British Leyland Motor Corporation Is Formed Summary

  • Last updated on November 10, 2022

The Leyland Motor Corporation merged with British Motor Holdings to from the British Leyland Motor Corporation. The merger represented an attempt to slow the demise of the British automobile industry, but it largely failed in that effort.

Summary of Event

Created by the merger of Leyland Motor Corporation and British Motor Holdings, British Leyland Motor Corporation (BLMC) became the only indigenously owned British producer of mass-market cars and offered a wide range of niche market models, commercial vehicles, and nonautomotive products. BLMC was among the four largest motor firms in Europe and Britain’s largest exporter in value of sales. The creation of BLMC provided an opportunity to restructure the British-owned sector to reap economies of scale in manufacturing and distribution and institute the hierarchical managerial structure necessary to improve its competitive position. BLMC management, however, was unwilling or unable to implement critical measures, thereby leading to the bankruptcy and subsequent nationalization of the firm in 1974. Several attempts to revive the firm in the late 1970’s and 1980’s were unsuccessful, and the British-owned car industry experienced an absolute decline. British Leyland Motor Corporation Automobiles Mergers, business Leyland Motor Corporation British Motor Holdings [kw]British Leyland Motor Corporation Is Formed (Jan. 15, 1968) [kw]Leyland Motor Corporation Is Formed, British (Jan. 15, 1968) [kw]Motor Corporation Is Formed, British Leyland (Jan. 15, 1968) British Leyland Motor Corporation Automobiles Mergers, business Leyland Motor Corporation British Motor Holdings [g]Europe;Jan. 15, 1968: British Leyland Motor Corporation Is Formed[09640] [g]United Kingdom;Jan. 15, 1968: British Leyland Motor Corporation Is Formed[09640] [c]Manufacturing and industry;Jan. 15, 1968: British Leyland Motor Corporation Is Formed[09640] [c]Business and labor;Jan. 15, 1968: British Leyland Motor Corporation Is Formed[09640] [c]Transportation;Jan. 15, 1968: British Leyland Motor Corporation Is Formed[09640] [c]Marketing and advertising;Jan. 15, 1968: British Leyland Motor Corporation Is Formed[09640] Harriman, George Stokes, Donald Ryder, Donald Wilson, Harold Benn, Tony

In other nations, consolidation of automobile manufacturers led to the rise of a limited number of dominant firms in domestic markets by the time of World War II. For example, General Motors General Motors , Ford Motor Company Ford Motor Company , and Chrysler Chrysler dominated the U.S. market. In contrast, the British automobile industry was composed of a number of small concerns well into the postwar era. This situation, reflecting the general characteristics of British atomistic capitalism, placed the firms at a cost and control disadvantage. The companies survived by exploiting a protected (until the mid-1970’s) domestic market and exporting to selected markets.

The gradual consolidation of the British motor sector was motivated by a number of factors, primarily defensive in nature. The American-owned subsidiaries of Ford (which established production in 1911), General Motors (which purchased Vauxhall in 1925), and Chrysler (which acquired Rootes in 1967) were a constant threat to the British companies. Increased sales by Ford, similar product ranges, duplicated export distribution structures, and the potential for economies of scale in manufacturing convinced the two domestic sales leaders, Austin Motor Company Austin Motor Company and the Nuffield Organization Nuffield Organization , to merge into the British Motor Corporation (BMC) in 1952. Over the next fifteen years, BMC kept its top sales position and expanded production, yet chairman Leonard Lord Lord, Leonard refused to integrate the production, distribution, and administrative functions of the former rivals.

Leyland, one of the country’s leading bus and truck manufacturers, expanded into the car business by purchasing financially troubled companies. This strategy had been used by William Morris, Lord Nuffield Nuffield, Lord , to build his motor empire in the 1930’s. In 1961, Leyland acquired Standard-Triumph, traditionally the smallest of the so-called Big Five motor firms. Within two years, Leyland, headed by Donald Stokes, returned the automaker to profitability by moving its models from mass to niche markets and achieving greater capacity utilization rates. Leyland-Triumph’s ambition and financial position was revealed in 1967 when it acquired Rover, producer of the Land Rover and upscale cars. Meanwhile, BMC bought Pressed Steel, a body-maker, in 1965 and Jaguar one year later. (Jaguar became a Ford subsidiary in 1990.)

