Last Thursday, the economic development committee of Cumbria county council decided to approach the Volvo corporation of Sweden, one of the world's largest commercial vehicle manufacturers, and to ask it to reconsider its decision to close the Workington bus plant.
The story of Volvo in Workington is, unfortunately, one of deceit, poor management, market miscalculations, asset and design stripping and media manipulation—certainly in recent weeks—culminating in a scorched-earth policy as Volvo desperately tears out jigs and other vital equipment from the plant in a desperate attempt to cart away the ashes of a previously profitable industry of strategic importance to the United Kingdom.
The story begins in the late 1960s when the Labour Government took the momentous decision to build a factory dedicated to the integrated manufacture of bus chassis and body production in Workington. The new bus plant prospered throughout the 1970s on the back of Labour's public transport policy. It was a fine example of good Labour planning, stemming import penetration and providing substantial employment for Workington.
The first real hurdle came in the early 1980s with the Government's deregulation policy, and cuts in fuel and bus grants. Bus plants at London's Park Royal, Lowestoft, Birmingham, Bristol and elsewhere in the United Kingdom closed as the industry contracted. All indicators pointed to Workington being the survivor plant. The Workington plant boasted two thirds of a million sq ft of prime modern industrial space, an up-to-date bus assembly production line, a competent design and development team and a healthy export order book.
The bus fleet aged as new operators came on the market with deregulation and the midi bus took off. Thereupon, the Government sold the plant to a management buy-out, which I supported, which set about the rationalisation of the Leyland Bus group with major redundancies.
The management buy-out considered midi bus production but concluded that cheap high wear and tear van chassis and body conversions were not the business of Workington whose expertise was a quality product on a bus-dedicated chassis manufactured to high specification at a competitive price.
The management buy-out led by M'Kinnon and Newbury turned the business round, if not altogether financially, so much so that the company which had been picked up on the cheap was sold for a sum in the region of £20 million, I am told, to Volvo in March 1988. The Leyland press release at the time of the sale said:
The complementary product ranges of Leyland and Volvo will enable us to strengthen our sales and manufacturing base within the European Common Market and throughout the world. The new Leyland bus facility will enable the newly enlarged Volvo Bus Corporation to significantly increase the chassis production which in Sweden is at full capacity. 'Volvo has increased its investment in research and development by 50 per cent. since 1986', said Lars Erik Nilsson, president of Volvo Bus Corporation at the time. He said, 'We see this latest development, with Leyland engineers joining the team, as a further significant step in a 10-year development programme.' Jurgen Bahr, Volvo Bus marketing director at that time added, 'The greatest impact
will however be achieved abroad. I am proud we have been able to join forces with you. Our aim is to preserve the famous Leyland name, uphold the present workforce and strengthen Leyland Bus. I foresee we have the possibility together of becoming one of the biggest and best bus producers in the world. Our aim is together with you to enter new markets and to achieve deeper penetration in the markets in which we are already established.'
Those were fine words from a company that knew that it was buying into a market reeling from deregulation and where losses would have to be carried for a few more years. It knew that it was buying a business struggling against recession, and such was its desperate need to buy it and secure greater market share that it was paying through the nose for it.
In retrospect, one can only speculate about Volvo's motives. It clearly wanted a potentially profitable spares business which it further reinforced with, in my view, a mistaken property acquisition in the midlands for distribution requirements.
I, along with my constituents, fell for the hype. We believed that that internationally renowned company, known for compassionate but firm management-worker participation, novel production methods, with its John Lewis Partnership reputation, could be trusted. We were badly let down and badly deceived.
Within 12 months rumours broke in the plant of a split between body and chassis production, subsequently to be confirmed by Volvo. It seemed that Volvo wanted out of body manufacture. Then a story broke of a tie-up with Renault in France, with buses being produced at Lyons. Volvo hot-footed it round to the House to reassure me that that rumour was unfounded. It said that the tie-up was a simple, logical market development. What I did not realise was that, at the same time that Volvo was reassuring me, it was busy closing down a project for the redesign of LYNX—a Leyland project.
The redesign of LYNX—a Workington product—included the use of an aluminium body and Volvoised parts. That decision sounded the death knell for LYNX and the last one came off the line in Workington the other day. The company pleaded corrosion problems as an excuse—a nonsense argument as all the problem vehicles had been repaired.
