Painting a Bailout British Leyland Racing Green

By Kevin Gordon

12.12.2008

In recent news coverage, there has been extensive discussion that bailing out GM, Chrysler, and Ford will have similar results to what happened to British Leyland in the ‘70s and ‘80s. For those not familiar with the story, in this time period, almost $17 billion, of British citizens’ tax dollars (USD inflation adjusted) were injected into Leyland and the company still failed.

Wall Street analysts call the phenomenon “Bad-on-Bad Money,” stating that throwing money at these failing auto companies is like throwing a cinder block to a drowning man. I want to tell a slightly different story and one that I have heard far less often in the mainstream media.

That story is what happened when the French government loaned $5.1 billion (USD inflation adjusted) and took a significant ownership interest in a company named Renault in the 1980s. Again, for those that do not know the story, Renault was losing a billion francs a month, and two years after the bailout, they became profitable. Since this “bailout,” Renault has remained profitable and produced some amazing products inside and outside of their product line.

My point; government bailouts can work. I am sure the argument could be made that Renault was not in the same amount of trouble as GM or Chrysler find themselves in today, but that is missing the point. While the money helped and was needed to keep the company from failing, it was something else that transformed Renault. It is the same thing that transformed Nissan in the late 1990s and the same thing that saved Chrysler in the 1980s. That something else was leadership. For Renault it started with Georges Besse, for Nissan it was Carlos Ghosn (he continued what Besse started at Renault), and for Chrysler it was Lee Iacocca.

These men figured out how to steer into the skid in a way that would make Ken Block pack up his Gymkhana STI and go home. [NOTE: If you have not seen this video, click here; it is worth the 4 minutes.] These CEOs truly revitalized their respective companies. For some it was painful and not every decision was a winner, but for each of these companies, the man rowing the gears, saved the company from pending doom.

So should we continue to paint this bailout British Racing Green? I would vote for more of a Renault Blue and Yellow, or a few coats of Nissan GT-R Super Silver. The government needs to keep the companies’ heads above the proverbial water, but the bailout should trigger an extended vacation for the U.S. auto executives. Now, where did I leave Carlos’ and Lee’s numbers?  I need to call and ask them if they up for a new challenge.

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Author: Kevin Gordon

Kevin is Autosavant's owner and Editor-in-Chief, responsible for setting the overall strategy and editorial direction of Autosavant. He's also the primary contributor to Autosavant's YouTube channel (youtube.com/autosavant) where you can find a comprehensive library of new-car reviews.

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3 Comments

  1. Great point, you never hear about Renault and that success. For that matter, VW was basically state-owned for many years, and they did OK. Still doing OK.

  2. For Renault, I taught then there was nationalized at the end of World War II because Louis Renault, the president and founder of Renault during that time, was accused of collaborating with Nazi Germany http://en.wikipedia.org/wiki/Renault#World_War_II_and_after_.281939.E2.80.9371.29
    However in the 1980, François Mitterand appointed Georges Besse as Renault’s CEO/chairman to do a big clean of the place and to put Renault in the black
    http://en.wikipedia.org/wiki/Renault#Restructuring_.281981.E2.80.9395.29

  3. Excellent post. The proposed bailout does not compare with the nationalization of British Leyland. Considering how poorly run GM has been over the past 30 years, BL still makes it look like Microsoft.

    And GM has a viable turnaround plan and good products–already available in Europe, increasingly so here. BL had the Allegro and Marina, nos. one and two on most “worst car” lists.

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