In spite of some model overlap, BMC (then called British Motor Holdings, or BMH) and Leyland-Triumph appeared to be the best match to create a British manufacturer with the scale and model range to maintain market share in the domestic and export market. As early as 1964, BMH chairman George Harriman had approached Stokes about consolidating operations. BMH was clearly in the dominant position, with twice the annual gross profit and annual car output about six times as high. When talks became serious two years later, the circumstances of the potential partners had begun to change. BMH’s output had declined, and it declared a loss for fiscal year 1966. Nevertheless, an agreement that gave BMH managers and shareholders a superior position was tentatively reached. The deal, however, collapsed over assigning specific managerial responsibilities.

Chrysler’s takeover of Rootes and the Labour government’s emphasis on improving the competitiveness of British industry kept the merger issue alive. Stokes and Harriman rejected Minister of Technology Tony Benn’s suggestion that Rootes should join BMH or Leyland but agreed to reconsider their own consolidation. In 1967, negotiations intensified as BMH’s losses accelerated and Ford’s market share increased. Leyland, with a better cash flow and earning an annual profit, now became a cautious aggressor, urged on by Prime Minister Harold Wilson, who believed that the merger was necessary to ensure the survival of the British industry, and the Industrial Reorganisation Corporation Industrial Reorganisation Corporation, British (IRC), which considered Stokes to be the only manager capable of reviving BMH. The IRC, established by the Labour government to facilitate such a merger, offered to mediate the negotiations and provide financial aid. Harriman, believing that he had no other choice, agreed to terms essentially dictated by Stokes on January 15, 1968. In reality, BLMC was formed by a Leyland takeover rather than an equal merger.

Significance

Following the merger, Stokes and his Leyland team controlled forty-eight factories, five thousand dealers and distributors around the world, 180,000 employees, and some of the most renowned nameplates in motor history, such as Austin, Morris, MG, Jaguar, Rover, Triumph, and Land Rover. The formation of BLMC also intensified the chronic problems of the British automobile sector. The immediate task for Stokes was to create a managerial structure and corporate strategy capable of integrating and rationalizing the two organizations. In the long term, BLMC had to confront the legacy of overlapping product ranges, inflated workforce, disruptive labor relations, low investment levels, outdated plant and machinery, scattered production facilities, inadequate engineering and management staff, product supply shortages, chaotic distribution structures, poor product quality, and increasing domestic and export competition.

Despite the creation of a multidivisional structure, Stokes held ultimate authority as a result of misalignment of some divisions and lack of skills in lower-level management. The chairman and managing director frequently became involved in trivial matters while the firm was guided by an ambiguous, often ad hoc, gradual rationalization program. Dedicated to arresting Ford’s growing penetration of the volume car segment, BLMC methodically launched new models intended to replace existing BMH offerings. Each car was produced with highly mechanized methods, in some cases in new facilities, rather than with traditional labor-intensive techniques.

Increased mechanization was an attempt to achieve economies of scale and higher productivity levels. In the absence of adequate initial investment capital, the mechanization plan was based upon the premise that the profits from one model would finance the next project, until the entire product range and manufacturing facilities of the corporation were replaced.

The strategy failed. The low quality and unattractive designs of the new models kept sales and output well below the minimum efficient scale. Costs were further increased by management’s inability to supervise the new automated production methods and by frequent strikes. In an attempt to maintain market share, old models and components scheduled for discontinuation were retained, resulting in a proliferation of offerings and internecine competition. At one point, the company featured four unique sports cars. Output, exports, and profitability all declined. When the world economy moved into recession during the 1973-1974 oil shortage, BLMC experienced a cash-flow crisis. In December, 1974, Stokes turned to the government for financial assistance.

Wilson and his second Labour government were committed to preserving the British-owned motor sector. Noting that BLMC provided exports, import substitutes, and substantial employment, the government purchased the company’s equity, dispensed short-term working capital, and appointed a committee to formulate a long-term rescue strategy. The Ryder Committee Ryder Committee , named for its chair, Donald Ryder, noted the obvious faults of BLMC and recommended a corporate blueprint similar to that used previously by Stokes. Ryder’s plan centered on solving BLMC’s productivity and industrial relations problems by changing executive management and committing massive public funds for capital replacement. Top managers, including Stokes, were duly dismissed. An investment schedule was drawn up with disbursements dependent upon reduced industrial action.