The future of LYNX then became subsumed in the design of a new product which was to be built in Sweden with a BIOR rear engine chassis. The reality is that it had designed a product on a chassis built for a coach with too many steps. It is for the market to decide whether that product will be successful.
There are those who believe that the replacement for LYNX will not be made in Sweden. The bus, currently being designed at Farringdon by a French, Swedish and British design team, may be made in France, in Lyons. Therefore, it will be of no benefit to Workington or to Farringdon. Farringdon's days are numbered. Volvo is no more interested in Farringdon than it is in Workington, and I hope that the workers are beginning to get the message.
The LYNX saga signalled the beginning of the end for Volvo in the United Kingdom. Following Volvo's dreadful miscalculations about the market for spares and the substantial losses throughout Volvo's bus operations in the United Kingdom and Sweden in 1991, Volvo Sweden started the big squeeze on Volvo's United Kingdom operations. Bill Russel, the sales marketing director in the United Kingdom, and no friend of Volvo Bus operations in this country, and Sandie Glennie, the United Kingdom managing director, became obsessed with closing the plant in a desperate attempt to heed their master's bidding.
Crude book-keeping exercises were made to prove that Volvo was losing a fortune and to hide the incompetent decisions that the management had taken, in particular those on spares. Recriminations in Sweden led to clearing out the Volvo management team responsible for the original Workington acquisition, including the removal of Lars Erik Nilsson and Jurgen Bahr, who was transferred to Austria. A new group of hard-nosed Volvo truck men moved in, who with surgical precision began asset stripping Leyland Bus. Their first task was to reveal that a major miscalculation had been made on the redundancy costs of closing the Workington plant. Whereas Volvo UK had budgeted £800,000, the cost was nearly £6 million. When Volvo learned of that major error, it was extremely angry, but not half as angry as the Volvo workers in Workington who found themselves blamed for the losses on the B10 Mark 3 chassis, which had been a design disaster and blamed for the 96 buses which went to Strathclyde and had to be rebuilt. Workington was blamed for losses beyond its control.
Should there have even been losses and was the Workington plant given a real chance? Tracing the order book has been no mean feat, but the evidence is that orders have been diverted. The first inkling of hidden orders came with attempts by Volvo to hide an order for 200 midi buses and 70 Olympians from StageCoach of Perth. What it did not know was that the managing director of StageCoach, Mr. Souter, wrote to me to say that the buses were to be made in the Workington plant.
Volvo thereupon denied that the 200 B6Rs were ever intended for Workington, maintaining that they were to be built in Austria, at the Steyr plant. Obviously, Volvo had forgotten that we had laid down the jigs at the Workington plant for the chassis. As for the 70 Olympians, Volvo said that they were to be built in Workington. I can only say that that was news to Walter Alexanders at Falkirk, which had been told that the buses were to be bodied in Scotland—and which, indeed, was receiving the order to body them. The value of that order was over £4 million—the order for the whole bus, that is.
Then came news of a chassis order for Singapore—order value, £10 million. When I located the order in Singapore, Volvo was furious. It ranted, "That is our business—that is Sweden's business." The fact that Workington had historically supplied buses to Singapore was irrelevant to the firm. It was stealing our trade and our business.
In mid-February, I was told that London Regional Transport had started re-ordering, and that it had bought 40 Olympians—value £4 million—and signed up the order on 7 February. Meanwhile, I was busy ringing round the world, chasing up Volvo's business. Then what happens? A story breaks back in Workington, in the local newspaper—the Times and Star—that a local entrepreneur, Mr. Mike Rawcliffe, who had been working in Turkey, had been approached by a company and told that an order for 200 buses for Turkey was available to the Workington plant. Mr. Rawcliffe approached Volvo, and was told that, if there was any business going, it was business that would go to Sweden. The value was £5 million.
News then came in of a further tender from Singapore, for—I am told—between 214 and 218 buses. A deal on that has yet to be struck; I understand that negotiations are still in progress. The coup de grace came, however, when, through the good offices of the Foreign Office—the good old British Foreign Office—I was able to confirm that, at the same time as Volvo was closing the Workington plant, it was signing a deal with Jelcz of Poland to produce buses in a joint venture. Further orders may well be in the offing, from Hong Kong, Lothian Transport, South Yorkshire, Nottingham Caldaire and, no doubt, others.
