With permission, Mr. Speaker, I should like to make a statement about the outcome of the discussions which the Department of Trade and Industry has had with Manganese Bronze Holdings Ltd. and BSA Ltd. on the future of the British motor cycle industry.
I told the House on Thursday that Manganese Bronze had expressed interest in taking over all or part of BSA's activities and had made certain proposals to the Government. In outline, the proposals finally put forward by Manganese Bronze were as follows: Manganese Bronze would make an offer for the whole issued share capital of BSA. The consideration would be 50 per cent. of the ordinary share capital of a company to be formed out of Norton Villiers Ltd., Manganese Bronze's motor cycle subsidiary. The remaining 50 per cent. would be owned by Manganese Bronze. In order to ensure that the new company would be established with a sound financial structure, Manganese Bronze would in addition provide £4·8 million of which £1·3 million would be in the form of convertible preference shares in the new motor cycle company and £3·5 million would be in cash for the acquisition of BSA's non-motorcycle interests. The DTI would also provide £4·8 million in the form, however, of prior-ranking preference shares of which £1·3 million would be convertible. Talks are also proceeding with banks to secure banking facilities of some £10 million.
Manganese Bronze's detailed proposals for the merger are being published this afternoon.
Manganese Bronze's offer would be conditional on the completion of a plan for the future of the new motorcycle company which showed to the satisfaction of Manganese Bronze that a viable business could be carried on within the available finance. The Department's support is dependent upon our being satisfied about the arrangements for the acquisition of BSA and about the proposals for the management and operation of the new company under Mr. Poore.
The Government have concluded after detailed study that these proposals, if agreed by the boards and shareholders of the two companies, offer good prospects of strengthening the British motor cycle industry which already exports over 90 per cent. of its output to a rapidly expanding overseas market.
The House will be interested to hear the Minister's statement announcing that nearly £5 million of public money is going to this lame duck. The House will want to study the announcement carefully and will want more information than the Minister has been able to give in his statement.
Are the Government satisfied that the degree of control that the Department of Trade and Industry will have, either by a director on the board or in some other form, will safeguard the enormous investment of public money that is to go into the new company?
Secondly, will the Minister explain the extent of consultation with the trade unions involved, as the failure of BSA is widely recognised to have been a failure of management in design and marketing and not a failure of manpower? There are 6,000 highly skilled people involved. The Minister told us that these proposals have to go to the boards and shareholders but he made no reference whatever to the workers whose jobs are at stake.
Thirdly, does the Minister contemplate an inquiry into the circumstances in which BSA collapsed? It appears from Press reports that the Department of Trade and Industry has been at work for two months on the company's problems. There were some rumours of informed trading last week at a time when the shares collapsed and, as Lord Shawcross is chairman of BSA, and the chairman of the takeover panel, some special form of inquiry might be necessary.
Finally, will there be a further statement when the Government feel satisfied about the arrangements that have been made, so that the House may consider the arrangements, as it always could in similar cases in which the Ministry of Technology—which now inspires his Department—was involved?
The right hon. Gentleman has made a good many suggestions that I would rebut, not least the last. The suggestion that under those arrangements the House was more fully informed is not one which the right hon. Gentleman would wish to press on further reflection because the IRC was under no obligation—and nor was the Minister—to make a statement of that kind.
The question of an inquiry is principally a matter for the takeover panel, but I will certainly bear in mind what the right hon. Gentleman said.
Representatives of the trade unions came to my Department this morning and I have a meeeting with them on Thursday. As the right hon. Gentleman knows, there has been consultation between the company and the trade unions concerned. I agree with him that trade union cooperation will be of great importance.
On monitoring, a condition of the arrangements will be the agreement of a satisfactory monitoring plan which will involve flows of information to the Government.
On the right hon. Gentleman's first observation, it is curious that he should describe as a lame duck Manganese Bronze—[Interruption.]—the right hon. Gentleman described the company which is being supported in those terms. The distinguishing factor—which I think will commend itself to the House as a whole —is that here is a British management which has been highly successful and is prepared to commit its future to the company. The management of the new company will be Manganese Bronze management.
Is my right hon. Friend aware that many people will be pleased to know that the Birmingham Small Arms Company is not to go bust? I hope he will not overestimate the employment factor because there is now a growing shortage of skilled labour in the West Midlands because of the Government's successful policies. Has my right hon. Friend considered with Managanese Bronze the research and development factor to ensure that the motor cycle industry does not run down any further, in view of Japanese competition?
