , Mr. John Hoskyns and
Mr. D a v i d Wolfson. They had b e f o r e them your l e t t e r of 21 March.
S i r K e i t h Joseph s a i d t h a t , a f t e r a bad s t a r t to the y e a r , B r i t i s h Leyland's performance had improved i n the l a s t month or s o . S a l e s had improved, and t h e r e had been no s t r i k e a c t i o n . The B r i t i s h L e y l a n d Board had i n d i c a t e d that they expected to keep w i t h i n the e x i s t i n g Government f u n d i n g p r o v i s i o n f o r the coming y e a r . At t h e i r next meeting on 26 March they were l i k e l y to d e c i d e to proceed with the B r i t i s h Leyland p l a n . British Leyland management were doing as w e l l as c o u l d p o s s i b l y be expected i n the c i r c u m s t a n c e s . The o n l y p o i n t on which S i r M i c h a e l Edwardes was not p r o v i d i n g f u l l c o - o p e r a t i o n was on the s u g g e s t i o n t h a t the Government s h o u l d appoint someone to a d v i s e on the d i s p o s a l o p t i o n s . S i r M i c h a e l was opposed to any such appointment because he was a f r a i d t h a t i t would l e a k , and t h i s c o u l d l e a d to the c o l l a p s e o f the Company. He was not averse t o d i s p o s a l as s u c h , and was w i l l i n g i n p r i n c i p l e to look f o r p o t e n t i a l purchasers; but he d i d not b e l i e v e t h a t t h i s c o u l d be v i g o r o u s l y pursued at the p r e s e n t time when the Company were t r y i n g to a c h i e v e a t u r n around i n performance: he took the view t h a t t h i s must wait u n t i l i t was c l e a r t h a t t h e r e was no p r o s p e c t of s u r v i v a l i n i t s present form. To move e a r l i e r would a l l too e a s i l y l e a k ,
and thus undermine the whole r e c o v e r y s t r a t e g y .
S i r Kenneth B e r r i l l s a i d t h a t , w h i l e S i r M i c h a e l might be doing a good j o b as C h i e f E x e c u t i v e , he c o u l d never be expected to c o n s i d e r the d i s p o s a l o p t i o n s w i t h any r e a l enthusiasm. I t was o f the nature of t h i n g s t h a t managers of companies were never keen s e l l e r s of companies. There c o u l d be no meaningful d i s c u s s i o n on s a l e o p t i o n s except between p o t e n t i a l purchasers and the Govern ment as s h a r e h o l d e r . Moreover, such d i s c u s s i o n s would have to be very d e t a i l e d . The Government d i d not have s u f f i c i e n t e x p e r t i s e to be a b l e to conduct d i s c u s s i o n s of t h i s k i n d ; and hence, i t was most important that an a d v i s e r with adequate support should be appointed very s o o n . The Government ought to appoint someone,

__

/ i f possible,

SECRET

^|
M

I
I I

i m p o s s i b l e with auto i n d u s t r y e x p e r i e n c e , who wo^ld c o n s i d e r the

ffe u W p o s a l p o s s i b i l i t i e s i n d e t a i l , i f necessary with the h e l p o f c o n s u l t a n t s , and a d v i s e the Government on the best course of a c t i o n . The C h a n c e l l o r s a i d that he was w o r r i e d that no p r o g r e s s had been made i n a p p o i n t i n g an a d v i s e r . While i t was necessary to r e l y on S i r Michael Edwardes and h i s team f o r the managemen t of B r i t i s h L e y l a n d , he agreed with S i r Kenneth B e r r i l l t h a t M i n i s t e r s needed expert a s s i s t a n c e on the q u e s t i o n o f d i s p o s a l s . I t s t i l l seemed a l l too 1 i k e l y t h a t the B r i t i s h Leyland plan would f a i l . The l o n g e r the delay i n f i n d i n g a p u r c h a s e r , the l e s s l i k e l y was i t that i t would be p o s s i b l e to f i n d one at l e a s t f o r the whole b u s i n e s s i n c l u d i n g Longbridge and Cowley. S i r K e i t h Joseph s a i d that t h e r e was l i t t l e p r o s p e c t of f i n d i n g a
p u r c h a s e r f o r the whole b u s i n e s s , and the r i s k o f the appointment o f an
a d v i s e r on d i s p o s a l s should not be u n d e r - r a t e d . N o n e t h e l e s s , he was
prepared to pursue the i d e a of a p p o i n t i n g someone. T h i s would have to
be on the understanding that S i r M i c h a e l Edwardes would have to be t o l d not l e a s t because an a d v i s e r would need B r i t i s h Leyland's c o - o p e r a t i o n i n
p r o v i d i n g i n f o r m a t i o n . The S e c r e t a r y of S t a t e f o r Employment suggested
t h a t one p o s s i b i l i t y would be t o a p p o i n t someone t o the B r i t i s h L e y l a n d
Board with the job o f l o o k i n g at the d i s p o s a l o p t i o n s .

1
I |

I ,

The Prime M i n i s t e r , summing up, s a i d t h a t M i n i s t e r s were agreed t h a t , the Government needed a s s i s t a n c e on the d i s p o s a l quest i o n , and that the ' appointment of an a d v i s e r w i t h s u i t a b l e back-up should be u r g e n t l y pursued.
In the f i r s t i n s t a n c e , i t would be h e l p f u l i f S i r Robert Armstrong c o u l d
c o n s u l t w i t h S i r Douglas Wass and S i r P e t e r Carey ( o r , i n h i s absence, Mr
B u l l o c k ) . M i n i s t e r s s h o u l d meet again b e f o r e E a s t e r to c o n s i d e r t h i s i q u e s t i o n f u r t h e r , and a l s o take s t o c k of the outcome of the B r i t i s h Leyland
Board meeting on 26 March.
I am s e n d i n g c o p i e s o f t h i s l e t t e r t o John Wiggins (HM T r e a s u r y ) ,
R i c h a r d Dykes (Department o f Employment) and David Wright (Cabinet O f f i c e ) .

I K C Ellison Department o f

Esq
Industry

Ref:
' #

A01771

I K S -

* * * * *

CONFIDENTIAL

snirvi-

u j t

^ f i ^ -

^ ^

PRIME

MINISTER

t,

h ^ _ r

British

Leyland

72.
BACKGROUND I FlAC n Y o u are having a stocktaking meeting of S t a t e f o r I n d u s t r y ' s of o n 24th M a r c h . The Secretary I

letter"oi H i s t M a r c h and S i r M i c h a e l E d w a r d e s ' l e t t e r S i r K e i t h J o s e p h w i l l a l s o be a b l e E d w a r d e s on 2 I st March. to

18th M a r c h p r o v i d e the b a c k g r o u n d . with S i r M i c h a e l

r e p o r t on his meeting HANDLING 2.

Y o u w i l l w a n t S i r K e i t h J o s e p h to r e p o r t o n the l a t e s t s t a t e o f p l a y . you m i g h t c o n c e n t r a t e discussion on: H o w l i k e l y i s it that 21 p e r the share

Thereafter (a)

The Company's curronl Company's recent

rjerfo^rnancgj

sales performance

cent m a r k e t

s o f a r t h i s m o n t h c a n be m a i n t a i n e d ? factor i n this; sales d r i v e as BL's )l (b)

T h e B u d g e t m a y be a Is the

b u t y o u m a y p r e l e r ' n o t to m e n t i o n t h a t . e x p e n s i v e as it a p p e a r s to the casual

r e a d e r of to

advertisements?

Is the

s t e e l s t r i k e b e g i n n i n g to b i t e

B L ' s detriment? The Wages strikes Package: What is the l a t e s t a s s e s s m e n t o f the r i s k of How

following

the i m p o s i t i o n o f the w a g e s p a c k a g e ? its

r e a l i s t i c i s i t to e x p e c t the C o m p a n y to i m p o s e productivity (c) (d) (e) improvements? Is t h e r e a n y m o r e Is t h e r e to

planned

Contingency Planning:

report? to report?

Collaborative Arrangements: A d v i s e r on D i s p o s a l : adviser on d i s p o s a l

more

D o the C o m m i t t e e

a c c e p t B L ' s v i e w that a n doubts

s h o u l d n o t be a p p o i n t e d b e c a u s e of the

t h i s w o u l d t h r o w o n the C o m p a n y ' s f u t u r e ? (*) Implications to h i s oi Collapse: D o e s the C h a n c e l l o r w a n t to a d d a n y t h i n g of the B L

recent

r e p o r t to y o u o n the w i d e r i m p l i c a t i o n s generally?

collapse?

O r i n d e e d on B L ' s financing

CONFIDENTIAL

CONFIDENTIAL CONCLUSIONS 3. e. g. Y o u w i l l w a n t to r e c o r d a n y s p e c i f i c c o n c l u s i o n s which have e m e r g e d , Otherwise, a l l that i s I

o n the a p p o i n t m e n t o f a n a d v i s e r o n d i s p o s a l s .

n e c e s s a r y i s l o r the C o m m i t t e e to i n v i t e the S e c r e t a r y of S t a t e f o r I n d u s t r y to r e p o r t p r o g r e s s a f t e r the n e x t B L B o a r d m e e t i n g on 26th M a r c h w i t h a v i e w to a f u r t h e r m e e t i n g of the G r o u p j u s t b e f o r e o r j u s t a f t e r , break. the E a s t e r

JljX

(R-obert A r m s t r o n g )

21 st M a r c h

1980

-2-

CONFIDENTIAL

COPY N O

I OF % COPIES

COMMERCIAL - SECRET

Qft
04979

To: From:

M R 1ANKESTER
SIR KENNETH BERRILL

Possible sale of British Leyland

1. The group of Ministers under the Prime Minister i s due to discuss on
The Prime Minister

Monday afternoon the current position on British Leylnnd.

might like to have this note on how the possible purchase of British Leyland
by Ford has progressed since I reported that the head of Ford of Europe
(Mr Lutz) had received the "green light' from Detroit to negotiate for the
purchase of BL i f he considered that this was the best way of making the
planned expansion of Ford of Europe's capacity.
2. Unfortunately, I have to report that things are not going well. Ford

of Europe ure s t i l l proceeding with staff analysis on the pros and cons of
\ a possible purchase but Mr Lutz is increasingly unwilling to take any
| further initiatives himself.
3. Mr Lutz happened to run into Sir Michael Edwardes and was subjected to

a fairly brusque attack along the now familiar lines that Ford are competing
unfairly with BL in the British market by bringing in cheap imports - particu
larly from Spain. There is the reverse of a rapport between the two men.
If Lutz is going to negotiate to buy the company
'
1

Lutz feels that Edwardes i s fighting a hopeless cause of trying to save BL

rather than to sell i t . Board).
l

he will negotiate with the owners (the Government) not the managers (the BL
"

t.

There is an additional small complication in that Mr Lutz B one meeting Understandably, perhaps, Sir Keith Joseph did not display any but in any case the person for - which Lutz now thinks

with the Secretary of State for Industry did not seem to him particularly constructive. keenness on the part of H M G to sell BL; he also indicated that there might be other buyers in the market than Ford; would be pointless. Mr Lutz to deal with was Sir Michael Edwardes

1
COMMERCIAL - SECRET

iiiiiiHIHiliiHHHiiHbiM

'a

COMMERCIAL SECRET 5. A f u r t h e r setback there is is the growing b e l i e f no need amongst senior executives of F o r d o f Europe t h a t As f o r F o r d to h u r r y to t r y to do a d e a l . They have had

time goes by the p o s i t i o n o f BL g e t s c o n s i s t e n t l y

worse.

two s u c c e s s e s ( t h e but 6.

v o t e on the Edwardes P l a n and the v o t e on Mr R o b i n s o n ) the story is one o f c o n t i n u o u s slippage. settlement, "Buy

a p a r t from these BL have s t i l l

n o t a g r e e d w i t h the work f o r c e a wage or d e t a i l s of closure programmes.

productivity deals, British 7.

1

The e x p e n s i v e

campaign ( i n the

short run at

least) it

was n o t a s u c c e s s . will pay to wait. The to B L

T h e r e a r e t h o s e i n F o r d who b e l i e v e get so bad t h a t

position will recommend that able

the BL B o a r d w i l l

no l o n g e r be a b l e

the company be c o n t i n u e d and i n t h i s p o s i t i o n F o r d might be of BL i t r e a l l y wanted and n o t be f o r c e d to take

to buy the b i t s

Longbridge, 8.

Cowley a n d B a t h g a t e . of the Government a r e the b e s t to s e l l terms. BL as a complete package

The i n t e r e s t s

under the be3t c o n d i t i o n s and a t time i s on 1 In.- i r si de, it cannot

I f F o r d a r e r i g h t , and o f the Government. If the

bo on the s i d e

Government hud chosen and a p p o i n t e d a "Mr Super Salesman" i t might t h e n be possible at f o r him to d e a l w i t h L u t z d i r e c t as that is happening i s the Government's a g e n t . Edwardes i s But

the moment a l l

that Michael

g o i n g ahead is

on h i s c o u r s e o f s t r i v i n g t o save B L , and the most l i k e l y p u r c h a s e r sitting back w a i t i n g f o r t h i s effort to f a i l i n the belief

t h a t he can then

p i c k up the

b e s t p i e c e s and n o t have to

take L o n g b r i d g e , Cowley and B a t h g a t e

which a r e the h e a r t o f the p r o b l e m . 9. I am s e n d i n g a copy o f t h i s minute to S i r Robert A r m s t r o n g .

