by Gordon Pitts
The incident spoke to a deeper cultural problem at British Leyland. The company was run by a cabal of entrenched senior managers who, he believed, concealed information from him, intentionally deceived him, and failed to tackle the essential issues that dogged Leyland. At British Shipbuilders, Day had had instant credibility because in a way he had come from the industry. But at Leyland, there was downright hostility towards this Canadian outsider who allegedly knew nothing about cars. There was a feeling of “we know best” and the lawyer-executive at the top of the company should just keep out of operations, out of marketing, out of engineering—basically, out of day-to-day management. But that was not how Graham Day, that disciple of Les Smith, ran a company.
The passive-aggressive resistance by senior management was Day’s first big test on taking the CEO’s job on May 1, 1986. In an interview with the Financial Times on his first day, he refuted suggestions that he was a hatchet man: “I think in the past I have been able to save jobs—although never as many as one would have liked. I also think that what I have done, wherever possible, is to preserve the preservable jobs.” Questioned about the possibility of changes within Leyland’s senior management, Day said, “We don’t have to like each other, but we have to have an effective working relationship. I look for professionalism and confidence.” He did not find it. On September 25, less than five months after Day joined, Rover announced the departure of Musgrove and two other senior executives. Another two had exited earlier. The surgical decapitation of senior management was known in the press as “the Night of the Long Knives.”
It’s a wonder it took so long. The company Day joined was a mess, the product of a clumsy merger between truck company Leyland and carmaker Austin Rover, which turned out a stew of brands from Leyland trucks to the venerable Land Rover and Range Rover to mass market Austins and the precious little Minis and MGs. There was no clear strategy of brand building, and the company was seeing its share of the British auto market eroding away. Owned almost entirely by the government, the company was being kept alive by public money, but lacked the necessary investment in technology, including robotics, that was revolutionizing the global car industry. Its labour practices were outmoded, but its prospects for change were being blocked by obdurate unions and uninspired management. It had swallowed up well over £3 billion of government funding, and more probably would be needed. Prime Minister Thatcher wanted desperately to staunch the flow and get it off her hands. In her memoirs, she concluded that “[t]he company had become a symbol of Britain’s industrial decline and of trade union bloody mindedness.” About the only thing that seemed to be working for Leyland was a burgeoning alliance with Japan’s Honda to co-develop car models.
Day arrived in the middle of a crisis for the Thatcher government, when Leyland was negotiating to sell its car division to US automaker Ford. The news leaked, causing a storm of protest against selling to a foreign buyer that would strip away British production and jobs. Tory MPs, particularly in marginal ridings in the West Midlands, where Leyland had a factory presence, rebelled and forced the government to walk away from the Ford deal. Also under attack was another negotiation to sell the truck and Land Rover business, potentially to General Motors. And yet, there did not seem to be any alternative to a foreign buyer to secure the company’s future. When the government backed down under this onslaught, the Times commented that “the government has run for cover, leaving the state still owning, in this seventh year of Thatcherism, a car company which continues to make losses despite £3.8 billion in subsidies from the taxpayer.”
Could Graham Day pull off a recovery at cash-devouring Leyland? He gave no hint of a lack of confidence. As he said to a Canadian journalist, “I must tell you, and I wouldn’t want to give an impression of arrogance, I actually don’t contemplate failure.”
As he sized up the situation, Day pledged Thatcher that she would need to put no new public money into Rover, although she still had to deal with the company’s historical debt, including government-guaranteed bank loans. He hoped Rover could fund future capital needs on its own, and pay down bank loans as profits and asset sales materialized. And he succeeded.
