Britain's Leyland-Daf Van: From Pink Slips to Profits

A MANAGEMENT buyout has turned an apparently doomed British vehicle manufacturer into a successful company with strong prospects of future expansion.

It has taken only eight months for the Birmingham-based Leyland-Daf Van company (LDV) to move from virtual extinction to profitability. Garel Rhys, professor of motor industry economics at Cardiff Business School, calls it ``one of the most dramatic recoveries in Britain's postwar history.''

On April 22, Allan Amey, chief executive of LDV, reported a pre-tax profit of 9 million ($13.4 million) on a first-year turnover of 80 million ($119 million) and gave his 1,070 workers the day off ``to celebrate a job well done.''

Mr. Amey unveiled plans to crank up production, currently running at 250 vans a week, to nearly double that figure, with sales into countries of the European Union a rising priority.

LDV came into existence in its current form after the Anglo-Dutch Leyland-Daf truck company crashed last year. Leyland-Daf itself was the product of the old British Leyland truck company, which the Dutch giant took over in 1987.

When the merged company went to the wall there seemed little prospect of rescue. But Amey and a group of managers put together a bid of 45 million, with funds coming from British banks and 3i, the venture capital company.

Rhys says the prospects then looked grim. ``Most people thought it was a terminal case, and that yet another element of Britain's manufacturing base was about to disappear,'' he says.

The experts did not reckon with the determination of Amey, his fellow managers, and the LDV work force.

``We pared costs heavily,'' Amey says. ``Every second light in the office was turned off, and the heating turned down. Managers and assembly workers all worked very, very hard.''

At this point Amey does not claim to be more than a niche manufacturer of vans. LDV holds 14 percent of the British market, which is dominated by Ford, Renault, and Mercedes-Benz.

What it can do, Rhys says, is turn out vehicles geared to the special needs of customers. ``The big manufacturers are not keen to customize their product, whereas LDV is making that one of its main selling points.''

The company has set up a Special Vehicle Operations department to plan and execute production of ``tailor made'' vehicles. Three out of four vans currently emerging from the production line are the result of SVO treatment. The Post Office and the Automobile Association are among their best customers.

Sales to EU countries have begun to pick up, with Spain, Belgium, and the Netherlands showing interest.

Amey forecasts that up to 5,000 vans a year will eventually be sold in the EU - around one-quarter of total volume. They also have long-range plans for sales in Africa and Asia.

Another hurdle LDV will have to overcome in the next two or three years is developing new products. This may pose problems.

According to Rhys, the company's plans to spend 30 million on product development may not be enough. Most of the money will go into updating existing models; there are not enough funds available to design and produce an entirely new product range.

``In the end they may have to face the fact that they are too small to finance new models on their own,'' Rhys says. ``One option will be to make themselves as attractive as possible so that they will be able to link up with a partner capable of financing the development of completely new models.''

LDV managers say they have been in touch with other van-makers, but Amey, aware that past mergers are black spots in the company's history, is cautious about future partnerships.

``We have proved that a market exists for our product, and we have been able to turn a tidy profit in less than a year since the buyout,'' he says. ``What is needed now is careful evaluation of available options.''