LEX Nationalisation is spreading from banks to carmakers – the US government might become majority shareholder in General Motors. Before it agrees, however, Washington should recall a cautionary tale: British Leyland. The UK took state control of the ailing carmaker, employing 180,000 and supplying 35 per cent of Britain’s cars, in 1975. After £3.4bn (now worth £11.2bn) was injected in 13 years of public ownership, the shrunken, still-struggling successor MG Rover went bankrupt in 2005, ending mass production by UK-owned carmakers. Today, only 30,000 UK jobs survive in one-time Leyland businesses.
Lesson one: beware of smaller, well- managed groups trying to gain scale by acquiring larger, unhealthy ones. British Leyland’s difficulties stemmed partly from Leyland Motor Corp- oration’s 1968 merger with British Motor Holdings. Sergio Marchionne, Fiat chief and would-be suitor of Chrysler and General Motors’ European arm, take note. Lesson two: before pouring in state funds, cut to a viable core. British Leyland’s 1975 rescue tried to preserve an empire spanning mass and luxury cars, buses and trucks. Yet it already struggled to compete with volume makers such as Ford. It might have done better focusing on the stronger, upmarket Jaguar, Rover and Triumph brands.
Lesson three: trade unions must be realistic. British Leyland became synonymous with industrial unrest. Lesson four: injecting capital is not enough. Carmakers must be superbly managed and produce desirable cars. BL achieved neither. Only its Austin Metro won mass-market acclaim. And it never overcame a heritage of multiple brands producing competing models. GM has absorbed some of these lessons and plans to cut a third of jobs and a quarter of its factories, and shrink to four brands. The United Auto Workers have, belatedly, acknowledged the sacrifices they must make. These are necessary, though not sufficient, conditions for GM’s survival. For that, Americans must want to start buying its cars again.
| BACKGROUND NEWS | |
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US taxpayers would take a majority shareholding in General Motors under a sweeping debt-for-equity restructuring proposal that the carmaker revealed on Monday in a bid to avoid bankruptcy. Under the plan, GM said it would shut 13 of 47 plants by the end of next year, resulting in an additional 7,000 job losses. The latest job cuts would reduce GM’s US workforce from 61,000 last year to about 40,000 by the end of 2010. The carmaker, which lost its crown as the world’s biggest carmaker to Toyota last year, said it would give up its 83-year-old Pontiac brand and cut its dealership network from 6,200 to 3,600 by the end of 2010. |
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