A big factor was the shifting labour scene. Day actually would benefit from the spadework of Musgrove and other senior managers under the previous CEO, South African Michael Edwardes. In the 1970s, the vast British Leyland factory at Longbridge, Birmingham, had become a byword for wildcat walkouts, union militancy, and industrial chaos; indeed, its dysfunction had helped clear Margaret Thatcher’s path to political power. For many years, the factory was in the grip of radical agitators led by Derek Robinson, nicknamed Red Robbo, signifying his reputation as an unregenerate communist. Robinson was a union officer at Longbridge and a troublemaker. The BBC observed that, between 1978 and 1979, Red Robbo alone was credited with causing 523 walkouts at British Leyland, at a cost of an estimated £200 million in lost production.
In 1979, Edwardes and his managers had averted what would have been a damaging strike, but Robinson continued to attack management in a pamphlet he distributed. The communist organizer was promptly sacked. When a strike ballot was held on the issue, his dismissal was upheld by an overwhelming vote of unionists. It signalled the end of communist domination at the plant and the rise of a new generation of union leaders at Longbridge and elsewhere who were more realistic about what could be achieved and more committed to improving, not impeding, the production process. Day would benefit.
After Edwardes left Leyland in 1982, he wrote a memoir about his time there called Back from the Brink. But it was not back far enough: the company was still losing truckloads of money, and the team he had left in charge was ill-equipped to change that. After Musgrove was dismissed in September 1986, Malcolm Brown of the Times observed that he was “one of the headbashing school” whose talents had been sorely needed in the late 1970s when the biggest challenge was taking on Red Robbo. But times had changed, Brown wrote. “[Graham] Day may look and even sound like an autocrat, but behind the tough words is a very shrewd strategic thinker.” Brown concluded with a harsh judgment: “Musgrove’s problem is that behind his autocratic mask is an autocrat. He was the man for the hour, but the hour has passed.”
This set the tone for change as Day pulled the company out of the clutches of the old guard—some of them engineers and deeply protective of their status and their knowledge—and put it in the hands of professional managers who took their cues from the customer. He opened the doors to new ideas about quality, training, and technology, and he made it a marketing company, flourishing on the basis of its best brands. Concluding that he could not compete with the international auto giants on price, he moved the company upmarket, betting its future increasingly on high-end consumers, not the mass markets of the past.
There were still valuable pieces—not just the Mini, but also the much admired Land Rover and Range Rover lines. Another venerable brand, Jaguar, had already been spun off in a management buyout under the direction of Thatcher favourite John Egan. But inside Rover, that left the dinosaurs of unloved Austin cars and factories that were almost untouchable because they sat in these marginal constituencies.
Fortunately, Day was able to bring with him from British Shipbuilders a couple of loyalists in Peter Thompson, his latest sweeper, and John Pullen, an ex-RAF fighter pilot and capable public relations man. He also found the equivalent of Colette Bowe in Catherine Bell, a bright senior civil servant with rich experience in the car industry. Bell recognized that Day had the advantage of sensitivity to British politics and a clear direction from the prime minister’s office. “He had a sort of baton in his hand from Mrs. Thatcher to be as radical as required—to take this Leviathan off the taxpayers’ hands and move forward.”
Day’s reputation began to grow, and both friends and enemies helped it along. Shortly after the Night of the Long Knives, Labour MP Ronald Brown rose in the House of Commons to say, “Surely it has to be admitted that Graham Day,
the slick lawyer from Canada, the undertaker of British Shipbuilders, was brought in to destroy the [auto] industry rather than to build it up. That is the real issue that is at stake. Let us admit that Mr. Day is a hatchet man for the Conservative Government.” Paul Channon, the Tory industry minister, noted that Day was first employed by the Labour party when it was in government in the mid-1970s. He had a sheaf of quotations containing glowing tributes to him, including some from leading Labour politicians. “If the House wants me to do so, I can read out those tributes.” That thread of opposition questioning was dropped.
With the government’s backing, he looked at Rover with a fresh eye. The truck and van business would go; after some dallying with GM, it was the Dutch truck maker DAF that bought the unit. He sold off a dozen businesses that he felt were extraneous to Rover’s core business. But what about cars? Market share, particularly for the mainstream vehicles, was under attack, and the factories were wallowing in massive overcapacity. Day needed a rethink, and approached the company’s ad agency to analyze how the brands fared with customers.
