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British Leyland

– in the House of Commons at 4:55 pm on 6th February 1986.

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Photo of Mr Paul Channon Mr Paul Channon , Southend West 4:55 pm, 6th February 1986

Yesterday, I informed the House that talks were at an advanced stage on the proposal for a merger between Land Rover —Leyland and the Bedford Commercial Vehicle subsidiary of General Motors. It is the Government's intention that, subject to satisfactory terms and conditions, and the receipt of firm undertakings from GM on its manufacturing and sourcing intentions, these negotiations should be brought to an early and successful conclusion.

I also confirmed that, following an approach by the Ford Motor Company, wide-ranging but, at this stage, exploratory discussions with the Austin Rover Group were in progress which might lead to a proposal for the merging of those businesses. I wish to inform the House at the earliest opportunity of the most recent developments affecting these discussions, in particular as regards Austin Rover.

The Government would have preferred to have waited until the exploratory talks had clarified the difficulties and opportunities a merger might have created and then taken a decision in principle, on the basis of a considered analysis, whether to pursue the possibility further. Speculation surrounding these exploratory talks has itself given rise to very great public concern and uncertainty. If that were to continue for an extended period, it could have seriously damaged the prospects for Austin Rover's business, its employees, its suppliers and its dealers. Nor would such a period of uncertainty have been helpful to many people associated in comparable ways with Ford's business in this country. Concern about these developments was expressed very clearly on both sides of the House in yesterday's debate. The Government have given full and immediate consideration to the situation so created. We have decided that the right way to end the uncertainty is to make it clear that the possibility of the sale of Austin Rover to Ford will not be pursued.

It is the Government's intention, with the agreement of the BL board, that negotiations should be pursued for the separate privatisation of Unipart by the early placement of shares with United Kingdom institutions.

Collaborative arrangements in the motor industry will become increasingly necessary and important. Austin Rover Group's successful relationship with Honda is an example of that. I hope that Ford and Austin Rover will also consider positively other opportunities for collaboration. I should like to pay tribute to Ford's contribution to the British economy through research and development, manufacturing and employment.

I hope that the Government's decision and the ending of uncertainty will leave Austin Rover free to devote its efforts to the further development and growth of its volume car business, building on creditable progress which has already been achieved.

Photo of Mr John Smith Mr John Smith , Monklands East

Can the Secretary of State explain why he has managed to attract some members of the Cabinet to sit beside him today although he was signally left on his own with his unfortunate task yesterday?

As for the proposals for Land Rover-Leyland vehicles and Bedford, can the Secretary of State tell us what is the difference between what he calls a merger and a takeover? Are the Government involved in the discussions to ensure that no arrangement which sells our crucial British interests is arrived at? What are the implications in terms of jobs and of the location of manufacturing plant?

In view of the history of an industry in which assurances have frequently been given, how will any assurances be made binding and unbreakable? Will the Government arrange for a full debate in Government time at an appropriate stage so that the full implications for jobs and British interests can be assessed properly before any conclusion is arrived at?

In making it clear on behalf of the Opposition that I welcome with relief the decision taken by the Cabinet this morning to abandon talks about the sale of the Austin Rover Group to Ford, may I remind the Secretary of State that he and his colleague, the Minister of State, derided the Labour party's motion yesterday suggesting that the talks be abandoned forthwith? Although the right hon. Gentleman and his colleagues voted last night against the motion that the talks should be abandoned, is it true that the Cabinet had to accept the force of the Labour party's case?

Has the Secretary of State reflected on the fact that if the Opposition had not exposed the existence of the talks, flushed out the Secretary of State on Monday and had not debated the issue yesterday in a way that allowed the full force of parliamentary and public opinion to be expressed, the likelihood is that the secret talks would have been continuing with the prospect of the sale of Austin Rover still alive? Why were talks that were never in the public interest ever started?

Why are the Government persisting in the sale of Unipart, the loss of which will only weaken the strength and integrated force of the British Leyland group at a time when all its strength is required to survive and prosper now that, at last, it has been permitted to remain British?

