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Industrial Relations: The Failure of Leyland and the British Motor Industry

 9 min read / 

The automobile industry for Britain was imperative to economic growth and survival. The agglomeration development, pre-1945, directly employed over 1.2 million people as well as creating many links to other industries. Britain, from 1914 until 1977, was a net exporter and thus benefitted economically in the form of balance of payments success and also infrastructural improvements whose improvements spilled over into other industries.  Post World Wars, Britain faced a world with increased demand for cars and their factories also had enhanced production capacity. Yet they suffered from a productivity gap with the other European mass production manufacturers making them internationally uncompetitive. Rising imports saw the British world share of output fall and eventually became a net importer by 1977.

British government attempts to reverse the decline centred on the encouragement of a series of mergers and acquisitions to form a “British Champion” as British Leyland in 1968. British Leyland never really found success with the Thatcher administration selling off its branches from 1979 and by 2005 none of the contributing firms were still trading as British companies. Many scholars argue that British culture and the poor industrial relations in the post war period inhibited any opportunity for British Leyland to succeed. Whilst industrial relations did pose a major problem, automobile firms still trade in Britain today showing this issue, with the correct policy, could have been overcome. Instead it is essential to assess the role of the government and the managers of British Leyland. The government must ultimately take the most blame, their policy towards the industry made managerial jobs particularly difficult for example through their failure to help rationalise and streamline the firms within British Leyland and also through their co-operation and strengthening of the Trade Unions; diverting essential managerial time towards industrial relations.

Strikes and protests undoubtedly caused much disruption within British Leyland, yet it is essential not attribute an exaggerated degree of blame to industrial relations for their failure as these issues could have been averted, proven by foreign manufacturers owning successful manufacturing projects in Britain today. Lewchuk saw British Leyland’s central problem being the introduction of new American technologies into an atmosphere of high mistrust between trade unions and management. Since the formation of British Leyland management of industrial relations was very difficult.

Having to deal with 36 different unions campaigning for various demands saw management have to spend approximately 60% of their time negotiating with stewards. Since the end of World War Two the Trade Unions influence over shop floor operations had expanded rapidly so they preferred the traditional British piece rate payment system where as the managers assumed the American day rate was more attractive. Thus the introduction of these American practices created huge tension and facilitated the rise of figures such as Derek Robinson, “Red Robbo” in the press, who encouraged widespread strikes within British Leyland and on eight separate occasions British Leyland was brought to a complete standstill. Very clearly Lewchuk was correct to identify the disruptive nature of Industrial Relations to British Leyland yet to attribute it as key factor for its failure would be overlooking the underlying factors behind the poor industrial relations. To blame them as a lone factor would be an assault on British Culture suggesting it is merely a tendency of British workers to strike and be disruptive. This would be an unfounded assertion since BMW and Nissan, overseas firms, have overcome these issues and still manufacture cars in Britain today. Logically inferring there are underlying factors that BMW and Nissan were successful in overcoming but in which British Leyland failed.

British Leyland was ultimately an amalgamation of firms competing against one another resulting in extremely low productivity; government intervention into streamlining the contributing firms could have not only made the management of industrial relations easier but would have also limited inter-firm competition and enhanced integration between factories. British Leyland’s low productivity and lack of international competitiveness was largely a result of a failure to rationalise after the merger. Just as Nissan did, British Leyland could have declared one operational trade union for all their workers making negotiations easier. This would also have had a uniting effect in creating a self-identifying “British Leyland Workforce” rather than workers identifying with constituent factories, for example workers of Austin.

