The purposeful Michael Edwardes was a key player in the Thatcherite revolution: a businessman who confronted the unions and reshaped a national institution in a cliffhanging serial of industrial relations. But Edwardes, who has died aged 88, was actually the choice of an exasperated Labour government to take over, in 1977, as chairman of the failing British Leyland motor company and he departed when Margaret Thatcher lost confidence in him in 1982.

In between, he became the highest profile businessman in Britain. He was an inspiration for managers who had come to feel powerless, but a bogeyman for leftwing trade unionists who accused him of reinventing macho management and called him “the poison dwarf” – a reference to his diminutive stature.

By the end of his five years at BL, he had almost halved the workforce and closed 19 out of 55 plants, but the company still produced 80% as many cars as before, and new models were also being launched. Jaguar was revitalised, though Triumph and MG shut down. It came at a cost – £1.5bn of losses charged, to Thatcher’s chagrin, to the taxpayer. But he rescued more of the company than anyone could have expected, and even his union critics credited him with a determination to do his best for the company.

Born in Port Elizabeth, South Africa, where his grandparents had emigrated to from the UK, Michael was the son of Denys Edwardes, who ran a business in the motor trade, and his wife, Audrey (nee Copeland). A tough outdoor upbringing led him to recount proudly in his autobiography, Back from the Brink (1983), how, when he lost an outboard while fishing in the remote Kromme river, his father marooned him and a friend until they finally dredged it up eight days later.

Educated in nearby Grahamstown at St Andrew’s college and Rhodes University, where he gained a law degree, Edwardes started a small grass-cutting business. But in 1951 a business friend of his father, who had battery interests, persuaded him to join the Chloride battery company in Britain. He later returned to South Africa, still with Chloride. Edwardes’ success in reorganising the company’s interests as the Rhodesian Federation broke up took him back to the UK and on to the board in 1969, becoming chairman in 1974. Achievement brought attention. He quintupled profits in five years and expanded abroad.

Michael Edwardes in 1977, the year he took the helm at British Leyland. Photograph: Evening Standard/Getty Images

He was the Guardian’s young businessman of the year in 1975, and the incoming Labour government of Harold Wilson chose him as a member of its new National Enterprise Board, its big idea for reshaping UK industry. The troubles at British Leyland, the agglomeration of British motor marques from Austin to Jaguar, became central to concerns at the NEB. But by then an expensive bailout, under the over-optimistic plan of the first NEB chairman, Lord (Don) Ryder, had turned into a disaster.

Edwardes watched appalled at Ryder’s attempts to exercise day-to- day control. The government also got the message; Ryder went, but the search for a replacement found few takers. Edwardes was approached to be chief executive under a proposed new chairman, the Scottish-American Ian MacGregor, who was already on the board. Edwardes declined, insisting he would only take over as chairman – and on secondment.

Famously, he arrived at BL with a tiny team that included both his communications director from Chloride, John Mackay, and a psychologist who was to put BL top management through his tests. Communication and the empowerment of management were Edwardes’ priorities.

When he started at BL in November 1977 workers at the Liverpool Speke factory were coming out on strike, in the latest of a series of disputes that were breaking out two or three times a day. Funds were running out. By February, Edwardes, never short of personal courage, was putting a recovery plan that would involve more than 12,000 redundancies to a meeting of 700 BL union representatives.

Later that year Edwardes closed Speke – supposedly the first of the group’s factories to be shut in Britain in 10 years. It set a pattern. Rapid assessment; a clear and public challenge to the unions to accept the plans or the company would founder; communication over the heads of the unions to workers, using leafleting and the media; and a rationing of the media’s access to Edwardes to allow only a brief clear message to be delivered – often through the open window of his car as he halted momentarily on a car-park ramp. It was a powerful and early demonstration of the art of spin.

Edwardes never had any doubt he was playing on the national stage. “Every minor dispute is carried out in full public glare; BL is the anvil on which every one of society’s ills is beaten out.”

In parallel, Edwardes applied his Chloride principles to management – moving swiftly to halve the size of the board, decentralise, and return power to line management. He wrote to managers: “Act firmly and you will be backed. Repercussions? Yes of course there will be, but I give you my word you will not be let down.”

Individual brand loyalties were resurrected – “large/specialist vehicle operations” became Jaguar once again. Edwardes was worried by the lack of new models and amazed at the absence of profit and loss figures on individual marques. He refused to back existing plans for BL’s crucial new small car. Instead, he upgraded the specification, fought for funds for new plant at Longbridge, near Birmingham, and deliberately sacked the formidable Derek “Red Robbo” Robinson, the most powerful convener, a year before the car was due so that its production would not be disrupted. It was a close-run thing, but with only lukewarm backing from some national union officials, Robinson failed to find support from his members.

It was a turning point; the Metro was launched in 1980 to acclaim and without disruption. And in a key strategic move, Edwardes started a collaboration with Honda to get new medium-sized car models quickly. He even discussed a takeover of BL by General Motors, and merger with Vauxhall, but management there failed to convince their American bosses.

In five years, Edwardes halved the workforce; factories closed included the MG plant, where cars were losing nearly £1,000 apiece. With investment and redundancy costs, the company never made a profit.

In the end it exasperated Thatcher, who had become prime minister in 1979. For her, Edwardes was no longer the hero but the man who endlessly asked for more money, and resisted her urgings to sell off parts of the company. He left at the end of his contract in 1982, making it clear that it was time for other challenges and he wanted to earn some proper money.

His own assessment was that nobody had expected him to save the whole company. “If you analyse the chunks of what I took on, a lot is profitable and not linked with BL in people’s minds today. I saw this as 40 different businesses and the more that could be saved the better.” The survival of Jaguar, Land Rover and the new Mini under different ownership were to bear him out, but the decline of the mass car business, which he had slowed, was inexorable. For the time being, Edwardes had saved BL.

He had also ignited a sea change in British management, providing managers, outside BL too, with a long-lost confidence that they could successfully take initiatives and carry workforces with them. It could easily lurch into macho management, but overall it led to a revival in British business.

Edwardes’ subsequent business career was lucrative but less obviously successful as he became the “nearly man” in a number of high profile if shortlived interventions. He was briefly the chairman of Mercury, an unsuccessful fixed-line phone company, and in 1984 became chairman of the British-owned computer company ICL. which was promptly taken over by the telecom company STC.

He turned instead to the reorganisation of another failing motor industry group, the tyre company Dunlop, only for it to be snapped up by BTR. Next stop was back to his South African roots with Minorco (1984-93), a mining company that narrowly failed to take over Consolidated Goldfields in a bitter and high profile battle.

Subsequently, Edwardes continued with other business interests in the UK and South Africa while maintaining his sporting enthusiasms, particularly squash, as president of the Squash Rackets Association (1991-95). He was knighted in 1979.

In 1958 he married Mary Finlay, the daughter of a managing director of the South African shipping line Safmarine, and they had three daughters, Susan, Judy and Penni. After the marriage ended in divorce in 1988, he married his long time business assistant, Sheila Witts (nee Guy). She, his daughters, five grandchildren and his sister Jill survive him.

• Michael Owen Edwardes, businessman, born 11 October 1930; died 15 September 2019