Photo of Mr Paul Channon Mr Paul Channon , Southend West

The hon. Gentleman asked about General Motors in relation to Land Rover-Leyland. As the House will remember, I made a full statement a few days ago. I outlined, with care and in some detail, the undertakings that we would require before any deal with General Motors would be acceptable to the Government. The question of a further debate in the House is a matter for my right hon. Friend the Leader of the House. Obviously, the right hon. and learned Gentleman's point is noted.

As to the reason for deciding not to pursue the talks between Austin Rover and Ford, I have tried to explain why, in my view, it is essential at this stage to end uncertainty. I believe that it is in the interests of Austin Rover and Ford. It will be widely welcomed in the House that the Government have taken an early decision to end that damaging uncertainty.

Photo of Mr Steven Norris Mr Steven Norris , Oxford East

I thank my right hon. Friend for his statement, which will be warmly welcomed by the work force of Austin Rover at Cowley. I especially thank him for the speed with which he has killed the damaging speculation, which arose as a result of the leak of the confidential talks. Will my right hon. Friend bear in mind the workers of Unipart who, contrary to what the right hon. and learned Member for Monklands, East (Mr. Smith) suggests, welcome the move towards privatisation? Will they have the opportunity to be included in any anticipated share issue?

Photo of Mr Paul Channon Mr Paul Channon , Southend West

I am extremely grateful to my hon. Friend for his support. He certainly welcomes our decision. I shall take on board his point about the work force of Unipart. I believe that our decision on the privatisation of Unipart will be widely welcomed.

Photo of Mr David Steel Mr David Steel Leader of the Liberal Party

Will the Secretary of State answer the question that I put to the Prime Minister earlier? Why is the Land Rover division not being treated separately, for example, as a management-employee buyout? Will he confirm that it is profitable, that Land Rover has been a symbol of British engineering round the globe for almost 40 years and that it is of crucial importance to our armed forces? If it is not treated separately, the suspicion will remain that it has been put in as a succulent carrot along with the truck and bus division at the same time as an announcement that production of the American jeep is ceasing. Will he justify that?

On the matter of the Leyland truck and bus divisions, why are the Government not giving a similar commitment to open negotiation and public discussion, which the right hon. Gentleman pointed out would have happened if the Ford deal had been going ahead?

Turning to the Austin Rover Group, will he confirm that the British Leyland board will be left to get on with the management of that company? Given the successful turn-round, will he confirm that no public money has been put into the company in the past three years and that it now has a successful range of vehicles, which are competing well, not only on the domestic market, but in the European market? Does he agree with the right hon. and learned Member for Monklands, East (Mr. Smith) that in this episode there is one cause for rejoicing, which is the fact that the House of Commons has been able to change the Government's mind?

Photo of Mr Paul Channon Mr Paul Channon , Southend West

It is very nice to welcome the right hon. Gentleman to these discussions. On public expenditure, as the House has been informed on many occasions, guarantees under the Varley-Marshall assurances of up to £1·5 billion are available to BL, which is a factor that the House would do well to bear in mind. I am convinced that the proposals regarding Land Rover are in the best interests of the company. That is also the view of the British Leyland board. I would not put forward the proposals to the House if I was not convinced that they were in the best interests of Land Rover, including the opportunities that will arise from increased distribution in the United States. I hope that the talks will go well. Obviously, I shall keep the House in touch with the progress of the negotiations.

Photo of Mr Roger King Mr Roger King , Birmingham, Northfield

Will my right hon. Friend accept the grateful thanks of many workers in the west Midlands and Birmingham that the cloud of doubt over the future of Austin Rover has now been lifted? Does he accept that the work force and the management will work and continue to work with new models designs and with productivity plans to produce, in collaboration with other manufacturers, the type of products that will lead the company into renewed prosperity in the knowledge that the Government have been able to give a helping hand?

Photo of Mr Paul Channon Mr Paul Channon , Southend West

Yes. I hope that my hon. Friend will join me in encouraging British Leyland to make progress along those lines, so that it increases its share of the market and makes increasing efforts to produce profitable results. In that way we can ensure a secure future for Austin Rover without it being a drain on the taxpayer.

