UK: KEEPING CLEAR OF THE CUL-DE-SAC - REFORM AT ROVER. - Reform came too late for Rover. And time is running out for the rest of industry.

by Robert Heller.
Last Updated: 31 Aug 2010

Reform came too late for Rover. And time is running out for the rest of industry.

BMW's Rover deal places the tombstone over a prolonged, painful and decisive sequence of economic decline. If Britain's car industry had merely maintained parity with Germany, the country's overall economic performance would have been transformed. Instead, UK car production has been overtaken even by South Korea, and the economy has suffered 25 years of relative decline.

The whole engineering industry would also have been uplifted. But that, of course, places the chicken before the egg. Decline fed on decline, but poor competitive powers (for which read poor management) initiated this unexampled fall of the British car makers. They made the wrong cars, in too many ranges, in the wrong ways, and marketed them internationally with equal incompetence.

That isn't altogether water over the dam. All the talk (well merited) about Rover's recovery can't alter its unpalatable inheritance. This was a rump operation, the unplanned result of seven brand collapses and one sale (Jaguar) since British Leyland's birth in 1968. Rover still maintains twice as many car platforms as BMW, spread over similar volume (361,000 registrations), but at much lower average prices.

Even that relatively weak position was only made tenable by the Honda connection. The survival, alongside the Honda-based winners, of antiques such as Maestro and Montego speaks for itself. The Japanese link not only kept the BL rump alive, it helped Rover turn a new and un-British philosophy of management into successful action. The lessons of that implant ought to be the last and best legacy of Rover's travail.

The 'fundamental principles' applied at Rover are well described by Terry Hanley, its manager of 'concept planning'. Under the watchwords 'Better, faster, cheaper', management pushed home the lesson that doing a thousand things 1% better outdoes a 1,000% miracle on a single process. Pursuing continuous improvement rather than continuous change, Rover sought to maximise added value, with zero duplication and no workforce passengers.

Managers saw that their business was about customers, not products; all activities had to contribute to delivering 'extraordinary satisfaction' to customers (including the internal customers for departmental work). Without planned progress to world-class performance, moreover, Rover couldn't compete in a worldwide industry. That meant taking balanced, fact-based decisions founded on business realities and multi-functional teamwork.

The leadership also recognised its own responsibilities: truthfulness, enthusiasm, and establishment of common objectives and values by managers 'prepared to communicate, learn, and admit mistakes'. That holy trinity wasn't much in evidence at the old BL. Nor were the other Rover fundamentals. If that gospel had been followed from the start, the lost years would have been 25 years of opportunity found - and taken - because European rivals are still Maestros (or Montegos) of management.

Hanley's words were circulated at February's welcome launch of the UK Quality Award. Whoever wins that prize will demonstrate the now almost hackneyed truth that you don't achieve quality by inspection: you build quality into all processes, from management onwards. The collaborative, co-operative methods which that demands, and which Rover has employed, sit uneasily with traditional German culture: witness the tiny German membership of the European Foundation for Quality Management.

It doesn't include BMW, whose boss, Berndt Pischetsrieder, was recently praised for 'using his co-workers' first names' and speaking to them by phone, instead of memo. Mercedes-Benz may no longer employ more people as inspectors than Toyota uses to make the Lexus, but the numbers won't be far apart. And a VW manager recently confessed that the company has 'the highest unit production costs on the face of the earth'. BMW's costs, however, are thought to compare well with Germany's best, those at Opel.

There, an older-fashioned revolution in philosophy and practice was more effective than Rover's - simply because General Motors has a far stronger strategic base. The identical Opel and Vauxhall ranges (like Ford's) are assembled, at corporate choice, in Britain or on the Continent. Presumably, Rover is expected to fit into a similar BMW pattern, just as the Rootes Group became part of the Peugeot-Citroen network. That may not be the happiest of precedents, since the Rootes brands have now vanished.

If that fate overtakes Rover's brands (with the obvious four-wheel drive exceptions), will it matter? The benefits of possessing a free-standing, mass-production motor industry, generating its own designs, were surrendered long ago when BL entered 'the cul-de-sac to extinction'. That is Michael Heseltine's 1987 phrase for a fate he then wanted passionately to avert. The world has since changed. Rover's market share in the UK (13%) is significant only in the wider European context.

That same truism applies to all British manufacturers; it has not, alas, shaped all their strategies. The need for reforms like those which revolutionised Rover was equally obvious long before Honda lent a hand. The difference today is that the highly desirable has become the absolutely imperative. Yawning gaps between words and deeds are now fatal: typically, British Aerospace's boastings of powerful synergies with Rover were so empty that, many months after the takeover, the respective production directors hadn't even met. Strategically, it was a union that accomplished nothing.

The real tragedy of Rover, however, would come if its contribution to better British management also proved null and void. The new Quality Award is well overdue: 43 years after the Japanese model, half-a-dozen years after the American, three years after the European. Reform, however brilliant, was always too late for Rover. For British industry as a whole, the clock is at the 11th hour - and running.

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