Second World War Relative Decline of Uk Manufacturing 1945-1975, Viewed Through the Lens of the Birmingham Small Arms Company Ltd
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AN EXAMINATION OF THE POST- SECOND WORLD WAR RELATIVE DECLINE OF UK MANUFACTURING 1945-1975, VIEWED THROUGH THE LENS OF THE BIRMINGHAM SMALL ARMS COMPANY LTD by JOE HEATON Volume 1: Text A thesis submitted to The University of Birmingham for the Degree of DOCTOR OF PHILOSOPHY Centre for Lifelong Learning The University of Birmingham July 2007 University of Birmingham Research Archive e-theses repository This unpublished thesis/dissertation is copyright of the author and/or third parties. The intellectual property rights of the author or third parties in respect of this work are as defined by The Copyright Designs and Patents Act 1988 or as modified by any successor legislation. Any use made of information contained in this thesis/dissertation must be in accordance with that legislation and must be properly acknowledged. Further distribution or reproduction in any format is prohibited without the permission of the copyright holder. ABSTRACT This is a study of the decline and collapse, in 1973, of the Birmingham Small Arms Company Ltd, primarily a motorcycle manufacturing company and pre-WW2 world market-leader. The study also integrates and extends several earlier investigations into the collapse that concentrated on events in the Motorcycle Division, rather than on the BSA Group, its directors and its overall strategy. The collapse of BSA was due to failures of strategy, direction and management by directors, who were not up to running one of Britain’s major industrial companies after it was exposed to global competition. While the charge, by Boston Consulting and others, that the directors sacrificed growth for short term profits was not proven, their failure to recognise the importance of motorcycle market share and their policy of segment retreat in response to Japanese competition, played a large part in the decline of the company. Their ill-fated diversification policy harmed the motorcycle business, but capital could have been raised in the 1950s to re-equip its manufacturing facilities, had the directors had the confidence to do so. The study also examined whether the ‘cultural critique’ of Barnett C, Wiener M.J. et al provides a valid alternative explanation for the collapse. While the hypothesis has some plausibility, too many variables and unresolved supplementary questions arise for this to contribute effectively to a rigorous account of the causes of the demise of the firm. ii ACKNOWLEDGEMENTS This thesis could not have been written without the support and critical guidance of my Supervisors in the Centre for Lifelong Learning, Professor Willie Henderson, Dr Patricia Jones and Peter Leather, to whom I offer my grateful thanks. Behind them stood my lifelong friend Emeritus Professor Barry Hughes of Birmingham University and Michael Dintenfass of the University of Connecticut, whose moral support and wise counsel I shall long treasure. My thanks are also due to the staff of the Archives Department of Birmingham Central Library and Solihull Library and the Modern Records Centre of Warwick University, custodians of the BSA Archives, whose quiet efficiency facilitated my research. Graham Tall of the School of Education introduced me to the mysteries of the Chi-Square and Margaret Richards showed me how to use some of the lesser known attributes of Microsoft Word. My thanks are due to them both. Finally, I record my grateful thanks to my wife Ilse, who sacrificed much of five years of her retirement to minister to my every need. iii ABBREVIATIONS ADC Aide-de-Camp AEU Amalgamated Engineering Union AMC Associated Motorcycle Group AGM Annual General Meeting AH Alfred Herbert Ltd BIM British Institute of Management BMCCIA British Cycle & Motorcycle Industries Association BSA Birmingham Small Arms Co Ltd BSAGN BSA Group News BSAT Tools Division of BSA CBE Companion of the Order of the British Empire CEGB Central Electricity Generating Board CEO Chief Executive Officer CPRS Central Policy Review Staff CPS Centre for Policy Studies CUP Cambridge University Press DG Directorate General of the European Commission (followed by a roman numeral, e.g. III indicating which Directorate, e.g. Industry, Environment, R&D etc) DTI Department of Trade and Industry EITB Engineering Industry Training Board FBI Federation of British Industry FSA Financial Services Authority GEC General Electric Co. Ltd iv GNP Gross National Product GRC Group Research Centre HMC Headmaster’s Conference HMG Her Majesty’s Government HMSO Her Majesty’s Stationary Office HNC Higher National Certificate IEA International Association for the Evaluation of Educational Achievement ICI Imperial Chemical Industries Ltd IEE Institution of Electrical Engineers IMechE Institution of Mechanical Engineers IMI Imperial Metals Industries Ltd MBH Manganese Bronze Holdings Ltd MD Managing Director MSC Manpower Services Commission NEDC National Economic Development Council OJT On-the-Job Training OECD Organisation for Economic Co-operation & Development ONC Ordinary National Certificate OUP Oxford University Press. SSEB South of Scotland Electricity Board TUC Trades Union Congress TWI Training Within Industry v TABLE OF CONTENTS Abstract Acknowledgements Abbreviations Chapter 1 Introduction. 