Rover in 10% two-year pay offer: Car maker seeks to scrap blue collar/white collar distinctions in shake-up of grades

ROVER GROUP has offered its 28,000 manual workers a two-year pay deal worth up to 10.7 per cent under a radical plan to eliminate blue-collar/white-collar demarcations - the scourge of British industry in general and car making in particular.

The overhaul marks the end of four years of change in which the once-ailing company - under the influence of Honda - has been transformed into the most efficient European car maker.

Rover wants to cut 11 pay grades to just three, which would remove many of the grey walls that prevent reorganisation and greater flexibility. Even the UK car plants owned by Japan's Honda, Toyota and Nissan have more than three grades. The Ford 2000 programme is an attempt to streamline operations at the UK's biggest car maker, but it is way behind Rover.

Garel Rhys, motor industry professor at Cardiff University, said Rover's move ranked as one of the most important organisational changes made at the company. 'It puts the final seal on a long process of streamlining and improvements at Rover.'

The deal proposes a general pay increase of 3.7 per cent from November followed by a further increase of 4 per cent - or the rate of inflation if higher - in November 1995. Inflation next autumn is expected to be around 4 per cent. However, around 12,000 lower- paid workers will receive about 10.7 per cent, as the agreement would mean lifting them into higher grades.

The deal involves nine separate improvements in conditions of employment, including extra bereavement leave, an extra day's holiday after 10 years' service and an extra day after 15 years. The car unions are recommending the offer, which will be put to a workforce ballot at the end of the month.

Rob Golding, automotive analyst at SG Warburg, said the attempt at a cultural transformation at Rover was the 'most grown-up move any European car maker had made in a long time.'

He said it was part of the long process of streamlining introduced by Honda, which sold its 20 per cent stake in Rover after the company's controversial sale to BMW earlier this year.

Honda's encouragement of greater flexibility, multi-skilling, and better conditions on the production line are key factors behind Rover's success and the envy of many car makers.

Rover's car sales in the first six months are up 31 per cent to 246,000, far higher than the industry average of 14 per cent. Exports are up 23 per cent, and the company is planning a large sales push on the US market. The productivity improvements have meant a huge cut in jobs, 8,000 since 1990, leaving a workforce of 34,000. Yesterday, Rover and the unions were both emphasising that the pay rise was a thankyou for past productivity.

A joint statement said: 'This is a fair and forward-looking agreement which recognises the contribution made by Rover people to the success of its business.'

Car workers' pay rises are slightly higher than the average for manufacturing, about 3 per cent. Ford workers will receive a 3.5 per cent rise in November. Vauxhall workers will get 3 per cent plus 1 per cent lump sum. Unions at Jaguar, owned by Ford, are in negotiations and are unlikely to accept less than Rover. Negotiations at Peugeot and Nissan start in January.