A united “British Leyland Workforce” would have also reduced the ideological differential from the “British Leyland Management” enabling easier industrial relations and increased productivity. British Leyland’s lack of rationalisation also created high inter-firm competition and rivalry. The constituent 48 factories, compared with Ford’s 4, in Britain, often competed within the same cities and target markets forcing British Leyland’s total market share to fall from its outset. The same is true of car models, for example the Triumph 2000 and the Rover 2000 were one another’s biggest competitors despite both being British Leyland. This inter-firm rivalry also reduced technological spill-over, for example Rover refused to allow Triumph use of their new V8 engine. These hostile relationships made integration and co-operation even more difficult, for example through the failure to adopt a joint accounting system rendering it even more difficult to streamline the firm. Ultimately, this failure is largely attributable as a government failure since they encouraged the mergers yet failed to incentivise or intervene in ensuring their success. Owners of Austin, Rover and BMC were not going to voluntarily liquidate their properties when they had been staunch rivals before the merger. If this project was ever to be a success it required government intervention that was never realised.

Government blame does not end at the failure to streamline British Leyland, there were further direct and indirect policy decisions that had an undermining impact on the potential for success. Whisler blames government policy, for the failure of British Leyland, due to the effects of shielding them from competitive forces. This certainly holds a lot of explanative power since the government’s direct attempts to bolster the sector was to enact a protectionist policy and delay the entrance to the EEC. This ended direct international competition and saw the price gap between British products and imports rise to the extent that Britain became a net importer in the 1970s. This equally blocked any developments into European distributive networks whose market demand was much greater than the Empires.

However, Whisler overlooks the further government failures. Another direct policy failure is their failure to incentivise management to succeed. Government nationalisation gave managers the perception that they simply couldn’t fail and thus never took entrepreneurial ownership of the project; these managers were proven correct in 1975 through a £900 million bailout. There were also indirect government policy failures. Stop and go fiscal policy between 1952 and 1977 saw 23 changes in hire price making the environment extremely unpredictable and confusing, deterring many potential investments which could have been used to bridge the productivity gap. Indeed, whilst Whisler is correct is suggesting the government policy failed to expose British Leyland to market forces it is also important to note how government failures made the job for management extremely difficult through a lack of investment and incentives.

Poor management of British Leyland often receives unfair criticism in its enactment of American technology and Fordist management principles, however the government had created an environment almost impossible to manage through firm nationalisation and the institutionalisation of the Trade Unions. Broadberry blames the failure of British Leyland on management decisions and a failure to innovate. This is indeed the situation that arose in the early years of British Leyland. Management fell into a short termism mind-set, generally failing to innovate and instead paying out 94% of all profits in dividends to shareholders.

This lack of innovation resulted in car models remaining unchanged for 20 years where as European manufacturers updated their lines approximately every 4 years. Management also often get the blame for the poor industrial relations for their enactment of American technologies and day rate pay, as previously discussed. Not only did this new payment system fail to incentivise the workforce, resulting in departments becoming independent and not helping out on bottle necked production lines but it also dissatisfied the Trade Unions who campaigned for old traditional British piece rate pay. Whilst it would seem the management made many of the key decisions that undermined potential for the success of British Leyland it is important to consider the context and alternatives that they had. By co-operating with the trade unions the government placed them in positions of unprecedented power within the shop floors, which facilitated the rise of poor industrial relations and all the derogatory effects that followed leaving management with very little potential to make British Leyland a success. Furthermore the nationalisation of British Leyland by the government gave the City of London investors huge power over the management and had a greater desire to gain short-term profits rather than learn how to encourage long term and sustainable development and growth.

The failure of British Leyland was ultimately down to the combination of poor industrial relations, management and government policy. However it was a lot more complex than a simple British cultural deficiency creating a tendency for unmanageable industrial relations. These poor industrial relations were ultimately institutionalised by the Labour government through their co-operation with the Trade Unions, which allowed their negative effects to spill out onto shop floor production making management an extremely difficult job. Thus whilst the industrial relations did play a large part in the failure of British Leyland their blame must but subordinated to the government policy that facilitated these issues. British Leyland was a basket case failure of poor mergers of too many un-cooperative firms that found itself in decline from its founding year. Thus managers lacked both the incentive and the ability to be able to overcome the deficiencies that government policy had left them in.

