Michael Heseltine – 1993 Statement on DAF Trucks

The statement made by Michael Heseltine, the then Secretary of State for Trade and Industry, in the House of Commons on 2 February 1993.

The Government have been disappointed to hear about the financial problems facing the Dutch-based company DAF NV, which today filed for a legal moratorium on its debts. We are concerned about the implications for its United Kingdom operations.

I regret that it has not been possible for the company and its bankers to put together a satisfactory restructuring package. We have kept in close contact with the company and with the Bank of England, which has been closely involved in trying to help the relevant United Kingdom banks come to an agreement with their Dutch and Belgian counterparts, which have led the consortium. The United Kingdom banks have done all that they were asked, but unfortunately not all the other banks have felt able to agree an acceptable financing package with the Dutch and Belgian Governments.

The legal position of Leyland DAF should be clarified this afternoon. We have not participated directly in the discussions on the financial restructuring, as that primarily related to the company’s Dutch and Belgian activities.

The Government stand ready to work closely with Leyland DAF, the receivers, banks and other interested parties to mitigate, as far as possible, the impact on United Kingdom jobs. We hope that it will prove possible for all those involved to find a means of creating a business with a long-term commercial future out of at least part of DAF’s United Kingdom operations.

While regretting the particular circumstances affecting Leyland DAF, we must remember that the United Kingdom vehicles sector has made excellent progress during the past few months. In the midlands alone, Rover recently announced a 5 per cent. increase in output for its four-wheel drive vehicles in 1992 and a new £9.5 million fleet deal; Jaguar will be launching a £560 million investment plan on the back of a sharp rise in sales in the United Kingdom and the United States markets; and Lucas is to build a new £3.7 million factory, creating 350 jobs. We must continue to build on those extremely encouraging prospects.

Mr. Cook

Will the President of the Board of Trade précis his answer by confirming that, when I asked what Government assistance may be available, the answer that we got today was that there will be none for Leyland DAF? Is he aware that the news that he has just confirmed is another bitter blow to Britain’s shrinking industrial base? Will he try to understand that it is not enough to express disappointment for the work force, as he did today? The work force, who face the loss of their jobs, want to know what he is going to do to help save them.
Will the right hon. Gentleman remember that he prefers to be known as the President of the Board of Trade? Does he know that Leyland DAF is the leader in the British truck market? If that market share goes on imports, how many more millions will it add to the trade gap? Will he remember that he is the Minister responsible for regional policy? What help will he offer the communities whose local economy will be devastated if those factories and their suppliers close?

Will the right hon. Gentleman remember that he promised to intervene before breakfast, before lunch and before dinner? Why did he not intervene to stop that major British company going into receivership?

Why is it that the Belgian and Dutch Governments were willing to underwrite the loans that would secure the company’s future but not the British Government? Why did the British Government not support that rescue package by underwriting it?

Will the right hon. Gentleman accept that, as advised this afternoon by DAF, the minority who wrecked the deal in the banking consortium were all British banks—NatWest, Barclays and Lloyds? Why has he not had talks with them to press them to take the longer view of the Dutch and Belgian banks who want to rescue, not close, the plants?

Today 5,500 people face the prospect of redundancy. When they hear the Government talk about recovery, it must sound like a Government who do not know what is happening in the real world. Will the President of the Board of Trade do them the justice of now admitting that Britain faces a real industrial crisis and needs an industrial strategy that tackles it?

Mr. Heseltine

The hon. Member practises his usual technique of undermining any British company or institution. He would have done well to read the press release put out by DAF, a copy of which I have. Perhaps I can quote from it in dealing with the serious allegation that the hon. Member made: However, both Governments”— that is, the Dutch and Belgian Governments— have informed the Board of Management of DAF N.V. that they consider a further delay in a final decision on the restructuring and long term financing proposals to be unacceptable … I do not understand how, faced with that public information, the hon. Member can suggest that the British Government have been dilatory in performing their duties. Nor do I understand how he can name and single out three British banks which, he says, did not co-operate without, as far as I am aware, one shred of evidence to substantiate the charge. Does he understand the damage that he does to British banking interests by so careless a use of language?

The Labour party might have learned from its experience in putting hundreds of millions of pounds through the National Enterprise Board into the motor industry when it suggests handing out short-term working capital to a company of this sort that such action is unlikely to solve the problems that it ought properly to address. Will the hon. Member realise that my Department has done all that has been asked of it by the company itself? We have been in touch with the company, and it has made no specific request to us for specific financial aid of the sort that we are discussing today. We have been in touch with the Bank of England, and we know that it has been in touch with British banks.

All the hon. Member seeks to do is to make mischief out of a very difficult situation. He also fails to understand what receivership is about. There is every reason to hope that at least some of these jobs can be saved. What now must happen is an orderly process of analysis so that other people in the market can make offers for parts of this company in order that there can, we hope, be a viable commercial opportunity for those parts of the business that can stand competitive strains.