Photo of Mr Andrew Faulds Mr Andrew Faulds , Warley East

Would the right hon. Gentleman care to comment on the report I have had that a deal has already been agreed between Bedford Motors, part of General Motors, and Leyland and that it was probably signed on 27 January, but could not be announced that day because that was the day that the Westland fib fabrication exercise was at its height?

Photo of Mr Paul Channon Mr Paul Channon , Southend West

That is a strange allegation. I have known the hon. Member for Warley, East (Mr. Faulds) for a long time and occasionally we hear such remarks. As I have already told the House, talks are at an advanced stage on the proposal for a merger between Land Rover-Leyland and Bedford Commercial Vehicles. No decisions have been taken. I assure the House that that is the exact position.

Photo of Mr Kenneth Warren Mr Kenneth Warren , Hastings and Rye

I welcome my right hon. Friend's decision to stop the Austin Rover talks. Will he use the opportunity to discuss with the owners of motor vehicle assembly plants how to get more British content into their vehicles and will he draw into the discussions the motor components buyers, whose future rests on the success of the assemblers?

Photo of Mr Paul Channon Mr Paul Channon , Southend West

My hon. Friend makes a good point and I am grateful for his support He will remember that my predecessor announced an improvement in content in December. The figures that I gave to the House yestery about Ford are extremely impressive.

Photo of Mr Terry Davis Mr Terry Davis , Birmingham, Hodge Hill

In view of the links between Austin Rover and Freight Rover, will the Secretary of State reconsider his insistence on including Freight Rover on the menu being offered to General Motors? Alternatively, will he insist on an undertaking that the manufacture of Sherpa vans and the jobs that go with it remain at Washwood Heath?

Photo of Mr Paul Channon Mr Paul Channon , Southend West

I will not consider taking out Freight Rover. It is part of the discussions that are taking place. I have already explained to the House the sort of assurances that I shall be seeking and I have nothing to add.

Photo of Mr John Taylor Mr John Taylor , Solihull

Does my right hon. Friend accept that, on behalf of the 8,000 Land Rover employees who work in my consitiuency, I shall be looking to him and hope that he will look to General Motors if this deal goes through for guarantees on British identity, British content, flagship status for the Land Rover plant at Lode Lane at Solihull, research and development in Solihull and increased commitments to exports, not least to America?

Photo of Mr Paul Channon Mr Paul Channon , Southend West

I understand and share my hon. Friend's views about all those matters. I assure him that the proposal is good news for his constituents, good news for the future of the company and good news for Land Rover.

Photo of Mr George Park Mr George Park , Coventry North East

Although I welcome the news that the talks between Ford and Austin Rover have been abandoned, can we be assured that they will not be resurrected with another company? Will the Government do two things to assist Austin Rover? Will they take positive steps to improve the miserable Spanish export quota allocated to Austin Rover, and will they finally do something about the differential tariffs which give great advantages to firms such as General Motors, but work against the best interests of Austin Rover in trying to export to Spain?

Photo of Mr Paul Channon Mr Paul Channon , Southend West

The hon. Gentleman is right to draw attention to the extremely unsatisfactory Spanish tariff system. We inherited the position from negotiations long ago. As a result of fresh negotiations before Spain's accession to the Common Market, those differences in tariff will be reduced over a period. At the same time, our reduced duty quota will be increased. Now that Spain has acceded to the European Community, the end of that ridiculous system is in sight.

Photo of Mr Michael Grylls Mr Michael Grylls , Surrey North West

Does my right hon. Friend accept that, as usual, the attitude of the Opposition is hypocritical? They know perfectly well that thousands of British workers have good and secure jobs with Vauxhall and Ford, and that many American workers have good jobs with British firms in the United States. Is not investment international? Would it not be in the interest of the trucks part of British Leyland, and Land Rover in the long term, to be part of a big group with worldwide marketing facilities, and would it not increase jobs in Britain?

Photo of Mr Paul Channon Mr Paul Channon , Southend West

I agree with my hon. Friend. As I tried to point out yesterday, Ford in the United Kingdom employs about 50,000 people, supports more than 100,000 other workers through its dealers and suppliers and spends nearly £750 million a year on product development in Europe, about half of it in the United Kingdom. Any Opposition Member who attacks that does a grave disservice to Britain and to the constituents of many hon. Members.

