Select Committee on Trade and Industry Minutes of Evidence


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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