Auto bailouts aim to buck history,’75 British effort failed, but experts say economy, labor different now

Published: May 24, 2009 3:00 a.m.

Auto bailouts aim to buck history

’75 British effort failed, but experts say economy, labor different now

Marty Schladen
The Journal Gazette
 Timeline
1968 – In attempt to recapture its status as the world’s No. 1 carmaker, English Labour government encourages the nation’s two biggest motor companies, Leyland Motors and British Motor Holdings, to merge

 

1975 – English government puts up 2.4 billion pounds to bail out struggling carmaker British Leyland Motor Corp. Through its holding company, British Leyland Ltd., it controlled the carmaker.

1977 – Sir Michael Edwardes appointed chief executive of British Leyland Motor Corp.

1979 – Margaret Thatcher becomes prime minister, partly from fallout from Leyland’s financial losses and labor strife

1984 – Leyland sells Jaguar, one of the six brands it made

1988 – Leyland sells its remaining business, Rover Group, which includes its two remaining brands, Rover and MG, to British Aerospace

 

British Leyland Motor Corp. was once a lot like General Motors Corp.

 

When it was formed in 1968, British Leyland was the No. 1 carmaker in the United Kingdom, the proud producer of Jaguar, Rover, Triumph, MG and other popular vehicles.

 

But spiking oil prices, outdated production plants, poor management and worse labor relations helped push the company to the brink of collapse, prompting a government investment of about $9 billion in today’s dollars over five years.

 

The government rescue didn’t work, but it parallels in some respects efforts by the U.S. government to save General Motors and Chrysler LLC.

 

Both governments made downsizing big, inefficient car companies a precondition of taxpayer money. But experts and those involved in the U.S. auto industry point out there are vast differences between the England of 1975 and the United States of 2009 and their automakers.

 

“The degree of crisis is different,” said Lee H. Adler, a professor at Cornell University’s Industrial and Labor Relations School in Ithaca, N.Y.

 

The Labour government in England assumed control of British Leyland at a time when inflation ran as high as 25 percent and unions were notorious for walking out even when their own leaders told them not to.

 

The U.S. government started lending money to GM and Chrysler about six months ago at a time when inflation was essentially zero, credit was frozen and workers feared for their jobs as auto sales dipped.

 

“Both governments recognized there was going to be a catastrophe and a lot of voters were going to lose their jobs,” said Michael Hicks, director of Ball State University’s Center for Business and Economic Research. “But that’s where the comparison ends.”

 

One big difference has to do with the role of the governments.

 

The British government took the reins of Leyland, a company the government helped create seven years earlier by pushing the merger of England’s two largest carmakers, Leyland Motors and British Motor Holdings.

 

In the United States, the federal government has lent General Motors and Chrysler cash that could be converted to an ownership stake in the companies. But the Obama administration says it wants GM and Chrysler to make hard choices needed to become profitable so it can get out of the car business as quickly as possible.

 

It has already rejected austerity plans from both companies. It allowed Chrysler to slide into bankruptcy at the end of April, and it could let GM suffer the same fate soon.

 

The plan is to use bankruptcy protection to force on bondholders and employees largely represented by the United Auto Workers bitter medicine they otherwise aren’t willing to take.

 

Some critics say the U.S. government’s venture still will end up the same as that in England, but Hicks says that misreads what’s happening now.

 

“The Labour government (in England) really took excessive steps,” he said. “It was essentially a socialist government. What’s happening today is very different.”

 

Another big difference has to do with the role of organized labor.

 

With inflation running well into double digits, the Labour government in England sought to control prices by limiting pay raises for Leyland’s production workers.

 

Union leaders consented to the measure, but autoworkers struck for a month in 1977 anyway, bringing Leyland to the brink of collapse, according to contemporary news reports. The workers backed down only when Hugh Scanlon, leader of the powerful Engineers Union, said he wouldn’t protest if Leyland fired the wildcatters – workers who strike without the authorization of their union.

 

That strike was hardly the only disruption as Leyland tried to control wages and cut its workforce.

 

Between 1978 and 1979, union leader Derek Robinson led 523 walkouts at Longbridge, Leyland’s largest plant, the BBC reported in 2005.

 

Partly due to the strife with the Leyland unions, the Conservative party defeated the Labour government in the 1979 elections and swept Margaret Thatcher into the prime minister’s office.

 

Her goal was to crush the unions, said Cornell’s Adler. By the 1980s, the habitual strikes lost much of their emotion.

 

Jonathan Moss now owns an Auburn-based construction consulting business with his wife. But in the 1980s, he still lived in his native England, and for a time he drove every day past strikers at a Leyland plant in Oxfordshire.

 

“For weeks and weeks, there were picket lines, but they were fairly passive,” Moss said. “By that point, they were fairly resigned.”

 

Contrast that with the United Auto Workers’ 2007 agreement – without strikes – to a wage system that pays new hires $14 an hour and to take over a retiree health plan for less than its expected liability. Then, in separate negotiations with GM and Chrysler this year, the UAW has agreed to accept stock instead of cash for at least part of that health care liability.

 

It’s a far cry from England’s strikes of the ’70s, said Hicks of Ball State.

 

“The UAW has really made an attempt to cooperate,” he said. “I give (UAW President) Ron Gettelfinger a lot of credit for ending the antagonistic relationship.”

 

And unlike Thatcher, President Obama isn’t at war with manufacturing unions.

 

“Now the president feels like he needs to save the auto industry,” Adler said. “He doesn’t feel like he needs to pulverize the unions.”

 

As the economy has become more global, it has become easier for manufacturers to move production overseas and for foreign carmakers to open non-union factories in the U.S. That might be part of the reason relations between American carmakers and the UAW are more cordial now than those between Leyland and British carmakers were in the 1970s.

 

“When I first went to work, it was more of an adversarial relationship. We had more power,” said Orval Plumlee, a 32-year autoworker and president of UAW Local 2209, which represents production workers at GM’s Allen County assembly plant. “Now we’re more of a partnership. I don’t know if I agree with that, but it’s a reality and a necessity.”

 

Important cultural differences might also have made Leyland’s problems with its unions worse than the U.S. automakers have had with theirs. Several newspaper articles from the 1970s blamed the British class system for a workplace where management didn’t communicate with labor.

 

In February 1979, 19,000 Leyland workers struck for weeks after losing a pay increase for not meeting productivity targets. Management never told workers what the productivity targets were, the New York Times reported.

 

It’s not certain how the U.S. government’s venture into the car business will turn out, but it’s a different venture than the one England undertook 34 years ago.

 

mschladen@jg.net

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