Photo of Mr Tam Dalyell Mr Tam Dalyell , Linlithgow

As a former parliamentary private secretary to Rab Butler, does the Secretary of State recollect that it was the Government in which he served who required the then British Motor Corporation to come to Bathgate? It grew into the greatest concentration of machine tools under one roof in Europe. In those talks, what obligation do the Government believe they have towards Bathgate?

Photo of Mr Paul Channon Mr Paul Channon , Southend West

The hon. Gentleman knows the present position at Bathgate, which is unchanged by my announcement. If we are going back into the history of British Leyland, I should say that the Labour party has a lot to answer for.

Photo of Mr Robert Atkins Mr Robert Atkins , South Ribble

Does my right hon. Friend recognise that the uncertainty that surrounds the future of the Leyland truck and bus divisions is still very much evident? Does he also agree that the possible purchase of Leyland Bus by Laird is not mentioned in his statement? Will he comment on that and say whether another offer is in prospect for that, too? Will he also comment upon the position of Multipart, which is another successful aspect of the Leyland group? As a matter of urgency, will he answer the questions raised by me and my hon. Friend the Member for Bromsgrove (Mr. Miller) in the debate yesterday, so that I can alleviate the anxiety of people in my constituency which, after all, includes the town of Leyland where this great company was born?

Photo of Mr Paul Channon Mr Paul Channon , Southend West

I shall study carefully what my hon. Friend said yesterday and write to him about the points that I have not already covered. As to the trucks division, the merger proposals are at an advanced stage, and I hope that it will not be long before I can inform the House of the arrangements. As he said, talks are continuing with Laird. My statement today does not relate to Leyland Bus, but I shall keep my hon. Friend closely in touch with progress.

Photo of Mr Allan Roberts Mr Allan Roberts , Bootle

Is the Minister aware that the British public would have expected him to have the good grace to thank the Official Opposition who, with a little help from the right hon. Member for Old Bexley and Sidcup (Mr. Heath), saved Austin Rover from an American takeover? Although we have been watching the disintegration of the Government before our eyes, the British public did not expect that the Opposition would achieve so much power in such a short time. But why are the Government still considering the privatisation of Unipart? Have the Conservative party in government completely lost their patriotism?

Photo of Mr Paul Channon Mr Paul Channon , Southend West

Unipart will go to British sources, so I do not know what the hon. Gentleman is talking about. I have never heard such rot in my life. We are proposing the privatisation of Unipart, and I believe that the Government's privatisation programme has wide support inside and outside the House.

Photo of Mr Hilary Miller Mr Hilary Miller , Bromsgrove

Will my right hon. Friend accept congratulations on having the good sense and courage to put an early end to the uncertainty, greatly aggravated by the attempts by the Opposition to mike political capital out of the matter? Will he not be deterred by the damaging leak from ensuring that further discussions on collaboration with Austin Rover are pursued and that alternative sources of financing are examined?

Photo of Mr Paul Channon Mr Paul Channon , Southend West

I thank my hon. Friend for his remarks, and I greatly welcomed his constructive speech yesterday. It is right to end the uncertainty that existed, because that is in the interests of the companies concerned. As he said, the Opposition are clearly not interested in the issues—only in trying to stir up trouble.

Photo of Mr Nigel Spearing Mr Nigel Spearing , Newham South

Is it not terrible that Britain imports railway locomotives from the United States while closing long-established engineering works, such as those at Swindon? Is this with the permission of the Minister

Photo of Mr Bernard Weatherill Mr Bernard Weatherill , Croydon North East

Order. The hon. Gentleman is going rather wide of the subject of the statement.

Photo of Mr Nigel Spearing Mr Nigel Spearing , Newham South

Does the Minister agree with that import, and can he tell us whether that deal has anything to do with—

Photo of Mr Bernard Weatherill Mr Bernard Weatherill , Croydon North East

Order. The hon. Gentleman cannot pursue that line. It is a completely different matter.

Photo of Mr Nigel Spearing Mr Nigel Spearing , Newham South

On a point of order, Mr. Speaker. May I conclude my question?