1 Chapter 2 Literature Review 11 2.1 Introduction 11 2.2 Industrial Decline 11 2.3 Decline and Collapse of BSA 34 2.4 Corporate Governance 60 Chapter 3 The Group and its Board of Directors. 64 3.1 Introduction 64 3.2 The Board: Structure and Relationships 66 3.3 The Individual Businesses 78 3.4 Research & Development 95 Chapter 4 Direction, Management and Corporate Governance. 104 4.1 Introduction 104 4.2 Direction and Management 104 4.2.1 Strategy & Policy 4.2.2 Integration of Triumph Engineering Co.into BSA 4.2.3 Response to the threat of Japanese Competition and the Anglo Japanese Trade Agreement 4.2.4 Impact of McKinsey, Consultants 4.2.5 Production and Quality Control Problems at Small Heath, 1968-71 4.2.6 Merging of Tools Division into Alfred Herbert Ltd 4.2.7 Management Succession Planning 4.2.8 Dividends, Revenue Reserves and Capital Expenditure 4.2.9 Fight for Survival vi 4.3 Corporate Governance 150 4.3.1 Stakeholders Loyal Customers Shareholders Employees Trade Unions Distributors 4.3.2 Key Events in Corporate Governance Dismissal of Sir Bernard Docker in 1956 Struggle for Control of the Meriden Factory: 1965-73 Company – Shareholder Relations Reconstruction of the Board in 1971 Response to a Take-over Bid Speculation in BSA Shares Chapter 5 Financial Parameters. 176 5.1 Introduction 176 5.2 BSA’s Accounts 176 5.3 Sales/Profits/Losses 1966/67 and 1971/72 178 5.3.1 Profit and Loss Account, 1966/67 5.3.2 Subsidiaries’ Sales and Profits, 1966/67 5.3.3 Divisional/Subsidiary Losses: 1971/72 5.3.4 Losses Year ended 31st July, 1972 5.4 Capital Expenditure and Depreciation: 1945-1973 190 5.5 Investment v Diversification 193 5.5.1 Diversification; Costs and Proceeds 5.5.2 Profitability and Return on Capital Invested 5.6 Supplementary Information 204 Chapter 6 Education and Vocational Training 206 6.1 Introduction 206 6.2 Secondary Education 211 6.3 Craft and Supervisor Training 214 vii 6.4 Professional Engineering 219 6.5 Management Education and Training 225 6.6 Education and Training of BSA Directors 231 6.7 BSA v- IMI. Education/Experience of Directors 233 6.8 Conclusions 236 Chapter 7 The Culture of English Public Schools and Career Choice 237 7.1 Literature on Public Schools 237 7.2 Attitude Survey 245 7.3 Questionnaire 248 7.4 Commentary 259 Chapter 8 Conclusions. 267 Bibliography 280 APPENDICES (in Volume2) 1. Tabular History of BSA and its Motorcycle Division: 1861-1973. 1 2. Notes of Interviews with former BSA Personnel. 3 3. Education and Professional Qualifications of the Chairmen, Managing Directors and Directors of BSA and the Managing Directors of its Motorcycle Division. 16 4. CVs of Non-Executive Directors. 18 5. Reports and Letters from Cooper Bros, Financial and Management Consultants, to the Directors of BSA. 22 6. Edward Turner’s Summary Report on his Visit to Japan, September 1960. 23 7. Financial Data: 1946-1973. 29 8. Organisation of the Motorcycle Division. 50 viii 9. Purchase and Sale of BSA’s Subsidiary Companies. 57 10. Typical Jobs and Qualifications in a UK Engineering Company in the 1960s. 59 11. Research Methodology and Results (Chapter 7). 60 12. BSA v IMI: (1966). 76 13. Chief Executive’s Notes on Group Policy and Capital Employed February 1960. 79 FIGURES 6.1 The Streams of Schools. 207 6.2 The Japanese Education System. 210 7.1 Domination of Public Schools 239 8.0 Organisation Charts (1-6) of BSA’s Motorcycle Division. A50 TABLES 1.1 Growth of Output: (Average % per annum) 1950-79. 2 1.2 Rates of Productivity Growth (%): 1950-79. 2 3.1 Output per Employee from National Machine Tool Industries. 87 4.1 After-tax Profit Allocated to Dividends: 1945-73. 136 4.2 BSA Reserves: 1963-1973. 137 5.1 Actual Profit-v-Budgeted Profit: 1965-68. 181 5.2 Divisional and Subsidiary Company Contributions to Profits/Losses: 1966/67. 182 5.3 Bank and Debenture Interest: 1965/56 and 1966/67. 187 5.4 Purchase Costs & Sales Proceeds of major Non-Motorcycle Subsidiaries. 194 5.5 Profitability of BSA Tools Division: 1961-66. 197 5.6 Turnover/Profit in 1959/60 of the four Largest Companies in Tools Division. 199 ix 5.7 Metal Components Division: Sales and Profits, 1966/67. 200 5.8 Profits Earned by Subsidiaries sold to Manganese Bronze in 1973 202 5.9 Export, Home and Total Motorcycle and Scooter Dispatches: 1966/67 204 5.10 Daimler: Sales, Profits and Losses, 1930-38 205 7.1 Analysisis of Questionnaire Answers. 249 x CHAPTER 1 INTRODUCTION It is suggested by Dintenfass (1992) that different explanations for the relative decline of UK manufacturing industry should be tested at the level of the firm.