HI
21 March 1980

COMMERCIAL -

SECRET

I
M

CONFIDENTIAL COMMERCIAL IN CONFIDENCE

m\\ ~* ( 1 -Aj. JtV )

! *
HOUSE STREET

D E P A R T M E N T O F INDUSTRY ASHDOWN 123 V I C T O R I A LONDON

SW1E 6RB

TELEPHONE DIRECT LINE 0 1 2 1 3 5501

S W I T C H B O A R D0 1 3 1 2 776

Secretary of State for Industry

Jll Tim LarLkester E s q P r i v a t e S e c r e t a r y to t h e Prime M i n i s t e r 10 Downing S t r e e t LONDON SW1

March 1980

You a s k e s / f or a note on the c u r r e n t s i t u a t i o n b e f o r e t h e Prime

M i n i s t e r ' s meeting about t h e c u r r e n t s i t u a t i o n a t BL on 2 4 -
March. I e n c l o s e a copy o f a l e t t e r from S i r Michael Edwardes
which, summarises t h e BL Board's assessment a t t h e i r meeting
l a s t week. My S e c r e t a r y o f S t a t e d i s c u s s e d t h i s w i t h S i r
Michael today. BL p u b l i s h e d t h e i r unaudited 1979 end-year f i g u r e s l a s t week. These showed a t r a d i n g l o s s o f 4 6 m and a net l o s s a f t e r t a x a t i o n , i n t e r e s t , and e x t r a o r d i n a r y items o f 1 4 5 m . BL C a r s ' performance d e t e r i o r a t e d by 1 0 8 m compared with "tyyti.' T h i s y e a r began d i s a p p o i n t i n g l y with BL C a r s ' domestic market share . f a l l i n g to 15% i n J a n u a r y . The February f i g u r e was 16.7% arid would p r o b a b l y have shown f u r t h e r improvement but f o r doubts among would-be customers about the outcome of t h e Robinson a f f a i r . The impact o f BL C a r s ' v i g o r o u s s a l e s campaign i s expected t o be f e l t most s t r o n g l y t h i s month and market share to date i s 21%. I U Despite these adverse developments, the Board expect to keep ] I'l w i t h i n e x i s t i n g Government f u n d i n g p r o v i s i o n s without jeopar- / l| d i s i n g the agreed l o n g e r term o b j e c t i v e o f t h e i r P l a n . Xhey / ^imf.n HjDnfirro t h i s a f t e r t h e i r f u r t h e r meeting on ?G March. 1 1
S i r " Michael t o l d my S e c r e t a r y o i titate t h i s morning that BL s
cash s i t u a t i o n i n f u t u r e y e a r s would depend h e a v i l y on the
Government's success i n lowering i n f l a t i o n . S i r Michael w i l l be
d i s c u s s i n g t h i s f u r t h e r w i t h t h i s Department a f t e r the Budget.
My S e c r e t a r y of S t a t e i s s a t i s f i e d that any judgement on the
P l a n i n the l i g h t of t h e 19 December l e t t e r must be l e f t t o t h e
B o a r d . S i r M i c h a e l a l s o r e p o r t e d on developments i n connection
w i t h BL's c o l l a b o r a t i v e v e n t u r e s . These i n c l u d e t h e Honda deal
t o produce the Bounty and d i s c u s s i o n s o f a v a r i e t y of p r o j e c t s
with BMW, R e n a u l t , VW, P e r k i n s , N i s s a n and I n t e r n a t i o n a l

H vi e ste r rCOMMERCIAL e a land l p ar i u a ri ln yg p cr oo np fo is da el ns t

a ic a l
not Ma ar rt be n d Lagonda i. s c l These o s e about d . aBL MG has CONFIDENTIAL put its dc e a IN t wl ai CONFIDENCE t l e d t h e i r r e to t i and Aston o n s .must

CONFIDENTIAL
COMMERCIAL IN CONFIDENCE

The wage and c o n d i t i o n s of employment n e g o t i a t i o n s f i n a l l y broke down on 17 March and BL Cars have d e c i d e d to implement the package u n i l a t e r a l l y . BL Cars are w r i t i n g to a l l t h e i r employees g i v i n g them n o t i c e t h a t , when they f i r s t c l o c k i n a f t e r the E a s t e r h o l i d a y b r e a k , they w i l l be deemed (hy the act of c l o c k i n g i n ) to have accepted t h a t the r e v i s e d c o n d i t i o n s of s e r v i c e are i n c o r p o r a t e d i n t o t h e i r c o n d i t i o n s of employment. Those not a c c e p t i n g the changes w i l l be t r e a t e d as g i v i n g four weeks' n o t i c e . Accumulated back pay w i l l not be i n c l u d e d i n pay packets at once f o r a d m i n i s t r a t i v e reasons hut w i l l be p a i d out i n mid-May. There i s the p o s s i b i l i t y of some i n d u s t r i a l a c t i o n at p l a n t l e v e l . My S e c r e t a r y of S t a t e has d i s c u s s e d the h a n d l i n g of contingency
p l a n n i n g w i t h S i r Michael Edwardes. We are now i n a b e t t e r
p o s i t i o n than b e f o r e Christmas because of S i r M i c h a e l ' s and h i s
Board's commitment to s t a y w i t h the company, should they decide i t
i s n e c e s s a r y to withdraw the P l a n , and to co-operate with the
Government i n a c t i o n to minimise the r e s u l t i n g damage. My
S e c r e t a r y of S t a t e c o n s i d e r s i t most important that no a c t i o n
be taken by the Government to o v e r r u l e the Board i n any way which
might put t h e i r c o - o p e r a t i o n at r i s k and he endorses S i r Michael's
s t r o n g l y h e l d view t h a t no p r e c a u t i o n a r y moves should be taken by
the Government which c o u l d p r e j u d i c e t h e i r chances of p u l l i n g
t h r o u g h . There i s great p u b l i c i n t e r e s t i n BL's a f f a i r s and any
news of Government a t t i t u d e s and a c t i o n s a n t i c i p a t i n g c o l l a p s e
would s e r i o u s l y damage the c o n f i d e n c e of purchasers and d e a l e r s .
O f f i c i a l s have given f u r t h e r c o n s i d e r a t i o n to the s u g g e s t i o n
t h a t M i n i s t e r s should appoint an a d v i s e r to the Government such
as S i r Kenneth C o r k . I f such an appointment were made, the
person i n q u e s t i o n would have d i f f i c u l t y o p e r a t i n g simply on the
i n f o r m a t i o n which was a v a i l a b l e i n the Government machine; he
would need to have c o n t a c t w i t h BL d i r e c t . S i r Michael Edwardes
agrees t h a t at the r i g h t moment - i f i t ever a r i s e s - the Board
themselves should employ such an e x p e r t ; but h i s Board do not
c o n s i d e r they have reached t h a t stage and they c o u n s e l s t r o n g l y
a g a i n s t t a k i n g any premature a c t i o n . They p o i n t out t h a t there
is o n l y a h a n d f u l of people i n the c o u n t r y capable of g i v i n g
worthwhile a d v i c e and these are a l l well-known and t h e i r i n v o l v e
ment would be i n t e r p r e t e d as a s i g n t h a t the end of the road had
been r e a c h e d . A c c o r d i n g l y the Board of BL would be s t r o n g l y
opposed to the involvement of such an i n d i v i d u a l u n t i l the end
of the road was m a n i f e s t l y i n s i g h t . N e v e r t h e l e s s i f M i n i s t e r s
s t i l l a t t a c h importance t o having such a d v i c e , o f f i c i a l s could
e x p l o r e whether such an expert would be w i l l i n g and a b l e to do a
u s e f u l job without d i r e c t access to BL. There would, however,
remain a s e r i o u s r i s k t h a t such an appointment could not be kept
s e c r e t and leakage would be v e r y damaging. My S e c r e t a r y of S t a t e

/has CONFIDENTIAL
COMMERCIAL IN CONFIDENCE

...

CONFIDENTIAL
COMMERCIAL IN CONFIDENCE

has warned S i r M i c h a e l t h a t the Government might appoint someone

a g a i n s t BL's wishes but he has promised to inform S i r M i c h a e l i f
an appointment i s t o be made.
i "U/ Other contingency p l a n n i n g i s a l s o i n hand and the Prime M i n i s t e r
[ w i l l have seen the T r e a s u r y ' s updated e s t i m a t e s o f t h e impact o f
a BL c o l l a p s e on p u b l i c e x p e n d i t u r e . The C h a n c e l l o r and my
S e c r e t a r y of S t a t e have a l r e a d y agreed the circumstances i n which guarantees would be i s s u e d and o f f i c i a l s of the two Departments are d r a f t i n g an u n d e r s t a n d i n g on the coverage o f guarantees and the procedure which would need to be adopted i n those c i r c u m s t a n c e s . O f f i c i a l s of t h i s Department have a l s o been examining w i t h the Department of Employment and the T r e a s u r y measures which might be taken t o a l l e v i a t e the knock-on e f f e c t s of a t o t a l or p a r t i a l BL c o l l a p s e . No measures, however, w i l l be able t o prevent major and widespread d i f f i c u l t i e s . I f the Board s h o u l d e v e n t u a l l y conclude t h a t t h e y c o u l d no longer
d e l i v e r the P l a n , t h e y have undertaken t o g i v e us warning so t h a t
n e c e s s a r y c o n s u l t a t i o n s can take p l a c e t o enable guarantees to be
i s s u e d to the major l e n d e r s i n r e t u r n f o r t h e i r agreement t o
waive covenant r e s t r i c t i o n s i n h i b i t i n g the r e - s t r u c t u r i n g of the
company and s u b s t a n t i a l d i s p o s a l s of a s s e t s . In t h i s i n t e r i m p e r i o d
b e f o r e a p u b l i c announcement, d e c i s i o n s would a l s o need to be
reached i n c o n s u l t a t i o n w i t h the Board on the f u t u r e of i n d i v i d u a l
c a p i t a l expenditure programmes. Because of the danger of leakage,
i t might not be p o s s i b l e d u r i n g t h i s p e r i o d to make overt approaches
to p o t e n t i a l p u r c h a s e r s , but p r e p a r a t i o n s would be made t o
i n i t i a t e urgent d i s c u s s i o n s immediately a f t e r the p u b l i c announce
ment. O f f i c i a l s c o n s i d e r a minimum p e r i o d of two - t h r e e weeks
should be allowed t o complete the n e g o t i a t i o n s w i t h the banks on
t o agree new o p e r a t i n g i n s t r u c t i o n s f o r
the guarantee i s s u e ; the Board; and t o secure M i n i s t e r i a l agreement on the supplementary
measures d i r e c t e d t o m i n i m i s i n g the knock-on e f f e c t s .
I am copying t h i s l e t t e r t o M a r t i n H a l l ( T r e a s u r y ) , R i c h a r d Dykes
(Employment), John Hoskyns and David W r i g h t .

lew

CONFIDENTIAL
COMMERCIAL IN CONFIDENCE

If .
I ' jp***
1

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j..-,

I
3 5 - 3 B POFVTMAN S Q U A R E LONDON W 1 H OBN I

.'

I, FROM S I

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I

, T E

M.CHAEL E D W * O E S

18th March 1980

The Rt. Hon. S i r Keith Joseph, Bt,MP, Secretary of State for Industry, Ashdown House, 123 Victoria Street, London SW1.

, PC* .'.DV1CE (AND ^ l ( j l M

' C" 'FT R " . F L Y if < ^ i _ %%% - c . ? . T n
4. \_t_r-pi^M \ n - 3Y: M' Svu V _ .H

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H. j I

On 12th March the Board considered the company's current position and has asked m e to provide you with i t s conclusions. In making this review the Board has considered the Corporate Plan, my letter to you of 19th December last year and our discussion of p r i o r i t i e s on 16th February in which i t was agreed that the overriding criterion for judging the company's position was i t s a b i l i t y to stay within the approved Government funding l i m i t s . First i t seems clear that, while BL should meet the Plan on Commercial Vehicles, i t w i l l not be able to attain the profit objectives set for the Cars business in 1980. The bad start experienced in the f i r s t two months of the year in terms of market share, coupled withtougher economic conditions than originally assumed, is primarily responsible for t h i s . We are, Of course, taking vigorous action to remedy, to the fullest extent possible, the cash and other consequences. For example, we are running very aggressive marketing programmes to restore and maintain our UK market share in the run up to new Marina and Metro product launches and to reduce working capital. Furthermore, we have indicated to employee representatives that we intend to accelerate, to a significant degree, the restructuring and redundancy elements in the recovery programme announced in September 1979. This cannot be easy for them to accept, but they have not i n fact baulked at i t .

H. H|

Continued

&

The Rt.Hon. S i r K e i t h J o s e p h , Bt,MP, Secretary of State f o r Industry. 18th March 1980 Page 2.

fl'

fl i

In a d d i t i o n t o t h e s e a c t i o n s , which a r e i n t e n d e d t o produce a more e f f i c i e n t o p e r a t i n g base f o r the company, we a r e examining very c a r e f u l l y t h e c o n t e n t and t i m i n g o f o u r c a p i t a l e x p e n d i t u r e programmes. I n t h i s r e s p e c t o u r o b j e c t i v e s are twofold: (1) t o p r o t e c t t h c programmes which a r e fundamental t o the f u t u r e v i a b i l i t y o f Lhe b u s i n e s s , though t h i s cannot p r e c l u d e d e t a i l e d changes t o t h e c o n t e n t or t i m i n g o f such programmes; t o ensure t h a t , t a k e n i n c o n j u n c t i o n w i t h t h e o t h e r a c t i o n s r e f e r r e d t o above, we do n o t exceed t h e agreed cash c a l l on Government d u r i n g i t s 19 80/81 f i n a n c i a l y e a r . We hope t o c o n f i r m t h i s a f t e r o u r March 26th B o a r d .

(2)

We have n o t completed t h e r e v i e w o f c a p i t a l e x p e n d i t u r e a t t h i s s t a g e b u t t h e B o a r d does n o t expect t h e outcome t o involve j e o p a r d i s i n g the agreed longer-term o b j e c t i v e s o f the business. On t h e b a s i s o f t h e i n f o r m a t i o n a v a i l a b l e t o us a t t h i s t i m e , we have made a r e v i s e d assessment o f t h e l i k e l y t i m i n g o f t h e c a l l s on t h e c r e d i t l i n e f a c i l i t y o f 1 5 0 m i l l i o n announced i n y o u r statement on 20th December 1979. We a n t i c i p a t e t h a t t h e B o a r d w i l l , i n A p r i l ' o r May, be r e q u e s t i n g t h a t some 7 5 m i l l i o n o f e q u i t y be made a v a i l a b l e from t h e f a c i l i t y d u r i n g J u n e . A t t h i s s t a g e i t l o o k s as though we w i l l need the 7 5 m i l l i o n , n o t because o f a cash shortage p e r s e , b u t r a t h e r t o a v o i d a f o r e c a s t b r e a c h o f two o f t h e key r a t i o s i n t h e Medium Term Loan agreements.

