Motor Industry

Part of the debate – in the House of Commons at 10:04 pm on 26th July 1979.

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Photo of Mr John Patten Mr John Patten , Oxford 10:04 pm, 26th July 1979

I am grateful for the hon. Gentleman's observations. As he said, I am very new to the House, and I may take a long time to come to the point of my argument. I agree that BL receives its money from a number of different sources. But there is no doubt that a substantial amount of that money, however it is funded, comes directly from the taxpayer, even though there is a financial burden on the management of BL and on the NEB to produce a return in terms of profit.

If I may, I shall return to what I see as four substantial obstacles to BL beginning in the 1980s, as its corporate plan suggests, to make a genuine commercial return to full profitability—an aim which Sir Michael Edwardes and his management team have and, I know, hold very strongly.

The first obstacle is the general state of the domestic economy today. My right hon. and learned Friend the Chancellor of the Exchequer said only yesterday that he found the prospects for the economy in the short term frighteningly bad. That has to be worrying for BL.

Secondly, I do not see that the motor car industry in demand terms has very strong prospects in the next two or three years, especially following the recent oil crisis. I think that we shall see demand levelling off over the next two or three years for new motor cars, except for those which are fuel-efficient at the lower end.

Thirdly, in the United Kingdom anyway, recent figures reveal that the cost of running a motor car increases year by year. The Hertz car leasing firm produced figures today showing that the running cost of the average family car was some 18p a mile. That is a 22 per cent. rise over the cost of running the same car last year.

The most significant problem that BL faces is consequent on the strength of the pound. There is no doubt that the strength of the pound is making BL's position as a competitive exporter and an importer of certain components extremely difficult. This will make the internal generation of capital for future investment, to which the hon. Member for Nuneaton referred, that much more difficult to achieve in the next three or four years.

Hon. Members may say that other car manufacturers in countries with strong currencies, such as Germany, where the deutschemark is strong, manage to export substantial numbers of motor cars for which there is a great demand. That may be the case. But those manufacturers are starting from a much stronger base than that from which BL is starting today. I have no wish to go back over the industrial history of BL during the past 15 or 16 years and try to apportion blame between Government, management, trade unions, work force, investors and the rest. But there is no doubt that BL is in a weak position. The power to generate its own investment capital, which is vital in my constituency of Oxford if the new middle-range car, the LC10, is to go into production in 1981 and 1982, is being severely undermined by the present level of the pound.

What is the position in terms of regional policy? We have clearly not seen the last of BL and its financial relationship with the Government. We also have to look carefully at the role and relations of BL with foreign investors. I applaud the management of BL for its development of trading and manufacturing links with the Japanese firm, Honda. This is critically important. Increasingly, as members of the European Community, we have to look at regional policy not simply within a national framework but within a European and, I suggest, a worldwide framework. Foreign investment, particularly in the motor industry, will become more important.

There are some people who say that BL has made a mistake in stretching its line by joining with Honda, a small to medium-sized Japanese firm. I do not believe that BL is mistaken. Those who say that a link with Renault would have been better are totally wrong. I believe that Renault, a completely State-owned firm, is much more a lame duck than any motor car manufacturing company in the United Kingdom. BL and Renault have comparable work forces. In the motor car division, Renault employs about 104,000 and BL 117,000. Renault has a much greater share of its domestic market, about 34 per cent. compared with the unfortunately low 23 per cent. BL share of the United Kingdom domestic market. Yet on 1978 figures Renault performed less well than BL. BL turned in better after-tax profits.

The temptation for BL management to take an easy course and to turn to a nearby European partner like Renault was rightly avoided. BL is on the right lines in beginning to strengthen its links with Japanese manufacturers such as Honda. I hope that the Government will endeavour to foster these links. I hope that we shall hear observations to that end from my hon. Friend the Minister tonight.