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Interview with Harry Dunlevy, ex-HR director at BMW

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Ten years ago BMW pulled the plug on Rover, selling the loss-making car group to the Phoenix consortium for 10. Harry Dunlevy, HRD at the time, gives his version of the events that marked a major turning point in the history of Britain's car manufacturing.

Harry Dunlevy, former HR director at Rover, cuts a lonely figure as he stares dolefully out across the rubble of what used to be Birmingham's 400-acre Longbridge car plant. In its heyday, 110,000 cars rolled off the production line per year, home to some of the most iconic British marques - the Austin Mini, Healey, Jenson and Land Rover. "This used to be where Rover's engine factory stood," he recalls. "It's a very sad sight, looking out here, knowing how busy this used to be."

It's been a decade since Dunlevy last stood here. Just 10 years ago, 9,000 workers were also here, greeting the sale of the then BMW-owned Rover Group to the Phoenix consortium with jubilation. After six torrid years, having pumped £3 billion into the company (on top of the £800 million it paid for it), BMW was admitting defeat, pulling the plug on its UK adventure. In the last few months of BMW's ownership, Rover was losing the German car giant £2 million per day - £1,500 on every car made. Phoenix, meanwhile was guaranteeing only 1,000 redundancies (versus total collapse); the then trade and industry secretary Stephen Byers was trumpeting the deal as a victory for 'third way' politics. Even the unions called it 'tremendous news'. Rover, of course, was not saved. It limped on for just five more years, but by then it had only 3% of the car market (down from 30% in the late 1970s). It was a stay of execution only. Its lack of inspiring cars and poor image made its demise inevitable. But, according to Dunlevy, it was these BMW years that precipitated one of the greatest collapses in British corporate history. He was there, in the thick of it, and is telling his story for the first time.

"Things really began in 1994," he says, "when I was group employee relations director and HRD for Longbridge," he says. "Speculation had been building about the future of Rover ever since British Aerospace acquired us in 1988."

Although Rover was making a record 440,000 cars a year, by 1994 its market share was down to 13%. Britain was forecast to make 1.45 million cars - mostly from Japanese entrants Toyota, and particularly Nissan, whose more efficient, eight-year old Sunderland plant was already the UK's top car exporter. "I remember being summoned to a meeting with John Towers, the then CEO of Rover Group," says Dunlevy. "I simply thought we were being sold to Honda (since 1979 it had a 20% stake in the company). Completely out of the blue he announced BMW was buying us."

Dunlevy had to announce the sale to 40,000 workers by 6.30am the next morning when shift work started. "After Tony Woodley (chief negotiator for the TGWU) literally fell off his chair at the news, describing it as 'not too bad', there was real excitement," Dunlevy recalls. "BMW's board described Rover's brands with great passion, saying they had wanted a UK foothold for some time. We were all very impressed. They were saying all the right things about investment and growth. Woodley was invited to meet the German equivalent of works councils. It wasn't presented as a takeover at all."

Hindsight is, of course, a wonderful thing. It seems obvious now that the match was not right. Outwardly, BMW needed to expand its market, either by buying an existing brand or by developing its own models. With Rover, BMW would have an instant heritage of cars, pitched at a level below its luxury models. However, as experts have since observed, Rover was in advanced development of its own 400 and 200 models - competition for BMW - when the sale was agreed.

"Despite the great start, over the next 18 months it became clear BMW's senior management were starting to scrutinise the UK board far more," says Dunle

vy.

"Towers was being called every day and he wasn't enjoying it. Whereas British Aerospace gave senior managers freedom, BMW began questioning people's performance - the number of cars made and their quality. BMW declared the 200 to be unsaleable. We said: 'We're mass production; you're a premium brand, that's the difference.' They just kept saying we were falling short."

By 1995, BMW parachuted in the first of its senior management - Wolfgang Reitzle, engineering director BMW Group - to directly oversee things. Dunlevy remembers it to be a testing time. Not only was the BBC wandering around, filming him in negotiating committees for a six-part When Rover met BMW series, he was trying to see where BMW was coming from. "Senior management were really feeling the heat," he remembers. "They were finding it uncomfortable, but my line was to get the unions to up their game and raise standards across the sites. We'd had lots of silly stoppages, disputes, never anything major, but enough to interrupt assembly. I remember getting 300 or so shop stewards together to say things couldn't go on like this. It made the local press, but I still pushed on - I took 35 of these shop stewards all over the globe to see Lean manufacturing for themselves. I said: 'Guys, we need to do things differently. It's coming'."