Continued

-a I ,

1
MP", Page 3

The Rt.IIon. S i r K e i t h J o s e p h , B t , Secretary of State f o r Industry. 18th March 1980

Your o f f i c i a l s w i l l be p r o v i d e d w i t h d e t a i l s o f the r e v i s e d
f o r e c a s t which has l e d us t o t h i s c o n c l u s i o n . I t d o e s , by
the way, assume minimal impact from the s t e e l s t r i k e . It
a l s o assumes t h a t we succeed i n implementing the s u b s t a n c e
o f our pay and working p r a c t i c e s p r o p o s a l s f o r BL C a r s . As
you w i l l know, our d i s c u s s i o n s w i t h the trade union G e n e r a l
S e c r e t a r i e s and JNC b r o k e down y e s t e r d a y . A f t e r 16 meetings
and w i t h 5 months o f the new pay. y e a r a l r e a d y gone, we have
reached the end o f the road on neg^t.i a t i o n s and i n t e n d t o put
our p r o p o s a l s i n t o e f f e c t u n i l a t e r a l l y . This decision w i l l
not be announced u n t i l towards the end o f t h i s week.
The Board has c o n s i d e r e d v e r y c a r e t u l l y i t s p o s i t i o n i n r e l a t i o n
t o my l e t t e r t o you o f 19th December 19 79. Its conclusion i s
1 t h a t , a l t h o u g h , as d e s c r i b e d above, the t r a d i n g c i r c u m s t a n c e s w i l l m a k e i t i m p o s s i b l e to meet the PTaTTin l u l l t h i s year~ tne management o f BL s h o u l d p r e s s ahead w i t h a l l p o s s i b l e v i g o u r I and d e t e r m i n a t i o n b o t h t o l a u n c h the new p r o d u c t s p l a n n e d f o r
1980 and to implement the o t h e r changes r e q u i r e d t o secure a
sound f o u n d a t i o n f o r the b u s i n e s s i n the f u t u r e - f o r so l o n g
The Board i s
as we can s t a y w i t h i n the agreed f u n d i n g l i m i t s . ( most emphatic i n t h i s v i e w , p a r t i c u l a r l y as the M i n i Metro
programme i s on time and i s g o i n g w e l l . I am s u r e you w i l l
welcome the f a c t t h a t the Board has been a b l e to reach t h i s
c o n c l u s i o n and t h a t , as seen a t p r e s e n t , we expect t h a t we
w i l l be a b l e t o keep w i t h i n e x i s t i n g f u n d i n g l i m i t s .
With r e s p e c t to the q u e s t i o n o f c o n t i n g e n c y p l a n n i n g , we would
l i k e t o f o r m a l i s e w i t h Government the procedure t o be f o l l o w e d
i n the event t h a t i t i s n e c e s s a r y or d e s i r a b l e to r e q u e s t a
guarantee to s e c u r e the company's borrowing f a c i l i t i e s .

1 1 ^ 1

Continued

0 f

The Rt.Hon. S i r K e i t h J o s e p h , Bt,MP,

Secretary of State f o r Industry.
18th March 1980 Page 4.

We s u g g e s t , t h e r e f o r e , t h a t a procedure and a c t i o n statement

be agreed between us - perhaps at o f f i c i a l l e v e l - so t h a t
we are a l l c l e a r about the n e c e s s a r y s t e p s and t i m i n g t h a t
would need to be taken i n the event t h a t we need an u m b r e l l a
under which to put c o n t i n g e n c y p l a n s i n t o e f f e c t .
I am copying this l e t t e r to S i r Arthur Knight.

li^B>WlllHIHIiiMiMliiiiMHHHlBjiiMHni

***

l O DOWNING STREET from the Private Secretary 19 March 1980

As E has been postponed by h a l f an hour

and i s due to s t a r t a t 1530 hours on Monday 24th,
the B r i t i a n L e y l a n d meeting w i l l now s t a r t
at 1700 h o u r s .
I am s e n d i n g c o p i e s o f t h i s l e t t e r t o
M a r t i n H a l l (HM T r e a s u r y ) , R i c h a r d Dykes
(Department o f Employment), David Wright
( C a b i n e t O f f i c e ) and John HosKyns.

C A R O U N E

STEPHEN!)

Ian E l l i s o n , E s q . ,
Department of I n d u s t r y

CONFIDENTIAL

17 March

1980

The Prime M i n i s t e r has r e a d your l e t t e r o f

14 March b r i n g i n g her up-to-date on the BL
situation. Although she notes t h a t the next BL
board meeting i s not u n t i l 26 March, she would
s t i l l l i k e t o have another s t o c k t a k i n g meeting
on 24 March as we had p r o v i s i o n a l l y p l a n n e d .
I t w i l l be h e l p f u l i f your S e c r e t a r y of S t a t e
c o u l d c i r c u l a t e a f u r t h e r note b e f o r e the weekend.
I am sending c o p i e s of t h i s l e t t e r t o
M a r t i n H a l l (HM T r e a s u r y ) , R i c h a r d Dykes (Employment)
and David Wright ( C a b i n e t O f f i c e ) .

[L

P.

L A N K E S T E R

I K C E l l i s o n Esq. Department o f I n d u s t r y

CONFIDENTIAL

9 PRIME MINISTER
BRITISH LEYLAND
I understand next that Keith has q u e r i e d there whether have our meeting on B L , s i n c e been I we at believe may there a r e a number of questions n o t y e t b eas c l e a r with BL, I feel i n our minds i t might stake that be development then the is simply sorts at BL(which react t o that i s likely t o be some development, suggested prefer an

14

March

1980

i t i s necessary no fresh

t o have

developments.

- I attach

a list be.

- on so

which
much

a s we s h o u l d a mistake sort

With

t o await

the next
and

o f bad news)

especially

i f our p o s i t i o n o n
may be others i t may
the

of questions clear.

I have I would

- and t h e r e early

not r e a l l y

meet i n g .

though

only next

be a short events

one, so that rather than

we c a n a s f a r a s p o s s i b l e be taken by surprise.

anticipate

a t BL

am c o p y i n g

this

to Geoffrey

and

Keith.

A
t
JOHN HOSKYNS . JjK\

mmmmmmmmmmmmmmmmmmmmmmmmm

IIW-HMi^iiiSai^iHkHinHhM
QUESTIONS WE NEED TO ADDRESS

1. 2. 3. Do we privately f a r t h a t i t cannot f u l f i l Is Edwardes l i k e l y I f s o , when?

Do we l e a s t damaging one) deteriorates further?
4. We know of one

agree t h a t BL has i t s last

a l r e a d y been blown o f f course so

Plan?

to come back t o Government f o r more money soon?

( o r , more a c c u r a t e l y , the
piece - before i t

agree t h a t the best a v a i l a b l e o p t i o n

i s the e a r l y s a l e of B L i n one

i n i t i a t i v e which the CPRS b e l i e v e to be very, s e r i o u s . .

f u r t h e r a c t i o n on t h i s , eg to c o n v i n c e
If there i s any a c t i o n f o r Government
are s e r i o u s , or t o f o r c e t h e i r hand by
bids?

Should Government be t a k i n g any the company that we h e r e , who 5. should encouraging c o m p e t i t i v e

undertake i t ?
we take i n the next

If e a r l y s a l e proves imposs i b l e , what s t e p s should few months to prepare f o r run-down and

piecemeal s a l e ?
confidence about our objectives

6.

How for

f a r can we
BL?

take Edwardes i n t o our

7.

What would be the r o l e of an independent a d v i s e r to HMG, at the l a s t meeting? BL been t o l d about Has any progress this?

as

discussed
Have

been made i n f i n d i n g one?

8. j What would we do \ 9 . 1 0 . striking?

Are we

i f the unions r e f u s e to s i g n up

on the pay

and

by

n c o n d i t i o n s d e a l , then r e a c t to BL's

p l a n to impose i t u n i l a t e r a l l y

w i l l i n g t o contemplate an o v e r t do i f BL say

run-down?
they

What would we now

t h a t under the terms of t h e i r l e t t e r ,

have t o abandon the P l a n ?

i n BL's d e t e r i o r a t i o n where Government says that Plan?
the

11.

Is t h e r e a p o i n t

terms of the December l e t t e r r e q u i r e B L to abandon the

COWIDEHTIAL

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PS/ 5 / y of Stmt,**- Indusiy

DEPARTMENT OF INDUSTRY 122ASHDOWN HOUSE STREET LONDON S W 1 E 6RB

V ) C T 0 R I A

T E L E P H O N E

D I R E C T U N E

01-111

5501

S W I T C H B O A R D 01-112 TS76

AM Tim L a n k e s t e r Esq P r i v a t e S e c r e t a r y to the Prime M i n i s t e r 10 Downing S t r e e t London SW1 \ . pcit^c 0^

March 1980

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1

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BL

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I am w r i t i n g to b r i n g you up-to-date on the BL s i t u a t i o n f o l l o w i n g the Board meeting on 12 March. 1979 Results '

At a p r e s s conference at 3 - 3 0 pm t h i s a f t e r n o o n , S i r M i c h a e l Edwardes w i l l announce h i s company's p r e l i m i n a r y unaudited accounts f o r the y e a r ended 31 December 1979 (resume" a t t a c h e d , w i t h some comments). They w i l l show a A 6 . 2 m l o s s b e f o r e i n t e r e s t and tax; M i n i s t e r s were warned m December t h a t a l o s s of the orrler of 5Qm was l i k e l y t o be s u s t a i n e d . The f i g u r e f o r l o s s e s a f t e r e x t r a o r d i n a r y items i s 1 4 4 . 5 m . Sir Michael Edwardes' Future

fl

S i r M i c h a e l w i l l announce h i s i n t e n t i o n to remain as Chairman of BL d u r i n g the course of the p r e s s c o n f e r e n c e . T h i s should p r o v i d e a major boost to management and d e a l e r morale and h e l p to o f f s e t some of the u n h e l p f u l and untrue rumour-mongering i n the media and elsewhere t h a t BL has a cash flow c r i s i s on i t s hands. BL Cars Wages and C o n d i t i o n s Negotiations

These remain b l o c k e d . BL management have w r i t t e n t o the members of the J o i n t N e g o t i a t i n g Committee s a y i n g t h a t , i n the management's view, a f t e r 14 meetings, t h e r e i s no f u t u r e i n c o n t i n u i n g discussions. ' I ' h e purpos'e of t h i s move was t o t r a n s f e r the n e g o t i a t i o n s t o the l e v e l of the General S e c r e t a r i e s of the relevant unions. A meeting w i l l take p l a c e t h i s morning, but i t i s by no means c e r t a i n t h a t the TGWU w i l l agree to be represented even by a s u b s t i t u t e f o r Mr Moss E v a n s . The management w i l l . .

/decide

...

COIff IDENTICAL

| I

decide i n the l i g h t of p r o g r e s s made at t h i s meeting how to

proceed w i t h the wages and c o n d i t i o n s package. They may decide to announce t h a t i t i s b e i n g imposed u n i l a t e r a l l y and make t h i s p u b l i c d u r i n g the a f t e r n o o n p r e s s c o n f e r e n c e . I f such a d e c i s i o n i s made, management w i l l then implement the new working c o n d i t i o n s at p l a n t l e v e l w i t h the p o s s i b i l i t y that such a c t i o n w i l l l e a d
. to l o c a l i n d u s t r i a l a c t i o n . BL Cartjs do not appear to t h i n k
I t h e r e i s much danger of a company-wide s t r i k e i n p u r s u i t of
| the c l a i m .
Contingency P l a n n i n g
T h i s s u b j e c t was d i s c u s s e d by the BL Board on 12 March. My
S e c r e t a r y o f S t a t e expects to r e c e i v e a l e t t e r from S i r Michael
Edwardes i n the next few days f o r m a l l y a s k i n g t h a t guarantees
should be i s s u e d i n the p e r i o d p r i o r to any formal d e c i s i o n
to withdraw the P l a n . The BL Board are not a s k i n g f o r guarantees
i n other circumstances. The C h a n c e l l o r has a l r e a d y agreed i n
p r i n c i p l e to t h i s a c t i o n b e i n g t a k e n .
I The BL Board w i l l c o n s i d e r at t h e i r next meeting on 26 March whether any m o d i f i c a t i o n of the 1980 Corporate P l a n i s c a l l e d I f o r at t h i s s t a g e . There i s at the p r e s e n t time no q u e s t i o n of the BL Board a s k i n g the Government f o r a d d i t i o n a l f i n a n c e d u r i n g 1980 and the CSETJ have a l r e a d y been t o l d that the model and f a c i l i t y renewal programme i n the P l a n should remain i n t a c t provided t h e r e are no f u r t h e r s e t b a c k s . F o r t u n a t e l y there has been some recovery i n market share i n the wake of the BL Cars s a l e s campaign: BL Cars s a l e s i n the f i r s t 10 days of March Q were 21% of the UK market as a g a i n s t 16.7% i February.
1 : 1 1 6

I \ ^ * <
I1

M r

a*-**^

o f

As you know, Treasury o f f i c i a l s have updated the estimates i n

O f f i c i a l Group Report on the BL Corporate P l a n o'f the impact
c o l l a p s e on p u b l i c expenditure and the PSBR i n 1980/81.
a B L
T h i s was p r i m a r i l y a budget p l a n n i n g e x e r c i s e but t h i s Department w i l l be ready to p a r t i c i p a t e i n f u r t h e r work on the need f o r supplementary measures to h e l p the s u p p l i e s i n d u s t r y and the r e g i o n s a f f e c t e d i n the event of a BL c o l l a p s e . Conclusion

t X 1 fe

I
fl

[) My S e c r e t a r y o f S t a t e t h i n k s i t w i l l be premature to have a
U f u r t h e r meeting of the Prime M i n i s t e r ' s Group on 24 Mar.ch. There i s c l e a r l y no immediate danger of the BL Board withdrawing the P l a n . I t w i l l a l s o be u s e f u l before any f u r t h e r meeting to see the March market share r e s u l t s and the outcome of BL Cars next moves on the wages and c o n d i t i o n s f r o n t . He would
suggest t h e r e f o r e t h a t a f u r t h e r meeting should be considered
i n the l i g h t of the d e c i s i o n s made by the BL Board on 26 March.
In the meantime, however, t h e r e w i l l continue to be u n h e l p f u l
/speculation ...

