BL, Britain's state-owned automaker, seeks to shift out of neutral

Its assembly lines produced the Jaguar, one of the world's great cars. Many of the other automobiles and trucks on the roads of Britain rolled out of its factories. But for more than a decade, BL PLC (the former British Leyland) has been weakened by poor management, buffeted by industrial disruption, and challenged by strong competition from Ford and General Motors.

The state-owned auto company has attempted to reverse its declining fortunes, but its efforts have met with mixed results. Many analysts are now convinced the future of this quintessentially British company depends on its ability to join forces with its Japanese competitors.

``The company is in better shape, but there are still questions to be answered,'' said Mike Costello, an analyst at Grieveson, Grant & Co.

``Its impact on the public consciousness must overcome years of poor quality,'' said an analyst who declined to be named. ``Realistically, it faces a difficult future.''

BL's long-term health will be determined in part by the success of the company's 1.8 billion ($2.5 billion), five-year investment program recently approved by Prime Minister Margaret Thatcher's government.

Under the program, Austin-Rover, BL's volume car manufacturer, and Honda of Japan will jointly design and develop a middle-range car for the late 1980s. This will replace the existing Maestro model.

In addition, new arrangements, agreed in principle between the Japanese and Austin-Rover, call for the United Kingdom company to assemble the Honda version of the new vehicle for Honda's dealer network in Britain and other Honda models for export to Europe. Honda is also considering the manufacture of engines for its own vehicles at its U.K. site. The Japanese connection

Austin-Rover is already cooperating extensively with Honda to develop a new luxury executive car and engine to be launched at the end of this year in the U.K. and in North America in 1987.

Austin-Rover's collaboration with Honda is not new. In the early '80s, the two car companies jointly produced the Triumph Acclaim, modeled on Honda's Ballade.

BL's five-year plan would also see the company selling off Unipart, its successful spare-parts subsidiary, by the end of this year, assuming the government's privatization program continues to go smoothly. This would be another step toward putting BL on a more profitable footing after last year's sale of Jaguar, the company's luxury car division.

Approval of BL's corporate plan was preceded by nearly six months of controversy.

In essence, the debate about the program was sparked by the government's pressure on Austin-Rover to agree to purchase Japanese engines and gearboxes to be used in the production of a new small car designed to replace the existing Metro model at the end of the decade.

The government contended that this move would cut 250 million ($341 million) from the company's investment program and help reduce BL's massive overspending, which has soaked up more than 2 billion pumped into the company by the government since it was nationalized in 1975.

Critics, including Austin-Rover chairman Harold Musgrove, countered that reduced investment would jeopardize the future of Britain's only volume car manufacturer, undermining its ability to design its own engine and turning BL into an assembly operation dependent on Japanese technology.

In the end, the government agreed with BL, saying that no cut in the investment program would be made and Austin-Rover would go ahead with production of the next series of its engines.

Even after this announcement, however, Labour members of Parliament continued their criticism of the plan, saying that it would give BL a role subordinate to the Japanese.

Although criticism of BL's Japanese connection continues, enlisting Honda's cooperation is viewed by some as critical to help the company resolve problems dating back to its foundation in 1968. Boom and bust

Originally created from the merger of Austin and Morris (which made the famous MG sports car) to form the British Motor Corporation (BMC) in 1951, British Leyland underwent a series of other mergers to combat the competitive threat from Ford, eventually becoming known as BL.

But after a boom in the '60s, BL's difficulties worsened. It was on the brink of bankruptcy in 1975, when the Labour Party, then in power, nationalized it.

It faced continuing labor problems, however, at one stage being forced to negotiate with 300 different bargaining units. Production continued to fall, the quality of BL vehicles was called into question, and in 1978 the Labour Party was forced to change management.

The new chairman, Sir Michael Edwardes, fought the unions, cut costs by firing more than 100,000 employees, and tried to get the company moving again. Although he slowed the company's decline and productivity improved, by the time he left his position in 1983 he had not been able to turn BL around completely.

Under the new leadership of Sir Austin Bide, the company operated at a loss last year, and it still faces many problems. Chief among them is an inability to make inroads into Britain's company-car market, which is 55 to 75 percent of the country's automobiles.

``Its cars have a poorish image and it has suffered from mistakes in models and poor labor relations,'' one car analyst said. ``Ford and GM have the image. Their cars have caught the imagination. Austin-Rover doesn't enjoy a high level of public esteem.''

According to the Society of Motor Manufacturers and Traders, the car company's market share last year was about 18 percent and in the first quarter of this year has stayed fairly constant, remaining well below the 30 percent market share it held 15 years ago. World auto competition

As Austin-Rover tries to boost its domestic market share, it also faces a daunting task abroad, with excess capacity and cutthroat price competition throughout the European car industry, hurting BL's export business.

The company's other subsidiaries have also been in a slump. Leyland Vehicles, the truck and bus subsidiary, has lost millions over the last few years and Land-Rover, a subsidiary whose profits once offset losses in the rest of BL, turned only a marginal profit last year.

For BL to achieve greater productivity, analysts agree it will have to work even more closely with its competitors.

``In essence,'' said Garel Rhys, an auto industry economist at University College in Cardiff, Wales, ``BL's true independence is impossible as a world manufacturer. It's a question of cooperation. Even General Motors is having to cooperate with Toyota. BL's independence has to be less than previously. It is the only way it can survive.''

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