Controversy still surrounds much of Ryder’s proposal. Vital issues such as product planning and development, staffing levels, product quality and supply, shopfloor relations, line management abilities, model range composition, and distribution structures were examined, but they were given little emphasis and not remedied. Moreover, continued unsettled labor relations issues limited the amount and effect of government investment. The ownership and management of BLMC had changed, but its operations and strategy had not. As a consequence, the results of the firm were unaltered. In 1977, Ford displaced BLMC as the domestic sales leader.

The government’s intervention on behalf of BLMC established a precedent in the British motor sector. Chrysler’s takeover of Rootes had not revived that firm. The parent, experiencing losses on both sides of the Atlantic, requested financial support from the Wilson government in 1975. Once again public funds were used to prevent the collapse of an automaker in Britain. Critics of the Wilson government’s policy have claimed that action should have been taken to eliminate excess capacity and reorganize the entire British sector rather than simply supporting chronically ailing firms such as BLMC and Chrysler. British Leyland Motor Corporation Automobiles Mergers, business Leyland Motor Corporation British Motor Holdings

Further Reading
  • citation-type="booksimple"

    xlink:type="simple">Bhaskar, Krish. The Future of the UK Motor Industry. London: Kogan Page, 1979. Primarily an analysis of British Leyland during the mid-1970’s, including a review of the firm’s past failures and future options. The work broadly defends the Ryder recommendations. Highly technical in some areas, but gives excellent summaries of government studies of the firm. One of the best overall assessments of British Leyland.
  • citation-type="booksimple"

    xlink:type="simple">Edwardes, Michael. Back from the Brink: An Apocalyptic Experience. London: Collins, 1983. An autobiographical account of Edwardes’s guidance of British Leyland. Explains the situation he inherited and criticizes the Ryder plan. The account tends to be self-serving, but it also reveals motivations for the actions taken. Valuable for its insights into how long-term decline restricts operational options.
  • citation-type="booksimple"

    xlink:type="simple">Lewchuk, Wayne. American Technology and the British Motor Vehicle Industry. New York: Cambridge University Press, 1987. Primarily an economic history. Examines the evolution of production methods in the sector and concludes that the British industry developed unique production institutions and that firms could not successfully make the transition to the mass production techniques used by rivals. A convincing interpretation that has caused some scholars to rethink their work.
  • citation-type="booksimple"

    xlink:type="simple">Pryke, Richard. “British Leyland.” In The Nationalised Industries: Policies and Performance Since 1968. Oxford, England: Martin Robertson, 1981. After reviewing Britain’s nationalized firms, Pryke concludes that performance is not improved by government ownership. He suggests that faults at British Leyland were correctly identified and that potentially effective remedies were offered but never implemented.
  • citation-type="booksimple"

    xlink:type="simple">Stevenson, Heon. British Car Advertising of the 1960’s. Jefferson, N.C.: McFarland, 2005. A unique work on the advertising of British automobiles in the 1960’s. Includes several Leyland Motor cars. Many illustrations.
  • citation-type="booksimple"

    xlink:type="simple">Turner, Graham. The Leyland Papers. London: Eyre and Spottiswoode, 1971. A comprehensive narrative of the mergers that created BMC, Leyland-Triumph, and British Leyland. A very readable account of the people and circumstances behind the British horizontal consolidation. Vital to understanding the industry up to the early 1970’s. The author focuses on people in the industry and holds them responsible for its problems.
  • citation-type="booksimple"

    xlink:type="simple">Whisler, Timothy R. The British Motor Industry, 1945-1994: A Case Study in Industrial Decline. New York: Oxford University Press, 1999. Several chapters in this historical study focus on British Leyland.
  • citation-type="booksimple"

    xlink:type="simple">Williams, Karel. “BMC/BLMC/BL: A Misunderstood Failure.” In Why Are the British Bad at Manufacturing? by Karel Williams, John Williams, and Dennis Thomas. London: Routledge & Kegan Paul, 1983. Clearly demonstrates that the firm suffered from the same problems under various names and compositions. This nontechnical historical analysis argues that management consistently chose inappropriate production and market strategies. The workforce was often used as a scapegoat. A fine study.
  • citation-type="booksimple"

    xlink:type="simple">Wood, Jonathan. Wheels of Misfortune: The Rise and Fall of the British Motor Industry. London: Sidgwick and Jackson, 1988. A narrative that traces the history of motor manufacturers from the late 1800’s. Aimed at general readers, the work is valuable for its breadth. An excellent introduction to the sector.

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