CONFIDENTIAL

s p e c u l a t i o n i n the p r e s s t h a t BL f a c e a cash c r i s i s . He
would he g r a t e f u l t h e r e f o r e i f c o l l e a g u e s would r e f u t e any
such s u g g e s t i o n s put to them by j o u r n a l i s t s by p o i n t i n g out
t h a t Government has r e c e i v e d no r e q u e s t f o r a d d i t i o n a l
funds from BL or any s u g g e s t i o n t h a t i t i s about t o withdraw
the P l a n .
I am c o p y i n g t h i s l e t t e r to Martin H a l l ( T r e a s u r y ) , Richard
Dykes (Employment) and t o David W r i g h t .

I I C ELLISON
Private Secretary

A T H I S D O C U M E N T IS I M P O R T A N T . If you are (n any doubt about the course you should ^ ^ f o l l o y v , you should consult your stockbroker, bonk manager, solicitor, accountant or other professional adviser immediately.

BL LIMITED

(Registered in England No. 1213133) , i i. * , Sir Michael Eiiwardes (Chairman) Ion MacGiegor {Deputy Chairman) D. R. G. Andrews Sir Austin Bido Sir Robert Clark Albart . Frost
r J

Registered Office: 35-38 Portman Square. London W1H OHQ.

Sir RobDrt Hum

14ih March, 1980.

To the Ordinary shareholders of tho Company and. for information only, to the holders of the 7 i per cent. Convertible Unsecured Loan Stock 1382/87 of BLMC Limited.

Dear Sir or Madam, I am writing to give you the preliminary unaudited results for the year ended 31 st December, 1979 and to give notice of an Extraordinary General Meeting to be held on 31st March, 1980 to consider proposals for the issue of further equity capital at par to the National Enterprise Board ("NEB"). The preliminary results, which reflect a marked deterioration in the second half of thc year, and my comments on them are sot out in Appendix 1 on page 3. The Bt Bullelin sent lo you in September, 1979 contained details of the unaudited results for the six months ended 30th June. 1979 and of the plans for streamlining the business of BL and accelerating the new model programmes. Subsequently, we initiated discussions with employee representatives and national union officials on proposals for the restructuring and slimming of the Company which your Board insists is essential to the survival of B L These plans, wnich were overwhelmingly supported by employees in a secret ballot held in November, 1979, form the basis of the Company's Corporate Plan for 1980 and underline the Board's objectives of building on the profitable pans of the business and turning round or discontinuing those parts which are unprofitable. ;

The Corporate Plan Under the 1980 Corporate Plan, the Company will concentrate its operations at fewer locations while retaining enough capacity to meet demand when market prospects improve. This concentration, together with the considerable reductions in manpower planned over the next two years, has enabled the Company to set higher targels for improvements in productivity than were possible previously. In 1980 Leyland Vehicles has launched the Roadtrain, ihe first of a now range of trucks, and Austin Morns is launching the Mini Metro. In order to accelerate the necessary further revitalisation of Ihe product range the Company is also seeking collaborative deals wilh other manufacturers. To this end, on 27th December, 1979, I signed an agreement wilh Honda Motor Co.. Limited, one of the leading Japanese automotive manufacturers, under which BL will produce and sell in the European community, under a BL maroue name, a new car currently being developed by Honda Motor Co., Limited. BL will start assembly in the summer of 1 931 with a large and increasing content of the car originating in the UK. Your Board regards this agreement as being of major importance to BL. The Plan envisages that 2 9 7 million of public funds will be required in 1980 with a further 1 3 3 million between 1981 and 1983 Theso two sums together represent the C225 million balanco of the original 1.000 million recommended in the Ryder Report, with an additional 2 0 5 million to meet the cost of redundancies and closures under lha Company's restructuring programme. Clearanco has been sough: from tho EEC Commission for the additional funding. In spite of the vigorous action being taken BL is unlikely to achieve anything approaching a commercial rate of return on assets for some time. Indeed, tho severity of the engineering industry strike in tho autumn of last year and the decline in market share which tho Company experienced has already put in jeopardy some aspects of the Plan. The extensive programme of rationalisation and development contained in the 1980 Plan is vulnerable to continuing industrial unrest, both internal and external. Further national disputes like those which did your Company such immense harm in 1979 and undermined the improvement in our own industrial relations would put the Plan boyond us.

!
I

Accordingly, in seeking Government approval to tho Plan, I wrote to tho Secretary of Stato for Industry on 19th December, 1979 as follows:

gjjh
itjmm

"I should like to make clear beyond any doubt the basis on which my Board have sought
from tho Government the funds needed for the 1980 Corporals Plan.
Considerable hazards face us from within and without. Tho Board will monitor progress
very closely, and if shortfalls in performance placo tho achievement of the Plan in jeopardy, then
tho Booid consider that they will have no option but to abandon the Plan.
In particular if there is a significant shortfall in cash flow whether duo to major disruptions
through internal or external strikes, or to delays in any of our programmes for investment and
launch of new products, restructuring and redundancies or for improving productivity and working
practices, or to any other cause internal or external, tho Board will abandon the Plan.
If the Government decides to support the Plan and provido the funds, you can be assured
that the Board and management will pursue it with tho utmost determination and commitment.
I havo every reason to believe that this goes for our employees as well."
On 20th December, 1979 the Secretary of State announced that, following receipt by the Govern ment of a report by the staff ol the NEB on the Company's pcrlormance in 1979 and its 1980 Corporate Plan and Budgot, and in the light of my letter set out above, tho Government had decided to fund tha Plan up to the end of its 1980/31 financial year by the provision of C150 million in equity form, with an additional facility on which the Company would be entitled to draw, on giving evidence of its need, up to a maximum of a further 1 5 0 million in equity. In addition, the Government accepted your Board's request for conversion to equity of the 1 5 0 million NEB subordinated loans provided in 1977.

Issues to tho N E B In 1978 and 1979 the Company raised 5 9 8 . 4 million of equity capital by moans of rights issues underwritten, free of charge, by the NEB. With very few exceptions shareholders followed the advice of the Board and did not lako up their rights entitlement. Tho middle market quotation for tha existing Ordinary shares on 10th March, 1980 (the latest practicable dealing date before printing this document) was 2 0 ' P per share and did not exceed 25}p per share in the preceding twelve months. Accordingly, shareholders wishing to acquire further Ordinary shares are likely to be able to acquire them in the market at materially less than their par value of 50p which by law is tho minimum price at which they can be issued. The Directors do not see tho likelihood of dividends being paid on the Ordinary shares of the Company tor some years to come. In these circumstances your Board has decided that a rights issue (for which tho Board would again recommend thai shareholders, other than the NEB, should not sub scribe) would not be an appropriate or officient way of arranging the further provision of equity capital and it has therefore decided to recommend the alternative method of issuing shares direct to the NEB. You will find on pago 6 Notice of an Extraordinary General Meeting at which a resolution will bo proposed to increase tho authorised share capital of lhe Company by 4 0 0 million and to authorise the Board to issue a maximum of 900 million additional shares to the NEB. It is not intended to seek a listing on The Stock Exchange for tho new shares and tho relative sharo cenificates will bo marked accordingly; otherwise tho new shares will rank pari passu in al! other respects with tho existing issued shares. The authority for the issue of shares to the NEB is expressed to expire at the conclusion of the 1981 Annual General Meeting unless then renewed. Ordinary shareholders will find enclosed a proxy card for use at tho Extraordinary General Meeting. Whether or not they intend to be present at the Meeting they should please complete and return the proxy card as soon as possible and in any event so as to arrive not later than 48 hours before the lime appointed for the Meeting. The completion and return of a proxy card will not preclude them from attending the Meeting and voting in person should they wish to do SO.

Your Board beliovos the proposals to bo in tho best interests of the Company, its
shareholders and stockholders and strongly recommends that you voto in favour of the
resolution set out on page 6 of this Circular,
Additional information is set out in Appendix 2 on pages 4 and 5.

Yours faithfully, MICHAEL EDWARDES, Chairman

I
5$r|a Sales UK Ovarsoas Total of which direct oxports tiom UK (Loss)/1978 Profit bolore Inlorcst and Taxation (bofore exceptional manpower reductions) Excaptional Manpower Reductions' Interest payabla less recclvablo (Loss)/137S Profit bofore Taxation Taxation charge Loss after Taxation Minority Interests Loss beforo Extraordinary Items Extraordinary Items" LOBS after Extraordinary Items Vehicle Unit Production ('000) Vehicle Unit Salos ('000) Weekly averaoo number of employees ('000)"" M C

APPENDIX 1 PRELIMINARY UNAUDITED RESULTS FOR THE YEAR ENDED 31st DECEMBER. 1979 1979 1978 million C million 1,759 1,231 2,990 866 (46.2) 10.0 GG 0 (122.2} 6.3 128.5 3.0 131 ^ 13.0 144.6 658 693 177 1,716 1,3(38 3,073 910 71,3 13.6 66.0 1.7 12.8 10.9 2.1 13.0 24.7 37,7 771 797 192

1
'
1

m%m

|$j9
9 *

tfilw
I

I '

(Less),'1078 Profit Is after charging depreciation and amortisation ol 83.6 million 75,7 million "'Exceptional Manpower Reductions" refers to costs incurred In thoso plants which continue in operation. ""Exiraordlnary Horns" are mainly tho costs of closure of plants or companies where operations era being discontinued. " A t 31 si December, 1979 thore were 1 G8.600 employees. Chairman's comments: Overall sales revenue at 3 billion was slightly d o w n on 1973. In the UK the Company, although, it maintained its sales revenues, was unable to take full advantage of the highest ever vehicle sales because of the effect of externally generated disputes. B L was the only major motor vehicle producer directly effected by the national engineering dispute, which occurred in the second half of the year. Tho trading results, before interest, tax and the cost of exceptional manpower reductions, were hit heavily by the national engineering dispute which was the biggest single contributor l o the overall trading loss of 4 6 million. The other unhelpful factor was the strength of sterling which gave a competitive advantage to the importers in the U K and led to lower exports by BL, one of Britain's leading exporters. The loss before tax was 1 2 2 million compared with a profit of 2 million in 1978. Interest costs of 6 6 million were incurred ( 1 9 7 8 5 6 million). The main component in the change from profit to loss was the severe setback suffered by B L Cars w h i c h showed a deterioration of 1 0 8 million compared with last year. B L Commercial Vehicle's profit before interest and taxation was virtually unchanged from 1978. The Company has taken determined action l o reduce its manpower as a prerequisite to improving productivity of both cars and commercial vehicles. Reductions in manpower levels of on-going operations in 1979 cost the Company 1 0 million, In addition the 1 3 million of extraordinary costs include the cost of discontinuance of certain operations l o reduce excess production capacity, where decisions have already been taken. In the autumn employees approved the Company's recovery plan by a 7 to 1 majority; this plan provides for the acceleration of model programmes, closure of plants and ihe loss of at least 25,000 jobs. The backing by the workforce of the Company's recovery plan encouraged Ihe Board to seek further funds from the Government in December. 3 0 0 million is to be made available to the Company by the Government during its 1980/81 financial year for capital investment and for meeting the cost of redundancies and closures under tho restructuring programme. BL's capital expenditure continued at a high level in 1979, the three main projects being the new M i n i Metro facilities at Longbridge, Phaso 2 of the Land Rover programme and Ihe new truck assembly hall at Leyland. A n agreement was signed with Honda at the end of tho year; this major collaborative venture will provide the Company with a new car. 1980 will see ihe first major results of the public investment in B L i n the shape of new c o m mercial vehicles and new cars. Nevertheless, 1980 will be a very difficult year for BL. Improved production performance to date has been offset by our lack of success so far in restoring our market share to a satisfactory level Action is being taken to increase sales, in the meantime we are trimming vehicle inventories by adjustments to production schedules. 3

iWM

dj^

APPENDIX 2 ADDITIONAL INFORMATION

Share Capital 1. Tho following table shows Ihe authorised and issued share capital ol tho Company beloro and atler ihu proposed Increase in authorised sharo capital and Iho Issue ol iho maximum number pi Ordinary shares to ihe NEB:

Authorised Before AIM

Issued end Fully Paid Before Alter

E ' O O O

rooo

'000

rooo
\

850.000 1,260.000 Ordinary shares ol 50p each 728,096 1,178,096 Note: It is not intended lo seek a listing on The Stock Exchange (or tho now shares IO bo Issued to the NEB. 2. The NEB holds 1.443,404,996 Ordinary shares representing 99.12 par cent, of the issued share capital. Upon con version into equity of tho 150 million ot NEB subordinated loans and lha maximum subscription of a further C300 million ol equity by iho NEB, the NEB would hold 2,343.404.996 Ordinary shares representing 99.46 per cent, ol the enlarged issued share capital ol the Company. 3 . Since 31 si December, 1978. iho date tP which tho latest audited accpunts were made up, the Company has issued 298,852.088 Ordinary shares at par by way of rights [of whlcti all but 1,119 Ordinary shar.^ werf illotl'd to Ilia NEB) and a subsidiary has Issued 4.96 mllljpn Ordinary shares of Indian Rupees 5 each. In addition two subsidiaries with external share holders are proppsing lo capitaliso toserves of Zaires 6 million and Zanibian Kwacha 0.4 million ro-.pccliveiy Oilivrwise no chaiLui loiin L j p i i J - l tiiu Co.-iipjiiy or eny ol its subiidi JMUI (except lor store capital issued within the Group) has bean Issued (or cash or other consideration end no discounts, commissions, brokerages or other special terms have been granted by tho Company oi any ol Its subsidiaries in connection with the issue or sale ol any part ol tho capital of the Company or its subsidiaries. Savo as disclosed herein, no unissued share or loan capital of the Company or any ol us subsidiaries is under option or agreed conditionally or unconditionally to be put under option or is proposed tP be issued. 4 . The holders of tho outstanding 26,748,430 nominal of 71 percent. Convertible Unsecured Loan Stock 1982/87 ol BLMC Limilod have the tight to convert their Slock (or a period of one month, normally tho month ol June, In oach of tho years up to and including 1 987 (subject lo tho provisions for early redemplion contained In the Trust Deeds constituting tho Convertible Stock) Into fully paid Ordinary shares ol 50p each of Iho Company at the rate of one fully paid Ordinary share for overy 5.50 nominal of Convertible Stock converted. Full conversion on this basis would involve the issue ol 4,863,360 Ordinary shares. Group Indebtedness At 31 st December, 1979 the Company and its subsidiaries had outstanding tho following loan capital and term loans: C million Loans from NEB Parent Subordinated Loans 1982/97 150.0 10.0 160.0 26 7 Short Term C million 3.8 Long Term million 16,8 Subsidiary 73 per cent. Subordineted Loan 1982

ijgfl

lag

9
71 par cent. Convertible Unsocurad Loan Stock 1982/87 Othar Loon Capital and Torm Loons Secured : fl Unsecured 6 per cent. Unsecured Loan Stock 1998/2003 6.1 par cent. Unsecured Loan Stock 1977/82 7 J per cent. Unsecured Lo3n Slock 1987/92 B par cent. Unsecured Loen Stock 1998/2003 B percent. Industry Act Loan 1977/83 repayable in instalments 10 per cent. Industry Act Loan 1978/35 repayable in instalments 6J per cent. Unsecured Loan ol 50m Swiss Francs 1979/84 repayable In instalment 7J per cent. French Franc Bonds 1977/87 repayable in Instalments Long Torm Bank Loans 1982/86 Other

20 6

' 0.4 0.4 2.8 0,7 9.5 13.5 17.6 12.4 3.4 9.9 10.9 1.3 2.0 11.3 8.6 115.0 3.9 178.6 195.4 12.4 3.4 9.9 10.9 1.7 2,4 14.1 9.2 115.0 13,4 192.4 213.0 | | | J I

S Rj

Notes: 1. The NEB Subordinated Loans with tho Parent Company lolalllng 150 million ara ol various rates of interest between 13J and 15 J percent, and, under the proposals set out in this Circular, ere to be converted into equity. 2. Short term loans arc loans repayable within one year. The majority ol the abovo loan capital and term loans aro constituted by Irust deeds or loan agreements which. Inter art*, contain various covenants as lo the Group's (inancial condition.

