The Westland helicopter company was small by international aerospace standards but it was Britain’s only helicopter manufacturer. Unlike the bulk of the aerospace industry it was never nationalized by the Labour Government and was reasonably profitable into the early 1980s. It then began to run into financial trouble. Mr Alan Bristow bid for the company in April 1985 and it was in the light of this that on 30 April Michael Heseltine informed me and other members of the Cabinet’s Overseas and Defence Committee of the Ministry of Defence’s view of Westland. Westland hoped to obtain an order from the Indian Government for helicopters partly financed from our Overseas Aid budget. But they were also looking to the MoD for crucial new orders: from Michael’s minute it was clear that they would look in vain. He made no suggestion at this stage that Westland was of strategic significance to Britain. Indeed, he emphasized that he would not wish to give the company extra orders for which there was no defence need. He added that even with the best will in the world it was difficult to see a single British specialist helicopter company competing in worldwide markets in the longer term.
In mid-June we learned that Mr Bristow was threatening to withdraw his bid unless the Government provided assurances of future MoD orders and agreed to waive its right to repayment of over £40 million of launch aid provided by the DTI for Westland’s latest helicopter. I held a series of meetings with Michael Heseltine, Norman Tebbit, Nigel Lawson and others. At the meeting on Wednesday 19 June Michael suggested a scheme by which we could provide £30 million in aid to the company, but explained that what was important to the defence programme was not the existing Westland company but rather Britain’s capability to service existing helicopters and to develop the EH101 project (see below). In spite of that, we all agreed that it was desirable to avoid Westland going into receivership, which appeared likely if the Bristow bid was withdrawn. In the end we decided that rather than provide aid to the company in the midst of a takeover bid (which in any case might have breached company law), Norman Tebbit should encourage the Bank of England to bring together the main creditors with the object of putting in new management and developing a recovery strategy as an alternative to receivership.
As a result Mr Bristow withdrew his bid and in due course Sir John Cuckney took over as Chairman, bringing his extraordinary talents to the task of securing Westland’s future. Shortly afterwards it emerged that a large privately owned American company was considering making a bid for Westland. The new Westland management opposed this particular bid. Norman Tebbit and Michael Heseltine were also against it. But while noting the general arguments against an American takeover I made it clear even at this stage that a different American offer would have to be judged on its merits.
The situation of Westland was one of the first difficult issues which Leon Brittan had to face when he took over at the DTI in September. On Friday 4 October Leon sent me a thorough assessment of the position. The matter was urgent. It seemed likely that the company would have to go into receivership if a solution could not be found before the end of November. Leon urged me to take up the issue of India’s proposed helicopter order with Rajiv Gandhi when he visited Britain in October. As part of the proposed financial reconstruction of the company the Government was asked to underwrite some helicopter sales. We would also have to decide what to do about the launch aid, which seemed unlikely to be recovered. What would be the most controversial aspect of the package put forward by Sir John Cuckney, however, was the introduction of a new large minority shareholder to raise new capital. No British company was prepared to take such a shareholding. The most likely candidate was the large American company, Sikorsky. Westland were in contact with their European counterparts, but the prospects of a European solution within the timetable did not look good.
It was from a note of a meeting on Wednesday 16 October between Leon Brittan and Michael Heseltine that I first read about Michael Heseltine’s concern that Sikorsky would turn Westland into ‘merely a metal bashing operation’. Michael did not wish to go so far as to oppose Sikorsky’s taking the 29.9 per cent in any circumstances, but he did think it important to make every effort to find an acceptable European shareholder instead. More ominously, he apparently did not think that Sir John Cuckney was the right person to deal with negotiations with the European companies, since the latter looked to their governments for guidance in such matters. Michael argued that the approaches needed to be made at a political level by the Ministry of Defence.
It was now becoming clear that the preference of the Westland board was likely to be for Sikorsky, while Michael Heseltine’s preference was very different. Other things being equal, we would all have preferred a European solution. Since 1978, European governments had agreed to make every effort to meet their needs with helicopters made in Europe. This did not, of course, mean that we were bound to rule out purchases of non-European helicopters, but it did obviously incline us in the European direction.
