MONEY Textile leverage for ICI
NICHOLAS DAVENPORT
It was a stroke of luck that the Government inquiry into the textile industry should have been chaired by a Manchester ex-business- man and advocate, Mr Harold Lever. From all the accounts I received it was conducted with great bonhomie and devastating real- ism. It would be hard to find the textile man who could lead the Paymaster-General up the garden. The occasion for the inquiry was the Christmas bombshell of a £50 mil- lion bid for Viyella made by Imperial Chem- ical Industries, which desired to merge Viy- elle with Carrington and Dewhurst. The tex- tile trades, always fearful of the fibre giants, were immediately up in arms. As the Gov- ernment had decided last June to call a halt to further mergers between the larger firms in the textile industry a new inquiry had to be made, and last week Mr Lever reported to the Commons the Government's approval of his labours.
In my view it was a sensible, realistic de- cision, but it has not had a very good press. The to proposals are not to be referred to the Monopolies Commission but are to be allowed to proceed subject to certain under- takings. These are that to should reduce its shareholding in the combined company to not more than 35 per cent as soon as prac- ticable, that it should not use its sharehold- ing to influence the two companies in their choice of fibres or other materials, and that the board of the combined company should have an independent chairman of standing and independent non-executive directors of which ICI will provide only one. Perhaps the last undertaking is the most important of all. The intelligence and expertise of most boards of directors in the textile industry, as in other industries, are so appallingly low that it is refreshing to see that the Government —or is it Mr Lever?—attaches great weight to the composition of the boardroom.
Proposals by other fibre producers to make acquisitions in the textile industry will be considered on the same basis and a code will be drawn up, in consultation with the producers, to prevent unfair trading in fibres. The code will cover prices, terms and conditions of sale, the supply of goods, fair trading practices and disclosure of informa- tion.
'In the course of my inquiry', said Mr Lever, 'it became evident that if Lancashire is to compete successfully with imports by 1972, when quotas will be replaced by a tariff on Commonwealth imports, a substan- tial increase in the rate of re-equipment is needed . . . I am pleased to say that the Board of Inland Revenue have agreed that the annual depreciation allowance for tex- tile machinery—worked for three shifts— should be increased to 25 per cent, the maxi- mum permissible under existing legislation'.
What more could they want? Yet there were general murmurs of pretest against the Government's decision. Lancashire has always been frightened by the bogey of ver- ticalisation, that is, when the great fibre pro- ducer extends forward down the line of spinners, weavers, knitters, dyers and finish- ers, Courtaulds has for years pursued a
policy of forward integration and is greatly feared, being aggressive, ruthless and highly efficient. The wool textile delegation not only opposed the ict scheme but asked the gov- ernment to divest Courtaulds of its textile trading interests. The only note of strong approval came from Mr Joe Hyman, the former boss of Viyella, who said that Mr Lever's plan was 'the most constructive step taken in the textile industry since the intro- duction of man-made fibres'. But Mr Hyman has been known to exaggerate before. In- cidentally, it was Mr Hyman's secret nego- tiation with to which caused the great row on his board. How right he was!
It is time the textile industry woke up to realities. Why or how does this ici verti- calisation become monopolisation? The fibre producers acquire their great market power not because they own or control a few textile trading companies but because they are predominant in the manufacture of their particular fibre. They do not have to own shares in a textile trading company to acquire power over it; they have merely to lend it money. There are foreign fibre pro- ducers who have tied textile houses simply because they have bailed out their manage- ments when they got into financial trouble. ici would have bailed out Klinger even if it had had no financial interest. Both Viyella and Carrington and Dewhurst would prob- ably have been helped by to in due course without a formal merger scheme. Ict have already said that the companies they help are free to buy fibres from other producers. It seems clear that to, unlike Courtaulds, is a genial giant.
There are. therefore, no grounds for com- plaint on the part of the foreign fibre pro- ducers who have plants in Britain or North- ern Ireland. If they want to imitate to and acquire a share interest in some of their customers they can submit their proposals to Mr Lever and get a fair hearing. The Amer- ican Monsanto has said that it will do so. British Enkalon (a subsidiary of the Dutch AKU group) has declared that in order to protect its Northern Ireland investment it will encourage its European customers to set up plants in other UK development areas. Hoechst of Germany has also made threat- ening noises. The more they imitate to the better for the British textile industry and the British consumer.
The Lever committee solved the problem in the only possible way. It could not have let the standstill go on. It could not have restricted la and allowed the Courtaulds empire to become even more powerful. It could only have let the la merger plan go forward with proper safeguards. This it has done and Sir Peter Allen, chairman of Ice has happily said that Mr Lever's terms are acceptable. The Committee might be critic- ised for not attempting to curb Courtaulds, but this was not in their brief. Courtaulds, as I have said, is an agressive and ruthless giant, and if the ta merger had not been allowed it might even have driven Carring- ton and Dewhurst out of business. Now there is a chance of an integrated textile
group under ict auspices which may become strong enough to stand up to Courtaulds.
With this healthy shake-up in the textile industry I venture to suggest to the unem- ployed Mr Hyman that he should strike while the iron is hot. He should think up another merger of textile companies and go to the great Burlington Industries of America to back it. He would probably get a consenting smile from Mr Levers ,
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