JH

Al tho some dalo Iho Company and its subsidiaries had. in addition, outstanding bank indebtedness, other short lotm borrowings and liabilities under accr/pianco credits which amounted to C253 million (of which C1G million was secured) and Ihoro were coming!ni liabilities in icspoct of bills discounted and guarantees amounting to 39 million In rospecl o f which no material loss was oxpoclod to arise. For tho above purposes, amounts in foreign currencies have boon translated Into sterling nt latos of oxchango ruling on 31st Docombcr, 1979. . Save as disclosed heroin and excluding inlra-group liabilities, neither the Company nor any of its subsidiaries had outstanding at such date any borrowings or indebtedness in Iho nalure of borrowing. Including bank overdrafts and liabilities under acceptances (oilier than normal trade bills) or acceptance crodiis. moitgages, charges, him purchase commitments. Or guarantee; (except (or normal ti.iduig rju.'iiontcr;) or oilier malurijl cantingunl liabililles. At 29lh February, 1900 (Iho lalcst procticablo date before the printing of this document) Head Olfico records indicated no material chango In overall Group borrowings since 31st December. 1979. 9 0 antral A claim has been made ncrninDI the Company and certain of Its subsidiaries arising from tho proposed termination of n distributor Irenehiso in Nortli America. This claim is being vigorously resisted and no material loss is c peeled lo arise. Save as disclosed, so far es the Directors of iho Company are aware, thero is no material litigation or claim ot material importance ponding or threatened against Ihe Company or any of ils subsidiaries. Documents avniloblo for Inspection Copies of the following documents will be available for inspection al the offices of Linklaicis & Paines, Darringion House, 59-67 Gresham Street, London EC2V 7JA during usual businoss hours on any weekday (Saturdays and public holidays excepted) up to and including 31 st March, 1960: (i) tho Memorandum and Articles of Association of the Company; iho published accounts ot the Company for tho financial years ended 31 si December, 1977 and 31 SI December, 1978; (Hi) the Report (or Parliament by Ihe staff of Iho NEB on iho 1980 Corporalo Plan ol BL Limilod together with Ihe (II) text of Iho Poillomemary statement made by tho Secretary of Stale lor Indusiry on 20lh December, 1979; and (iv) ihe Principal Trust Deed and Supplemental Trust Deeds constituting the Unsocured Loan Stocksof BLMC Limited.

AWk WW

. '.

B L L.M .TED

NOTICE OF EXTRAORDINARY

GENERAL

MEETING

N O T I C E IS H E R E B Y G I V E N that an E X T R A O R D I N A R Y

G E N E R A L M E E T I N G of tho C o m p a n y

w i l l be held at Cafe Royal, 68 Regent Street. London W1 at 1 2 noon o n M o n d a y , 31st M a r c h , 1980 for the purpose of considering and, if thought fit, passing the following Resolution w h i c h w i l l bo proposed as an O R D I N A R Y RESOLUTION:

RESOLUTION THAT: A . The authorised share capital of the Company be increased from 850 million to E l , 2 5 0 million by the creation of an additional 8 0 0 million Ordinary Shares of 50p each, and Tho Directors bo authorised hereby from time to time to issue at par for cash and/or by way of conversion of loan to the National Enterprise Board additional Ordinary Shares of 50p each to a maximum aggregate nominal value not exceeding C450 million subject to the following restrictions and c o n d i t i o n s : (i) the authorisation hereby conferred shall cease to havo effect at the conclusion of the A n n u a l General Meeting in the year 1981 unless then renewed or extended; and (ii) the authorisation hereby conferred shall forthwith cease and determine if the middle market quotation for the fully paid Ordinary Shares of the Company o n Tho S t o c k Exchange {determined o n tho basis of Tho Stock Exchange Daily Official List) shall not be less than par o n five consecutive dealing days.

B.

By Order ol" the Board, A . R. W . L A R G E , Dated 14th M a r c h , 1 9 8 0 . Secretary

Registered Office: 3 5 - 3 8 Portman Square, London W 1 H 0 H Q .

Notes: 1. A m e m b e r of the Company w h o is entitled to attend and vote at the Meeting may appoint a proxy or proxies to attend and, o n a poll, to vote in his stead. A proxy need not be a member. 2. Forms of proxy must be lodged at Ihe transfer office of the Company, 3 5 - 3 8 Portman Square, L o n d o n , W.I not later than 48 hours before the time appointed tor the holding of the Meeting. 3. Holders of the Convertible Stock are not as such entitled to attend or vote at thc Meeting.
L SMJMV

#^
lO DOWNING STREET
From the Private Secretary 14 March 1980 I am w r i t i n g t o c o n f i r m that the B r i t i s h
L e y l a n d meeting w i l l now take p l a c e at
* .
1630 hours on Monday 24 March^ o c I am c o p y i n g t h i s l e t t e r t o John Wiggins (HM T r e a s u r y ) , R i c h a r d Dykes (Department of Employment), Gerry Spence ( S i r Kenneth B e r r i i r s o f f i c e ) , D a v i d Wright (Cabinet O f f i c e ) and John Hoskyns.

^
I

Ian E l l i s o n , E s q . ,
Department of I n d u s t r y .

CONFIDENTIAL

t)
Treasury Chambers. Parliament Street, SW1P 3 A G Ot-233 3 0 0 0
12th March, 1980

BL
You w i l l have r e c e i v e d the a^p'or-t
of A r n o l d L o v e l l ' s group under a separate
l e t t e r o f today's d a t e . The Prime M i n i s t e r
may f i n d i t h e l p f u l to have a d d i t i o n a l l y
1
A r n o l d L o v e l 1 s s u b m i s s i o n , which hajje
not been seen by the other two Departments
i n v o l v e d i n the work.

(H.A. HALL)
Private Secretary

T. L a n k e s t e r , E s q . ,
Private Secretary,
10, Downing S t r e e t
CONFIDENTIAL

^ 1

CONFIDENTIAL

~ ~ rAi"x -i^f

Treasuiy Chambers. Parliament Street, SW1P 3 A G

0 1 - 2 3 3 3 0 0 0

12th M a r c h , 1980

B L CONTINGENCY PLANNING: GENERAL IMPACT IH FI.-:::T TA'.-ILVF. O.ITHS The C h a n c e l l o r t h o u g h t t h e P r i m e M i n i s t e r w o u l d be i n t e r e s t e d t o s e e t h e e n c l o s e d r e p o r t , p r o d u c e d by a g r o u p c o m p r i s i n g o f f i c i a l s o f t h e T r e a s u r y and t h e D e p a r t m e n t s o f I n d u s t r y and E m p l o y m e n t , under A r n o l d L o v e l l ' s chairmanship. You l l w i l l a p p r e c i a t e t h a t knowledge o f t h e work I fr-;-. b c . n c o n f i n e d t o a . v e r y small number ' 11
o f peopled ' I am c o p y i n g t h i s l e t t e r t o R i c h a r d
Dykes and I a n E l l i s o n .

...

(M.A. HALL)
Private Secretary
T . L a n k e s t e r , E s q . , CONFIDEHTIAL

m-% 1. MR 2. RYRIE

CHAJICELLOR Chief Secretary Financial Secretary S i r D Y.'ass S i r A Rawlinson

Copies f o r :

cc Kr F Jones Kr C h r i s t i e Kr Unwin r Bridgeman Kr Shepherd Kr Dixon Mr R i d l e y Mr I.'oore' Mr P a t t e r s o n Mr G Smith Mr Y/elsh LACS _ I

BL The

COiJTIUGEIlCT PLAtfMIHG : attached r e p o r t by

GENERAL IMPACT IN FIRST TWELVE MONTHS under my chairmanship, plan to of the reason fact I to

o f f i c i a l s , which met

assesses

the e f f e c t s o f BL p a r t i a l The

c l o s u r e s i f the c o r p o r a t e

i s abandoned.

I understand t h a t the r e p o r t w i l l be shown to purpose of the e x e r c i s e was

S i r K Joseph and Kr P r i o r . the PS3R and

a s s e s s the s i z e of the p o t e n t i a l a d d i t i o n s to the estimates C h a n c e l l o r w i l l base h i s coming Budget judgement. the r e p o r t does not l o o k beyond the f i r s t it now seems u n l i k e l y t h a t a n y t h i n g By t h a t time we can be providing further tranches The estimates b e f o r e the autumn. the HUB plan. For t h i s In

changes i n o t h e r main economic v a r i a b l e s on which twelve months.

d r a m a t i c w i l l happen, i f at a l l , s h a l l probably have agreed o f 2 2 5 m towards the corporate

adjusted

to r e f l e c t the e f f e c t i n

1980-81 i f the plan i s abandoned ( s a y ) i n O c t o b e r .

2.

The

r e p o r t assumes t h a t a p r o p o r t i o n o f BL w i l l s u r v i v e at L o n g b r i d g e and The Cowley. l o s s of BL jobs would be

the

main shut-dowitfbeing

T h i s assessment 79,000.

r e f l e c t s d i s c u s s i o n s w i t h 3L, c l o s e down o r shed l a b o u r , and add and i

Firms s u p p l y i n g the c l o s i n g p a r t s o f BL w i l l e i t h e r themselves the assumption i s t h a t they would O x f o r d , the West M i d l a n d s As an o f f s e t a g a i n s t |< I ffi a f u r t h e r 79,000 t o the l o s s of j o b s .

South Wales would be p a r t i c u l a r l y hard h i t .

t h i s l o s s of 15B,000 j o b s 11,000 new p a r t i a l t r a n s f e r of BL's

jobs might r e s u l t from a manufacturers.

market s h a r e t o other UK

COirPIDErTIAL

3. not

Increases

i n unemployment of t h i s s i z e , and

heavily

concentrated It is
are will

i n areas which h i t h e r t o have enjoyed a measure of p r o s p e r i t y , are

easy to contemplate e i t h e r p o l i t i c a l l y or s o c i a l l y . l i k e l y to be some time b e f o r e f i r m s which go out of business r e p l a c e d by new does not suggest t h a t a shut-down of the order contemplated produce c o n d i t i o n s o f economic catastrophe"
new

m a n u f a c t u r i n g e n t e r p r i s e s , a l t h o u g h our a n a l y s i s

In time the unemployed labour should be re-absorbed i n t o j o b s , a l t h o u g h t h e r e i s l i k e l y to be l i t t l e r e c o v e r y

i n net

employment i n the f i r s t twelve months f o l l o w i n g the shut-down;

- and the e f f e c t on BL s u p p l y i n g f i r m s should be manageable
w i l l f a c e immediate cash flow d i f f i c u l t i e s ,
of s u r v i v i n g a f t e r a p e r i o d
will
BL
of

so l o n g as the banks are prepared to i n c r e a s e t h e i r l e n d i n g

to those f i r m s who but who of a d j u s t m e n t . which w i l l be I 4. The "business. estimates i n paragraph 29 have r e a s o n a b l e prospect

Some o f t h i s i n c r e a s e i n bank l e n d i n g i n l e n d i n g to those p a r t s of

c l o s e d and

be matched by r e d u c t i o n s

to s u p p l i e r f i r m s which go out

of the r e p o r t show the e f f e c t of BL kind

BL c l o s u r e s . adjusted can be c l a i m e d short-term

In paragraph 8 o f t h i s cover note the f i g u r e s are p o i n t that c l o s u r e s on the s c a l e of adjustment f o r t h i s to be a l r e a d y at l e a s t p a r t i a l l y r e f l e c t e d i n the B e f o r e making any

to allow f o r the forecasts.

of a n t i c i p a t i o n - b y the f o r e c a s t e r s the i n c r e a s e i n t o t a l p u b l i c spending i n the f i r s t y e a r f o l l o w i n g the c l o s u r e s i s put at 8 2 5 m and 5. the a d d i t i o n to the PSBR 1,275m. i n c a l c u l a b l e aspect of the The situation
and

A p a r t i c u l a r l y w o r r y i n g and and

envisaged i n the r e p o r t i s the u n c e r t a i n impact on business market c o n f i d e n c e and the e f f e c t of the expected. t r a d e union sentiment. and beyond our e x p e r i e n c e ,

f i g u r e s are l a r g e
be

pressure f o r a p u b l i c statement of

c l o s u r e s on the post-Budget a r i t h m e t i c can

A major t a s k f o r the Government w i l l be t o t r y to f i n d

some balance between:

