LEYLAND ALL ALONE
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It is now a year since Ian McKinnon's management team bought Leyland Bus from Rover Group. We examine the company's progress as an independent manufacturer.
• It could hardly have been encouraging for Ian McKinnon's management team, attempting to buy Leyland Bus from the Rover Group, to read the following in the pink pages of the Financial Times: "At first sight, it seemed as if the people who wanted to organise a management buyout of Leyland Bus had lost their senses. Why would they want to risk their money buying a company which had suffered losses of about 280 million in the past three years, the domestic market for which had collapsed and which had developed a relatively poor reputation for back-up and parts supply?"
If the performance of Leyland Bus in 1987 is anything to go by, many of these questions have already been answered. It is now just over a year since McKinnon and his team took on the challenge of a privatised Leyland Bus (the sale went through officially on 13 January 1987), and already much of the company's previous misfortunes appear to be changing — not least its financial position.
A crucial factor in the buyout, which saw the company sold for around £5 million, was the Government's decision to write off its historical debt. In 1986 alone, Leyland Bus finished in the red to the tune of about £30 million. Losing this mill stone has provided the company with the right springboard to bounce back into the black — and that process has already started, according to sales and marketing director Owen Quinn.
"Before the buyout was confirmed," he says, "we had to set some plans in action. One of the things everyone wanted to know, not least our bankers, was whether or not the company was going to be viable. Part of that plan was that in 1987 we would break even. That was the target — and we're going to achieve that."
Exactly by how much Leyland Bus will "break even" Quinn is keeping secret, but the company has already improved its turnover from around £83 million in 1986 to £92 million — an increase of almost 10%.
By Quinn's reckoning, managementowned Leyland Bus had a good, although by no means easy, debut year. "We had to consolidate many of our activities and really cut the umbilical cord (from Rover Group), physically as well as metaphorically.,, As if becoming a private company was not enough, last year Leyland Bus undertook a massive programme of reorganisation, particularly at its main assembly plant in Farington, Lancashire, as Quinn explains. "When you walk around the factory you'll see a large number of machine tools, but that's about 300 fewer than we started with last year. Of the 800 machine tools left at Farington nearly every one was moved to a new position during last year."
Faced with such a major upheaval on the shop floor it would have been understandable if the company's production levels had gone down in 1987. In fact the reverse happened. In 1987 Leyland Bus built more vehicles than expected. "We set ourselves a target of sales for 1987 of around 1,097," reports Quinn. "We actually built 1,140."
Because many of its chassis are often not registered for up to six months after they are built, Leyland Bus finds it is better to measure its performance in terms of vehicle output, even though in the public arena, it is registrations which are most frequently used as the yardstick.
For the record, according to the 1987 SMMT statistics, Leyland Bus' UK registrations decreased dramatically from 873 to 441 — a sign of the continuing depression in the heavy bus market.
RUSH OF ORDERS
Despite this, Owen Quinn has no doubts that 1987 was a good, though patchy, year in terms of sales. "At the beginning of the buyout, it was pretty much a flat market. We felt that the market had bottomed out, and that the 50% reduction, followed by another 50% reduction which the industry had experienced since 1979, had stopped. That proved to be the case until last September when we saw a rush of orders to a very high level indeed — particularly on Lynx single-deckers and Olympian double-deckers. The sales rate of vehicles in the last quarter of '87 alone would probably be equivalent to twice the levels of big bus orders that actually came out as a total in volume in 1987."
For Leyland Bus, the difference between 1986/87 has been very much in the bus, rather than the coach market. Given the interest, however, in the minibus sector since deregulation, where are all the new double-decker orders coming from?
Adrian Wickens, Leyland Bus' market planning manager explains: "First of all there is a very big parc of double-deckers left — 20,000 plus — everybody recognises that the large bus has a role to play alongside medium and small vehicles, and they'll use a bus that will do the job for them route by route, or even time of day by time of day."
After letting double-decker replacement programmes fall badly behind during recent years, PSV operators are realising that they can no longer put off the buying decision, particularly on large buses, says Wickens.
"There is a realisation that even in a deregulated operating environment, they will need to replace that fleet, and the operating industry as a whole has slipped behind in replacement vehicle terms."
Quinn sees it as a "pent-up dam of demand", although the predicted upturn in registrations during 1988 does not mean that the business will be back to previous levels, not least on bus replacements.