Where are those buses to be built? Volvo tells us that they are to be built in Irvine—in the truck plant that is to be modified for bus production. Some, no doubt, will go to Irvine, but I wonder how many will end up going to Sweden.
The exercise in Workington has been to strip out the assets, to strip out the work force, the design teams, the jigs and the equipment, and to kick a Workington work force with 20 years' experience fairly and squarely in the teeth. One can only feel great anger.
The question is, were the Government aware of what was happening? The Minister kindly met me, and I took everything that he said at face value. What he told me, I believed; but let us see what Volvo said. According to a Volvo press release of 10 February,
Sandie Glennie has had meetings with several senior government officials including Roger Freeman … Mr. Freeman has been kept fully informed of our plans, actions and the reasons behind them.
Is Volvo telling us that it told Ministers that it was intending to close Workington, and "screwdriver" assemble in Scotland with Volvo parts made in Sweden? Is it saying that the Volvo relationship with Renault—based, as it is, on an exchange of share capital—has been fully explained to Ministers? Perhaps it also told Ministers why the French Government are expressing such concern about Volvo's activities in Lyons, fanned by the Pro Cordia merger in Sweden. I understand that people in France are asking what is in it for the French now that Volvo has done a deal with Mitsubishi to produce cars at Born in Holland. Perhaps Volvo has handed to Ministers a document that was promised to me in Workington in the office of Rodney Swarbrick, the plant manager, and which set out the financial considerations behind its move to
Irvine. I waited eight weeks for that document which was promised to me by, I understand, the leading Swede in the whole affair. It never arrived. Only then did I begin to campaign publicly against Volvo.
Has Volvo handed to Ministers its own analysis of what productions would be required to maintain a viable chassis operation in Workington? Everyone knows that the figure of Volvo's PR man, Mr. Broadley, of 1,500 chassis per annum is a gross exaggeration of the truth. What are the real figures—not the Broadley figures—about the viability of that plant? I should like to know whether Volvo has discussed with the Government its programme for the Volvoisation of Leyland Bus products which was stated in internal Volvo documents available in Sweden? Ministers should be aware that the Olympian—one of the British products—is being Volvoised to accept Volvo componentry. It is Volvo's intention to switch nearly all Volvo Olympian products to Volvo engines and other components made in Sweden and to drop its purchase of Cummins and Gardner units as soon as possible. That means that more jobs will be lost in the United Kingdom, on this occasion at Shotts, near Glasgow. The reality is that Volvo has stolen the Olympian product from Leyland Bus.
Ministers might do well to consider Volvo's relationship with Walter Alexander, the Scottish body builder, which will clearly be a beneficiary of this strategy. Walter Alexander recorded £700,000 after-tax losses in 1989, and £61,000 in 1990. Its turnover fell from £27·5 million to £19·3 million in the same period. Has Volvo handed to Walter Alexander on a plate a substantial turnover injection without something in return? Have shares changed hands at a corporate level or at any other level? I shall be following that aspect of the decision with great interest in the coming years.
On Friday 27 January 1992, in a reply to me, the Scottish Office was equivocal about matters that I think I should draw to the House's attention. I asked the Secretary of State for Scotland
what is the policy of Scottish Enterprise and local development agencies towards providing assistance to companies which have plants located in England and which they wish to relocate in Scotland.
The Under-Secretary of State for Scotland, the hon. Member for Eastwood (Mr. Stewart), replied:
Scottish Enterprise and the local enterprise companies would assess very carefully any proposals from companies wishing to relocate to Scotland before considering whether it would be appropriate to offer assistance. Any assistance provided would be within the terms of arrangements agreed by the Government and would take account of factors such as employment displacement."—[Official Report, 27 January 1992; Vol. 202, c. 449.]
I do not think that the Government grasped what I was driving at. Is Volvo going to be given public money to close a plant that was built in the main with taxpayers' money in the late 1960s and early 1970s and to transfer its manufacturing operations to Scotland? The answer should be no because we are dealing with taxpayers' money.