The analysis complete, Day’s team attended a briefing where they received a summary. The ad man flashed some slides on a screen. When the beleaguered Austin cars came up, the conclusion was: “If you’re between fifty-five and dead, you are a customer or a potential customer.” That said it all. It was not a brand with a lot of growth potential. As for the MG, it was much loved, but a niche product only. It was much the same with the Mini: a loyal following, but nothing you could take to the bank.
Then came the 4 x 4s, Land Rover and Range Rover, the parts of the company making money. The more utilitarian Land Rover had two basic markets: the wealthy farmer group and military customers, including a kind of vehicle you could drop by parachute into a war zone. The Range Rover was a premium, higher-end vehicle. The Rovers came out as “middle-class aspirational” brands in the survey. That was what Day wanted to hear, and he switched the focus of the company over to Rover, including the introduction of new models under the Rover name. The company was no longer Leyland—now shorn of its Leyland truck baggage, it would be the Rover Group.
Day saw changes he could make right away. You could sell only so many Range and Land Rovers domestically. To raise production volumes and gain market traction abroad, he needed a line extension. That became Discovery, an SUV that was slightly below the market niche for the Land Rover, and it provided the necessary volumes. “We made money from day one on Discovery,” he says, and it remains a mainstay Rover product.
Catherine Bell says that, in the marketing of Rover, Day brought an international perspective that included knowledge of North America, where Rover would make inroads. The industry had been run, she says, by enthusiastic engineers, and it is vital to have great engineers, but Day was a professional manager who could see the bigger picture. He could envision where the 4 x 4 market was going. “We saw muddy Land Rovers in farmers’ fields, but look at it now,” Bell says. More Land Rovers can be spied in the posh lanes of London’s Mayfair and Belgravia than in mucky barnyards in Yorkshire and East Anglia. Day grasped that trend and ran with it.
As at Cammell Laird, Day discovered a woefully underskilled workforce. Many employees needed skills upgrading in areas such as calculus in order to be retrained in new technology and, at the other end, there was a need to remediate the poor quality of school leavers. “You faced a situation in cars where you were trying to get a fifty-year-old man to understand the calculus that is driving a three- or five-axis milling machine. That is a challenge, but you have to try,” he recalls.
Rover sent qualified employees into schools to teach subjects the schools had difficulty handling. It embarked on in-house instruction to enable employees to secure nationally recognized qualifications. Rover and Rolls-Royce Engines built a dedicated manufacturing engineering building on the University of Warwick campus, and the university worked with the two firms to deliver a master’s degree in manufacturing engineering. Rover, for several years on a per employee basis, was the largest spender on training in the European Union.
This is where Day was grateful for a new generation of workers and their union leaders, who would accept and even embrace training changes. “The Second World War union leaders with Marxist leanings were being gradually replaced by a younger, better educated, more pragmatic leadership.” As a result, Rover was able to move its basis for pay to skills acquired, rather than skills deployed. Over time, as individual employees expanded their skills and their pay, Rover could deploy them on a variety of tasks.
In all he did, Day tried to advance women to supervisory and leadership roles. The media became interested in Day’s improvements, and the company would give tours. On one occasion, reporters came upon an area where workers were involved in the process of stuffing engines in cars. A reporter looked at his watch and noticed a young woman standing there: “Excuse me, are you providing the tea?” Day remembers the scene. “This big guy had his head inside an engine compartment and he looks at this guy: ‘Tea, my ass. She’s the boss.’”
Day realized that a key to the turnaround was for Rover employees to regain pride in their business. He talked with one woman on the trim line who was embarrassed by the Rover image. She and her husband would walk down to the pub on a Friday night and face a barrage of snide remarks. The joke was that Rover employees just clocked in—they might as well have signed the visitors’ book.