Mr. Den Dover (Chorley)

Will the Secretary of State confirm that in Chorley and Leyland in Lancashire there is purpose-built accommodation, a test track for vehicles, a major assembly plant for vehicles which is the largest in Europe, and Multipart office and warehousing? Will he also confirm that the labour force in Lancashire is one of the hardest working, best qualified, most skilled and most co-operative and, therefore, looks forward to constructive discussions?

Mr. Heseltine

I know that my hon. Friend the Member for Chorley (Mr. Dover) and my hon. Friend the Member for South Ribble (Mr. Atkins) have been extremely energetic in making sure that the best interests of their constituents were drawn to our attention. I am delighted to confirm the references that my hon. Friend made to the work people of Lancashire. I am equally delighted to know that, while national average unemployment is 10.5 per cent., in the travel-to-work area of Preston it is 7.9 per cent.

Mr. Terry Davis (Birmingham, Hodge Hill)

Is the Secretary of State aware that the Leyland DAF van factory in Birmingham increased its production, its sales and its market share last year in spite of the reduction in the market as a result of the recession, that 2,000 people work at that factory in my constituency, and that the factory has been forced to stop production this afternoon because suppliers have stopped deliveries, putting even more thousands of jobs at risk? Is the right hon. Gentleman aware that the factory has, in turn, been forced to stop its deliveries, including those of components of the Range Rover—the four-wheel drive vehicle mentioned by the Secretary of State—so putting yet more jobs at risk?

The Dutch and Belgian Governments have been engaged in direct talks with the banks in an attempt to save jobs in those countries. Why will not the British Government talk to the banks to attempt to save British jobs and avoid an industrial disaster?

Mr. Heseltine

I fully understand that the hon. Gentleman is deeply concerned about the large number of jobs that will be affected in his constituency. I can only repeat what I said in my first reply: my Department has been absolutely satisfied that the British banks and the Bank of England have been fully engaged in the necessary dialogue. It is now a matter of the administrators, the receivers and management of the company working out proper arrangements to secure, where possible, commercially viable jobs within the DAF organisation. That will not be helped by exchanges across the Dispatch Boxes of the House of Commons based largely on inaccurate allegations from the Labour party. We must let the receivers do their job. Jobs may well be saved as a result.

Mr. Iain Mills (Meriden)

Does my right hon. Friend recognise that many of my constituents live near the factory in Birmingham and, like the constituents of Opposition Members, have contacted me as they are greatly concerned about both the direct effect on their jobs and the indirect effects on the many component suppliers? Will he give me an assurance that he will do everything possible to facilitate a quick solution, whether partial or total, to the problem? The workers have literally been presented today with a closure.

Mr. Heseltine

I give my hon. Friend an unqualified assurance of the sort that he requested. My Department has kept in touch with DAF over this difficult period and will certainly continue to do so. Any proper assistance that we are able to provide we will provide.

Mr. Roy Hattersley (Birmingham, Sparkbrook)

If, as the Government claim, the recession is at last gradually coming to an end, how can it make sense to allow the collapse of a company which, when recovery comes, would make a substantial contribution to our balance of payments? The Secretary of State will recall that he said to my hon. Friend the Member for Livingston (Mr. Cook) that no request had been made to the Government for immediate emergency support to see the company through its difficulty. Were such a request to be made, what would the right hon. Gentleman’s answer be?

Mr. Heseltine

I think that the right hon. Gentleman will realise that the company has been seeking a solution to its difficulties over a significant period. Were there to be a request for the short-term working capital which is, as I understand it, at the heart of the dilemma today, such a request could be put to my Department by a myriad different companies in the motor industry and many others. It would be extremely difficult to find any argument that I could deploy for providing taxpayers’ support for working capital for one company to enable it to compete more effectively with other British companies in the same industry that produce competitive products.

The second issue involves the development of an alternative product to the van, which is the principal product line of the DAF organisation in the midlands. That issue was discussed with my Department before the last election, when figures of the order of £450 million were suggested as the possible investment needed to deal with the long-term programmes. We made it clear that we could not contemplate a project of that sort. Under the regional assistance that my Department is entitled to provide, the maximum amount available would be £18 million. The House should understand that we are either talking about subsidising short-term losses and the implications of that for a wide number of companies in this country or we are talking about dramatically large investment capital projects, and the House having to decide why we should invest in one company when a range of other companies which have invested their own capital are surviving in the marketplace.

§Mr. John Butcher (Coventry, South-West) I congratulate my right hon. Friend on resisting the ghosts of Upper Clyde Shipbuilders. My right hon. Friend is aware of the large implications that this has for the engineering industry generally in the west midlands. Will he reassure me that he will place his office at the disposal of private sector bidders, who may be involved in quite complex negotiations across the North sea, in order to expedite such negotiations, whether purely British companies or British companies in alliance with European companies, so that we may have a speedy solution?

