EXPORTS k11:1 HOME OPERATORS
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SPARES, SERVICE, :ONTINENTAL VEHICLES, THE FUTURE-SOME FRANK VIEWS
IN common with most manufacturers of British commercial vehicles, Leyland Group companies have been experiencing criticism from operators about long delivery periods: what do you think has caused these delays?
Three things. First of all the popularity of our products at home and overseas, which gives you a long delivery date. Secondly, our determination to maintain a balance between exports and the home market. Here I would emphasize the fact that we export very substantially and „this gives us a much bigger throughput in our plant, which in turn enables us to reduce the price of our vehicles for the home market.
And because we export we have been able to keep prices down on the home market; I think you will find that the price of heavy vehicles in Great Britain today is set by Leyland and if we exploited a market we could put the prices up. We don't do that.
The third reason is that we have had, in common with all manufacturers of commercial vehicles in the United Kingdom, considerable, difficulty with certain suppliers. Some of the troubles were not necessarily of the suppliers' own making; some of them were due to shortages of material and the fact that some of our suppliers have not been as ambitious in their forward programme as we have.
About 18 months ago, you did say publicly that you thought the component supply position was not too happy. Is it now better?
It's getting very much better. Other people in the heavy commercial vehicle industry are saying that the last month's figures have been better, as far as output is concerned, because the supplies of components are beginning to come through. But, with Leyland's bigger financial and technical resources, we are better placed and we are making a lot more parts which we used to buy out. But there is both an economic limit and a physical limit to this.
Are current national economic restrictions affecting orders and production of commercial vehicles?
Well, they are not affecting production at the moment; but obviously it is to the advantage of the national economy to make as much as we can—provided that we can sell it. As I see it, the current restrictions were imposed to prevent inflation and I think in the long run it is going to be necessary and good for all of us. Short term, obviously, the general credit restrictions throughout the country are going to have quite a serious effect on industry, and therefore road haulage will be affected, and we will be affected. I believe there are signs among the lighter range of vehicles (which are always the first to be affected) that yoti tian get them immediately from stock end the delivery position is improving. We've improved the delivery position as far as Leyland is concerned also because we have put a special line down for supplying the home market; but we still have very big export orders.
Leyland Motor Corporation has concentrated in postwar years on exports; I think it has achieved outstanding results. Has this, in your view, been advantageous or detrimental to the interests of the home market?
I think people are a little unfair to Leyland when they say we concentrate cn export markets. We have tried to run our business properly; we have placed emphasis on the home market and on the export market. We haven't done one to the detriment of the other. We have looked after the home market and we have looked after the export market; but because we presumably make better trucks and better buses than other people we have had longer order books and sold more vehicles.
Would you say your success in the export market had, in fact, aided design?
Of course it has. It's made a tremendous impact on design at home. The broader your field of experience, the more knowledge you get. You've got a world testing ground now, quite apart from MIRA. The improvements made as the result of conditions in Africa or Australia or on the Continent are coming to fruition in our current range of vehicles. There are new models, new power units, transmissions and so on which are being developed and have been exhaustively proved all over the world. I think we are in a very much stronger position than most companies.
Turning to a home matter, I have had a chance myself to see Chorley and various other depots so that I do know that Leyland has a large investment in spares. But there do still seem to be complaints from operators about shortages and I wondered whether it is possible that these result from a breakdown in communications between your agents and yourselves. Or do you think there are other factors involved?
Well, first of all I think you want to get this thing in its right perspective. What are the percentage of complaints compared to the total volume of spares that are supplied?
They must be quite minute.
This is really the first thing to get right. Leyland spares turnover, for instance, probably exceeds the total volume of sales of a couple of other firms put together. This is a vast business on its own; we try to supply spares for vehicles as old as 25 years. We supply spares on a world-wide basis and our availability of spares as far, as we see it is about 95.8 per cent, which is pretty high compared with anybody's standard. If you compare us with any of our Continental competitors in this country, for instance, you will find that we have got a far better coverage of spares. We have 47,000 part numbers at Leyland and we've got 48,000 part numbers at AEC. That gives you some idea of the magnitude of the task. It's very difficult.
We do get problems at times; I'm not going to say that we are perfect, far from it. One of the big problems we've had is in the old LAD cab which, although it was designed by Leyland and tools
.d so on were paid for by us, is made by an outside contractor m in the Midlands. Due to labour troubles for a long time we ,uldn't get bits and pieces of that cab to supply as spares.
Now, this wasn't just Leyland sitting down on its bottom doing !thing. We tried to remove the tools from the factory but we Ten't allowed to—physically by the operatives—and we had ry great difficulty. We were quite prepared to make the parts rselves.