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2 Comments

2 Comments

    WP_Comment Object ( [comment_ID] => 131377 [comment_post_ID] => 63803 [comment_author] => Steve Page [comment_author_email] => [email protected] [comment_author_url] => [comment_author_IP] => 141.101.107.34 [comment_date] => 2018-05-05 12:56:52 [comment_date_gmt] => 2018-05-05 11:56:52 [comment_content] => Fascinating piece and all the more relevant now as Britain is threatened with a future Labour government led by Jeremy Corbyn, a man who has promised ‘all things to all men’ including a return to the lunatic nationalisation policies of the 1960’s. [comment_karma] => 0 [comment_approved] => 1 [comment_agent] => Mozilla/5.0 (iPad; CPU OS 11_3 like Mac OS X) AppleWebKit/605.1.15 (KHTML, like Gecko) Version/11.0 Mobile/15E148 Safari/604.1 [comment_type] => [comment_parent] => 0 [user_id] => 0 [children:protected] => [populated_children:protected] => [post_fields:protected] => Array ( [0] => post_author [1] => post_date [2] => post_date_gmt [3] => post_content [4] => post_title [5] => post_excerpt [6] => post_status [7] => comment_status [8] => ping_status [9] => post_name [10] => to_ping [11] => pinged [12] => post_modified [13] => post_modified_gmt [14] => post_content_filtered [15] => post_parent [16] => guid [17] => menu_order [18] => post_type [19] => post_mime_type [20] => comment_count ) )
  1. Steve Page

    May 5, 2018 at 12:56 PM

    Fascinating piece and all the more relevant now as Britain is threatened with a future Labour government led by Jeremy Corbyn, a man who has promised ‘all things to all men’ including a return to the lunatic nationalisation policies of the 1960’s.

  2. WP_Comment Object ( [comment_ID] => 85075 [comment_post_ID] => 63803 [comment_author] => Frank Burchill [comment_author_email] => [email protected] [comment_author_url] => [comment_author_IP] => 162.158.22.240 [comment_date] => 2015-12-23 15:06:40 [comment_date_gmt] => 2015-12-23 15:06:40 [comment_content] => In the late sixties and through the seventies I spent a lot of time mediating and arbitrating industrial relations in the Midlands car industry. I was also involved in training shop stewards and full-time trade union officers. The main problem was very weak and fearful management. TU reps were often dismayed by managers who could not recognise that apparently officers' militancy was a necessary consequence of representation. Their members expected it. They were often praying that managers would take a stand which would allow them to bring members into line. Even the members wanted this. I could say a lot more. This article gets nowhere near the issues. MDW versus piecework was a non issue. More a platform for I R consultants claiming the latest snake oil. You would be surprised at how intelligent the British labour force was and is. [comment_karma] => 0 [comment_approved] => 1 [comment_agent] => Mozilla/5.0 (iPad; CPU OS 9_2 like Mac OS X) AppleWebKit/601.1.46 (KHTML, like Gecko) Version/9.0 Mobile/13C75 Safari/601.1 [comment_type] => [comment_parent] => 0 [user_id] => 0 [children:protected] => [populated_children:protected] => [post_fields:protected] => Array ( [0] => post_author [1] => post_date [2] => post_date_gmt [3] => post_content [4] => post_title [5] => post_excerpt [6] => post_status [7] => comment_status [8] => ping_status [9] => post_name [10] => to_ping [11] => pinged [12] => post_modified [13] => post_modified_gmt [14] => post_content_filtered [15] => post_parent [16] => guid [17] => menu_order [18] => post_type [19] => post_mime_type [20] => comment_count ) )
  3. Frank Burchill

    December 23, 2015 at 3:06 PM

    In the late sixties and through the seventies I spent a lot of time mediating and arbitrating industrial relations in the Midlands car industry. I was also involved in training shop stewards and full-time trade union officers. The main problem was very weak and fearful management. TU reps were often dismayed by managers who could not recognise that apparently officers’ militancy was a necessary consequence of representation. Their members expected it. They were often praying that managers would take a stand which would allow them to bring members into line. Even the members wanted this. I could say a lot more. This article gets nowhere near the issues. MDW versus piecework was a non issue. More a platform for I R consultants claiming the latest snake oil. You would be surprised at how intelligent the British labour force was and is.

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