The British Motor Industry, 1945-94. . - book review

Organization Studies, March-April, 2002 by David Barron

Timothy R. Whisler: The British Motor Industry, 1945-94

1999, Oxford: Oxford University Press. 428 pages.

This an interesting and insightful addition to the already voluminous literature on the post-war decline of British manufacturing industry in general, and its automobile industry in particular. Whisler's fundamental point is that either 'traditional institutions' within the car industry remained unquestioned or they proved resistant to change. These institutions developed during a period when the industry was successful at producing semi-specialist products, on a small scale, for niche markets. It was a strategy with which they were broadly compatible, and the more successful firms were generally those that followed this strategy. However, as British firms attempted to move into the large-scale production of models aimed at mass markets, these traditional institutions proved a serious impediment. The inability of firms to adapt these institutions eventually led to the demise of all UK-owned car makers.

Whisler's analysis is based on detailed archival research, primarily of corporate and labour records from the Modem Records Centre at the University of Warwick and government files from the Public Record Office. He begins with four chapters outlining the histories of specific British-owned firms and the industry as a whole from 1945 until 1979. This is followed by chapters analyzing engineering and design and development, production and industrial relations, distribution structures, product market strategy and quality-control procedures. One drawback of this structure is that the book is somewhat repetitive, with much of the material in the first four chapters reprised in the chapters that analyze specific institutions.

Some of Whisler's findings are surprising. For example, in Chapter 5, he claims that the reputation for engineering excellence that some British car makers achieved, at least domestically, was largely illusory. Firms relied on 'practical men' who had worked their way up the engineering hierarchy via the apprenticeship system, rather than those with university qualifications. Even legendary designers, such as Alec Issigonis, the designer of the Mini, suffered from this weakness. Although the Mini is generally thought of as a very successful design because of its enduring popularity with consumers, in fact, it was very complex to produce, resulting in high unit costs and low product quality. As a consequence, the Mini's manufacturers made very little profit from it, despite healthy sales. These problems, which were repeated time and time again, were the result, Whisler argues, of the lack of professional training among the 'dominant designers' and their teams. They arrived at their designs through trial and err or, with not enough attention to the requirements of efficient production. The problem was not lack of investment in new model development, as is often asserted, but the fact that a large proportion of the money invested in development was wasted.

Perhaps Whisler's most consistent theme, though, is his assertion that the root of the problems of the British car industry was its stubborn adherence to a fundamentally mistaken product market strategy. This strategy entailed the production of a large number of differentiated models, which was felt by managers to be necessary in order to achieve a large share of the home market, given UK consumers' preferences. The most extreme example of this strategy was adopted by BLMC, which, in the 1970s, was offering the widest model and component ranges in the world, including eleven different engines and fourteen different body-shell types. Many of these unique models actually competed against each other in the same market segment. Old models continued in production after new models, intended to replace them, had been introduced. Consequently, although the total installed capacity of UK producers was sufficient to have enabled them to reap economies of scale, the factories were small -- on average, only one-quarter t he size of German and one-sixth the size of US plants.

What is more, the British production system was also designed to cope with this product market strategy. It was characterized by the use of labour-intensive, flexible production methods that relied on piece-rate payments to motivate employees. This enabled managers to adjust inputs -- mainly labour -- to cope with fluctuations in demand. The result was a U-shaped cost curve, with high fixed costs at low output, and high marginal labour costs at high output. This contrasts sharply with the declining cost curve that characterizes Fordist production methods.

Whisler's argument is somewhat similar to Chandler's (1990) in a number of respects. In particular, Whisler implies that product market strategy is fundamental, and that other aspects of a firm follow from that. The demise of UK car manufacturers was ultimately caused by their attempts to change strategy without changing institutional structure to match. Like Chandler, Whisler also points to the personal management style that dominated the industry. This was possible, even as the industry became more consolidated, because merged firms typically adopted a holding-company structure, with the constituent firms maintaining a high degree of autonomy. A common pattern with these mergers was that a relatively small firm playing to traditional British manufacturers' strengths would merge with a larger, but less successful competitor. However, it would be assumed that the problems experienced by the larger firm were due to the correct strategy being poorly implemented, and that the merged firm would benefit from the e xpertise of the managers of the successful partner in the merger.