Photo of Mr Bernard Weatherill Mr Bernard Weatherill , Croydon North East

I do not think it will help, because I do not think the Minister can answer it. This statement deals with British Leyland. If the hon. Gentleman can relate his question to British Leyland, he may continue.

Photo of Mr Nigel Spearing Mr Nigel Spearing , Newham South

I was about to conclude the question, which the Minister could answer and which is directly connected to the statement. I was about to ask the Minister whether that deal has anything to do with the one between British Leyland and General Motors.

Photo of Mr Paul Channon Mr Paul Channon , Southend West

The hon. Gentleman asks about something completely different from the subject of my statement. I shall be in touch with him, but my statement has nothing to do with what he asks.

Photo of Mr Edward Heath Mr Edward Heath , Bexley Sidcup

May I thank my right hon. Friend for the decision he has announced this afternoon, and may I assure him that the decision reached by the Cabinet about Austin Rover and Ford is absolutely right? However, I must tell him that he has done nothing to alleviate the very real fears and anxieties expressed by Conservative Members yesterday about General Motors taking over the remainder of British Leyland. My right hon. Friend referred to a "merger". Is it not accurate to say that what is proposed is a complete takeover by General Motors of British Leyland and that control would leave Britain and go to Detroit? That is what many of us strongly oppose, and we shall maintain our opposition.

Photo of Mr Paul Channon Mr Paul Channon , Southend West

I am grateful to my right hon. Friend for the first part of his question, but he will not expect me to agree with what he said in the latter part. I have already explained to the House the exact details of what is proposed between General Motors and the Land Rover-Leyland group, and, in due course, I shall inform the House of the exact arrangements, if and when the companies produce arrangements that are satisfactory to the Government.

I assure my right hon. Friend that if I was not convinced that the proposals are in the interests of Land Rover and the other parts of British Leyland about which we are talking, I would not put them before the House. I am convinced that such a merger would, if the assurances are satisfactory, lead to substantial benefits to both companies.

Photo of Mr Dave Nellist Mr Dave Nellist , Coventry South East

Do not the S-bends during the past 96 hours show that the Cabinet is looking increasingly like a headless chicken running around in its death throes?

In persisting in the statement promoting a multinational takeover of British Leyland Truck and Buses by General Motors, is the right hon. Gentleman continuing to tell the House that there is 40 per cent. overcapacity in that sector of the vehicle market? If so, has he tried to convince Oxfam and other aid agencies of that 40 per cent. overcapacity? Is he not aware that they cannot get trucks for Ethiopia and the Sudan to shift food for the millions of starving people?

Photo of Mr Paul Channon Mr Paul Channon , Southend West

I am saying that there is substantial overcapacity. I explained that to the House yesterday. I also explained the reasons that led me to believe that if a merger on acceptable terms could be arranged, that would be in the interests of all concerned.

Photo of Mr Kenneth Lewis Mr Kenneth Lewis , Stamford and Spalding

While congratulating my right hon. Friend on his speedy footwork, may I ask what difference there will be to the amount of contribution that the Government are making now, and will have to make in the future, to British Leyland if the General Motors proposals come to fruition?

Photo of Mr Paul Channon Mr Paul Channon , Southend West

It is clear that the sections of British Leyland that will be involved in any merger between Bedford Commercial Vehicles and General Motors—if satisfactory terms are arranged —are those parts currently making a substantial loss, which is something the House should recognise.

Photo of Mr Ian Wrigglesworth Mr Ian Wrigglesworth , Stockton South

How can the Secretary of State justify the sale of Land Rover to General Motors? Do not the BL interim results show that last year Land Rover made a profit of £5·7 million and had record sales? Is he not aware that the sale of Land Rover will cause widespread dismay, not only among the work force but among all customers of Land Rover throughout the world? Having decided not to go ahead with the discussions with Ford, will the right hon. Gentleman consider the implications for the collaboration with Honda? Does it not place a great cloud over future collaboration? What is to be the future of the arrangement with Honda?

Photo of Mr Paul Channon Mr Paul Channon , Southend West

As I said in my statement, I hope that collaboration with Honda will continue. Austin Rover's collaboration with Honda has been very sucessful, and I see no reason why that should change. I very much hope that it does not.