CONFIDENTIAL

i ^H

- t r y i n g t o r e a s s u r e s i t u a t i o n , while to the h a r d s h i p and employees;

the

p u b l i c and

the markets that

the

s e r i o u s , should be kept i n p e r s p e c t i v e .
t h a t w i l l f a l l on l a r g e numbers of businessmen

At the same time the Government must not appear i n s e n s i t i v e

- a v o i d i n g o v e r - r e a c t i n g through announcing r e m e d i a l measures which c o u l d be situation; - a c h i e v i n g maximum p o l i t i c a l value from the emphasising t h a t i t demonstrates how job.
R e l a t i o n s h i p , to the NIF 6. Since t h i s was Forecast i g n o r e s the market f o r i t s products can event by
out o f a
c o s t l y without n e c e s s a r i l y improving the i

a work f o r c e which
put i t s e l f

e x e r c i s e we were not able

an i n t e r d e p a r t m e n t a l

to d i s c u s s the worse prospect implicitly

extent to w h i c h the c u r r e n t NIF

already

implies a
plan. to be

f o r BL than t h a t envisaged i n the

corporate claimed

As noted above, i n s o f a r as t h i s contingency can be i n c o r p o r a t e d w i t h i n the NIF the r e p o r t cannot simply 7.

the e s t i m a t e s

produced i n

be added to the f o r e c a s t s .
i s not b u i l t up from a d e t a i l e d so t h e r e i s no incorporated Industrial of F e b r u a r y . j I I so on

The p r o b l e m i s t h a t the NIF

a n a l y s i s of the p r o s p e c t s e x p l i c i t f o r e c a s t of BL within i t . However, the

f o r i n d i v i d u a l f i r m s , and

o u t p u t , employment and

i n d u s t r i a l i m p l i c a t i o n s o f the f o r e c a s t s are r e f l e c t e d i n the end r e p o r t c i r c u l a t e d at the

are examined i n some d e t a i l and Assessment System (IAS) The NIF sector. overseas c o m p e t i t i o n The IAS

assumes that output r e d u c t i o n s and

the adverse e f f e c t of

w i l l be p a r t i c u l a r l y marked i n the manufacturing continue to d e c l i n e i n 1980 with 1979. imports

f o r e c a s t f o r the motor c a r i n d u s t r y w i t h i n the

s e c t o r i s t h a t demand w i l l

t a k i n g a l a r g e r share of the domestic market than i n

- 3

CONFIDENTIAL

Reduced domestic of is "is

demand and l o o s o f c o m p e t i t i v e n e s s i n overseas

i n motor v e h i c l e p r o d u c t i o n
1.1 million i n 1979
Car o u t p u t , which was

markets l e a d s to a f o r e c a s t o f a f a l l 10 per cent i n 1980. expected to f a l l

to about 800,000, a l e v e l which the r e p o r t says

But i t n e v e r t h e l e s s seems that c l o s u r e s on
fully

u n l i k e l y to be c o m p a t i b l e w i t h a l l f o u r majors remaining i n

volume p r o d u c t i o n " . r e f l e c t e d i n the 8.

the s c a l e envisaged i n the r e p o r t cannot be assumed t o be NIP.

c o n t r i b u t i c n to GDP,

The NIF I m p l i e s t h a t BL's

including

the

impact on s u p p l i e r s , i s perhaps a q u a r t e r below t h a t i m p l i e d by the

corporate plan. As a broad and crude a p p r o x i m a t i o n , t h e r e f o r e , i t
i n the
On t h i s b a s i s the c u r r e n t IIIP
would seem r e a s o n a b l e t o reduce the range of assumptions a t t a c h e d r e p o r t by 25 per c e n t . f o r e c a s t would need t o be changed as f o l l o w s :
E s t i m a t e d changes to February 1980 (assuming A p r i l shut-down)
m E x p o r t s reduced by Imports i n c r e a s e d by B a l a n c e of payments l o s s Employment lower by GDP lower by P u b l i c e x p e n d i t u r e h i g h e r by Revenue lower by PSBR h i g h e r by 9. Bul 300 750 1,050 110,000 0.5 per cent
650 350 1,000 e f f e c t on interest


NIF F o r e c a s t s f o r 1980/81

T h i s i n c r e a s e i n the PSBR s h o u l d have l i t t l e

i a t e s because the lower GDP

i m p l i e s a reduced demand f o r money.

paragraph 5 above draws a t t e n t i o n t o the u n c e r t a i n t i e s o f these

developments on market s e n t i m e n t .
10. These a r e f u l l of year f i g u r e s . Apart from the d i r e c t financing

BL and the payments under the Redundancy Payments Act the

remaining major p u b l i c e x p e n d i t u r e and revenue items can be p r o - r a t e d .

Thus, as a broad October

a p p r o x i m a t i o n , i f the plan was

abandoned i n

the PSBR would be 3 5 0 m l e s s than ahown above.

Further A c t i o n
11. There are bound t o be wide e r r o r margins i n v o l v e d i n an a n a l y s i s
o f t h i s k i n d and approximation the r e s u l t s can be taken as no more than a rough
immediate impact. The e s t i m a t e s could
31 does
o f the l i k e l y

be f u r t h e r r e f i n e d , but however suggest two

i t i s d o u b t f u l whether t h i s would r e s u l t i n
The r e p o r t i n paragraph The f i r s t

significantly different figures.

f u r t h e r stages i n contingency p l a n n i n g which

i s a more d e t a i l e d
on

we b e l i e v e would be worth p u r s u i n g . s u p p l i e r f i r m s and industries.

assessment o f the l i k e l y r e g i o n a l impact, and the e f f e c t

The o b j e c t i v e would be t o p r o v i d e
The W h i t e h a l l

the b a s i s f o r a f u r t h e r step i n contingency p l a n n i n g - an examina

t i o n o f p o s s i b l e a c t i o n by the Government. responsibility and be f o r t h e s e i s s u e s l i e s with the Department of I n d u s t r y ,
However, we have a g r e a t d e a l of
contingency

i f you f e e l t h a t the work i s worth p u r s u i n g the Department might

i n v i t e d t o s e t up the s t u d i e s .

i n f o r m a t i o n i n the T r e a s u r y , and we are p u t t i n g i n hand some

p r e l i m i n a r y s t u d i e s . w h i c h a r e r e l e v a n t a l s o t o the wider p l a n n i n g f o r i n d u s t r y r e c e n t l y commissioned. You might wish to wait

f o r these b e f o r e i n i t i a t i n g f u r t h e r i n t e r d e p a r t m e n t a l work.

A.H. LOVELL - IA
11 I'arch 1980

r- - * ^ BL:

CONFIDENTIAL CONTINGENCY PLANNING - THE FIRST TWELVE MONTHS

This report accesses the likely consequences in the f i r s t twelve months i f

BL's Corporate Plan i s abandoned and the company closes down a major proportion
of i t s operations. It was prepared under Treasury Chairmanship and o f f i c i a l s
of the Departments of Industry and of Employment took part. It i s restricted to the effects on the main economic and financial aggregates and the discussion
was not extended,at this stage, to an examination of the feasibility and costs
of'posrjible offsetting measures by way of regional, employment and other forms
of assistance.
2. Ministers approved the Plan-in December. It envisages that BL will close and They will undertake a major investment programme and launch a number of the collaborative venture with Honda on the Bounty and the new medium cars,

down a number of plants and reduce their UK workforce- substantially in 198O 1981.

new models: notably the Metro (the Mini replacement) which starts production at Iongbridge later this year; which will be launched from Cowley at the end of 1981;

the LC10 and LC11, which will be launched respectively from Longbridge in late 1982 and from Cowley in 193^. The Government has agreed to put in up to 300m in 1980-81; and there i s public expenditure provision for a further 75n in

1981-82, although BL have not asked Ministers to approve their Plan beyond 1980-81. 3. S i r Michael Edwarde3 has said, in a letter published with S i r Keith Joseph's

Statement on 20 December, that his Board would abandon the Plan i f i t considered that shortfalls in performance, particularly in cash flow, placed i t s achievement in jeopardy. Even with the successful.dismissal of Mr Derek Robinson, there i s no doubt that the Plan i s already under serious threat. 3L have yet to set'tle the crucial wages and productivity deal for BL Cars. 15^ for which they were aiming. Their UK market share f e l l to in January and, although i t i s now recovering, i t i s s t i l l short of the 20Jb Because of the current high level of stocks the steel

strike has not yet damaged BL, but i t would do so i f i t went on beyond the end of March. In these circumstances there remains a serious risk that BL will have to abandon the Plan at some time in 198O-81, although i t now seems unlikely that this will arise in the next few weeks. Broadly, in respect of 198O-81 the estimates made in this report can be prorated. ASSUMPTIONS
l*. We have assumed that i f SL totally withdrew their .Plan - as distinct from
modifying i t - thoy would not go into receivership or liquidation. possible and closing down the rest.
Instead the
present Board would continue and take on the task of selling operations where

J 5-

CONFIDENTIAL

. '

"

For thc purposes of this exercise we have taken as a r e a l i s t i c but cautir^i^

assumption that the following businesses could be sold and continue to operate:-
Land Rover
Jaguar
Alvis
Coventry Climax
Prestcold
Unipart
Leyland Vehicles (Trucks and Buses)
Some parts of BL Components and of Pressed Steel Fisher, which supplies body panels, H would also hove to be kept in operation to service these a c t i v i t i e s . 6. I " It i s also possible that the HQ works at Abingdon will be sold and that Honda
I

could be persuaded to GO ahead with the production of their car by acquiring part of the Cowley s i t e . If this were to happen i t would be of great importance for the Oxford area and could lay the foundations for building up Cowley again over a period of years. But i n

198O-81

only about

5i00O jobs would be saved and since

those numbers, and the consequent redundancy costs, are well within the margins of error we have not included them in tho figures in the rest of this paper which are based on the assumption that the operations l i s t e d in the preceding paragraph will continue. A note as Annex A gives more details of the sales prospects of these operations. 7. There i s no experience of closures on this scale. The estimates in this H

report need to be interpreted therefore with caution, and wide error margins should be attached to them. It i s possible, for example, that the BL shut-down and the

knoc!k-on effect on suppliers could generate a c r i s i s of confidence in manufacturing^ WM industry and in financial markets, domestic and overseas. We assume that this w i l l ^ ^ H happen and that the effects w i l l be confined to BL and companies closely associated fM with then, while other UK car manufacturers and, of course, overseas suppliers benefit from BL's misfortunes. So long as the effects are contained within this kind of Scenario tho implications, although serious, appear to be manageable. Apart from this major uncertainty much of the estimating cannot be claimed to be more than informed guessing. There are doubts for example over which operations in BL will survive and also over how much BL may get in sales or from break-up values. There arc doubts whether customer confidence even in the saleable parte can be held. It i s possible that the company could be faced with highly costly disruptive action from workers defending their jobs. This would make orderly rundown much more d i f f i c u l t . To alleviate the situation and re-establish control, I

'

CONFIDENTIAL

BL c o u l d bo f o r c e d t o make h i g h e r redundancy payments than a r e r e q u i r e d by law and than a r e assumed i n t h e s e estimates.

EMPLOYMENT BL 8. A t t h e end o f 1 9 7 9 that omploya:ent there were about l ^ f J O O BL employees i n t h e UK. The P l a n to

assumed

would have f a l l e n

140,000

by t h e end o f

1 9 S O

(and by

5,000
in

more i f S p e c i a l P r o d u c t s I n d u s t r i e s ,

mainly P r e s t c o l d ,

can be s o l d by t h e listed

end o f t h e y e a r ) . paragraph

I f t h e P l a n were w i t h d r a w n , and o n l y t h o s e o p e r a t i o n s

above s u r v i v e d , o f t h i s

1'0,000:

61,000 79,000 9-

BL j o b s would be p r e s e r v e d would be l o s t .

The d i s t r i b u t i o n o f t h e Birmingham Oxford

79,000

redundancies 39,000

would be

15,200
8,?00
3,800 700 3,400 1,000

Coventry
Swindon Cardiff Llanelli Liverpool Other

7,200 79.000

Birmingham and O x f o r d would be p a r t i c u l a r l y a f f e c t e d the

because o f t h e c l o s u r e o f

A u s t i n - M o r r i s works a t Lonrjbririec a n d Cowley and o f Rov-er and Triumph a t The

Solihul].

7,200

" o t h e r " r e d u n d a n c i e s i n c l u d e company

s t a f f s and would be West

spread widely ( i n c l u d i n g Abingdon, Dunstable,

Hemcl Hempstead, L e i c e s t e r ,

Y o r k s h i r e and L o n d o n ) b u t none .-ould be more than r e d u n d a n c i e s i n S c o t l a n d , assuirdng t h a t s o l d with the rest o f Leyland Vehicles.

1,000.

T h e r e would be no

the Bathgate

p l a n t near Glasgow were

10. 1

I t i s t o be e x p e c t e d

that

some o f t h i s

employment l o s s would be taken up The t a k e - u p o f market s h a r e is

by o t h e r UK i n d i g e n o u s extremely difficult

c a r manufacturers.

to p r e d i c t , assumptions:

but i n o r d e r to a r r i v e a t o u r e s t i m a t e we have

made t h e f o l l o w i n g

HMHUIlllllHIlllllllllllHB

CONFIDENTIAL

',

i. i i .

BL' G e x p o r t s o f the replacements

non-viable a c t i v i t i e s

are l o s t to

the

f o r R o v e r / T r i u m p h w i l l a l l be imported, s i n c e produced competitor models;

t h e r e a r e no d o m e s t i c a l l y i i i .

the A u s t i n / M o r r i s market w i l l be r e p l a c e d by UK manufacture i n p r o p o r t i o n to the 1979 s h a r e o f the n o n - B L market i e 31#;

i v .

the t o t a l demand f o r c a r s i n t h e UK w i l l be unchanged by the collapse of BL. 5,700 j o b s would be c r e a t e d i n the

11.