My hon. Friend is right when he talks of the developing shortage of skills in the West Midlands. Undoubtedly, the Department's principal task is to provide the conditions in which a profitable, independent industry can flourish to the country's benefit. The vigorous expansion of industry which is now taking place in the Midlands and elsewhere is proof of that. We recognise that there are some situations in this country, as for all our free enterprise rivals abroad, in which Government action is needed to supplement the workings of private industry. While it is almost certainly true that with our highly efficient capital market those situations are rarer in this country than in other free enterprice nations, none the less this is an instance in which possibly British exports are at stake worth about £300 million over the next 10 years.
In the introduction of any form of public accountability will the Minister say whether there will be a Government director to safeguard the public interest and to prevent the kind of asset stripper which these transactions seem to invite? In view of fears by suppliers and workers, can he say whether there will be a continued underwriting of payments for supplies necessary to maintain employment at BSA?
There will be such monitoring and provision for the appointment of a Government director if it is felt that that carries an advantage. But the principal task is that the Government should ensure that its investment is spent in the directions intended, and there will be a continuing job of monitoring to be undertaken. The injection of support depends on a plan which keeps and then, subsequently, one hopes, expands the British motor cycle industry.
I am sure my hon. Friend will have been encouraged by the large falls in unemployment in the North West which have followed the introduction of improved incentives to investment in the area.
What kind of jobs guarantee, particularly for the workers at the Triumph Works at Meriden, is the Minister prepared to give in this package? To what extent are the debts of BSA to be allocated between the new company and the present company? What will the Minister do to ensure that the reputation of a very fine motor cycle, the Triumph, is guaranteed, and what kind of accountability will he give to this House to ensure that the benefits of this money go to the country as a whole and not to private shareholders?
On the question of accountability, the hon. Gentleman will recall the arrangements which exist under the Industry Act providing for regular reporting to this House, including publication of an annual report. In regard to the reputation of the motor cycle, and particularly the Triumph, the hon. Gentleman is right to say that it has a considerable reputation, particularly in the United States market. The question of employment must be principally a matter for the management of any company that is formed. Clearly it is not possible in this House to say anything about precise levels of employment, but the best safeguard for future employment is a competitive and profitable British motor cycle industry.
Is the Minister aware that his statement and the Government aid he has provided will occasion great relief to a very large number of men whose jobs have been in danger throughout the West Midlands and in my constituency of Solihull? Is he able to say anything further at this stage about the future of the non-motor cycle side of BSA and in particular about the future of the important metal components divisions? Fears have been expressed in many quarters that the subsidiaries might be sold off piecemeal. Is he able to allay any of these anxieties?
On the non-motor cycle activities, there is a very good prospect that the majority of them will be continued in their present form, and interest in them has been expressed by a number of organisations. I agree with what my hon. and learned Friend said about the jobs involved. He will appreciate that, over and above that, there is an overriding concern in terms of the importance of these activities to the balance of payments.
Mr. Terry Davies:
Is the Minister aware that his statement will not give much assurance to the people employed in BSA because they heard much the same sort of thing several months ago when they accepted large-scale redundancy? Is he further aware that the only redundancies which will be acceptable to those employed at BSA will be among the board of directors?
I believe that those employed in BSA will recognise that their best guarantee is the formation of an internationally-competitive motor cycle industry. In regard to alternative courses of action suggested by one or two hon. Gentlemen, I do not believe that in the longer term the employment and security of those employed at BSA would have been any way improved had the Government simply supported BSA in its present form.
The only proposals involving Government assistance which have been put forward are proposals relating to Manganese Bronze. That is the only bid which has been received although, as my hon. Friend knows, there has been news of a tentative inquiry by an overseas purchaser. If there had been other proposals, we would of course have been prepared to look at them on their merits, but we would have needed to make sure that the consequences for the industry and for British exports were beneficial.
The Minister has acknowledged that the industry possesses a highly-skilled engineering work force. What have the trade unions been consulted about? Will he insist that the trade unions are given real participation in Manganese Bronze in the form of industrial democracy, or will the unions be left outside as they have been in the past and be told about what has happened only after is has become a fait accompli that the firm is to close?
I believe that the existing employees of Manganese Bronze have recognised the advantage to them of being in a highly successful firm which has made progress against Japanese competition in the American market. It will become clear that the new management of the company is determined to ensure that the British motor cycle industry as a whole, in which they will now play a greater part in terms of management, does just that for the benefit of their employees.
