Hansard extract – 16 March 2000


Mr. Richard Burden (Birmingham, Northfield): Yesterday in Prime Minister’s questions, I said that the entire midlands area was holding its breath, waiting on the BMW board meeting that was to take place today. We now know the result. The responsibility for what looks like befalling Longbridge and other large parts of the Rover group is that of BMW. The day after the announcement in 1994 about BMW taking over Rover,

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I met its then chairman, Bernd Pischetsrieder. He assured me that BMW was in for the long haul, knew the investment requirements of Rover and would make the company a success. I believe that Bernd Pischetsrieder was being straight with me but I know also that, from that day on, every time there was speculation about the future of Rover and BMW not being in it for the long haul, BMW assured me personally, the Government and–most important of all–the people who worked for Rover and its suppliers that BMW was in for the long haul and had a long-term commitment to Rover and to Longbridge in particular.

We know that BMW faced difficulties, but in negotiations over two years, it struck me that there were three essential elements in Rover having a bright future–and BMW did not disagree. First, workers at Longbridge and the other Rover plants needed to change their working practices and adopt greater flexibility. The workers delivered ground-breaking agreements on working practices. They have done everything that BMW asked of them and more.

Secondly, the whole process had to receive the backing of government at all levels in the UK. That has been delivered as well. Local partners–from Birmingham city council to the chamber of commerce and the training and enterprise council–got behind Longbridge and put together a package negotiated with BMW to deliver their side of the bargain. Despite what has been said by Opposition Members, my right hon. Friend the Secretary of State has behaved impeccably and has shown commitment on behalf of the Government by delivering the £152 million package and showing faith in the Rover group and BMW.

The third element was BMW itself. It is true that, in the first years of its involvement, it made a major investment in the Rover Group: about £500 million a year. It is also true that BMW committed itself to a further £1.5 billion of investment at the Longbridge plant. That commitment, however, has not been honoured, and the responsibility lies with BMW and with BMW alone.

I do not think that we should allow any evasion, and I was disappointed that Conservative Members tried to shift the responsibility. Let me take up some of the issues that they raised. First, let me deal with the European Commission, and the reference to the grant.

It is regrettable that the European Commission takes such time over applications–I have a less sanguine view in that regard than the hon. Member for Twickenham (Dr. Cable)–although it must be said that it has taken less time over this application than over others. We should remember, however, that the European Commission agreed and announced in December that it would embark on a formal inquiry. At that stage, we wanted to know what time scales were involved. There was speculation; it could take up to 18 months. The Commission said that it would take up to six months. That was clearly regrettable, but there was no suggestion then, and there is no suggestion now, that it constituted a fundamental barrier to BMW’s continuing its investment and standing by Longbridge. In implying something else, Conservative Members are being disingenuous, or else they have lost the plot in regard to what is going on with BMW and Longbridge.

The strength of sterling was also raised. Anyone who represents a manufacturing area–anyone who knows companies involved in exports, particularly to Europe–

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is aware of the difficulty that that is causing to our manufacturers, but it is no excuse for what BMW has done. The losses announced at the BMW board meeting were not a bolt from the blue; they had been predicted for months.
If BMW or anyone else argues that the strength of sterling was the make or break element for BMW, it should be remembered that BMW prides itself on being a pan-European company. That means that it produces in Germany as well as in the United Kingdom, and that it benefits from the weakness of the euro when importing its vehicles to the United Kingdom and when exporting them to the United States. Perhaps BMW could have been more aggressive and dynamic in exporting classic cars such as the Rover 75 to the United States: if it had done that earlier, the cars would have sold very well.

It grieves me to say this, because I have been supportive of BMW for years, but it has a responsibility for what has happened, and that needs to be recorded.

Mr. Geoffrey Robinson: Does my hon. Friend agree that production of cars in the United Kingdom is some 40 per cent. lower than it is in Germany? Does that not more than negate the exchange-rate argument?

Mr. Burden: My hon. Friend makes a good point.

I hoped that we would be able to secure a degree of cross-party agreement on the important issue of how we could get behind Longbridge and plan for the future, but if Conservative Members are going to criticise the way in which my right hon. Friend the Secretary of State has handled the grant application, or the way in which he has handled the matter overall, they will be sitting in some rather fragile glass houses. It was they who sold off the Rover Group to British Aerospace for a song. It was they who, when the company had an asset base worth in excess of £250 million, wrote off debts totalling £800 million. The company was declaring a pre-tax profit of £65 million, and how much did they sell it for? They sold it for £150 million. That was crass incompetence and against European rules; the previous Government were found out about that.

Mr. Butterfill: Were the previous Government trodden down in a rush by alternative buyers prepared to pay more?

Mr. Burden: The hon. Gentleman would perhaps do well to read–I hope that it is still in print because it is a classic document–the National Audit Office report entitled “Department of Trade and Industry sale of Rover Group plc to British Aerospace plc”. One of the issues mentioned in the report is that the previous Government went straight to British Aerospace and did not look around for other potential partners.