Dunlevy is certain the failure of the unions to grasp what the rest of the world was doing did not help matters, although he is also critical of management. By 1996 Towers had left the company and Reitzle ran things for six months "with an iron rod, with BMW making it clear there would never be a another British Rover CEO". BMW appointed German board member Walter Hasselkus as new CEO: "He had a personnel background," says Dunlevy, "and put a nice feeling back into the organisation but in 18 months he had not transformed the culture or driven increases in the performance of the company."

It was time for another bolt from the blue moment. "I remember being at the 1998 Paris Motorshow for the launch of the Rover 75," he says. (This was the only new car launched under BMW's ownership). "Hasselkus and I were sitting in a Range Rover, when a fax arrived for him. It was from the finance director in Berlin. He gave it to me with an ashen-white face. It was the forecast for the year. It said Rover would lose £800 million." The result, he adds, was being told to find £200 million worth of savings. And he had just six weeks to do it.

"Tony and I locked ourselves in a room and tore lumps out of each other," he says. "We tested redundancies, taking money out of pensions, and even a new way of working - a Working Time Account - where workers could build up time worked in the busy period up to the change of number plates, then have lots of time off afterwards. Woodley said he could agree to this, and we took over the National Exhibition Centre to explain things to staff." He says: "This was the first time the workforce really knew how bad things were."

Dunlevy describes this as being Woodley's greatest hour, his greatest show of passion. When they took the plan to the board in Berlin, the savings were just shy of the magic £200 million figure, but both men were confident. But both were to be shocked. "They said no; they said that in five years things hadn't improved, but had got worse. Before the end of 1999 Reitzle himself was sacked. By now, we knew BMW was in crisis. They'd never lost money on this scale before. Everyone thought: 'If they've got rid of Reitzle, who else is safe?'"

The third German brought in as UK CEO was German director Werner Samaan. "He sacked three-quarters of the UK board within three weeks," says Dunlevy. But at this worst possible moment, came another surprise. "I was asked to be overall HRD - I was the only senior director left."

Dunlevy pauses to emphasise the irony. Why now, after all this, could he possibly have considered taking this role on? "I'd been with the company 25 years," he says. "It seems strange to say it looking back now, but even then I felt a sense of loyalty. In everything that had gone on, I'd earned a degree of respect. I had a meeting with the personnel team in Berlin:they said 'We believe in you'. Samaan treated me as someone who could advise him. I'd always wanted to be HRD. It was going to be difficult getting out of bed and coming to work, but there was still so much I thought I could learn."

By this stage, early 2000, Dunlevy says it was clear there were only ever two options for Rover - being sold, or broken up - and he planned the scenario for both of these options. Again, though, things were about to take an unexpected twist. "In January I was told to attend a meeting with the legal director. That was when I was informed Rover would be sold to a group called Alchemy. It was code-named 'Project Cruffs' - some sort of German take on the British sense of humour."

Dunlevy says the top team managed to keep the plan secret for three months, giving him time to work out terms for redundancies, and the mechanics of a break-up of the group, and which jobs would be saved. But another bolt from the blue then overtook events: "Woodley phoned me up in March. He said Germany had announced the sale to coincide with Rover's latest sales figures. We'd done no planning to anticipate this." He added: "How do you take 40,000 people and give them new arrangements? Had we consulted properly? The stakes were getting higher, the ground muddier."

More muddy ground appeared when John Towers re-emerged, leading the Phoenix bid. "Towers asked me if I wanted to continue as HRD. That was the final straw. I knew this was no longer the place for me. Lo and behold the Alchemy sale fell through and BMW sold Land Rover to Ford."

Dunlevy says he left in June 2000 "feeling bloody drained". By then, Phoenix was in charge, but starting its own doomed road to eventual break-up. "I'm not bitter, but I was just left thinking it could all have been done so differently. BMW did, at first, try hard, but the cultures, the industrial scene - everything was so far apart. A great number of unexpected things happened; at times you just reeled from one thing to another. It's a shame, I worked with great HR people."

- Harry Dunlevy is now a director of HR consultancy, Independent.