The next installment…
EVALUATION OF THE ALTERNATIVE COURSES OF ACTION
- Closure of AEC Plant Now
To avoid industrial relations problems a years’ notice of closure would have to be given. If AEC are not to suffer from the reduction in volume, with its consequent losses (see 2 below), this must take place before the major volume is lost, i.e. it must close early 1972.
The effect of this would be to lose a substantial production volume in the Division unless another company could make up the extra volume with similar vehicles. The only plant with a similar model range to AEC is Leyland Motors.
Despite continual efforts and a full order book Leyland Motors have not been able to make any significant increases in production volume; in fact there has been a 2% reduction in Leyland chassis production between 1968 and 1970. (Actual average weekly volumes 191 and 187).
It is unreasonable, on the above time scale, to expect Leyland Motors to increase their production rate equal to an extra 130 vehicles per week, which represents an increase of 70% over the Leyland production rate. The Division would lose this volume which consists very largely of vehicles in the profitable heavy end of the market.
This lost volume would be picked up by the independents and foreign imports, substantially increasing their strength. It will be difficult for the Division to increase its penetration at their expense in the future when improved models are available.
It can be concluded that the closure of AEC within 12 months will result in a loss of market share plus a loss of revenue and profit to the Division.
This action is not recommended.
- Run Down of Production to Meet the New Demand
The loss of 25% of the chassis production would not enable any production departments in the AEC plant to be closed completely. It is considered that unless part of the plant could be closed and disposed of to reduce overheads, the reduced volume could not be made profitably.
Lack of action will lead AEC into a spiraling loss situation and must be avoided.
- Increase the Sales of Other AEC Vehicles
The AEC vehicles have been sold in most of the markets for which they are suitable. There are a few opportunities which can be exploited in the short term, e.g. the export market will take some more Rangers, and the home market may take a few more Mandator tractors. The Marshal can be uprated to 24 tons with minimum modification, this should gain some extra sales (approx. 100 per annum). The Mammoth Major 8 can be uprated to 28 tons, with an anticipated minor expansion of the eight wheeler market this model should achieve 100 incremental unit sales per annum.
The total incremental volume of 200 per annum will make little difference to the overall position of the company. Volume taken by the Leyland Lynx and Bison from the Mercury and Marshal will soon erode this small increase.
This action cannot be considered as a satisfactory solution.
- Increasing Sales by the Introduction of New and / or Improved AEC Models
In the short term the only new models which might give substantially increased sales volumes are the V8 models, which may be re-introduced in September 1971, with some modifications to the existing specification.
However, only a marginal increase in sales can be expected from vehicles fitted with this engine in its present condition. This incremental volume will make a small contribution to overhead recovery but will make little difference to the overall company position.
However, if all other avenues are closed to AEC, a crash development programme will have to be embarked upon to increase the competitiveness of the present vehicles. This would include: -
A. Adoption of the 5.5" lift cab and extended front panel (where applicable). This would result in improved cooling, improved reliability, and thus improved sales.
B. Development of the 505 and 760 engines in both naturally aspirated and turbo-charged forms to give increased power, better fuel consumption etc.
C. Development of the Swift bus chassis and continued sales efforts in all markets.
D. Development of new easy-build cab to accept the V8 and 760 for Southern Hemisphere markets.
E. Development of the V8, principally to improve durability.
F. Development of the Sabre coach chassis, possibly fitting proprietary V8 engines as options.
The successful conclusion of the above developments would enable the sales of AEC vehicles to be maintained despite the increased competitiveness of other Divisional models and competitive vehicles.
However the development of the 505 and 760 engines, the Swift and the easy-build cab are directly opposed to Divisional policy and would slow the increase in the 500 Series vehicles’ sales quite appreciably, depress sales of the Leyland National, and of the proposed FPT70 premium heavy goods range.
If no other models are available to AEC these developments must take place to keep the plant profitable.
Owing to adverse effects on other Divisional models this cannot be considered to be a satisfactory solution.
…to be continued