Mr. Heseltine

I welcome my hon. Friend’s constructive approach, which is precisely the approach that is likely to bring the best possible outcome for the large numbers of people employed by DAF and for the viability of the separate component parts of that organisation.

There is no question but that in Leyland in Lancashire there is a modern factory with order books for an important product, and one hopes that there will be alternative owners and capital for that product. It must also be self-evidently the case that the products sold by the company over the years leave considerable demand for spare parts which, again, must offer potential jobs in some companies based on what we have here today. But none of this can be dealt with without a detailed set of negotiations conducted by the receivers in the calm atmosphere that is essential to constructive progress.

Mrs. Audrey Wise (Preston)

Is the Secretary of State aware that compliments to highly skilled, hard-working workers will not be well received unless they are accompanied by some action? The right hon. Gentleman is apparently willing for taxpayers’ money to be used to pay unemployment costs rather than invest in maintaining them at work. He casts scorn on short-term capital investment. Why does he not then find some long-term solutions to prevent the 2,500 workers in the Preston-Leyland-Chorley area from being put on the scrap heap? If the right hon. Gentleman is so scornful of short-term solutions, who does he not look for long-term solutions?

Mr. Heseltine

The hon. Lady should have more faith in the quality of the work people and the quality of the product in Leyland. She would do well to remember that her party has indulged in massive long-term investment in the automobile industry with scant benefit to show for it.

Sir Giles Shaw (Pudsey)

My right hon. Friend will be aware that this company was set up by his predecessors in office at the Department of Trade and Industry, and he will recall the substantial losses that were written off at that time to enable the consortium between Leyland and DAF to survive in order to employ those persons in Lancashire whose considerable skills were at risk. Can my right hon. Friend confirm that the project, which was initially to provide a trans-European prospect for commercial vehicles, where DAF would have the entry into the Community, still remains a realistic partnership on offer to any other company that may well seek to acquire the considerable assets which British taxpayers have supplied to that plant?

Mr. Heseltine

My hon. Friend is right. One of the arguments in favour of the DAF deal with Leyland in 1987 was that DAF would secure for Leyland greater access into the European single market. That it has done, and that is an additional asset now available within the negotiations that must come under way. It is obviously important that those negotiations are given a fair chance.

Mr. David Marshall (Glasgow, Shettleston)

Is the Secretary of State aware that 500 jobs are at risk in the excellent Leyland DAF Albion works in Glasgow which makes axles for the company? As the Dutch and Belgian Governments are doing all that they can to help, will the right hon. Gentleman advise the Secretary of State for Scotland that the Scottish Office, Scottish Enterprise and Glasgow Development Agency will need to do everything possible to protect and maintain those vital, highly skilled jobs in Glasgow?

Mr. Heseltine

The hon. Gentleman cannot have listened to what I said about the Dutch and Belgian Governments. They have made it clear that they are not satisfied with the arrangements that have been offered by the banks involved, so it would be wrong for me to suggest to any colleague of mine in the Government, including the Secretary of State for Scotland, that he should seek to act in a way that neither of those two Governments is prepared to do.

Mr. Phillip Oppenheim (Amber Valley)

While everyone is understandably concerned about the possibility of job losses, will my right hon. Friend bear in mind when considering requests for financial assistance the huge amount of Government money that the predecessor to Leyland DAF received in the 1970s? Does he recall that, under a Labour Government during the period that it received that money, manufacturing output in this country fell, whereas, despite the recession, it has risen under this Government? Will my right hon. Friend bear in mind that any money that he might give companies such as Leyland DAF would have to be taken from other companies that might better be able to utilise it in creating jobs and products that can be successfully sold?

Mr. Heseltine

My hon. Friend is perfectly right. I can only reiterate that the Labour Government’s experience, through the National Enterprise Board, of investing huge sums of taxpayers’ money in what was then seen as the creation of a long-term, viable automobile industry in this country was wildly unsuccessful. During the course of the 1980s, very largely as a result of inward investment in the industry, Britain can now enjoy the prospect of moving back to a trade surplus in the automobile industry. That is because we have viable companies with profitable records behind them. It is absolutely clear that no purpose is to be gained from trying to repeat the mistakes of the past and the Government trying to double-guess the commercial market in that industry.

Mr. Michael J. Martin (Glasgow, Springburn)

As my hon. Friend the Member for Glasgow, Shettleston (Mr. Marshall) said, many people in Glasgow are dependent on the Albion motor works for employment. There are highly skilled engineers throughout the group, and if steps are not taken to protect their jobs Britain will lose an engineering base that has taken generations to build. If the right hon. Gentleman argues that the recession will soon be over, we shall need skilled men and women to cope with the new situation.