The impact of today’s decisions is real enough. As the Secretary of State said, the impact is not on a theoretical plant, or theoretical people, but on real people and real livelihoods in the west midlands and elsewhere. It has been estimated that, just in the midlands, about 50,000 jobs depend on the Longbridge plant. Birmingham city council estimates that, if Longbridge were to close, the total cost to the public purse would be about £317 million. If there were a major slimming down of Longbridge, the cost would be £178 million. Total jobs lost from a

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complete closure in the Birmingham area would be 19,370 and from a slimming down 10,850, so we are dealing with a very serious issue for the west midlands and for motor manufacturing in this country as a whole.
Today, we have heard the news that Alchemy Partners is in negotiations with BMW and that BMW has said that it wishes to dispose of the majority of Rover Cars to Alchemy. We do not know much about Alchemy at this stage, but we must say clearly that, if it ended up as an exercise in asset-stripping, that would not be acceptable to my constituents or to the west midlands as a whole.

Statements have been coming out of Alchemy today about its launch of the MG car company. It says that it wants to retain motor manufacturing at Longbridge and that it is committed to motor manufacturing in the west midlands. I am pleased that it is saying that, but, as the Secretary of State said, we must ask it some serious questions.

We have to examine exactly what model range Alchemy anticipates producing and how all that will be financed. We need to examine whether other partners are involved. Production and design of new models involve considerable financial firepower. If Alchemy is to take over Rover Cars, we have to be assured about what it will do with it and of its commitment.

I hope that my fears about Alchemy are unfounded. If it is committed to the west midlands and can bring the firepower to bear not just to save Longbridge, but to ensure that the commitment of the work force to the plant continues and that the potential of the plant is realised, no one will be happier than me. For that to happen, it will need a critical mass behind it. It has to explain how it will put that critical mass together.

There is a longer-term issue that goes well beyond Longbridge and the Rover Group. Throughout Europe and, indeed, elsewhere, there is over-capacity in the motor industry. We have known about that for some time. The consequences are beginning to be felt. We need a long-term strategy for the motor industry. We know of the devastation that was inflicted on coalfield communities as a result of the acts of industrial vandalism by the previous Government. There have been integrated strategies to regenerate those areas. We need similar–in fact, greater–creativity in our industrial areas.

We need to look 10 and 20 years hence, think about where the motor industry and manufacturing will be, and get ahead of the game in working with components’ suppliers and manufacturers, so that we can decide the strategies necessary to make the best use of our great powers of innovation and great industrial base and to meet the challenges of the future.

Some examples are available, such as the British motor sport industry. Although that is a hobby-horse of mine, it is a relevant example. Everyone knows about motor sport, but not many people know about the multi-million pound motor sport industry. The industry is essentially composed of quite small firms, but they are clustered, bringing together communities of knowledge that, although highly competitive, are highly co-operative. The arrangement has been a success story not only for the industry, but for Britain.

I do not claim that the lessons of the motor sport industry can simply be picked up and dropped into mainstream motor manufacturing–they cannot–but some lessons can be learned from it. I hope–I am sure

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that it will happen–that my right hon. Friends and other Ministers will get together with partners in the regions, such as the regional development agencies and local authorities, to implement a strategy to ensure not only that Longbridge survives next year and the year after, but that British motor manufacturing lasts well into this century and beyond. It has the potential to do so.
Although it is no excuse for BMW to blame the exchange rate for its decision today–the responsibility for the decision is with BMW, and BMW alone–the exchange rate is an issue for manufacturing industry. I do not dispute the Bank of England’s right to set interest rates. As far as I know, under their current policy, even Conservative Members do not dispute the Bank of England’s right to set interest rates–[Interruption.] They have done another U-turn. I cannot keep up with their policy shifts.

The Bank has a responsibility to consider the long-term health and stability of the British economy, but a healthy manufacturing base is both a short-term issue and a long-term issue. Although the Bank has the right to set interest rates, it perhaps needs to examine more closely its responsibility for ensuring the long-term health of manufacturing industry.

The lessons of the past 24 hours will be remembered in the west midlands for a long time to come. Now, however, is the time for us not only to lay the responsibility at BMW’s door, but to move on–to work with Alchemy to ensure that it can deliver what it says it can deliver, and to ensure that we develop and implement the strategies that can revive our industrial areas and allow British motor manufacturing to achieve its potential.



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Richard Burden

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I was Labour Member of Parliament for Birmingham Northfield between 1992 and 2019 and a former Shadow Transport Minister. I now chair Healthwatch in Birmingham and Solihull, and the West Midlands Board of Remembering Srebrenica. I also work as a public affairs consultant. I am an effective community advocate and stakeholder alliance builder with a passion for human rights. I am a trustee of the Balfour Project charity and of Citizens Advice Birmingham, and a former Chair of Medical Aid for Palestinians.

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