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Economic Focus
By Pete Watson
UK Short-Termism
Inc
N 1927 THE Austin Motor
company issued a licence to
Dixi Wereke AG of Eisenbach, Germany, to produce a left-hand drive Austin Seven. This licence was passed to the Bayerische Motoren Werke company, makers of aircraft engines and motorcycles. The first BMW was an Austin, forerunner of today's Rover ( Group. It is an irony therefore that in January this year that same company bought Rover from British Areospace, thereby finishing British owned volume car production - that is, unless the Reliant Robin is about to make a comeback!
This sale was a successful coup for BMW. A rival car producer is cut out while they gain profitable models particularly in the four-wheel drive Land Rover/Range Rover/Discovery range. Rumoured to having spent £2bn in attempting to develop a rival four-wheel drive model, they get it for £800m!
BMW may invest in fourwheel drive and in the small and sports car sectors of Rover production. There is little sense however in boosting production of the 600 series Rovers that compete directly and are starting to outsell BMW rivals.
With workers in British manufacturing on wages of 65- 75% of their German brothers and sisters, BMW may shift car component production to Britain. It is unlikely however that the huge cost of heavy investment in new product lines will follow.
The second success for BMW bosses lay in the take-over's ef-
om
fect on Honda. It represented a humiliating defeat for the Japanese carmaker. Honda's world strategy had been to buy into local car production, lending technology and know-how in return for a profit share. In the case of Rover, success was based on Japanese technology. The 200, 400, 600 and 800 series cars all used Honda engines or transmissions. Honda owned 20% of Rover and earned £400m a year from that investment.
With the development of the European Union, Japanese companies have sought to avoid tariff walls by setting up shop inside Europe itself. Britain has taken the most: 38% of inward investment into Europe up to March 1993. Now, Honda's reaction may hasten the end for volume car production at Rover, ending its technological support which has been the key to Rover's success. Rover's models reach the end of their product life soon. Without Japanese help a crisis will develop. At the same time, Honda intends to create a new rival, boosting production at its Swindon plant to 100,000 by 1995.
However, while BMW has now become a bigger player in world car production, this bigger fish could still become beached. Both Rover and BMW had a similar output, selling about 360,000 models in West Europe last year, 6.4% of market share. But the
• world car industry has faced a crisis since the late 1980s. Europe's car giants are equipped to make up to 3.5m more cars per year than they currently sell. Volkswagen made a $1.4bn loss last year. Fiat is running at 55% capacity and Ford of Europe has been losing money since 1991. And Japanese companies expect to sell one million cars in Europe by the end of the decade.
British Aerospace's decision to sell Rover was not however mo tivated by these long-term strategic problems. Rover was a success - BAe's desires lay nearer the shrine of share prices and short term bank balances.
Rover for them was an asset stripping operation. They bought it from the government for £150m, receiving £57m in 'sweeteners. Under the conditions of the rules of sale they were unable to sell the company until the end of last year. When the time was up, Rover was sold. BAe made $650m as well as profit from land and property that Rover formerly owned. Here we can see the real vitality of the British ruling class!
The excuse given by capitalist commentators is that BAe
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shed to consolidate its aeroace business through this sale. It its commercial airliner busiss is a drain on BAe, losing bn between 1981 and 1992. e latest noises from BAe sugst that it will not boost restment here but in defence. mmercial aircraft and jet enle production in Britain may the way of car production. BAe lost £237m over the last ar. Compare this performance th the National Westminster nk that made nearly £lbn fit in the same period. Here lies the special crisis of itish capitalism. A highly develed financial system can be a ›gressive feature in the developent of capitalism. It allows ›fits to be shifted rapidly ere investment can make the st return. New sectors at the ist advanced technological 'edge' the economy benefit. Export of lexico's New Jawn HE SIGNING OF the North American Free Trade Agreement (NAFTA) beeen Canada, Mexico and the ¡A was heralded by Mexico's ers as a new dawn for Mexi- 1 capitalism. Jobs and wealth uld flourish as North Ameri- 1 investors flocked to Mexico. The world saw a different id of dawn, however, when the patistas rose in revolt in uthern Mexico. That uprising s partly linked to NAFTA. The subscription rates bscribe to the Militant ernational Review for g7-50 six issues, UK/Ireland, or 29 erseas. Write to us with your me and address and a aque or postal order made yable to World Socialist oks at 3/13 Hepscott Road, ndon E9 5HB.
capital leads to finance playing an international role. Imperialism, the rule of finance capital and multinational monopolies, takes control of the world. Profitability is however the name of the game. Low profitability in manufacturing leads to finance searching for new homes to make money. The early development of Britain as a world imperialist power has meant that this separation of industry and finance is more extreme than elsewhere. The City of London is a world finance centre developed historically from the surplus extracted from the workers and peasants of the former British empire. British manufacturing has been underfunded and in decay for decades. British bosses think in terms of short-term share prices, currency speculation, balance sheets with no long term view on the development of Mexican government are seeking to force the poor peasants to let or sell their land under the terms of the agreement.
Now new figures have been published that cast a fur- Life in Mexico City. ther gloom over the bosses. Mexican economic growth stands at a seven year low. It grew only by 0.4% last year with manufacturing shrinking by 1.5% from 1992. Mexico currently has a strong currency and high real interest rates. Like a number of Latin American countries this has led to a balance of payments problem. Exports are more expensive and imports are cheaper relative to other countries. Mexico's trade was in the red by $65bn for 1993.
The government has pinpointed the 'restructuring of the industry. Britain is now 18th of 22 OECD countries in terms of productivity. It is the only West European country to run a deficit on merchandised goods. A final word on British Aerospace. It is now likely to retreat almost solely into arms production, linking up with GEC to do so. This will mean that the core of British manufacturing will be hiding behind the windbreak of government contracts and sweeteners.
Britain is an economy exploited for its low wages and as a market for overseas multinational companies. The present character of the British ruling class is probably best summed up by The Economist, an authoritative journal British capitalism, which declared that those who opposed the sale of Rover to a foreign company were 'deluded'.
private sector as the reason for the problems. For 'restructuring read 'redundancies and closures'. NAFTA free trade arrangements already are hitting home based industry. US capital will benefit. The World Bank has called for a more 'flexible labour market' in Mexico. They bemoan union agreements that workers have forced upon employers. The battle lines are being drawn between US capital and the Mexican workers and peasants. The Zapatistas' struggle represents the opening shot.
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