I still do not understand why anyone later imagined that the Westland board, Leon Brittan and I were all biased against a European option. In fact, the Government bent over backwards to give that option and Michael Heseltine every opportunity to advance their arguments and interests. Yet in the frenzy which followed there was almost no limit to the deviousness and manipulation we were accused of employing to secure Sikorsky its minority holding.
At the end of November the opposition between the Westland board’s views and Michael Heseltine came out into the open. Sikorsky made an offer for a substantial stake in Westland which the Westland board was inclined to accept. But entirely off his own bat Michael now called together a meeting of the National Armaments Directors (NADs) of France, Italy and Germany as well as the United Kingdom to agree a document under which the respective governments would refrain from buying helicopters other than those designed and built in Europe. This was more than a blatant departure from the Government’s policy of maximizing competition to get the best value for money: it also placed Westland in an almost impossible position. There was now an obvious risk that if Westland concluded its deal with Sikorsky it would not be deemed to meet the NADs criterion and would be excluded from all further orders from the four governments, including the UK. It was my view — and Leon Brittan’s — that the Government must not seek to prevent any particular solution to Westland’s problems: it must be for the company to decide what to do. Yet by a stroke of a pen Michael Heseltine was effectively ruling out the company’s preferred option for its future. If Westland were to be able to make a free decision it would be necessary for the Government to overrule the NADs decision. This, of course, meant overruling Michael.
I realized that we might have to do this. Although these were essentially matters for the company, the closer that we looked at the European option the less substantial did it seem. The three European companies concerned — Aérospatiale (France), MBB (West Germany) and Agusta (Italy) — were, as Michael certainly knew, subject to pressure from their own governments. Aérospatiale and Agusta were state-owned and MBB was substantially financed by the West German Government. All the European companies were short of work and promises of more work for Westland from Europe seemed likely to remain just promises. By contrast, Westland had been collaborating with Sikorsky for several decades and had produced a number of models under licence from them. Indeed, most of not just Westland’s but Agusta’s existing helicopter designs were of American origin. Michael Heseltine argued that if Sikorsky took even a minority stake in Westland they would use their position to put pressure on the Ministry of Defence to order American-designed Blackhawk helicopters. In fact, it was widely rumoured that the armed services would have liked the MoD to do just that rather than wait for the European equivalent which was now still only at the stage of feasibility study. My own personal view of all this was of little importance, but I could well understand, as would anyone else conversant with the facts, why Westland had their preference for the American option and how angry they and Sikorsky were with Michael Heseltine�
��s manoeuvrings.
Nor, by now, was the ‘American’ option American only. Sikorsky had been joined by Fiat in their bid. Not to be outdone, however, Michael Heseltine suddenly revealed that British Aerospace would be ready to join the European consortium, thus making it less ‘foreign’. There were several accounts of how precisely this had occurred: I had my own opinions.
I held two meetings with Michael Heseltine, Leon Brittan, Willie Whitelaw, Geoffrey Howe, Norman Tebbit and Nigel Lawson to discuss Westland on Thursday 5 December and the following day. (British Aerospace entered the field between the first and second meetings.) By the time of the second meeting Michael had totally changed his line from the one he had pursued in April. Suddenly the issue had become whether it was right to allow a significant British defence contractor to come under foreign control. But the real issue was whether the Government should reject the recommendation from the NADs, thus leaving Westland to reach their decision whether to accept the Sikorsky offer or that from the European consortium on straightforward commercial grounds. By the end of the second meeting it was clear that for most of us the argument had been won by Leon Brittan: the NADs decision should be set aside. But Geoffrey, Norman and, of course, Michael strongly dissented and so I decided that a decision should be reached in a formal Cabinet Committee. ‘E’(A)[62] enlarged as appropriate would meet on Monday 9 December.