Is the Minister aware that there is a substantial body of opinion which has no wish to commit the taxpayer to become the pillion passenger of Mr. Dennis Poore, whatever may be his entrepreneurial skills—and the greater they axe, then the less it would seem that he should have to rely on the taxpayer to supply the funds. Could my right hon. Friend give the House a little more information about his statement? Was the statement he made to the House that which was also made by Manganese Bronze and communicated to the board of BSA yesterday and which so far, according to the statement issued by Lord Shawcross this morning, has meant that the BSA board has been unable to reach any final conclusion? Does this mean that there are still factors to be resolved? Is one of the unresolved factors whether the £4·8 million is the full commitment of the British taxpayer? Will he bear in mind the fact that the £4·8 million falls tantalisingly short of the £5 million figure which would require to come before the House under the provisions of Section 8(8) of the Industry Act? Will the right hon. Gentleman represent to the Leader of the House the anxiety in many quarters that we should have a full debate on this topic at the earliest opportunity?
As I hope I have made clear, BSA has not reached any final conclusion. I am giving information to the House at the earliest opportunity. I should have thought that my hon. Friend would welcome that. My hon. Friend spoke of Government support. As he will know, the greater part of the new finance available is coming from private sources. Obviously it has been our intention to ensure that the Government commitment is as small as possible. I am sure that my hon. Friend would not have wished us to pay more than we needed simply to ensure a debate in this House.
Is the right hon. Gentleman aware that a little over 12 months ago BSA had 100 per cent. support from the trade union movement in the massive redundancies which took place? Today the Minister said that the viability of BSA arises to a certain extent from the output of the workers. Is the right hon. Gentleman aware that the workers have not staged a strike in this factory for the past 25 years, so that there is no problem about unrest in the industry? It is a problem of management. If the Government are now to invest capital in the industry, will they first ensure that the organisation at management level is looked into seriously? If there is any reconstruction of the industry required from inside, will he ensure that the British machine tool industry is considered very seriously in any new infrastructure which is put into it?
I will take account of the hon. Lady's later observations. I agree entirely that the principal fault in the past has been with management, and perhaps some way back in the past. The best guarantee for the future of the company is the efficiency of the management. It is for that reason that we have chosen to take this course rather than to bale out BSA. I believe that the majority of the employees of BSA, for whom this must be a very worrying time, will accept that to have been the right course.
Some 90 per cent. of the output of both companies at the moment is exported, principally to the American market. The specific market which both BSA and Manganese Bronze go for—that is, for motor cycles over 500 cc—is expanding, at present, at the rate of between 15 and 20 per cent. The principal competition is Japanese, and the belief of the management of Manganese Bronze is that the upward movement of the yen, amongst other factors, must be of considerable assistance to the company.
Does the right hon. Gentleman agree that his statement today can be interpreted as being anti-European and pro-monopolistic? Will he confirm, in the matter of consultation, that he has not even offered the same facilities to Steyr-Daimler-Puch whose principal subsidiary is in Nottingham, as he has to Manganese Bronze?
I have made clear our position about the offer by the Austrian company. There is no intention to discriminate. As for monopolies, it is clear that in an industry such as this, where we have a considerable capacity but are relatively small compared with the Japanese, there are the strongest arguments for forming one strong company.
Will my right hon. Friend confirm that the £4·8 million will be sufficient to avoid a liquidator and a receiver, and that the creditors and liabilities will be fully met in addition to the assets being taken over? Can my right hon. Friend say what proportion of the capital the Government will hold on conversion of the convertible preference?
If the preference shares were converted, it would amount to 20 per cent. of the equity. We have an obligation under the Industry Act to sell our holdings at the first practicable opportunity, as we have done with the IRC holdings, a substantial proportion of which has now been sold. Certainly that would be our intention in this instance. My hon. Friend will understand if I say that while negotiations are still proceeding I cannot comment in detail on the other matters which he raised.
The reason why the House wants further opportunities to discuss this matter is that we are interested in seeing that the jobs of those who have suffered under the appalling management they have had at BSA are safeguarded, and that there is not asset-stripping going on. Will the right hon. Gentleman assure us that Lord Shawcross will not be invited to undertake any study of insider trading in BSA? Is the right hon. Gentleman aware that the Opposition welcome the conversion of the Cabinet to the industrial logic of the white Heath of the technological revolution?
The right hon. Gentleman's suggestions about Lord Shawcross are unworthy of him. Though it is not a matter for me, it is quite clear that Lord Shawcross, as chairman of the Takeover Panel, would not be involved in an investigation in this instance. As for the right hon. Gentleman's more general remarks, he himself has to accept that many of the efforts which he made in good faith to prop up existing managements, no doubt in order to ensure that employment was maintained at current levels, were highly unsuccessful. While I can give no undertaking about employment levels in this instance, we believe that by backing a proven entrepreneurial team we are giving the best opportunities in the future for maintaining them.