Examination of Witness (Questions 460
- 479)
WEDNESDAY 5 APRIL 2000
RT HON
STEPHEN BYERS
MP
460. It is quite a significant statement, is
it not, to refer to cuts in the workforce, etc, etc? I would have
thought something as significant as that your officials would
have drawn your attention to.
(Mr Byers) I am sure it was drawn to my attention
and particularly in the briefing I would have had before the meeting
on 10 March.
461. Can we move on to 15 February? You told
us that you had got the EC inquiry running on a fast track, and
to quote you: "If we can achieve that then BMW will not cause
any difficulties providing we get approval and we are confident
that we will. We are working very closely with BMW. We are in
constant contact with them." And the response to a subsequent
question on the report from BMW's discussions with Volkswagen
that neither you nor your officials had been in touch with Volkswagen
in relation to Longbridge, what have you got to say about that?
(Mr Byers) It is true that there had not been contacts
between either myself or my officials in relation to Volkswagen
and Longbridge.
462. How good do you think the DTI's link was
with BMW?
(Mr Byers) We had very close links. There were 27
separate contacts between the DTI and BMW between December of
last year and March, so almost every three days there was a contact
between the DTI and BMW. There were very close links and we were
working very closely with them.
463. Do you not think your officials should
have warned you that something was afoot?
(Mr Byers) Certainly we knew that there were escalating
losses at BMW but, as I think the evidence from the trade unions
last week indicated, there was no indication, no hint, that BMW
were considering breaking up Rover and the sale of Longbridge
to Alchemy Partners.
464. Do you have anyone reporting to the DTI
from Munich?
(Mr Byers) We have the British Consul in Munich who
follow these things very closely.
465. How do they do that? How do they inform
you if there are any developments?
(Mr Byers) They will normally do it through the embassy
in Berlin.
466. How many officials and at what grades in
your Motor Vehicles Directorate are exclusively devoted to BMW
and Rover matters?
(Mr Byers) I doubt that any are exclusively devoted,
or I think they might say over the last few months a lot of their
time has been spent specifically in relation to BMW, but it may
be better for the Committee, Chairman, if I perhaps give a full
reply in writing on that particular point, not wishing to mislead
the Committee.
467. I would have thought, given the seriousness
of the situation, that somebody would have been seconded official-wise
to keep their eye on the situation, even though there might not
have been any indication.
(Mr Byers) I am sure that the officials were spending
a lot of their time with BMW related matters. I do not want to
mislead the Committee, Chairman, so perhaps I can reply to that
in writing.
Chairman
468. Could we just clear up one point here?
The Foreign Office in the shape of a consular official has someone
in Munich. Did the communications from that consular official
come through the Embassy to you or to the DTI, or did it come
direct to the DTI?
(Mr Byers) Certainly the information I receive comes
through the embassy in Berlin. Whether that is a convention that
the Secretary of State gets his information through the Ambassador
I am not sure. I am sure there are direct links between the Department
and the Consul in Munich, but certainly the information I have
seen has always come via the Ambassador in Berlin.
469. Is that not a somewhat circuitous route
for what might be a fast-moving commercial situation?
(Mr Byers) As I say, the information may come through
from the consulate in Munich directly to the Department and then
through to me, but my direct line of communication is through
the Ambassador. Whether that is a convention that has applied
for generations I honestly do not know.
470. Was it any good, the information that you
got?
(Mr Byers) It was information which I think was based
on the best available evidence at the time.
471. For example, let us try and clear this
point up, one of the big things that has always been a problem
with BMW is that in varying numbers a proportion of the board
was always against the Rover deal in the first place. Would you
have been able to get the kind of café gossip about the
shifting sands within the board of BMW, who was in favour, who
was against, had they changed positions? You and I are students
of the Labour movement in the United Kingdom. This is meat and
drink to us.
(Mr Byers) It is very sad, is it not, really?
472. It is, but the fact is that it just goes
to show that on both sides of industry these things happen. One
just wonders, given the political character of the splits in the
BMW board, if it would have been helpful to have some kind of
inside track and, let us face it, our Embassy for decades had
spies crawling over Germany looking for the next Soviet invasion.
Now that that is no longer a threat could these people's endeavours
not have been put to the use of—I am not asking for industrial
espionage—keeping us informed as to what was happening inside
one of the major companies that has an impact in the UK?
(Mr Byers) I think you are right to say that the board
of BMW has always been divided on the whole strategy towards Rover
and indeed led to the resignation of the Chairman and Deputy Chairman
in February of last year, so this clearly has been a difficult
issue for BMW for some considerable time since their acquisition
in 1994. I think it is true to say that our Embassy and the consul
in Germany have monitored very carefully and keep close contacts
with BMW as a major employer in the United Kingdom. But as I think
is becoming increasingly clear, and as I think the evidence that
the Committee heard last week makes clear as well, BMW were playing
their cards very close to their chest. The evidence from the trade
union makes it very clear that they did not know and they had
got people working for Rover and they have got very close links
with the company as well. We have got close links. We were not
given the information that BMW were even considering the breaking
up of Rover and the sale of Longbridge.