Over the weekend the pace quickened and tempers frayed. Michael Heseltine blocked a joint MoD and DTI paper on Westland and had it redrafted to emphasize the risks of a Sikorsky bid. Leon Brittan was furious, but allowed it to go forward to ‘E’(A). This was a mistake. Michael said that the French Defence minister also telephoned over the weekend to place unspecified sub-contract work on the ‘Super Puma’ helicopter with Westland provided it was not sold to Sikorsky. Monday morning’s newspapers covered the row between Michael and Leon.
The main argument of substance which Michael Heseltine advanced was that the attitude of the Europeans to a Sikorsky deal would jeopardize future collaboration between Westland and the European defence companies. Some of this work was certainly important. Westland’s collaboration with Agusta on a large helicopter known as the EH101 was due to become the main basis of its business in later years. By contrast, the projected troop-carrying helicopter known as the NH90 was at a very early stage. In fact these fears were exaggerated. Though the NH90 was abandoned in April 1987, the EH101 subsequently went ahead successfully. Neither decision had anything to do with the ownership of Westland.
But the real sleight of hand was Michael’s suggestion that as a result of the recommendations of NADs two projected European battlefield helicopters — an Anglo-Italian model and a Franco-German one — could be rationalized and that the savings in development costs which for the UK might amount to £25 million over the next five years would become available for extra work for Westland. This would enable additional helicopter orders to be placed by the MoD to help fill the gap in production work. Whether or not one thought that this £25 million was in fact likely to be saved or whether this was the best way to spend it seemed almost beside the point. It appeared that for Michael Heseltine the procurement budget of the MoD and arrangements with other governments were to be manipulated in whatever way necessary to secure his own preferred future for this modest helicopter company. What small sense of proportion Michael possessed had vanished entirely.
At the ‘E’(A) meeting on 9 December Sir John Cuckney, who had been invited to attend and speak, brought matters down to earth. Westland needed fundamental reconstruction and an improved product range and it was the view of his board that this was best met by Sikorsky. The longer it took to make the decision the greater would be the pressure on the share price. Westland’s accounts were due to be published on 11 December and the company could not maintain market confidence if publication was delayed much beyond that.
There was a majority at the meeting in favour of overturning the NADs’ recommendation, but instead of terminating the discussion and summing up the feeling of the meeting in favour of that, I gave Michael Heseltine (and Leon Brittan) permission to explore urgently the possibility of developing a European package which the Westland board could finally accept. But if this had not been done and a package which the Westland board could recommend had not been produced by 4 p.m. on Friday 13 December, we would be obliged to reject the NADs recommendation.
In fact, the Westland board did not accept the European bid and chose to recommend that from Sikorsky-Fiat. But Michael had now developed another fixation or perhaps tactic. At the ‘E’(A) meeting it was recognized in discussion that the timetable would allow for another meeting of ministers before the Friday deadline. But there was no decision to call a meeting; and indeed none was necessary. What was the point? Westland’s board knew precisely where they stood: it was up to them and the shareholders. Michael had already started muttering. He urged John Wakeham to get me to call another meeting, saying it was a constitutional necessity under Cabinet government. It so happened that officials had rung round to see whether people would be available if a further meeting was called: but that was very definitely not a summons to a meeting, because no meeting had been arranged. This was of little consequence, however, because from this point on Michael became convinced that he was the victim of a plot in which more and more people seemed to be involved. Obviously, it now involved Cabinet Office civil servants. Who might be revealed as a conspirator next?
The next twist came soon. Without any warning Michael raised the issue of Westland in Cabinet on Thursday 12 December. This provoked a short, ill-tempered discussion, which I cut short on the grounds that we could not discuss the issue without papers. Nor was it on the agenda. The full account of what was said was not circulated, though a summary record should have been sent round in the minutes. Unfortunately, by an oversight this was not done. The Cabinet Secretary noticed the omission himself and rectified it without prompting. However, Michael Heseltine was not satisfied with the brief record, complaining that it did not record his ‘protest’. For Michael the plot was thickening fast.
