Nationalisation is spreading from banks to carmakers – the US government may become majority shareholder in General Motors. Before it agrees, however, Washington should recall a cautionary tale: British Leyland.
The UK government took state control of the ailing carmaker, employing 180,000 and supplying 35 per cent of Britain's cars, in 1975. After £3.4bn (today worth £11.2bn) was injected in 13 years of state ownership, the shrunken, still-struggling successor Rover Group went bankrupt in 2005, ending mass production by UK-owned carmakers. Today, only 30,000 UK jobs survive in onetime Leyland businesses.
Lesson one from the saga is beware of smaller, well-managed groups trying to gain scale by acquiring larger, unhealthy ones. British Leyland's difficulties grew from Leyland Motor Corporation's attempt to do that through its 1968 merger with British Motor Holdings. Sergio Marchionne, Fiat chief and would-be suitor of Chrysler and General Motors' European arm, take note.