Rover’s German bosses look this week to have got what they wanted from the UK. By threatening to close Rover’s largest plant, BMW should now secure new working practices for Rover workers, get agreement for over 2,500 redundancies and receive a Government grant of at least £200m. In return, it will invest £1.6bn to overhaul Longbridge to build the new Mini and a replacement for the 200 and 400 models.
The threat first made in a carefully orchestrated speech by BMW chairman Bernd Pischetsrieder at the British Motor Show overshadowed the unveiling of the new Rover 75, built at a revitalised Cowley plant.
Pischetsrieder said Longbridge could close unless productivity is brought up to the level of BMW’s German plants. ‘The productivity gap, if you ignore wage costs, is 30% between Germany and Britain. That gap must go,’ he said.
Longbridge is Rover’s biggest plant, employing over 14,000 workers and manufacturing the 200, 400, Mini and MGF.
Rover chairman Dr Walter Hasselkus said: ‘The parameters under which we planned for Rover Group have changed. We are determined to take all necessary action to cut costs.’
For the past six weeks, union representatives for Rover workers and Rover and BMW management have been involved in talks.
Last week, union representatives even flew to Munich to broker a deal with BMW executives.
Finally, in a joint statement on Friday the two sides announced: ‘The Rover group and trade unions have reached an agreement in principal on key issues surrounding agreed cost savings and working time flexibility.’
This is subject to approval by all Rover staff, and to details being finalised and approved by the BMW board. The 39,000 Rover workers are this week being asked if they want to volunteer for redundancy or early retirement, which could lead to the required 2,500 job cuts by April.
Under the deal, the working week will be cut from 37 hours to 35, with a 2.7% pay rise from next November, but there will also be radical changes to working practices. This will mean workers ‘banking’ hours at busy times and taking time off during quieter periods, as in Germany.
The deal is aimed at saving £150m a year from the UK wage bill.
While BMW has resorted to strong-arm tactics, there is no denying that Rover has problems. Having paid £800m for the company five years ago, BMW has already invested £2.5bn for little return.
In October alone, Rover production fell by a third to 28,000 cars, from 42,000 cars a year ago. Sales also fell by 15%. One industry observer even suggests that Rover cranked up production in the first half so it could cut back at the time of the negotiations.
But for West Midlands-based suppliers and services companies, the conclusion of the talks the result of which was never seriously in question will be a relief.
The news is welcomed, for example, by Haden MacLellan Holdings, which supplies Rover with fasteners and other services and recently cited a drop in work from the car manufacturer as a contributing factor in its disappointing forecast for the second half. Chief executive Richard Taylor describes the deal as good news for the company and for UK manufacturing industry.
BMW’s promised £1.6bn investment includes £1bn for a new facility at Longbridge, which would produce up to 500,000 units a year. Another £800m will go into product development, including a new Mini and the R30 and R35, which will become the respective 200 and 400 replacements.
Trade unions are attempting to put an upbeat spin on the proposed deal. Roger Lyons, general secretary of the Manufacturing Science and Finance Union, says the deal is absolutely essential to save not just Longbridge but a large part of the West Midlands economy, which relies so much on the motor industry.
Ken Jackson, general secretary of the Amalgamated Engineering and Electrical Union, says: ‘The trade unions and Rover have secured a new future for the company. In today’s global economy it is essential that we help companies maintain and improve their competitive edge.’
As Rover workers prepare to vote on the proposed working practices, another of Britain’s traditional volume manufacturers, Ford, is also preparing for hard negotiations with British unions.
Ford, which said recently that its UK plants were 20% less productive than its other European sites, is determined to introduce more flexible working into the UK.
Rolf Zimmerman, Ford vice president of manufacturing, Europe, said recently he strongly believes that although the company’s European operations have made significant cost savings over the last year, ‘these are not going to save us’.
Zimmerman says Ford in Europe has to raise its return on sales to 5% from its present dismal 0.5%, but that it can not do it before 2000.
Central to turning around Ford’s operation is new product, inextricably linked with flexible working practices.
Hans Schardt, programme operations manager, vehicle operations, says that in other parts of Europe, Ford uses short-term contract labour for peak production. He is believed to want to introduce similar work practices in the UK. In Germany, Ford offers six-month contracts. In Spain, contracts last 18 months.
Such an arrangement would give Ford the flexibility Rover looks to have gained, via a different route.
Unfortunately, the British are quite resistant to this way of working, says one Ford insider.
Although Ford is clearly committed to producing cars in the UK a huge market for its products it needs to change working practices.
The company’s biggest challenge in the UK will be the transformation of the Halewood, Merseyside plant from volume production of Escorts, to luxury Jaguars.
Schardt, who has a reputation as a tough negotiator, describes the Halewood job as ‘very, very challenging’. But he adds: ‘Japanese plants in the UK are 15% better than our best European plants. So British workers can do it.’
Ford will look at how everything is done at Halewood. Staff will not have to reapply for their jobs under Jaguar. How management will deal with workers unwilling or unable to embrace the rigours of luxury car manufacture is as yet unknown.
Ford is already believed to be talking to union leaders about its plans. The recent turnaround at Rover can only have helped its cause.