Michael continued his campaign up to and over Christmas. He lobbied back-benchers. He lobbied the press. He lobbied bankers. He lobbied industrialists. GEC, of which Jim Prior was chairman, mysteriously developed an interest in joining the European consortium. The consortium itself came forward with a new firm bid. Each new development was adduced as a reason to review the Government’s policy. The battle was fought out in the press. There was an increasingly farcical air about the affair, which was making the Government look ridiculous. There was even a completely contrived ‘Libyan scare’. Michael Heseltine suggested that the long-standing involvement of the Libyan Government in Fiat raised security questions about the Sikorsky bid. In fact, Fiat would have owned 14.9 per cent of Westland and Libya owned 14 per cent of Fiat. Fiat already supplied many important components for European defence equipment. The Americans, who were even more sensitive than we were about both security and Libya, seemed quite content for Fiat to be involved with Sikorsky.
I rejected Michael’s argument that we needed now to come down in favour of the European bid. But the public row between Michael and Leon continued over Christmas.
Westland’s board were still extremely anxious about whether they could look forward to British and European government business. In answer to John Cuckney, I wrote to say that ‘as long as Westland continues to carry on business in the UK, the Government will of course continue to regard it as a British and therefore European company and will support it in pursuing British interests in Europe.’ Michael had wanted to include a good deal of other less reassuring material in my reply but I rejected this. Imagine, therefore, my admiration when I found early in the New Year that Lloyds Merchant Bank had sent him a letter which enabled him to make all the points in his published reply about what — in Michael’s view — would happen if Westland chose Sikorsky rather than the bid of the European consortium. It was in response to Michael’s lette
r that the Solicitor-General wrote to him of ‘material inaccuracies’. The leaking of the Solicitor-General’s letter to the press magnified the Westland crisis and eventually led to Leon Brittan’s resignation; but all that lay in the future.
I now knew from Michael’s behaviour that unless he were checked there were no limits to what he would do to secure his objectives at Westland. Cabinet collective responsibility was being ignored and my own authority as Prime Minister was being publicly flouted. This had to stop.
Westland was placed on the agenda for the Cabinet of Thursday 9 January. At that meeting I began by rehearsing the decisions which had been made by the Government. I then ran over the damaging press comment which there had been in the New Year. I said that if the situation continued, the Government would have no credibility left. I had never seen a clearer demonstration of the damage done to the coherence and standing of a Government when the principle of collective responsibility was ignored. Leon Brittan then Michael Heseltine put their respective cases. After some discussion, I began to sum up by pointing out that the time was approaching when the company and its bankers at a shareholders’ meeting had to decide between the two consortia. It was legally as well as politically important that they should come to their decision without further intervention directly or indirectly by ministers or by other people acting on their behalf. That must be accepted and observed by everyone and there must be no lobbying or briefing directly or indirectly. Because of the risks of misinterpretation during this period of sensitive commercial negotiations and decisions, answers to questions should be cleared inter-departmentally through the Cabinet Office so as to ensure that all answers given were fully consistent with the policy of the Government.
Everyone else accepted this. But Michael Heseltine said that it would be impossible to clear every answer through the Cabinet Office and that although he did not envisage making any new statements he must be able to confirm statements already made and answer questions of fact about procurement requirements without any delay. I suspect that no one present saw this as anything other than a ruse. No one sided with Michael. He was quite isolated. I again summed up, repeating my earlier remarks and adding that consideration should also be given to the preparation under Cabinet Office auspices of an interdepartmentally agreed fact sheet which could be drawn upon as a source of answers to questions. I then emphasized the importance of observing collective responsibility in this and in all matters. At this Michael Heseltine erupted. He claimed that there had been no collective responsibility in the discussion of Westland. He alleged a breakdown in the propriety of Cabinet discussions. He could not accept the decision recorded in my summing up. He must therefore leave the Cabinet. He gathered his papers together and left a Cabinet united against him.
The Downing Street Years, 1979-1990 Page 56
