BMW and BMC – who said ownership doesn’t matter?

Geraint Talfan Davies reflects on a visit to a German corporate showcase

As David Cameron courts Angela Merkel in his quest for release from the rack of Euro-sceptic torture, he does so as supplicant. She responds as the leader of a nation that long ago supplanted the UK as the workshop of the world and is now the dominant force in Europe. Her view will decide Cameron’s fate as surely as it has decided the fate of Greece.

The UK prides itself on the strength if its financial sector and on its creative industries  yet, unlike Germany, it has been astonishingly careless of its capacity for making things, exporting things and, even more inexplicably, owning things.

These ironies were brought home to me forcefully last week at BMW’s huge exhibition centre near the Olympic Park in Munich – BMW Welt (BMW world). The car company dominates this city, supporting everything from Bayern Munich football to the Bavarian State Opera.

BMW Welt – part company museum, part showroom, part exercise in corporate pride (or is it aggrandissment?) – is a series of somewhat overblown silver palaces that, appropriately, bridge a motorway. Inevitably, they generate conflicting responses: the place is superbly designed and presented, but any celebration of the car these days, however well crafted, must jar with one’s consciousness of the environmental damage that the car has done and is doing. Some will see no conflict, the verdict conclusively against the automobile.

And yet. The BMW Welt museum tells a tale – brilliantly, and with little expense spared – about a century of extraordinary engineering innovation that conveys many unspoken messages: about human creativity and an unending quest for improvement, about the symbiotic relationship between beauty and engineering, about the relationship between military and civil demands, and about the economic benefits of particular models of corporate ownership. It would be a folly to dismiss it as a wet dream for petrolheads – Jeremy Clarkson’s idea of heaven.

On the engineering front the progress from the earliest BMW car (would you believe, based on an Austin Seven) to the latest prototypes of electric cars is a remarkable narrative of technological development, and one which forces you to think about what may happen in the next 50 years as technological development accelerates still further. It poses questions about the nature of the car of the future – its shape, capability, electronics, safety, power source and environmental impact. But the answers may be also affected by possible changes to the way we organise our mobility.

Google and others are experimenting with driverless cars in order to answer some of the technological questions. Mercedes are working on self-driving trucks. At the same time the Uber online booking system is proving a disruptive force in the taxi industry, as we have seen in France. Volunteer car sharing groups are also raising questions about different concepts of ownership. At some point the questions raised by these separate developments are bound to inter-connect, and have unexpected consequences. For instance, the concept of car sharing is forcing insurance companies to think about risk in an entirely different way.

Despite these developments the cathedral-like spaces of BMW Welt betray no sense of vulnerability about a business model that relies on personal ownership of and identification with the car. The theatrical arrangements for the delivery of new cars in this gargantuan space take on the air of religious ritual, a visit to the temple. It may be that the size of developing markets such as China means that the business model has much life in it yet. The car industry’s investment in individual consumer aspirations – which BMW Welt is designed to reinforce – is such that only a fool would anticipate the majority falling out of love with the car anytime soon.

But it is the issues of industrial policy, particularly ownership, that confront the British visitor head on. In a large space a few yards from the entrance a Rolls Royce Phantom is a model of gleaming haughtiness. Close by are signs to the BMW museum with its display of the history of the Mini that commands an even bigger space. Both Rolls Royce and the Mini are now owned by BMW.

The British visitor (of a certain age) is hit by the poignancy of the juxtaposition of the letters BMW and BMC, synonyms for respective success and failure. In both cases the B stands for geographic identity – British in the case of BMC – the British Motor Corporation – and Bavaria in the case of BMW – Bayerische Motoren Werke. The blue and white quartered badge of the German car represents the Bavarian flag.

Their stories could not have been more different. BMC came to stand for British industrial ineptitude, a toxic mix of managerial complacency and incompetence and union intransigence, memorably sent up by Peter Sellers in I’m all right, Jack. BMC was not even a brand, but parent to a self-defeating fragmentation between its competing brands – Austin, Morris, Wolseley and Riley – brands that mimicked the British obsession with class. It even imposed this ‘brand-engineering’ nonsense on the Mini itself – variously, an Austin Seven, Morris Mini-Minor, Riley Elf or  Wolseley Hornet – ensuring that despite its technical novelty the Mini lost £20 per car for the company. BMC is no more.

In contrast, BMW has always been a single brand, imposed on both its cars and motorcycles, brilliantly and consistently developed over the long term. BMC was content to sell poorly made cars to protected Commonwealth markets, BMW sold to Europe and then the world, notably in recent years to China.  In 2014 it had revenues of €80.4 billion (In the same year Mercedes had revenues of just short of €130 billion, and Audi €53 billion). Ponder these figures when you next read of Britain’s ballooning trade deficit.

How to respond? Is the gut reaction simply silly injured amour propre? After all, you may say that as an ardent European this should not worry me. Isn’t the Mini still made in the UK? Isn’t the integration of European industry just what the founders of the European project wanted? Isn’t that why they started by merging the coal and steel industries?

Yes, but it is of concern when the movement is so one-sided. It is not true that ownership does not matter. One simple reason is that in 2014 BMW made a profit of €8.7 billion on its €80.4 billion revenues. That accrues primarily to the country of ownership not the country of manufacture. Ownership can also dictate the location of investment and particularly the location of research and development. The Welsh economy found this out the hard way when manufacturing plants of vaunted inward investors moved east after the collapse of the Soviet Union.

Last year, when the ONS looked at foreign ownership of British companies, it found that  the number of foreign owned companies had actually dropped by 3 per cent since 2009, but that their total contribution to GVA had increased by 19 per cent. That was explained by a 10 per cent drop in the number of foreign owned micro-businesses emptying fewer than 10 people. The number of small, medium and large sized foreign owned companies – who make a much bigger contribution to the economy and to exports – had actually increased. The U.S., Germany and the Netherlands were the three biggest UK company owners.

Only a few years ago it was reported that foreign corporations controlled 39 per cent of UK patents far more than foreign owned patents in the US (11.8%) Japan (3.7%) and the EU as a whole (13.7%). Last anyone jump to the wrong conclusion, this has nothing to do with the EU. Other EU member countries are just better at protecting their own industries.

Ownership also matters in the public utilities. James Meek, in his book Private Island has charted the takeover of water, rail and bus companies, sometimes by private equity companies – as in the water industry, though not in Wales! – but sometimes, with the deepest irony of all, by public utility companies from other European countries.

Scotrail is owned by the Dutch company, Abellio, the international arm of the Dutch national rail operator. The southeastern and London Midland services are owned by Keolis, jointly owned by SNCF, the state-owned French rail company and the Quebec Deposit & Investment Fund. Arriva Trains Wales that operate on the Valleys Line that runs past my Cardiff home is owned by Deutsche Bahn, a private German rail operator that carried me in much greater comfort between Munich and Nuremberg than it did between Cardiff and Welshpool yesterday.

Strange how the erosion of our industrial base has never been a central issue in this country, not in any general election in my lifetime, or even in the current contest for the leadership of the party of labour.

Geraint Talfan Davies is former Chair of the IWA. He is Chairman of the Welsh National Opera and former Controller of BBC Wales.

One thought on “BMW and BMC – who said ownership doesn’t matter?

  1. “The U.S., Germany and the Netherlands were the three biggest UK company owners.”

    Is this not a contradiction in terms?

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