Recently, Volvo has announced that Volvo Trucks (Great Britain) will effectively take over responsibility for what remains of Leyland Bus. Many in Workington ask the question, "Why now?" Was the secret Volvo agenda on acquisition in 1988 to close the plant and strip it out and boost the turnover of Volvo Bus Company's other plant? The answer to that question is known only in Gothenburg.
I should like to say a few words about deregulation and its impact on the market. I do not want to enter into an argument with the Minister tonight about deregulation. It has happened. It is a reality. In the words of the public service vehicle manufacturers section of the Society of Motor Manufacturers and Traders:
Inevitably, falling sales have had their effect on the bus makers. In 1980, there were over 3,000 heavy bus registrations but by 1990 these had fallen to just 1,000. 1991 is now the lowest market historically recorded at just over 600 units and an even lower market is forecast for 1992.
That may well be the case, but I am utterly convinced that there are stirrings in the market. I believe that StageCoach began the shift. It seems to me that the logic of that can follow only when one considers that it is not possible to run old buses for ever.
One of the problems of deregulation was that bus fleets aged as companies competed with the latest cowboy operators on a particular route. But the cowboy operators could run their buses for only so long. In the end the market has to move, irrespective of what party is in power. It might well be that a Labour Government would place greater emphasis on public transport, but all Governments have to be committed to some extent to public transport and cetainly the use of buses.
I believe that there are stirrings in the market. The Volvo strategy should have been to maintain manufacturing in the United Kingdom with a heavy sell in export markets. The business is there and Volvo knows it because it is transferring the operation back to Sweden. It should have held the plant open pending restoration of bus orders in the United Kingdom at the end of what I call the bad trading conditions that have prevailed during the period of deregulation in the market. My hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott), our spokesman on transport, came to west Cumbria the other day. He talked very much in those terms. It is fair to say that it is his view that if there is a change of Government the stirrings will inevitably boom into something more substantial, and quickly.
Of course, the danger is that if the Government do not react to the stirrings in the market and the United Kingdom does not have a capacity to produce buses, there will be an invasion of imports. I fear that in five or 10 years our streets will be covered with buses from Germany, France, Holland and Sweden. There will be Scania and Volvo buses and perhaps even buses from eastern Europe because we do not have the manufacturing capacity in the United Kingdom. When Volvo took its decision to close the plant in my constituency, it was meddling in a plant that had a strategic role in bus supply in the United Kingdom. I believe that it did not have the right to close it.
Lastly, I want to ask Volvo a simple question from the Floor of the House of Commons. I understand that two presses for body panels have been removed from the Volvo plant in Workington in the past few days and that they have gone to somewhere in the midlands. I should like to know where they have gone, why they have gone, and what the people who have acquired them intend to do with them.
The hon. Member for Workington (Mr. Campbell-Savours) did me the courtesy of notifying me of the general thrust of his remarks, and I am grateful to him for that. It is also quite a rare privilege not necessarily to watch the clock—although I am sure that the Government Whip, my hon. Friend the Member for Stevenage (Mr. Wood), would want me to do so—as attentively as one sometimes must during Adjournment debates. This is an important subject. The hon. Gentleman has raised a number of specific points about the Volvo Bus Company. He is an experienced Member of the House. He will not expect me necessarily to proceed by commenting on his specific allegations. Nevertheless, he has raised detailed questions with me as Minister and a number of general comments about the industry with which I shall deal.
I share the implicit assumption behind the hon. Gentleman's speech that buses play an important role in transportation, particularly in urban areas. There are 5 billion passenger journeys a year. That can be expressed most directly as the equivalent of two bus journeys a week by every man, woman and child in the country. Obviously, not everyone uses the bus, but, even expressed in that simple way, the House will realise how important a thriving bus industry is to transportation needs, both business and leisure.
On Volvo, I must say that I share the hon. Gentleman's regret about the closure of the plant in Workington. It undoubtedly is a blow; there is no sense in disguising that. I understand that there are proposals to move the chassis assembly operations to Irvine in Scotland, with a £2·4 million investment at that plant to facilitate it.