On these a s s u m p t i o n s it is

r e m a i n i n g UK c a r i s produced

manufacturers ( i f

f u r t h e r assumed t h a t

the a d d i t i o n a l o u t p u t

by a d d i t i o n a l l a b o u r r a t h e r t h a n t h r o u g h o v e r t i m e ) . extremely tentative and may be o p t i m i s t i c :

T h i s e s t i m a t e must be recent

B L ' s l o s t market s h a r e o v e r Ford continue to

y e a r s h;js been almost e n t i r e l y t a k e n up by i m p o r t s ; difficulties reluctant i n r e c r u i t i n g labour a t Dagenham;

have generally efficient

the m u l t i - n a t i o n a l s a r e when t h e i r more

to i n c r e a s e

c a p a c i t y i n t h e UK e s p e c i a l l y time w o r k i n g .

C o n t i n e n t a l p l a n t s a r e on s h o r t Suppliers 12. It

i s d i f f i c u l t to a s s e s s what would be the e f f e c t on employment i n f i r m s But, u s i n g the broad assumption that f o r every one BL employee economy, same (see

supplying B L there

i s one o t h e r p e r s o n i n d i r e c t l y dependent on BL e l s e w h e r e i n the U s i n g the

t h e r e would be a f u r t h e r 7 9 , 0 0 0 r e d u n d a n c i e s o u t s i d e o f B L . 1:1

r e l a t i o n s h i p , i f 5,700 j o b s a r e c r e a t e d by o t h e r UK c a r m a n u f a c t u r e r s

p r e c e d i n g p a r a g r a p h ) a c o r r e s p o n d i n g 5 , 7 0 0 might be saved i n the s u p p l y i n g f i r m s . Thus, the t o t a l r e d u n d a n c i e s i n BL and the s u p p l i e r s would be i n the o r d e r o f by about 11 ,000 new j o b s , to g i v e . a n e t total of 147 ,000.

158,000,offset 13.

There i s

c o n s i d e r a b l e u n c e r t a i n t y about the number o f

j o b s l i k e l y to

be

l o s t i n the s u p p l i e r s , s i n c e r e d u c e d d e p e n d i n g on the of outcome

t h e i n i t i a l j o b l o s s e s c o u l d be e i t h e r m a g n i f i e d o r companies c o n c e r n e d . Two b r o a d t y p e s collapse later

s i t u a t i o n s o f the

can be i d e n t i f i e d .

Some f i r m s h e a v i l y dependent on BL w i l l i n i t i a l job l o s s , year.

quickly,

t h u s m a g n i f y i n g the

and oime more c o u l d c o l l a p s e while initially

though p e r h a p s not i n t h e on BL f o r a s i g n i f i c a n t

first

Other f i r m s ,

dependent j

share o f

t h e i r business,

may be a b l e to

contract success-

f u l l y and i n time d i v e r s i f y . t i m e be r e d u c e d . closures

In these l a t t e r

cases the i n i t i a l j o b l o s s e s may i n the

I n the case o f a l l s u p p l i e r f i r m s the i n i t i a l e f f e c t o f create

w i l l be to

a c a s h f l o w problem and i n each case s u r v i v a l may this immediate difficulty.

depend on a s o l u t i o n b e i n g found to

CONFIDENTIAL

'

1 i.

The possibility of survival in the lon run w i l l depend on the extent to In

which these companies are dependent on those parts of BL due for closure.

some cases closure of the source of demand will not necessarily mean an immedi.-ite drying up of demand. Suppliers will s t i l l need to provide replacement parts such as tyresand batteries for the existing stock of BL cars. This, and the continuing production of vehicles by the BL companies which we have assumed continue i n operation, may help to tide the suppliers over the i n i t i a l period following closure. In considering the effect of a partial BL collapse i t i s worth bearing in mind that the weaknesses of BL have not been missed by their main suppliers and that I

a number of the larger firms have been taking defensive action by tryingto diversify. fM 15Cur Lest guess at the present time i s that most of the bigger firms will But this may not be true

probably survive, assuming that they are reasonably credit-worthy and can increase their short-term borrowing when the closures take place. of a number of smaller specialist firms, some of which may be completely tied to BL output. For example in the West Midlands there are some 3^0 firms identified as suppliers to BL, but most of the business i s accounted for by 50 major firms. A significant proportion of the smaller, highly dependent firms are l i k e l y to go out of business altogether. Hales. Indeed the regional problem seems to be essentially The likelihood centred i n the ' e s t Midlands as well as Oxford and, to a lesser extent, South Unemployment ratios would more than double in these areas. I of closures may also raise wider issues of national interest, i f the rundown of certain sectors leaves the UK with less capacity than i s needed to serve other firms and industries. BALANCE OF PAYMENTS
16. The balance of payments consequences ore much more d i f f i c u l t to estimate I

than the consequences for unemployment because we do not have data on 3L's export3 broken down by product to correspond to the operations listed in paragraph 5,nor do we have direct and indirect import content on this basis. The assumptions we have had to make are therefore more sweeping than for the employment effects. In many cases j[ | I exist. we have apportioned exports and both direct and indirect import content in proportion to output, although we have used hard figures whore they We have also had to assume that relationships between direct and indirect
1

imports and sales for 19?8 will apply for 198O and that exports and hence ealeo for 1980 will be as given i n the BL Corporate Plan, not be r e a l i s t i c . This latter assumption may ' The assumptions underlying BL's market share take-up by other

CONFIDENTIAL

UK c a r m a n u f a c t u r e r s a r c a s g i v e n 17. i n paragraph 10 f o r the employment esti^^.es.

The b a l a n c e o f would

payments e f f e c t s

i n the

first

t w e l v e months f o l l o w i n g a p a r t i a l

BL c o l l a p s e

be:

m i l l i o n 190 p r i c e s

^ 1.2

Direct

exports l o s t imports avoided

^13 -288

of

exports of imports o f

manufactures semi manufactures

Minus t o t a l

2.0 o f

Net e x p o r t s

lost

125

Replacement o f home s a l e s

1225

3 -7 o f

imports o f

manufactures

Total b.o.p loss GDP 18. ' t h e The not whole o f of worsening o f

1350

= 0.6? o f GDP

the o v e r s e a s t r a d e a c c o u n t by t h e c l o s u r e s

is

assumed t o

provide

for ie

t h e GDP l o s s c a u s e d No p r o v i s i o n i s

and i t s

e f f e c t on s u p p l i e r s , income

0.67%

GDP.

made i n the to

estimate

for losses of

leading

to r e d u c e d d o m e s t i c in effect their

demand and t h e r e f o r e that the

f u r t h e r l o s s e s of output of the

and j o b s and

we have assumed

income m u l t i p l i e r e f f e c t In f a c t there will

closures

repercussions they is

w i l l be z e r o .

be such e f f e c t s

but we The

-believe

w i l l be s m a l l and to l i k e l y to

some e x t e n t o f f s e t the

by o t h e r measures. personal

multiplier income

be s m a l l because first

loss of

disposable by redundancy

f o r the unemployed i n t h e use o f to savings

t w e l v e months w i l l be c o n t a i n e d (PDI o f the

payments, is assumed

and r e d u c e d s a v i n g s .

a d d i t i o n a l unemployed offsetting

fall

by no more t h a n a f i f t h . ) because o f the

T h e r e may a l s o bo some

rise

i n net output

a v a i l a b i l i t y of

additional skilled labour.

CONFIDENTIAL

PUBLIC EXPENDITURE AMD PSBR 19. three If OL were to collapse

IMPLICATIONS p u b l i c e x p e n d i t u r e and PSBP c o s t s would f a l l into

the

broad i) ii)

groups: net deficit remaining a f t e r on the the b r e a k up o f B L ; elsewhere;

the

those

consequent

r e d u n d a n c i e s i n BL and

.iii}

any o f f s e t t i n g

measures.

rll

This of

report discusses report. Costs that

C i ) and ( i i ) .

We p r o p o s e

f u r t h e r work on ( i i i )

at

the

end

the

BL Closure 20.

We e s t i m a t e after

the

public

expenditure c o u l d be

and PSBR c o s t s o f range o f

meeting

the

net three

deficit year

sales

and c l o s u r e s

i n the

1?5-650m over a

reriod: m 19SO p r i c e s Annex s a l e s a s g o i n g c o n c e r n s ,B1 B2 B2 borrowings High 450 278 (371) (534)
f

Proceeds o f

Low 285

Realisation of other assets l e s s liabilities Closure coats Repayment o f

58 ( + +9) (534)
(

OA j

Net d e f i c i t

(177)
(175)

(640)
(650)

Rounded

21.

However, a s over the

the

three is

y e a r cash flow made up o f

figures

in

Annex B3 b r i n g o u t , the first

thenet

deficit

period

a v e r y l a r g e outflow i n from d i s p o s a l s .

year the I '

partly offset public

i n the

l a t e r years in

by i n f l o w s

In assessing are

expenditure

costs

the f i r s t

y e a r tvo d i f f i c u l t

judgements

necessary,

22.

First,

the

Chancellor that

and t h e

Secretary of

State

for

I n d u s t r y have a l r e a d y

agreed

in principle facilities

the o u t s t a n d i n g p r i v a t e s e c t o r guaranteed i f necessary

b o r r o w i n g s by BL and t h e i r If this

overdraft

c o u l d be the

a n d where p o s s i b l e .

were done o n l y some o f Immediately. estimate

1534m b o r r o w i n g s shown i n Anne.; 3 would be negotiations But i f w i t h the lenders, it is

repaid to

I n advance o f

difficult

what would h a p p e n .

we assume

t h a t 2 5 0 * c o u l d be

guaranteed

^ l

CONFIDENTIAL
(mainly the overdraft borrowing) the net outflow in the f i r s t year would reduced to thc order of 550m -7 ?5m. repaid out of disposals receipts i n the later years. 23Secondly, there i s already provision i for public expenditure on BL of 300in If the Plan were withdrawn now i t would be reasonable to assume be^^

The 250m guaranteed borrowings would be

in 19S0-81 (and 75n i n 1981-82) and some of i t iB earmarked by 3L for meeting closure costs. that a l l of this 3O0m was available towards the net costs in the f i r s t year. If i t were withdrawn i n , say, 6 months time the position would be complicated by the further capital expenditure which would have been committed in the period. Much of this would be wasted, in so far as i t was in operations which then had to close. But the value of operations which could be sold as going concerns
could be increased.
2>u If the f u l l 300m were available to offset the total of 550m-775m the net Since i n

additional public expenditure in the f i r s t year would be 250 m -475m-

practice some of the 300m w i l l have been spent, and assuming an outturn towards
the top end of the range, a working assumption for the net requirement i s 500 m in the f i r s t year(but there are obviously very wide margins of error here).
25It would also be necessary to consider at the time how best to cope with the But this could lead to d i f f i c u l t i e s with

peak outflow in the f i r s t quarter. Some of i t could probably be met from addition.sj bank borrowing under guarantee. constraints on bank lending and i t might be necessary for the Government to inject some short term loans. If this were tohappen, and i f they were repaid within the same financial year, there would be no net additional public expenditure on this account. Redundancy costs 2C. The jobs lost by the partial closure of BL would eventually be replaced,

leaving no permanent increase after a number of years in the general level of

unemployment. But job replacement would take time. The i n i t i a l job loss might
be amplified i n the short run by income multiplier effects, although as explained
in paragraph 18 no provision i s made for this in the estimates. Such scanty information as i s available about job replacement time paths in areas of high
unemployment suggests that some part of any i n i t i a l job loss would be likely
to have been made good by tho end of 12 months. In tho circumstances envisaged the job losses would bo concentrated in a few towns and they would take place
at a time when the unemployment figures were likely to be particularly high and
the economy generally i s depressed. The extent of net job replacement during the
f i r s t 12 months might therefore be unuGually modest. As an average for the 12

CONFIDENTIAL

months a s a whole the a s s u m p t i o n j o b s i n o t h e r UK m a n u f a c t u r e r s loss 2?. applies.

made here

i s that, apart

from the

11,000

o r so

referred

to e a r l i e r , t h e whole o f t h c i n i t i a l j o b

We assume t h a t M j f o f redundancy payments, b o t h f o r BL and f o r s u p p l i e r s s o l v e n t , would be r e f u n d e d from the Redundancy Fund (though

which remained initially to

t h e Fund would bear t h e f u l l

c o s t o f t h e s e and c e r t a i n o t h e r payments t h a t 90J> o f t h e w o r k e r s made t h a t ttie a v e r a g e f o r i t would be redundancy pay

w o r k e r s a t f i r m s which became i n s o l v e n t ) ; would q u a l i f y f o r redundancy pay;

redundant

r e c e i v e d by each o f the t h a t t h e subsequent which in

%t%

who q u a l i f i e d

1280.

We a l s o assume

n e t E x c h e q u e r c o s t s p e r man i n t h e f i r s t b e n e f i t and

y e a r a r e C't.SOO, o f a reduction

1,500

i s unemployment and s u p p l e m e n t a r y

3,000

r e c e i p t s from t a x a t i o n and n a t i o n a l i n s u r a n c e . There c o u l d be a d d i t i o n a l p u b l i c e x p e n d i t u r e and PSER c o s t s i f s u p p l i e r s , forking C o m p e n s a t i o n Scheme

23. or

BL t h e m s e l v e s , made use o f t h e Temporary S h o r t Time

which h a s been r e c e n t l y e x t e n d e d for compensation t o be p a i d

to t h e end o f March 1981.

T h i s scheme p r o v i d e s

( o f , b r o a d l y s p e a k i n g , 75% o f t h e n o r m a l pay o f t h e ivork, p l u s N a t i o n a l I n s u r a n c e

w o r k e r s c o v e r e d , f o r each day t h e y a r e w i t h o u t c o n t r i b u t i o n s ) to e m p l o y e r s

who a r e p r e p a r e d , i n agreement w i t h any a p p r o p r i a t e to implementing

t r a d e u n i o n s , t o a d o p t s h o r t t i m e w o r k i n g a s an a l t e r n a t i v e redundancies a f f e c t i n g six to months. the f u l l The e f f e c t 1 0 o r more w o r k o r o . i s to e n a b l e a f i r m

Payments a r e made f o r a maximum o f t o r e d u c e i t s wages b i l l t e m p o r a r i l y b e a r i n g t h e c o s t s and

I f firms d i d

e x t e n t o f any s h o r t f a l l i n demand, w i t h o u t

d i s l o c a t i o n o f r e d u n d a n c i e s which i n the end may n o t be n e c e s s a r y .

use t h e scheme t o a v e r t more r e d u n d a n c i e s t h a n t h o s e d i s c u s s e d a b o v e , t h e p u b l i c

e x p e n d i t u r e c o s t o f i t c o u l d be i n the o r d e r o f o n l y about

60m.