But the new marketing push was turning opinion around. One Christmas, the company released an ad showing a stately house with guests arriving for a Yuletide party. Two parked Minis eye each other and come together, their bumpers just about touching. The romantic message: “Minis have feelings, too.” The day after the campaign launched, Day walked out to talk again to the woman on the trim line: “Did you see the new ad?” She had. On Friday night, as usual, she and her husband had gone to the pub. “All our friends were all talking about the ad. Do you have any idea what that means to me?”
Day paid a lot of attention to production values. One inheritance from the old management was a new saloon car model under development called the Sterling. The launch was approaching, and a television ad shoot was scheduled for beautiful, barren Iceland. But Day was not impressed by the producer. He knew someone who could make this work. He put through a call to Toronto and got in touch with Manny Pittson, his old producer at Singalong Jubilee. Pittson flew to Iceland to produce the ad. Gillian Perry, who was dating Pittson at the time, remembers that Pittson had just proposed to her, but he dropped everything to help out his old friend. She forgave Day. The wedding happened, and she found Day to be “a very interesting man.”
Day told the British crew and ad agency that Pittson alone had the production authority, and when shooting went ahead, he would come to London and decide what footage to use. The car took longer than expected to get right—a full eighteen months—but the ad was highly successful. (Manny Pittson died in 2013.)
Early in his Rover tenure, Day announced he would set up with a small team in central London, although the rest of the corporate group would remain at head office in west London. The core group bonded as it suffered the ups and downs of running Rover. When things were going badly, they gathered for lunch at a fish and chips place behind nearby Victoria Station. When they were going well, it was the posh dining room at the Goring Hotel. Day, Bell says, “had the ability to make the very difficult into fun.”
Shortly after joining Rover, Day got a call from a senior bureaucrat, offering to lend him a mid-ranked young woman manager for six months. Her name was Frances Elliott, and she had worked in the Irish Office, had been through a stressful situation, and needed a change. Elliott came with great credentials, including a double first in languages from Oxford. She would become a key part of Day’s small chairman’s office. She decided not to return to the bureaucracy; instead Day sent her to INSEAD, the Institut européen d’administration des affaires, in France for a crash course in finance a
nd accounting. She became the key negotiator when Rover finalized its joint venture arrangement with Honda. The Honda people in Japan referred to her as “your Frances,” and in an unusual tribute to a woman gave her a pearl brooch at the deal’s closing dinner.
After two years, when it was clear Elliott enjoyed business, Day told her she should work for someone else, and arranged for her to join Thorn EMI, the big music company, where he was a director. Later, she was recruited for a top public affairs job at Tesco, the supermarket chain. Day kept tabs on her after he returned to Canada. She had married a prominent journalist and was doing well. Then he learned she had been diagnosed with motor neuron disease. She declined rapidly, and died at age forty-six. Day chokes up today as he describes how she remains a stirring example of the young people, including many women, he encouraged in their careers. Her death “left a mark on him,” Ann Day says.
As with previous assignments, Day worked well with the cabinet ministers he served, including Paul Channon and Lord Young, an affable former businessman who was another Thatcher favourite. Day knew when to advise, when to step back, and when to duck the limelight, giving the minister the opportunity to take credit. The Financial Times’ Hazel Duffy noted that Day’s critics emphasized the cold mathematical manager, but she wrote that “it is difficult to reconcile this characterisation of Day with the polite warmth—familiar, but not cringingly chummy—which he extends to the media, and, it is said, to ministers.” Duffy quoted an unnamed observer who said that Day “weaves a web of charm” around cabinet ministers.
That web extended to the most important minister of all, the one who occupied 10 Downing Street. His relationship with Margaret Thatcher would be the ultimate test of what he had learned in Canada and the United Kingdom about leading and following.
Chapter 12
Mrs. Thatcher and Mr. Day