Britain's industrial Dunkirk: Our expulsion from one manufacturing sector after another is devastating to national self-respect, says Stephen Bush

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DESPITE the chorus of approval in the City and financial press, the proposed sale by British Aerospace of Rover to the German company BMW, if approved by their respective shareholders, brings into sharp focus fundamental faults in British capitalism which, if not corrected and corrected soon, will take our country to industrial oblivion.

At pounds 4,300m turnover, the transfer of Rover is the largest single loss of control of industrial output and market ever - about 4 per cent of our gross manufactured product, dwarfing other recent transfers like Jaguar to Ford (about pounds 800m) and ICI Fibres to Dupont (about pounds 300m).

Contrary to City comment at the time of the sale announcement, it is not chauvinistic to safeguard your most strategic industrial capacity from foreign takeover. To every foreign engineer and manager I know, it is the merest common sense; it is the difference in opportunities between having one company and having none. I doubt if there is a single British professional engineer who does not take the same view: millions of lay people feel desperately that there is something terribly wrong.

In terms of GNP per head, Britain has in 30 years slid from near the top to near the bottom of 24 Western industrial countries in the Organisation for Economic Co-operation and Development. At the same time, British manufacturing operations have hauled themselves from near the bottom of the efficiency league to near the top, Rover being an outstanding example.

We who work with or for British industry, as well as the millions outside who depend on it for a living, are entitled to ask what magic insight is it, denied the rest of us, that allows a tiny group of financial institutions and corporate managers to watch complacently as British industry is expelled from one sector after another, while swearing that it is the inevitable 'restructuring' of the international economy which is working in Britain's long-term interest?

The Rover sale exposes three of the most profound issues for national debate, which must not continue to be brushed aside by the City establishment and their allies in the Government.

Much has already been written about the City's incompetence and short-term outlook in industrial matters. But Rover is the clinching case. Essentially Rover is a growing success that is being sold at a failure price, to enable British Aerospace to relieve its difficulties arising from its aircraft-leasing arrangements. As a rule of thumb, a well run modern manufacturing company will have capital assets valued somewhere in the region of its annual turnover. On this basis, Rover is being sold at well under half its value, even if you count the takeover of debt as part of the price: Land Rover on its own is worth the pounds 800m cash being paid.

This leads to the first fundamental point. Why do the financial institutions place such blind faith in the abilities of a gilded circle of corporate managers who, lacking the technical expertise fully to get to grips with the businesses they are entrusted with, are whisked from one chairmanship to another in an elaborate game of musical chairs in which every participant receives a huge prize every time the music stops? In hi-tech manufacturing such as cars and aerospace, it is the three-way conjunction of long-term product research, process design and marketing that ought to be the primary concern of the board, as it clearly has been in our successful chemicals and pharmaceuticals businesses.

Exactly two years ago Akio Morita, chairman of Sony - one of the companies that have propelled Japan to world economic leadership - said it was 'very curious that so many British industrial companies are headed by accountants or lawyers . . . in Japan almost every major manufacturer is headed by an engineer or technologist . . . I do not believe accountants and financial professionals should be at the helm of industry.' Just as British manufacturing has learnt enormously valuable lessons from the Japanese, why do not the financial institutions do likewise in their own interest and that of the millions whose investments they manage? Why do they continue to reinforce failure?

The second fundamental issue is the future of Britain's prodigious research and design expertise. In a recent address to the Parliamentary Scientific Committee, the Prime Minister asked why so much of Britain's scientific achievement benefited our competitors rather than our own industry. The answer is that you cannot transfer science and technology to an industry which is not there or is not prepared to absorb it.

The Rover sale takes out of British hands pounds 4,300m of annual turnover in hi-tech products. No conceivable expansion in the birth rate of new hi-tech companies can begin to replace the added value this turnover represents. In a world awash with production capacity, the key strategy in hi-tech industry is to spread your very expensive research and design over as many products as possible, retaining only inexpensive badge engineering to create market differentiation.

It is inconceivable that BMW will retain two research and design facilities, since their consolidation into one, centred in Bavaria, is the obvious way for BMW to recoup much of the cost of buying Rover. This will not be noticed for some years by the general public, or even by the production workers, since the existing models will run for several years yet. This is why BMW is able to give a guarantee of continued employment to production workers.

But the loss of autonomy in research and design will be felt immediately. With the centre of design decision-making removed to Munich, discussion with British component suppliers about new developments will come rapidly to a halt as designers realise that for future models BMW will have their own views about component supply. Inevitably, young British graduate engineers will realise that promotion and prospects depend on fitting in with Munich, not Birmingham. There will be an enhanced flow of our ablest young people to Germany, ultimately to serve German, not British, industry.

For our research scientists and engineers to make a useful contribution to our industries, they have to know what the objectives are - what the markets are likely to be. It is this knowledge of the linkage between R&D and the market that domestic ownership of the market and production provides in strategic sectors of industry. The sale of Rover represents a massive reduction of that linkage and therefore a massive opportunity loss in mechanical engineering, as well as in plastics, electronics and metals.

Perhaps the most fundamental point of all is the devastating blow to our national morale and self-respect. It is not true that the battle for the British car industry was lost in the Seventies. This is the defeatist argument that has dominated British public life since Suez. It is never too late to build a new industry if the will is there - as the Japanese, the Koreans, and now the Malaysians are demonstrating.

Thirty years ago BMW was itself an ailing company, smaller than Jaguar is now. Since then, by keeping in the business a much higher proportion of profits than is usual in British industry and by dedicated expertise at the top, it has grown to its present position. Growing a business in this way is in fact much more typical of German industry than of British industry, where corporate managements tend to prefer the takeover of existing businesses as the easier route to growth. It was entirely symptomatic of the malaise of British corporate management that the only engineer present at the news conference announcing BMW's takeover of Rover was Mr Pischetsrieder, chairman of BMW.

No nation can survive on a diet of everlasting retreat and evacuation. Our country desperately needs a victory in the intense industrial war fought daily around the world. There was no immediate need to sell Rover: the partnership with Honda, committed as they were to keeping Rover a British company, had many miles to go.

In round terms, the pounds 100bn bonanza from North Sea oil has financed the bulk of the huge British investments in largely non-strategic sectors of overseas economies. Just 2 per cent of this sum is all that is needed to save the strategically vital Rover for the British economy.

Instead, the City and the BAe board have handed us another Dunkirk in order to obtain short-term financial relief. When a system continues to deliver nonsense, the thing to do is to change it - not pretend that it works. As Churchill said in 1940, 'Wars are not won by evacuations.'

The writer, formerly with ICI, holds the Chair of Polymer Engineering in Manchester and is Chairman of the North of England Plastics Processors' Consortium. He directs his own technology company and is a Fellow of the Institutions of Mechanical Engineers and of Chemical Engineers and of the Institute of Materials.

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