Commentary: Rescuer's thin hopes of a lifeline

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The Independent Online
There is more than a passing irony in the spectacle of the foreign company that rescued Leyland Trucks six years ago now needing to seek protection from its own creditors.

In 1987 the Leyland business was losing pounds 2m a week and was saddled with debts of pounds 750m. Today DAF is in debt to the tune of 3bn guilders ( pounds 1.14bn) and losing more than 100m guilders a year. How times change.

John Talbot and Murdoch McKillop of Arthur Andersen, who were appointed yesterday administrative receivers to Leyland DAF, have their work cut out to salvage the business. Nevertheless, the renamed and reshaped UK arm of the business is, arguably, in infinitely better shape than its Dutch counterpart.

The receivers should forget straightaway about intervention from Michael Heseltine's Department of Trade and Industry. Direct financial support from the DTI is, rightly, unimaginable as it would open the floodgates to aid requests from any and every private company down on its luck, while what small assistance towards capital investment projects the DTI might provide would not tip the balance anyway.

But Leyland DAF has much else going for it. In its Leyland truck factory in Lancashire it has the most modern manufacturing plant in the DAF group. It also has one of the lowest-cost labour forces in Europe, DAF's biggest single market on its doorstep, and a marque that accounts for 25 per cent of UK sales. Moreover, Britain is one of the few European markets where truck sales are forecast to increase this year.

It is easy to construct reasons why Leyland DAF might die. There are no signs of a buyers' queue being formed by UK engineering or industrial conglomerates, while Leyland DAF's direct competitors could be forgiven for hanging back and waiting for the excess capacity represented by its factories to be closed for good by the receivers.

But the lesson of AWD, the former Bedford Trucks business, is heartening. AWD went into receivership last summer and, despite being a less saleable proposition than Leyland DAF, was bought by Marshalls of Cambridge, albeit with the workforce slimmed down and production transferred elsewhere.

Koos Andriessen, the Dutch minister for economic affairs, believes that a slimmed down DAF has a strong chance of survival. Unfortunately for him, the business logic points to that taking place in the UK, not the Netherlands.

The stark prospect for Leyland DAF is that in these recessionary times there may not be any takers, with the very, very unlikely exception of the Japanese.