The miracle of the Mini

Jason Wakelam, the auto-industries partner at consultants PricewaterhouseCoopers, says: “There is something about the iconic nature of the brand.” But Germany’s BMW makes the Mini nowadays and the company that manufactured the original cars was merged into British Leyland, nationalised, privatised, demerged, sold and went bust.

“British Leyland’s problems of quality, building, innovation, design and technology put it at a disadvantage,” says Wakelam. “And the problems with labour relations had some bearing on it. But BMW saw the opportunity the Mini brand presented in opening the market for a luxurious small car and has re-invigorated it.”

However, the legacy of British Leyland lives on. The report on MG Rover’s collapse will be published next month by the Business Secretary, Lord Mandelson, even if the Serious Fraud Office said last week it will not investigate. His offer of aid to Jaguar Land Rover was rejected last week in favour of private finance, but vanmaker LDV went into administration when he refused help.

The biggest motor company problem on Lord Mandelson’s desk now is Vauxhall, a long-time rival to the Mini, whose insolvent General Motors parent was rescued in May by the US government, which is selling the British unit.

In 1959, however, Vauxhall was no competition to the Mini. It made flash saloons with wings and chrome, based on its American parent’s gas-guzzlers. A small car went against the trend of post-war conspicuous consumption. But when petrol rationing was re-introduced during the Suez Crisis in 1956, Alec Issigonis designed an economical small vehicle for Austin Motors.

The result was the front-wheel drive car with sideways-mounted engine, small wheels and external hinges. It was launched 50 years ago as the Austin Seven. Its sister company within British Motor Corporation sold it as the Morris Mini-Minor, adapting the marque of its decade-old Morris Minor.

By the time it officially became the Mini in 1969, it symbolised the Swinging Sixties. It won three Monte Carlo rallies, was used by pop stars and was itself a film star in The Italian Job.

Yet while its star ascended, the British motor industry’s declined. In 1959, almost all cars on UK roads were made in Britain. Ford, like Vauxhall was American, but Rootes made Hillmans, Leyland built Triumphs and Standards and Rolls-Royce crafted limousines.

Volkswagen had its Beetle, but German imports were negligible in the 1950s. With only domestic competition, the UK industry was slow to innovate. The Mini cost £500 at launch but heaters, mirrors, sun-visors or radios were extras. When foreign cars had electric windows, most British vehicles had wind-up handles ? and the Mini still had sliding panes.

The Mini was unprofitable from the start, though it was years before the management found out. Even though the designs were almost identical, Morris Minis were built at Birmingham and Austins at Cowley near Oxford. Labour disputes dogged both plants.

In 1968 the Labour government engineered the merger of British Motor Corporation with Leyland but instead of exploiting economies of scale the group that employed 200,000 made even greater losses and was nationalised in 1975. In the 1980s, Jaguar’s luxury car business was floated on the

stock market and the rest of British Leyland sold to British Aerospace, also recently privatised, which resold it to BMW in 1994.

But the Mini’s dominant position in the small-car sector had been lost. Vauxhall’s Chevette gave domestic competition while Fiat and others exported to Britain. The last old Mini was produced in October 2000, the 5.39 million vehicles built over four decades making it Britain’s most popular car. Autocar magazine named it “car of the century”.

BMW famously sold the company to the Phoenix Four and MG Rover, as it then became, went bust in 2005. Ford bought Land Rover but the German company retained the Mini name, built a new plant at Cowley (production had been transferred to Longbridge in 1970) and recreated the icon for a new market.

The new Mini, though less mini than the original, borrows the old model’s design and in six years sold a million cars. This was as fast as the old car had sold in the smaller 1960s market.

BMW is unusual in rescuing an old brand but the trend to put UK car production under foreign ownership is not. Chrysler bought Rootes in the 1960s before the US group sold parts to Peugeot, in effect closing the business. Rolls-Royce went to BMW and Bentley to VW. Ford bought Jaguar besides Land Rover and sold them last year to Tata of India. Nanjing Auto acquired MG. Japan’s Honda, Toyota and Nissan, meanwhile, built new plants in Britain.

About 80 per cent of cars bought in the UK are now made abroad, but the same proportion of UK-built cars is sold overseas. So unlike 50 years ago, the UK car industry now competes in a global market, but one where production capacity far exceeds sales.

European plants are operating at below 70 per cent capacity when Pricewaterhouse reckons 80 per cent is necessary for profitability. The UK produces 1.1 million vehicles but could make 1.6 million.

“The big issue for the industry in the long term is capacity,” warns Mr Wakelam. “The challenge is how you match production with sales and the move continues east, to Russia, China and India.” Those countries represent the growth in the market but, by building their own plant, they add to global capacity.

Lord Mandelson and Vauxhall’s workers are hoping General Motors’ collapse will not mean the capacity reduction occurs in Britain. Investment group RHJ International and Canadian car-parts company Magna have each bid for the UK manufacturer and Opel, its German sister company, but the choice rests largely with The German Chancellor, Angela Merkel. Mr Wakelam thinks it would be folly to rationalise production on Opel, saying it would risk UK sales to rebrand Vauxhall as the German marque.

UK car sales peaked at 2.58 million vehicles in 2003 but the long-term downward trend in demand has been temporarily reversed by the Government’s reaction to the slump. Sales generated by scrappage schemes are credited with lifting last month’s UK sales for the first time since April 2008 and for pulling Germany out of recession last week.

Nikki Rooke, of the Society of Motor Manufacturers and Traders, says: “The scrappage scheme has created a new market. Traditionally, people with cars 10 years old used not to buy new vehicles.” Next month, British registration plates change, itself usually a sales generator, and dealers hope for a double success.

Normally, they sell a sixth of their annual volume in each of the plate-change months: September’s sales will reveal whether the £2,000 a car scrappage allowance has boosted the whole market of just pulled sales forward. But the flat-rate subsidy favours makers of small cars like the Mini. July’s sales were 12 per cent higher than a year earlier whereas April’s were 47 per cent down.

The Mini’s makers almost certainly did not know what they had created 50 years ago but the car was ahead of its time as a fuel-efficient small vehicle. In a market where taxation penalises large cars, BMW has a winner. Its Mini is still one of the country’s top-10 sellers.

Mr Wakelam toasts the Mini’s remarkable revival. “It’s still there after 50 years,” he says. “But the reality is that it was not there 10 years ago.”

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