A book extract by Warwick alumnus Steve Koerner
Published July 2012
In December 1969, as the British motorcycle industry was tottering on the verge of financial collapse, a brief was delivered to the Parliamentary Secretary for the Minister of Technology from the Motor Cycle and Cycle Industries’ Association, an organisation that represented virtually all motorcycle and cycle manufacturers in Britain.
The brief, which was signed on behalf of the association by Lionel Jofeh, Managing Director of BSA’s Motor Cycle Division – Britain’s dominant manufacturer – provided the industry’s explanation for its current predicament. The British motorcycle industry was once, the manufacturers claimed, ‘at the top level of world production’, but, since 1945, had been in long-term decline. This was caused in large part by the severe battering they had received at the hands of foreign competitors, first from Italy and Germany, and more recently from Japan.
Jofeh and the other manufacturers were aware, the brief continued, of widespread criticism which accused them of having ‘let the Italians and the Japanese steal our markets’. It was true that many of the overseas markets, indeed even the home market itself, once the exclusive preserve of British motorcycle manufacturers, had been taken over by their foreign rivals. The fault, they insisted, was not theirs. Rather, it was the result of government policy which during the critical years after 1945 had forced them to divert their output overseas, thus making it impossible for the British manufacturers to satisfy the strong home demand for motorcycles. This had left them unprepared to compete against the large numbers of imported motorised two-wheeled vehicles that flooded into the country after the mid-1950s onwards. Moreover, they had been hobbled for years by ‘a severe restriction on the home market’, in the form of regulations and tax, which had smothered consumer interest. Hence, even although ‘mass demand existed’, the manufacturers argued that they had been prevented from ‘getting into gear to meet it because of artificial fiscal barriers’.
Foreign rivals, by contrast, had enjoyed the full support of their respective governments, and benefited from being allowed ‘unrestricted development and sale of the simplest form of transport available – mopeds, scooters and motorcycles’. All this had placed the British manufacturers at a considerable disadvantage. While the Italian and Japanese home markets flourished, Britain’s had grown at a slower rate than it was capable of doing.
This interpretation was supported by the most basic trade statistics. In 1950, for example, there had been 761,500 two-wheeled motorised vehicles registered in Britain, a total which had increased to 1,343,000 in 1968. By contrast, the number of motor cars registered had jumped from 2,307,379 to 11,078,000 over the same period of time. Furthermore, the slower rate of growth in motorcycle usage was aggravated by an actual overall drop in production. In 1950, 171,300 motorcycles had been produced by British factories, a total which had fallen to 84,000 in 1968. By contrast, imports, which had been negligible in 1950, had shot up to 111,700 in 1968.
Such was the manufacturers’ case. However, six years later, an independent report commissioned by the Department of Industry to investigate the plight of the surviving British motorcycle manufacturers, came to very different conclusions. This report, authored by the Boston Consulting Group (BCG) and entitled Strategy Alternatives for the British Motorcycle Industry, contained sharp criticism of the manufacturers’ past performance. They had been, over the years, it charged, too preoccupied with ‘a concern for short-term profitability’, which had badly eroded their competitive position relative to their Japanese rivals.
The BCG report further noted how lower investment and antiquated factories, which produced only a fraction of Japanese output, had contributed to the poor state of the British industry. Over 1974/75, for example, despite drastic restructuring and generous government subsidies, its entire output totalled 20,000 motorcycles, compared with over 2,000,000 from just one Japanese firm, Honda. The British manufacturers were particularly criticised for what was called ‘segment retreat’. This was the process by which they reacted to the advance of their Japanese competitors, who initially built mostly small motorcycles with an engine capacity of less than 250cc, but had gradually moved ‘up’ the market with larger and larger motorcycles.
As the competition increased, British manufacturers failed to develop new and improved light- to medium-weight models to counter those of their Japanese rivals, and simply vacated the various market segments one after another. By 1975 the British industry produced nothing smaller than machines in the 500cc engine displacement class, with the majority of production in the 750cc and 850cc classes, and had nowhere left to retreat. Backed by a vastly greater manufacturing base, enhanced by modern factories and far larger research and development establishments, the Japanese now produced models that were considerably more sophisticated technically than those of the British, and had steadily encroached upon the British share of motorcycle markets around the world.
The BCG report provided the justification for Prime Minister Harold Wilson’s Labour government to cease subsidising the motorcycle industry, which had absorbed nearly £24 million of public funds since 1973. Press coverage at the time confirmed a widespread belief that British motorcycle manufacturers were the architects of their own misfortune and did not deserve continued government support. Indeed, since its publication, the report has gone on to be used at the Harvard Business School as a case study of entrepreneurial failure, and has been referred to for illustrative purposes in at least two studies of the problems confronting British manufacturing in general. Popular business journals have been attracted to the subject as well. One noted that, throughout British business history, ‘there can be few cases of industries collapsing so swiftly and so completely’.
So what had happened? How could this industry, which had been the dominating force in world motorcycle production for decades, have failed so spectacularly, and what were the factors were caused the ‘segment retreat’ identified by the BCG report?
- Steve Koerner was awarded the BAC Wadsworth Prize in 2013 for The Strange Death of the British Motorcycle Industry. The BAC Wadsworth Prize is awarded annually by the BAC to an individual judged to have made an outstanding contribution to the study of British business history in that year.
The Strange Death of the British Motorcycle Industry, published by Crucible Books (2012), is based on Steve Koerner’s PhD dissertation which was completed at the University of Warwick's Centre for the Study of Social History (now the Department of History) between 1990 and 1995. Koerner, a writer and independent scholar, lives in Victoria, B.C., Canada.
Images: Triumph motorcycle by Jason Pier in DC (via Flickr)