Helen Southworth
473. With hindsight do you think that there
was too much concentration on the two specific issues of the RSA
and the R30 supply chain and that meant the big picture was lost?
(Mr Byers) No, because we looked very carefully—there
are two levels at which these things were operating, I suppose.
There is the direct contact that I am having with Professor Milberg
and Professor Sämann and the various contacts which the Department
of Trade and Industry is having with BMW, so that is at one level.
Then there are the external things that BMW are doing. Of course
it is important to look at those to see if there is any hint,
a change of strategy or a contract which is not proceeded with,
to show that they have changed their strategy. What is particularly
important here I think is that if we look at what happened in
January and February, clearly important months in the whole process,
what are the external signs? What are BMW doing which might indicate
that they have changed their approach? Well, they are continuing
with their investment in the Mini and indeed in January and February
they were putting in the new track line at Longbridge for the
Mini. They are working with my Department to make sure that there
is a good strong application into the European Commission which
went in on 24 February. They called all the dealers together in
the United Kingdom and if I can quote, Gabrielle Falco tells the
dealers in February: "Let me reassure you. Nothing has changed.
Rover has and will continue to have a critical role within the
BMW Group portfolio." Professor Milberg himself at the Geneva
Motor Show says that "our commitment to Rover and the United
Kingdom is as steadfast as it ever was". That was on 28 February.
All of these external signs are very clear. This is a company
committed to continuing a strategy of investment in Rover and
keeping the Group together.
474. When we were visiting Longbridge last week
one of the things I found very significant was one of their senior
managers saying that until three weeks before he had been letting
major capital contracts. Would you have had any indication of
those kinds of things happening or did you get any indication
that those were a smokescreen?
(Mr Byers) No, because for all outward appearances
it was business as usual. They were proceeding with the strategy
which they had discussed with us last year and, just to remind
the Committee what that was, it was that they would make losses
up until 2002 but by then they would hope to be breaking even.
The fact that they were making losses was part of their overall
approach to Rover. They had accepted that. What drove them in
the end to make their decision was that the losses were escalating
at a level which they had not planned for. As Professor Sämann
said last week when he gave evidence before the Committee, he
told the public and dealers right up until the end of February
that "we would like to continue the business. The decision
not to continue the business was made between 1 March and 16 March."
I think increasingly, as more and more of this is being revealed,
that is the case, that right up until the end of February there
was an absolute commitment to the strategy of continuing the investment
in Rover but it was at the beginning of March that they began
to change their position. Indeed, Professor Milberg, when he presented
the annual accounts on 28 March, does say: "In my statement
at the Geneva Motor Show on 28 February I once again emphasise
we were absolutely serious and steadfast in our commitment. But
then the internal debate on our budget for the year 2000 and the
years to follow ultimately forced us to recognise the painful
fact that we could no longer justify the continuation of Rover
from a commercial entrepreneurial perspective." So right
up until the end of February they were absolutely committed to
Rover and the United Kingdom, and then they begin the debate about
their costs, the escalating losses for the year 2000, and then
they make the decision which their supervisory board announced
in the middle of March.
Mr Butterfill
475. Can I turn to the meeting on 10 March and
you have kindly provided us with a minute of that meeting? Clearly
in the past there have been differences of interpretation if not
recollection of what discussions took place between you and BMW,
certainly in relation to other matters earlier on whether press
releases were agreed or not. There seems in this case to have
been some difference of recollection. Do you recollect any reference
at that meeting to clocks and five minutes to midnight and impending
doom because it is not contained in your officials' record of
that meeting?
(Mr Byers) No. I think it is worth stressing the point
which I think is in a covering note certainly members of the Select
Committee have got. These are not minutes of meetings or a verbatim
account. They are basically a note taken by a civil servant of
the main issues that were discussed and then action to follow
as far as the Civil Service is concerned. They do not reflect
all the points that were made. I have to say, and I have thought
long and hard about this, that I do not recognise the phrase "five
minutes to midnight". I do remember in relation to the two
million pound loss every day, because it is a leap year, that
it includes 29 February which actually is recorded in the notes,
but I honestly cannot remember a reference to five minutes to
12 or any other time.
476. It is obviously one of the other differences
of recollection. Let us just turn on to this. This meeting was
sought, was it not, by BMW?
(Mr Byers) No, it was not. I was after a meeting for
some time just to touch base, so it was a meeting that we both
wanted, I think it is true to say.
477. But even your own note says that Professor
Sämann explained that the main reason for seeing him today
was because of the losses, so presumably it was he who was more
anxious of the two of you to have this meeting?
(Mr Byers) No. I think what he was saying there was
that that was the main issue that he wanted to talk to me about.
478. Who asked for the meeting?
(Mr Byers) I seem to remember that I was asking for
a meeting with Professor Sämann.
479. So it was not Professor Sämann?
(Mr Byers) He may have been more than happy to meet
me as well. We both wanted to meet.
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