There are substantial advantages for Land Rover in any deal that may be agreed—and that is the view of the BL board, not just my view. The opportunities for Land Rover in the United States, taking advantage of General Motors' distribution network, could lead to greater sales of Land Rover in the United States and other markets and to substantial opportunities for Land Rover's work force and management. If those assurances I have mentioned can be obtained, it will be a very good deal.

Several Hon. Members:

rose

Photo of Mr Bernard Weatherill Mr Bernard Weatherill , Croydon North East

Order. I shall call the three hon. Members on the Government Benches who have been rising. I hope that they will be brief.

Photo of Patrick Cormack Patrick Cormack , South Staffordshire

Is my right hon. Friend aware that any objective observer will regard the way in which he has listened to and informed the House as both exemplary and impeccable? However, will he bear in mind that there is still widespread disquiet about the future, especially of the Land Rover-Range Rover group? Will he consider carefully what has been said on that subject from the Conservative Benches?

Photo of Mr Paul Channon Mr Paul Channon , Southend West

Naturally, I will consider anything that is said from any quarter of the House. I must repeat my belief that I have expressed on a number of occasions to the House that this is the best opportunity for Land Rover. I am exceedingly grateful to my hon. Friend for what he said in the early part of his question.

Photo of Mr Bowen Wells Mr Bowen Wells , Hertford and Stortford

Will my right hon. Friend accept my heartiest congratulations on the wisdom of his statement today? Has he now abandoned all attempts to try to find other sources of finance for the Austin Rover group? It will require additional resources if it is to increase employment, production and its market penetration both in Europe and in the United States. I hope that my right hon. Friend has not abandoned that pursuit.

Photo of Mr Paul Channon Mr Paul Channon , Southend West

I am grateful to my hon. Friend. Austin Rover's forward plans do not require further Government equity finance. Its financial requirements will be considered in the usual way, in the context of its corporate plans.

Photo of Tony Baldry Tony Baldry , Banbury

Does my right hon. Friend appreciate that the people of Oxfordshire realise the long-term guarantee of Austin Rover at Cowley is in their making cars that people both here and abroad want to buy, with ever more competitive design, marketing and delivery, while at the same time not being dependent on the Government always being prepared to write cheques on the taxpayers' bank account?

Photo of Mr Paul Channon Mr Paul Channon , Southend West

My hon. Friend is entirely right about that. We must try to get Austin Rover's share of the European car market higher than it is at present.

Photo of Mr John Smith Mr John Smith , Monklands East

The Secretary of State appears to be satisfied that he can find what he calls suitable assurances. Can he give the House an assurance that he will not sanction any arrangements that mean the effective takeover of Leyland Vehicles by General Motors so that the power to take decisions passes from Britain to Detroit?

Will the right hon. Gentleman explain to the House what he meant by the political history of this matter when he attempted to criticise the Labour party? Does he not recollect that when British Leyland collapsed as a private sector operation in 1975 it was rescued by the Labour Government against the wishes of the then Conservative Opposition, many of whom are sitting in front of me?

Photo of Mr Paul Channon Mr Paul Channon , Southend West

I cannot give the right hon. and learned Gentleman the undertaking that he seeks. As he well knows from my statement on Monday, I outlined to the House precisely the full undertakings that I would require. On the second part of the right hon. and learned Gentleman's question, I think that the least said about the history of the matter by the Opposition, the better.

Photo of Mr Dave Nellist Mr Dave Nellist , Coventry South East

On a point of order, Mr. Speaker. Will you take a few moments later this afternoon to consider the fact that the Secretary of State's statement was made available to the press well before 3 o'clock, yet shortly before 4 o'clock his Private Office denied that the draft of the statement had been finalised? It was not until almost 5 o'clock that the right hon. Gentleman gave his statement to Members of Parliament. Is this Secretary of State carrying on where the last one left off?

Photo of Mr Bernard Weatherill Mr Bernard Weatherill , Croydon North East

That is not a matter for me. If the hon. Gentleman is saying that the statement given to the press was leaked before the House heard it, that is a different matter. However, I do not think that the hon. Gentleman was alleging that.