Well that position has been resolved now, but it did g,i‘e us nsiderable trouble and I don't think that will happen again. it I think a lot of these things are highlighted out of their true rspective. We get also, a lot of complimentary remarks about r service.
Are there any special problems relating to spares?
People hoard spares. I know this is our problem, not the erators. They can say we are there to supply spares. But if :re is the slightest hint of a shortage, people will hoard spares d they will order twice or three times the quantity that they want i cause absolute chaos by this sudden building-up of spares. en if there is a sign of a recession or something, such as there at the moment, they won't buy any spares at all and then will it until the last minute and all come. in together. After all, hough we computer-control spares, we have to go on averages. take an average of so many months' or years' consumption of ts and there is no other way of running the business except .t. If we hold too many spares in stock, the operator pays for it. link we have got to be clear about this, and therefore it is to the :.rator's advantage for us to operate our service parts business economically as we can to provide reasonable service.
The other problem that we get on spares is that sometime., an ..rseas market gets an import licence with a letter of credit and emporarily strains our stock to fill that order; it soon gets filled again but it can explain some sudden emergency shortage.
But if you take all the outlets in the country, we have telex nmunication between most of them. There are very few cases ere we can't supply spares, and we find many of the cases we estigate are due to people going to the wrong place to buy the I. We have depots or agents now right over the country and if ;raters go to the right person I think we can nearly always iply them.
Sir Donald, you mentioned Continental competitors. In your w, how do British manufacturers compare with their foreign npetitors as far as the supply of spares and services is conned?
Well that's really up to the operators to comment on. All I aw is that if you take areas where we are in direct competition
—and here again I've got to come back to overseas to give a true comparison—I think that our spares service is absolutely second to none. I would suggest that the operators of these vehicles compare the costs of spares very carefully with the cost of British spares for a similar type of vehicle. I personally think that anyone who buys a Continental vehicle in this country at the present moment is paying a very healthy contribution to the Exchequer in the form of tax and so on, and not getting the commensurate advantage from it. We know that we are competitive with these Continental vehicles if we take a neutral third market where the tariff duties are the same for both of us. We are competitive with them in price and we believe that we are superior to them in performance. But some of them may be dumping stuff here; I don't know what they do with their price mark-up.
Turning to an individual company, there has been to my knowledge some concern expressed about the future of AEC goods and passenger models. Is it your intention to in any way restrict production of current or future AEC goods or passenger models?
We are not going to restrict anything whatsoever that sells. This would be absolute madness. We believe that the merger between Leyland and AEC and Albion (which are the three main commercial vehicle manufacturing constituents of our group) was a necessary and desirable thing for the commercial vehicle industry in this country; for that matter for the national economy because, as small individual units, we could never compete with large overseas manufacturing interests.
By getting together Leyland has been able to rationalize buying of components, parts and pieces that we get in from outside: incidentally, we get more attractive prices. We have been able to provide better service facilities. We've been able to rationalize the research activities, so that we do corporate research, allowing each of the companies a certain degree of freedom. They are given quite a lot of autonomony but basic research and so on (which costs a lot of money these days and which we must do if we are going to stay in the van of this commercial vehicle industry), we have been able to co-ordinate under Dr. Fogg. This makes sense to me, and now at home and overseas we can provide adequate service and a complete range of models.
But we are certainly not going to lose AEC's identity any more than we are going to lose Albion's identity or Leyland's identity. Each company is an autonomous unit which puts in competitive bids to make things within the group, and you can see the very successful range of Mercury and all the other new models that are coming from AEC. You may even have heard whispers of the developments that are coming along in other fields, all of which are sponsored by AEC.
All this nonsense talked about AEC and the passenger field—it just isn't true. AEC has got a very good rear-engined bus, the Swift, which we are developing as much as we possibly can. But there would have been little point in producing another rearengined double-decker for what is, after all, a very limited market. There was some criticism of this, but I think that was a little unjustified as events have turned out because it is obvious that London Transport are rephasing the whole of their thinking on bus operation and we must listen to what they say in this direction.
Would you think that the British commercial vehicle industry would benefit from further mergers?
Well I don't know who there is left to merge with—you tell me.
Looking at things from the outside it sometimes seems to me that the manufacturing industry, the operators and the Ministry tend to be pulling, if not in opposite directions, certainly at different speeds. Braking regulations is one example of this. Do you think there is a satisfactory relationship between the three sectors?
It is very much better than it used to be; but I think there is still a lot of room for improvement. Manufacturers and operators, despite what is sometimes said at various conferences and forums, actually have a very close relationship.