Any new business, therefore, for Leyland Bus will be for replacement rather than additional vehicles.
COACH SECTOR
Quinn says that this year the company should sell 301 double-deckers (nearly all Olympians), compared with just 83 in 1987. On single-deckers (Lynx) it is aiming to sell 211 vehicles (61 in '87), while in the coach sector (Tiger and Tiger Doyen) it expects to shift 473 compared with 359 last year.
Whatever the final numbers, Quinn reckons that Leyland Bus will finish as number one in both the singleand double-decker bus markets this year.
If 1987 was a mixed year for its home market, Leyland Bus "had a superb year with exports", says Quinn. "We had a major contract with our best export customer, Kowloon Motor Bus in Hong Kong, with three orders totalling 220 units — all tri-axle Olympians."
Although total exports last year amounted to 511 vehicles, Quinn sees a decline in the export business this year as customers hold back on orders, or simply do not order at all in '88.
In 1987 Leyland Bus made a number of changes to its product line-up, including the addition of its most powerful Cummins LTA10-290 Tiger Chassis (see pages 4044), the revisions to its Olympian doubledecker, and the launch of its Cummins B Series-powered Swift midi chassis.
Notably missing from its range (unlike its arch rival MCW) is a true minibus model. Quinn, however, feels that Leyland Bus is unlikely to be tempted into building a mini, despite the potential sales.
"That isn't the sort of marketplace we were in, so we very early on decided that it wasn't where we wanted to be. You have to pitch the strength of the company at where you see the greatest returns."
Quinn sees no major changes to the current Leyland Bus range in '88. "The big movement for us has been to standar dise on a Cummins/ZF driveline. We now see that right across our product range."
The Cummins' connection, however, will be further strengthened when, at the end of the year, the Leyland engine plant next to the Fatington factory closes down and stops building the horizontal version of the TL-11 engine.
The TL-11 is fitted as standard on the Royal Tiger Doyen integral coach, rated at 194kW (260hp), and also in the midengined Lion double-decker, built for Leyland by its Danish associate company DAB. It is also optional on the Tiger coach chassis as well as the Lynx (built at Workington) and Olympian bus.
The most interesting part of the Cummins equation, however, at least in 1988, will be its effect on the Royal Tiger Doyen and the DAB-built Lion.
Leyland Bus would probably be the first to admit that its TL-11-engined Royal Tiger Doyen has not achieved its true sales potential. The relatively low power output of the TL-11 used in the Doyen has been a factor in this, but the addition of a Cummins L10 engine, inevitably the same 216kW (290hp) LTA10-290 charge-cooled version already fitted in the Tiger chassis, will certainly enhance its appeal with longdistance luxury touring operators.
1989 SEASON
Quinn is reluctant to say how soon an L10-powered Doyen will be available beyond "watch this space", but it will certainly be in time for the 1989 season.
With the demise of the TL-11, Leyland will also have to go through the process of engineering the Lion to accept the L10 Cummins, which in terms of volume sales is likely to be a more expensive process than for the Doyen. Quinn is adamant, however, that Lion will continue to feature in Leyland Bus' line-up.
Leyland Bus last June signed a joint agreement with the German gearbox manufacturer ZF, which this year will see its Farington plant manufacturing components for ZF gearboxes — primarily the Ecomat automatic transmission — and eventually assembling complete gearboxes for Leyland's own use. The first components have now started down the Farington line.
While Leyland is still building its own Hydracyclic and Pneumocyclic gearboxes, these will gradually be phased out.
The positive changes which have happened at Leyland Bus have not been without sacrifices. During 1987 the company shed 800 jobs across its workforce. "Part of the reorganisation of the company before and after the buyout unfortunately included taking out a significant number of jobs — and that was again with a view to the long-term viability of the company."
Trimming the workforce by 800 has clearly been a painful process but, according to Quinn, the move would have been necessary, buyout or no buyout.
Like many of the managers involved in buyouts of National Bus Company subsidiaries, Leyland Bus' buyout team have put their own capital into the venture. Owen Quinn will not say how much, but it is "enough to cause those with grey hairs to get a few extra, and those who didn't have any to get some".
While Quinn is uncharacteristically (for a sales and marketing man) reluctant to say how Leyland Bus will finish financially in 1988, he is "certainly optimistic that the company will make a profit".
El by Brian Weatherley