Rover and out? Globalisation, the West Midlands auto cluster, and the end of MG Rover

Abstract

This paper sets the scene for this Policy Studies special issue on plant closures by outlining the form of the auto cluster in the West Midlands, the nature of structural changes unfolding in the industry, and the decline and eventual collapse of MG Rover (MGR). Structural changes highlighted include: greater pressure on firms to recover costs when technological change has been intensifying, driving up the costs of new model development; increased international sourcing of modular components; and a shift of final assembly operations towards lower-cost locations. All of these make maintaining mature clusters such as the West Midlands more challenging for firms and policy-makers. The paper then looks at 'what went wrong' at MGR. Given long-run problems at the firm and its inability to recover costs, BMW's sale of the firm in 2000 left MGR virtually dead on its feet, and by 2002/2003 it was clear to many that the firm was running out of time. Whilst recognising that the firm's demise was ultimately a long-term failure of management, the paper also looks at other contributing factors, including government policy mistakes over the years, such as the misguided 'national champions' approach in the 1950s and 1960s, a failure to integrate activities under nationalisation in the 1970s, a mistaken privatisation to British Aerospace in the 1980s, and a downside of competition policy in 'allowing' the sale to a largely inappropriate owner in BMW in the 1990s. The considerable volatility of sterling in recent years hastened the firm's eventual demise.

The MG Rover closure and policy response: an evaluation of the Task Force model in the UK

“…The background to the closure of MG Rover is well documented (Coffey, 2009;Bailey, Kobayashi and MacNeill, 2008;Bentley, 2007;HOC 2007;NAO, 2006;Holweg and Oliver, 2005). Almost as soon as the announcement was made in April 2005 that MG Rover was going into administration, AWM and the national government moved quickly to set up a new Rover Task Force (MG RTF2).…”

Re-examining the BMW-Rover affair: a case study of corporate, strategic and government failure?

“…Whilst BMW invested heavily in the Land Rover / Range Rover assembly plant at Birmingham-Solihull and at the Oxford-Cowley assembly plant, the position of the Birmingham-Longbridge assembly plant was soon in doubt, with BMW threatening to shift production of the new MINI (designed by Rover Group) to another location if productivity was not improved and new (allegedly more 'flexible') deals on working conditions were not agreed with the workforce (Bailey et al, 2008). 8 A productivity deal was agreed by workers in November 1998…”

“…This was brought together by the government merging British Motor Holdings and Leyland into one, in so doing bringing together several smaller car manufacturers (Austin, Morris, Triumph, Rover and Jaguar 4 ) into a single firm, in probably the most prominent case of the so-called 'national champions' approach. This forced merger "was a mistake both in concept and in execution, reflecting a naïve belief in the advantages of size and in the ability of charismatic individuals to revive declining companies" (Owen, 1999) and led to a failure to integrate operations to achieve economies of scale and scope (Bailey et al, 2008). Moreover, opportunities were soon undermined by an asymmetry which saw BLMC attacked in own market by foreign transnationals but unable to respond similarly, combined with a lack of effective government support as openness to foreign investment over-rode any desire to support a national champion (Coffey, 2009).…”

“…The reasons for the (then) disappearance of the British owned industry were tied up in a complex vortex of inter-related and long-term factors, including a failure to integrate and achieve economies of scale and scope, macro-economic instability, the particular short-termism of British finance-industry relations, fratricidal industrial relations and misguided government policy interventions (Williams et al, 1994a;Berkeley et al, 2005;Holweg and Oliver, 2005;Bailey et al, 2008;Coffey, 2009). 3 Such problems were compounded by the decision of a series of major British owned component part suppliers to partly relocate operations to the European mainland following Britain's entry to the Single Market, while adopting a more aggressive pricing strategy with the British car assembly sector (see Cowling 1986; discussed further in Coffey and Thornley 2009).…”

Plant closures, precariousness and policy responses: Revisiting MG Rover 10 years on

“…Typically, arguments have been put forward on the need for advanced economies to streamline welfare regimes and encourage greater flexibility in labour and product markets. A key manifestation of globalisation (in the UK and USA particularly, but also other industrialised countries) has been a shift away from manufacturing to services industries, a process which has been typified in the UK by a number of high-profile plant closures (Pike 2005;Armstrong et al 2008;Bailey et al 2008aBailey et al , 2008bBailey et al , 2014. Under pro-trade and foreign direct investment regimes, multinational corporations (MNCs) have engaged in the extensive subcontracting and outsourcing of production and employment across developed and developing countries.…”