The hon. Gentleman wonders what are the motives behind those moves. I shall not speculate; it is clearly not a matter on which a Minister of the Crown should comment. However, the hon. Gentleman referred to the initial investment by Volvo in the company, and I believe that he is right. The order of magnitude is £20 million—indeed, it may be a little higher. I am advised that if we take account of the losses that Volvo has incurred with the Workington plant, at a time, it must be said, of very depressed orders for the industry—1990–91 and perhaps for the first few weeks of 1992, although I agree with the hon. Gentleman that there are stirrings and hopeful signs that the industry may be enjoying some recovery—Volvo has probably invested several times the initial purchase price in the Workington operation and its directly related facilities.
In other words, the original investment plus the losses represent a significant sum. It is not for me to estimate what they are; that is a matter for Volvo. I have no doubt that the hon. Gentleman would find it interesting to press the company on the size of the investment commitment that it has made and may already have lost.
The hon. Gentleman asked me specifically about conversations between Volvo and the Department. I recall a letter from Volvo after the decision had been taken, explaining that decision and indicating to the Department—to myself—what the plans were. In no sense can that be described as a detailed discussion of strategy or policy. Indeed, it would not have been appropriate for the company to have entered into such a discussion. It was sensible and courteous information to the Department as to what the plans were.
I have not had a specific bilateral meeting with the management of Volvo. The representatives of Volvo have sat on the bus working group which I chaired and which examined ways in which demand in the bus industry can be stimulated. I shall have a few words to say about that matter in a moment.
In the past, the hon. Gentleman has been concerned about assistance that may be provided for the 50 or so employees at Workington who may be offered jobs at Irvine. I have examined that matter, and I am advised that assistance may be offered by the company in order to facilitate a move to Scotland for those who are employed at the Workington plant. I very much hope that those jobs are saved and that those who wish to go are able to move.
The hon. Gentleman referred to deregulation. It is important, for the record, to repeat some of the essential facts about deregulation, although I shall certainly not take up the time of the House by getting into an argument about the pros and cons of deregulation. According to the latest statistics that I have, in 1985, the bus share of total passenger transport was about 8 per cent., compared with 39 per cent. in 1955. Since the war there has been a gradual contraction in the share of the total transportation loads of the bus. There has been a dramatic contraction as the use of the car has increased.
The subsidy provided by local government was about £10 million in 1972 and had risen to £500 million in 1982. As a result of deregulation there has been an increase in the total bus mileage of 19 per cent. as the private sector has provided new types of vehicles.
I looked up the figures for the hon. Gentleman, who may be interested to know that, as a result of deregulation, since 1985–86, when there were 10,000 mini and midi buses on the roads, the number has risen to 20,000. I agree with the hon. Gentleman that there seems to be a sign that, with the replacement cycle now running its course, the double-deck bus may be being ordered again.
Some 84 per cent. of bus services are run commercially and there has been a one third reduction in bus-operator costs per mile. Revenue support by local authorities has been cut in half in real terms. However, there continues to be a long-term, secular decline in bus patronage outside London. That reflects individuals' desire to use the car, a much more flexible mode of transport. It is the type of transport that people prefer as they become prosperous. I argue that deregulation has made the industry better able to respond to those pressures, but that trend needs to be reversed outside London for the good of the industry and bus manufacturers.
The hon. Gentleman referred to investment. There has undoubtedly been a sharp fall in investment in buses during the past few years. That has been caused by the recession and the immediate impact of deregulation as, in a more competitive market, margins are reduced and affect the cash flow available to companies. I believe that that is a temporary phenomenon. As the industry becomes more profitable and cash flow improves, bus operators become better able to place orders for new buses and replace the fleet. As a result of management buy-outs and the sale of the National Bus Company's subsidiaries, debt has passed on to companies' balance sheets, inhibiting them when they wish to acquire new vehicles. But that effect will run off over time, as the debt is paid.
I agree with the hon. Gentleman that there is now evidence of new orders, and stirrings in the market. The bus manufacturing industry must be flexible in its response to that movement in terms of the type of buses that it produces. In the past, it may have produced midi and mini buses, but there may now be a need for double-deck buses. One of the great strengths of British Leyland—a great name in the bus manufacturing industry—has been the double-deck vehicle.