But the n e t c o s t would be

25m

because o f the f u r t h e r r e d u n d a n c i e s

avoided.

29-

Total On

( B L ' s net d e f i c i t

p l u s redundancy c o s t s ) y e a r c o s t s would be i n m i l l i o n o t 1 9 3 0 $00 80 220 j 25 8 2 ! ) **50 1275 (paragraph 2'0 prices:

t h i s b a s i s the f i r s t

I I J 1

( i ) Extra direct

f u n d i n g o f BL

( i i ) Under Redundancy Payments A c t ( i i i ) Unemployment and s u p p l e m e n t a r y benefits (iv) (v) (vi) S h o r t Time Working Scheme ( n e t ) total public expenditure

Tax and HI c o n t r i b u t i o n s l o s t

( v i i ) T o t a l PS B R

C O N F I D E N T I A L

'

SUMMARY 30. I f t h e B L Board listed were to withdraw t h e i r 5 above 198O Corporate Plan the main e f f e c t s and o n l y

^ those

operations might be:

i n paragraph

survived

i n the f i r s t

year

( i ) (ii)

147,000

net

redundancies

(half" i n BL i t s e l f ) ; loss;

1350m t o t a l

balance o f payments

'(iii)
(iv) ( v )

0 . 6 ? # l o s s o f GDP;

additional public addition to-the expenditure o f 825m;

P S B R o f 12?5m.

The p u b l i c increase stressed to

expenditure

a n d FSBR

costs,

which

are tabulated

i n paragraph

29,

will

i n so f a r a s o f f s e t t i n g m e a s u r e s a r e i n t r o d u c e d . tbrougliout t h i s over report, they are subject

B u t , as has been

t o wide margins o f e r r o r and

uncertainties

phasing.

31. need

I f Treasury Ministers further i .

feel

that

the contingencies envisaged

by t h i s

report

e x a m i n a t i o n wc r e c o m m e n d : consequences o f c l o s u r e s , and firms and and o f the case for sectors

F u r t h e r work o n t h e s p e c i f i c identification most a t risk

as f a r as p r a c t i c a b l e o f the

and t h e i r

regional distribution;

i i .

a detailed them,and

study o f p o s s i b l e o f f s e t t i n g measures, public expenditure a n d PSBR

o f the l i k e l y

implications.

IA Group Treasury

I 9

10 M a r c h

1980

Mm

1 0

ANNEX A

#
coiv::.:

. c c ;
THE BL

) ENCE

SAIEABILITl

OF

GROUP C O N S T I T U E N T

COMPANIES

A. \.

GOOD S A L E S 1 Land

PROSPECTS

Rover

This i s a substantially self-contained operation, although c e r t a i n f a c i l i t i e s a r e on s i t e s s h a r e d w i t h R o v e r and Triumph at S o l i h u l l . A few stampings and components would have t o be r e s o u r c e d i f o t h e r p a r t s o f t h e BL Group d i d not c o n t i n u e , but the m a j o r i t y o f components are u n i q u e to -. t h e L a n d R o v e r v e h i c l e r a n g e . The company i s p r o f i t a b l e and g e n e r a t e s a p o s i t i v e c a s h f l o w a f t e r i n t e r e s t and tax. T h i s t r e n d i s f o r e c a s t t o c o n t i n u e d u r i n g the 160 million e x p a n s i o n p r o g r a m m e c u r r e n t l y u n d e r way. Land Rover has a s u c c e s s f u l model r a n g e , and a s t r o n g p - o s i t i o n i n d e v e l o p e d and T h i r d World markets: the l a t t e r s t r e n g t h i s thought t o access be an i n c e n t i v e f o r any p o t e n t i a l p u r c h a s e r s e e k i n g t o t h e more d i f f i c u l t m a r k e t s , f o r e x a m p l e , i n A f r i c a . T h e c o m p a n y h a s i t s own e n g i n e e r i n g and s a l e s s t a f f but no component p u r c h a s i n g or financial organisation. 2 Jaguar

'

The m a j o r s e l l i n g p o i n t i s t h e r e p u t a t i o n o f t h e marque f o r top q u a l i t y e n g i n e e r i n g and t h e s u c c e s s o f t h e current s a l o o n and s p o r t s m o d e l s . J a g u a r has good p o t e n t i a l f o r p r o f i t a b i l i t y but d e s p i t e h i g h c o n t r i b u t i o n s p e r v e h i c l e i s c u r r e n t l y a u s e r o f c a s h b e c a u s e o f low v o l u m e s and the cost of developing a new e n g i n e and b o d y . The operation i s s e l f - c o n t a i n e d i n terms of assembly, engines, gearboxes and c e r t a i n o t h e r c o m p o n e n t s b u t some s t a m p i n g s c o u l d p o s e d i f f i c u l t i e s and the p a i n t shop would r e q u i r e investment. H o s t i m p o r t a n t J a g u a r has no s e l f - c o n t a i n e d body-building o p e r a t i o n : t h i s w o u l d h a v e t o be f o u n d . Staffing i s n e a r l y c o m p l e t e , i n c l u d i n g e n g i n e e r s who are regarded as v i t a l to the company's f u t u r e . T h e r e i s no s e p a r a t e sales team. P o t e n t i a l b u y e r s are g e n e r a l l y l i m i t e d to the small n u m b e r o f m o t o r c o m p a n i e s w h i c h h a v e n o p r e s t i g e c a r s o.r w h o s e own p r o d u c t i s r e l a t i v e l y weak.

11

CO: ":O'MT!AL
r

coiv-;:-,:::.:;:.:.
5 Parts

IN ZCHHDENCE

T h i s i s s e l f - c o n t a i n e d and would need t o be c o n t i n u e d i n

some form o r o t h e r t o s u p p l y the s t i l l l a r g e BL c a r p o o l .
Long term p o t e n t i a l i s p r o v i d e d by the p o s s i b i l i t y o f
s h i f t i n g from BL p a r t s p r o d u c t i o n as demand f a l l s away to
an " a l l makes" p a r t s p h i l o s o p h y . But t h i s w i l l be a
d i f f i c u l t o p e r a t i o n t o p l a n and a d m i n i s t r a t e . Currently
U n i p a r t i s p r o f i t a b l e and g e n e r a t e s a p o s i t i v e cash f l o w .
B. SELF CONTAINED SUBSIDIARIES 1 A l v i s , Coventry Climax, P r e s t c o l d

These are a l l s e l f - c o n t a i n e d s u b s i d i a r i e s c u r r e n t l y
o p e r a t i n g with a f a i r degree o f s u c c e s s and are not
consumers of c a s h . I t i s thought t h a t t h e y c o u l d continue i n e x i s t e n c e u n t i l such time as b u y e r s are f o u n d .
C. OVERSEAS OPERATIONS
1 Seneffe, Belgium

T h i s would be an expensive p l a n t to c l o s e because of

B e l g i a n l a b o u r l a w s . The p r e f e r r e d o p t i o n would be t o
i d e n t i f y a manufacturer l a c k i n g c a p a c i t y i n Europe and a b l e to take on t h i s unit" as a whole.
2 Ashok, I n d i a

T h i s o p e r a t i o n i s s e l f - c o n t a i n e d and i s only 5 1 % BL-owned. I t c o u l d g i v e a buyer wide a c c e s s to the I n d i a n and F a r East markets and, s u b j e c t t o I n d i a n Government a p p r o v a l , s h o u l d not be d i f f i c u l t to s e l l . D. OTHER BL COMPANIES
1 Leyland Vehicles Limited (LVL)

T h i s should be s a l e a b l e i n some f o r m , but the d e s i r a b i l i t y

o f the company's elements i s v a r i a b l e . The heavy t r u c k s
are c o n c e n t r a t e d i n L e y l a n d , L a n e s . The o p e r a t i o n i s
v i r t u a l l y s e l f - c o n t a i n e d , a new model i s j u s t coming on
stream and t h e r e i s a l s o a new assembly h a l l and t e s t
facility. Medium and l i g h t t r u c k s are a l e s s a t t r a c t i v e
p r o p o s i t i o n , thanks t o the ageing model range and over
c a p a c i t y at the Bathgate f a c t o r y , but o p e r a t i o n s c o u l d
c o n t i n u e w h i l e a p u r c h a s e r i s found f o r LVL as a whole.
Bus p r o d u c t i o n i s d i v i d e d i n t o " s o p n i s t i c a t e d " models f o r

-12

C O N F I D E N T I A L C O M M E R C I A LI NC O N F I D E N C E
the UK market and t r u c k - b a s e d models f o r d e v e l o p i n g c o u n t r y markets: the former c o u l d be continued p r o f i t a b l y 1 but the l a t t e r s f u t u r e would depend on whether medium and l i g h t t r u c k p r o d u c t i o n continued at B a t h g a t e . As a company LVL has a r e c o r d of low p r o f i t s and s u b s t a n t i a l cash a b s o r p t i o n : t h i s s h a r p l y l i m i t s the p o t e n t i a l s a l e p r i c e of the company. 2 Cowley

T h i s p l a n t c u r r e n t l y assembles fcni P r i n c e s s , Marina and Maxi models, a l l of which are due to be phased out i n the f a i r l y near f u t u r e . But the p l a n t has a l s o been d e s i g n a t e d as the base f o r BL p r o d u c t i o n of the Eonda c a r : i n the event of a c a l a m i t y b e f a l l i n g EL i t i s thought p o s s i b l e t h a t Honda may c o n s i d e r g o i n g ahead w i t h p r o d u c t i o n o f t h e i r c a r by a c q u i r i n g a p a r t o f the Cowley s i t e . Tho l a t t e r i n c l u d e s s e l f - c o n t a i n e d body, p a i n t , assembly and ( w i t h some i n v e s t m e n t ) stamping f a c i l i t i e s . Engines and gearboxes are a l r e a d y planned to be sourced from Japan. However heavy investment would be needed f o r mechanical u n i t p r o d u c t i o n f a c i l i t i e s and f o r a new p a i n t shop. Such investment c o u l d be p r o f i t a b l e but Honda's e v e n t u a l d e c i s i o n v a i l depend upon t h e i r judgment as to whether the time i s opportune to s e t up m a n u f a c t u r i n g w i t h i n the EEC and whether the r i s k o f investment i n the UK i s worth t a k i n g . 3 Abingdon/MG Marque

: \ t

BL are c u r r e n t l y n e g o t i a t i n g with a consortium l e d by A s t o n M a r t i n the p o s s i b l e s a l e of the Abingdon p l a n t and MG model. D e t a i l s o f the i n i t i a l A s t o u M a r t i n b i d and the p r e s e n t p o s i t i o n of n e g o t i a t i o n s have not been disclosed. I t i s not yet c l e a r whether BL are prepared t o i n c l u d e the Abingdon p l a n t i n any f i n a l l y agreed package. E. THE REMAINING BL GROUP COMPANIES

C e r t a i n o t h e r s m a l l p a r t s of the BL Group have been i d e n t i f i e d where s j l e s might be expected at nominal v a l u e s t o o f f s e t c l o s u r e c o s t s . But i t i e thought t n a t g e n e r a l l y A u s t i n M o r r i s , K o v e r , Triumph and s p o r t s c a r s would not prove a t t r a c t i v e p r o p o s i t i o n s f o r p o t e n t i a l b u y e r s . Small p a r t s of the f o u n d r i e s and the P r e s s e d S t e e l F i s h e r o p e r a t i o n s would need to be r e t a i n e d as a c e n t r a l s e r v i c e i f a number of u n i t s as o u t l i n e d above were kept i n o p e r a t i o n w i t h a view to s a l e .

-'3

a :

S A L E S AS COIiiG KQMSKHHS

! ' ::

LOW

Sales

nroccgd-: 200 15) 1t

. > .

'

i -i C

7? 9 5 4 20 8

ALVIS COVENTRY CLIMAX PRESTCOLD SEHEFFE INDIA LVL COW]

12 4 6 '!0 10 50 __ '150

285

0 WITS

BREAK-UP V A L U E S HOT TO BE SOLD AS GOING CONCERNS

Ni i. boo}:

Hr'iii ; ; al ;.M

n r, ] i o n : L t c i o r ]

FIXED

A3SE1B:
127 258 59 Bo 56 2 57 22 1

Land and b u i l d i n g s P l a n t and e q u i p m e n t Special tools

11

10

_5 85

415

154

INVENTORIES:
Vehicle' , 8 0 287 219 60 22

:
Part; VIP/Other

( 96)
60 181

( 95)
70 _J9

DEBTORS i J'ORS

19-';

162

NE

776

278

56

CLOSURE COSTS:
Hun -down c o s t C a n c e l l a t i o n o f contract;: "Redundan cy c o s t s ;; i
: ' ( 10) (145)
;

(240) _ i * (196)

(57D

44

(240)

Assuming BL w i l l not fp i n t o r B c o i v e r s h i p o r l i q u i d a t i o n

t h e y w i l l bear 593> paio

01' payments t o employees under the Hedundancy Payments A c t and 41* w i l l ' b e to them from t h e Redundancies F u n d . The redundancy

c o s t s shown here a l s o assume

t'int SL workers made redundant would r e c e i v e 10 wcoV.S pay i n l i e u oi' n o t i c e .

15

THREE YEAR CASH FLOW

' TOTAL
A. HIGH

(OUTFTOW)/[];F]Oiv lit K 22 2i Si Year 1 Year 2 Year 3

21

Assets

lees closure

( 93) CM3)
4) -

50
-

86

(2S?)

40

(534)
86 40 (30 0 200

250

(177)

(977)

50

B.

LOW

(39 ... (505)< 18) 20 11 t90) 73

A s s e t s l e s s c l o s u r e cost:

Borrowings Sal

(534) 285

(534) -

(534) -

150
223 161

(640)(1037)( 18)

20

11

(1024)

In GO far as these borrowings can be guaranteed their repayment could be deferred to years 1 and 2. It i s assumed in the main report (paragraph 22) tnat 2 5 0 m might be guaranteed and so deferred.

If.

fART

ends:-

PART

^3

begins:

fe~TZ-

j.tijsj^