Mr. Heseltine

It is precisely because Labour tried to protect industry after industry from the effects of world competition that so much of Britain’s manufacturing base was eroded. The then Government tried to protect it in the way that the hon. Gentleman suggests that we should do.

Mr. John Wilkinson (Ruislip-Northwood)

My right hon. Friend rightly said that he is willing to maintain a dialogue with interested parties. Will he discuss with his colleagues in the Ministry of Defence the military implications of the possible failure of Leyland DAF? As A. W. D. Bedford, another supplier of military vehicles to the British armed forces, failed only recently, will my right hon. Friend and his MOD colleagues see whether some restructuring can be achieved, whereby the important indigenous capability to build military vehicles that Leyland DAF hitherto provided can be maintained?

Mr. Heseltine

My hon. Friend is right to draw attention to the Army truck order that was won by Leyland with the help of DAF. That contract has about another 18 months to go. That supports the point that I was making, that here is a company with a good product and order books—and, hopefully, someone in the commercial marketplace will come to invest in it.

Mr. Malcolm Bruce (Gordon)

Does the President of the Board of Trade recollect that at the time of the Leyland DAF merger I and others expressed concern about the long-term implications for the British truck industry? Admittedly, there has been investment, but the situation now is that a major sector of our industrial base faces destruction. Does not the right hon. Gentleman accept the inconsistency of his statement to the House? On the one hand, there are full order books and a competitive business; on the other, there is no role for Government in ensuring its continuity.

Mr. Heseltine

That is a classic example of the Liberal Democrats wanting it both ways. They claim to want a single European market and to believe in Europe, but the moment a company sets out to achieve a Europe-wide base they criticise us.

Mr. Richard Burden (Birmingham, Northfield)

If the right hon. Gentleman really believes that he and his Department were doing all that was necessary in the run-up to today’s announcement, how does he explain the fact that last week there was speculation in the press, particularly in Holland, that jobs in Britain would be at risk because of the Government’s failure to get involved in a rescue plan? Does the right hon. Gentleman dispute the figures and the effects on jobs in Birmingham, Glasgow and Leyland claimed by my hon. Friends? What does the President’s statement amount to, other than a wringing of hands?

Mr. Heseltine

The hon. Gentleman can start with the employment of 5,500 people in Leyland DAF in this country. I do not accept that that automatically means that all those jobs are at risk. It is hoped that there will be commercial solutions, which will produce long-term, viable opportunities for at least parts of the company and, therefore, for a significant number of the work force.

I fully accept that there has been speculation about the company’s future for some time. We were fully aware of that. The only issue is whether we should have joined the Dutch and Belgian Governments, and whether we would have reached a different decision from theirs. I do not think that it was necessary for us to join them, because they were dealing with problems that were largely located on the continent; but, in view of the advice that we have received from banking sources, I do not see any reason for us to have reached a different decision.

Mr. Alex Salmond (Banff and Buchan)

Was the Secretary of State aware of the existence of the Albion works in Glasgow? He did not mention it until he was prompted. When did his Department first learn the extent of the serious financial problems enveloping the company? Was an intervention package prepared by his Department at any stage, and was such a package then rejected by the Secretary of State on political grounds? Has the right hon. Gentleman tried and failed, or has he just failed?

Mr. Heseltine

Yes, I was fully aware of the existence of the Albion factory in Glasgow. I have before me a list showing the location of Leyland DAF employees, and showing that the axles for the van were produced at the Albion works in Glasgow, which at the time employed some 500 people. The number of employees may have changed since then, but it is of that order.

The hon. Gentleman asked whether an intervention package had been presented. If he was asking whether we were prepared to put money into providing short-term working finance, I can tell him that we were not asked to do that, and that, if we had been asked, we would not have done it.

Mr. Bob Cryer (Bradford, South)

Was not selling off British Leyland to DAF an act of sabotage in the first place, and were not the Government warned at the time that it could lead to the extinction of a significant part of British manufacturing industry?

The Secretary of State keeps talking about refusing to put money into manufacturing industry. Given that he knows that between 10,000 and 20,000 jobs may be at stake—if the component manufacturing jobs are taken into account—why will he not argue the case for putting money into British manufacturing industry to keep our skills and our industry alive? He is prepared to put money into the dole queue to finance the millions who are unemployed, and to add to the queue at a rate of more than £9,000 per head per year. That simply does not make economic sense, or compassionate sense.

Mr. Heseltine

The simple answer is that, having been here as long as the hon. Gentleman, I have observed the track record of parties in government which have put money into what is called “manufacturing industry”. It always results in mounting losses, and in Governments eventually having to face unpalatable conclusions. The Labour party knows that, but is not prepared to recognise it.