After all, don't let's kid ourselves, a man who buys a truck is not a bit modest in his comments to us as manufacturers if he is not satisfied with either the truck or the service. But as far as liaison with the operators and the Ministry is concerned, I think you have a problem here in that the Ministry has improved enormously over the past few years but, good as it may be, has political masters.
In the anxiety for a political move, things sometimes move in a way which looks as though there hasn't been co-operation and sometimes I think it is done too hastily. If you take these C and U Regulations, there was rather hasty planning of their introduction, and I think this is a difficulty that is not always appreciated. We have got to get these kits for plating and so on. I don't think people in Whitehall realize the difficulty of getting together all the kits of parts and the difficulty of doing the engineering (which is done by a very limited number of draughtsmen and designers in the country).
I sometimes think that the Ministry of Transport allows the Chancellor to penalize operators of commercial vehicles too much. It is quite iniquitous that a commercial vehicle should not rank for investment allowance, for instance. I regard a truck as a tool of industry. Then you've got other things like fuel tax, road tax and all the other taxes.
Are there any specific points that you think the Government should attend to at this time to help the industry?
One's got to be sensible about this. You've got to take the economic situation of the country as a whole and I think if, as an industry, we bellyache just for the sake of bellyaching, we are not going to get anywhere. We have got to be sensible and try to put forward things that are practicable and feasible. I think one of these is this question of treating the truck as an investment, from an investment allowance point of view. This was unnecessary penalization. I will reluctantly accept that fuel tax and road fund tax is going to be used for general taxation. As a transport man, I don't agree with it, but I will accept it is a sort of politician's perks. But to knock off the investment allowance strikes me as a very foolish and shortsighted Niew.
I think that the Government must realize that while we can streamline the railways, and we can run these Liner Trains and all these sort of things which may have advantages, the lifeblood of this country is completely dictated by road transport. Any costs that we put on road transport are reflected in the cost of our exports out of the country and therefore we are penalizing exports by taxing road transport too highly. Could you give us any indication of future plans within th Leyland group?
Well, as a group, our policy is to expand. I hope we are a aggressive, expansionist group. I believe this is good for us. believe this is good for our customers, and I believe it is good fc the country. Our expansion, I am afraid, to a certain extent mw be dictated by the cash flow in the company; that is the profit retained in the business, plus the depreciation allowances. It dictated by the profit margins and the penalties that the Chancellc and other people put on us. But provided that we can keep ot business going we intend to go on with the expansion and replact ment programme which we have already announced, which for th whole group comes to about £50 million over the next five or si years.
We are putting up a new, very large, engine plant at Leyland the moment—one of the most modern in the world. We have ju: completed a new assembly conveyor line at Albion, which is tllongest commercial vehicle assembly line in Europe. We've got big improvement plan going on at AEC. We also, as you knov control a lot of ancillary companies which make parts an components, and we intend to expand these.
We obviously have an overall plan for our models which w include AEC, Albion and Leyland. There will be competitic between them but we want to avoid stupid competition and v want to get the advantages of economy of scale by, where possibl economizing in certain units. We have a plan in this direction at our plan also caters for expanding our production facilities whit are, incidentally, going up. Last year our turnover went up; but didn't go up enough. This year, unless the slump hits us ye badly, we should increase quite usefully.
What influence does productivity have on design?
One of the most important developments, which is quite obvio if you think about it, is that the cost of labour is going up and u It is nothing unusual now for a truck driver to earn £30 a week am sure he deserves it; but if he is going to earn that we have got get some more productivity out of him.
We have got to get the productivity by making larger vehicl that can handle easily with the chap not getting tired; comfortal driving for safety purposes; adequate braking; avoidance excessive smoke, and so on. We've got to have high power-t weight ratios to keep the traffic flowing.
Then, and I think this is equally important, there is no tutu whatever in people doing their own major repairs. I think t haulage industry in many instances is at fault in this; they vi keep tucked away in the corner of a workshop a little lathe with little drill and a few other bits of equipment and hide the true cc of their maintenance because they think it is convenient or ni to have, or sometimes the boss's car can be repaired there. E really you should only have a mechanic to do running adjustmer and small electrical repairs, the usual minor things, and the maj units should be taken out and sent back to the manufacturers f service unit exchange.
I believe, as manufacturers, it would pay us to make a vehic the units of which will last as long as possible and can then eith be exchanged or sometimes thrown away and a new one put This will be much cheaper than all these mechanics working aw in garages trying to repair things and doing complicated rebores, regrinding valves, or whatever, it happens to be. I am sure that ti is going to be a tendency.