The Government would also like to see more low-floor buses, not only to help the disabled, but to facilitate quicker boarding by passengers at bus stops in city centres. In addition, manufacturers must make further progress with clean engines. I know that that is the responsibility of engine manufacturers, but standards for the construction and use of vehicles will become tighter and tighter over time. When I visited the 1991 coach and bus exhibition in Birmingham, I saw evidence of exciting new bus and coach designs.
There has been a welcome increase in investment by London Transport—for which I am directly responsible, under my right hon. and learned Friend the Secretary of State. Its programme totals £24 million this year, which will mean about 300 new vehicles. That is a significant improvement on last year, when the figure was £15 million. The refurbishment of the Routemaster will be welcomed by many in central London. There is clear evidence that London Transport is increasing its investment.
StageCoach has ordered 250, 9·8 m midi buses from Walter Alexander, with an option for a further 100, and 70 double-decker Leyland Olympians. Ensign Citybus has ordered 30 double-deckers to run on newly won contracted services in London, and Plymouth city recently purchased 20 new Mercedes midi buses as part of its replacement programme.
Does the Minister agree that, despite the Government's hands-on approach, in so far as we are concerned with a strategic supplier—arguments about dual sourcing must be taken into account, for without it, and wider than dual sourcing, there is no real competition unless one includes imports—the Government ought to approach companies such as Volvo, not so much to check on them but to ask penetrating questions as to whether their market analysis is correct? Are they aware of all the considerations that both the Minister and I have in common, in terms of judging the market? Is there not a case for putting to such companies my arguments with which the Minister clearly has some sympathy?
Yes, and I intend to seek from all manufacturers a fresh assessment of the outlook for United Kingdom bus and coach engine, chassis, and bodywork manufacturing in the light of recent developments. I look forward to discussing that aspect with Volvo also, because it has an important role to play. Those discussions will ensure not only that the Department is properly informed about the immediate future, but that it can share with manufacturers certain information. Our view is that the future of the bus and coach manufacturing industry will be best served not by a return to grants, but by helping the operators who are the industry's customers to develop in a climate of growing demand for their services.
On 16 December, I announced a package of measures that received bipartisan support—including that of the Association of Metropolitan Authorities, which also has an important role to play. Even though the bus companies operate at arm's length, metropolitan authorities are still the shareholders in some cases.
The five key measures are £10 million of resources to fund demonstration projects sponsored by local authorities, to show operators what can be done to make better use of buses by way of bus lanes, park-and-ride, traffic light priority, city centre priority, and so on. I have already announced the allocation of £3·5 million of that £10 million. The message to the industry when those in it read this important debate is that it should encourage local authorities to submit bids during the summer for the balance of that money, which will be disbursed for 1993–94. That includes guided buses and trolley buses because they are manufactured by the companies to which the hon. Gentleman referred, and trials of those buses will be helpful.
Secondly, we have published guidance for local authorities on keeping buses moving. Thirdly, we have announced the tightening of the way in which vehicle emissions are measured. There is to be a new instrumented test from 1 September for all buses. The hon. Gentleman might be interested to know—I am speculating; I am not forecasting that it would be 20 per cent.—that it is not inconceivable that about 20 per cent. of buses on the road may fail the instrumented test when it comes into operation. That will have implications for the re-ordering of buses with new engines to meet the new, tougher demands. New European Community standards, as the hon. Gentleman is aware, come into operation in 1993, with a further tightening in 1996, for new buses. We have not yet reached a decision about making those standards retrospective for existing buses, but we have it under serious consideration.
Fourthly, I announced further resources for traffic commissioners to check the timetables of private sector operators to ensure that when they say they will run a service, they really run it and do not just cream off peak demand at the expense of other legitimate bus operators. Fifthly, there is research into better passenger information.
The Government believe that the United Kingdom bus and coach manufacturing industry needs to be profitable and thriving. We need a domestic manufacturing industry for buses and coaches in the same way as we need it for the railway manufacturing industry. The Government believe that the best way to help the United Kingdom industry, including Volvo, is to help promote the use of buses. But the operators and manufacturers must be innovative in design, flexible in responding to the needs of the market and confident in the long-term future of the industry.
I hope that this debate will have helped that process. When, in due course, I meet the manufacturers, I hope that I shall be able to share with them my confident belief in a market in which they will all be participating profitably.
Question put and agreed to.
Adjourned accordingly at twelve minutes past Ten o'clock.