Press Report : MG Rover Directors claim Brown vetoed £120m loan

Jon Griffin, Birmingham Post, 8th July, 2009

Phoenix Four claim Gordon Brown vetoed £120m loan for MGR

Phoenix Four claim Gordon Brown vetoed £120m loan for MGR

Tony Blair wanted to save Longbridge with a £120 million Government loan but was thwarted at the eleventh hour by then Chancellor Gordon Brown, claim the Phoenix Four. The allegation that Brown “pulled the plug” on the Birmingham car firm in spring 2005 is one of a series of criticisms levelled at the Government and the Department of Trade and Industry in the MG Rover Dossier.

The Dossier, issued by PR advisers Media House International, points the finger of blame for the closure of Longbridge, with the loss of more than 6,000 jobs, directly at Gordon Brown. The document says: “The Directors firmly believe one vital fact – Prime Minister Tony Blair wanted to save MG Rover. It was then Chancellor Gordon Brown who pulled the plug on advice from his special adviser Shriti (now Baroness) Vadera.”

It continues: “Having made the offer of a £120 million bridging loan, subject to PVH [Phoenix Venture Holdings] Directors’ agreed contribution of £10 million, the offer was suddenly and mysteriously withdrawn. MG Rover closed in April 2005. Four years later the workforce and the public deserve to be given the full reasons for its demise.

“Various Government departments have refused all requests for information and are treating FOI with contempt. The inquiry has cost the taxpayer more than £16 million. PVH provided five years of high quality jobs for 6,000 people, not to mention between 20,000 and 30,000 supply chain jobs. Unlike the recent banking bail-outs, the Phoenix Directors pledged substantial personal sums in support of the offered and then withdrawn short-term Government loan.

“The DTI not only failed to support MG Rover but they poured millions into rival foreign manufacturers such as Ford, Nissan, BMW, Vauxhall and Peugeot. The DTI’s dealing with China was amateurish at best and malicious at worst. The Nanjing Automobile Corporation was appalled by the behaviour of the DTI under the then Secretary of State, Alan Johnson.”

The dying days of the company were painful and the negotiations tortuous and the dealings with the Labour Government were characterised by leaks, lies, disinformation and double dealing. Since then the Directors suffered a torrent of media abuse fuelled by the No.10 spin machine and designed to distance the closure of MG Rover as far away as possible from the door of Brown and Vadera.” The Phoenix Four’s PR Advisers, Media House International

The report says former Longbridge workers “still deserve to be given the full story behind the closure of the last independent volume car maker in Britain. All they have is an unfathomable referral to the Serious Fraud Office and yet more delay and obfuscation. The Department for Business, Enterprise and Regulatory Reform (BERR) gave several reasons as to why the inquiry into the closure took such an interminable time.

“These reasons included: ‘the inquiry is extremely detailed and needs proper time to draw the right conclusions’ or ‘the Directors are having their legal advisors hamper the progress.’ Neither of these reasons were justifiable or true and the Directors said so for some considerable time.

“The inquiry was led by Mr Gervase McGregor of accountants BDO Stoy Hayward and barrister Guy Newey, QC. The total cost attributable to the inspectors is over £16 million. However, this figure is only the tip of the iceberg. In fact the collapse of MG Rover has cost the British taxpayer hundreds of millions. Certainly the taxpayer could have avoided a further £150 million if the original joint venture with SAIC was still in place at Longbridge.

“It is not too difficult to quantify the above losses to the taxpayer. However what remains a major difficulty is why the 6,000 former MG Rover employees have been kept in the dark over the final days of their company. The four Directors of Phoenix Venture Holdings – John Towers, Nick Stephenson, Peter Beale and John Edwards – are in a not dissimilar position and still have no idea of what they are supposed to be accused.

“The dying days of the company were painful and the negotiations tortuous and the dealings with the Labour Government were characterised by leaks, lies, disinformation and double dealing. Since then the Directors suffered a torrent of media abuse fuelled by the No.10 spin machine and designed to distance the closure of MG Rover as far away as possible from the door of Brown and Vadera.”

The report says that, following MG Rover’s collapse, then Trade and Industry Secretary Patricia Hewitt asked the regulatory Financial Reporting Council (FRC) to conduct a review of the accounts of MG Rover and its associated companies for the past five years. “The FRC report has never been made public after being suppressed by the Government. Lawyers acting for Phoenix Venture Holdings and Media House associates submitted more than 30 separate questions to various Government departments under the Freedom of Information Act.

“However, all requests for information that could shed light on Government thinking and decision-making during the crucial period before the £120 million short-term loan to save the company was suddenly abandoned have been denied. Yet none of the information requested could be judged to be commercially sensitive since MG Rover is now extinct.”

It is clear that, since the demise of MG Rover, there was a concerted campaign to lay the blame at the door of the Directors of Phoenix Venture Holdings. Despite Gordon Brown and Shriti Vadera’s lack of conviction about the ultimate Joint Venture process that the £120 million loan was meant to facilitate, the essential elements of that JV have now been put in place, independently by the now merged Nanjing and SAIC, but at an enormous and unnecessary cost in terms of jobs and taxpayers’ money.” The Phoenix Four’s PR Advisers, Media House International

The report claims the Phoenix Consortium saved MG Rover from closure “at the eleventh hour. When the deal was signed, BMW’s liquidation team from Munich was already on the Lufthansa flight heading for Birmingham. In its five-year tenure the Consortium invested £1.3 billion in the company, raised from negotiated sources.

“Phoenix significantly reduced the huge losses being made by the company under BMW ownership. Losses in excess of £700 million under BMW stewardship were reduced to below £100 million under Phoenix. In its negotiations with SAIC/Nanjing, Phoenix negotiated a value for the company of £400 million.

“Phoenix was in the process of developing electric hybrid versions of the Rover 25, the Rover 75 and the MG TF. When the Government precipitated MG Rover’s collapse, this vital technology, and the opportunity for a lead on electric vehicles, was lost to the UK.”

The report concludes: “It is clear that, since the demise of MG Rover, there was a concerted campaign to lay the blame at the door of the Directors of Phoenix Venture Holdings. Despite Gordon Brown and Shriti Vadera’s lack of conviction about the ultimate Joint Venture process that the £120 million loan was meant to facilitate, the essential elements of that JV have now been put in place, independently by the now merged Nanjing and SAIC, but at an enormous and unnecessary cost in terms of jobs and taxpayers’ money.

“The conclusion that we have reached is that the Government is doing and will do anything to disguise the role played by senior political figures in the closure of MG Rover. And, as in the recent revelations over MPs’ expenses, it is clear that adherence to Freedom of Information means nothing to this Government.”

[Source: Birmingham Post]

 

Posted in: AROnline News, MG Rover
Clive Goldthorp

About the Author:

Clive claims that his interest in the BMC>MG story dates back to his childhood in the 1960s when the family’s garage premises were leased to a tenant with an Austin agency. However, back in the 1920s and 1930s, his grandmother was one of the country’s first female Garage Proprietors so cars probably run in his genes! Admits to affairs with Alfa Romeos, but has more recently owned an 06/06 MG TF 135 and then a 15/64 MG3 Style… Clive, who was AROnline’s News Editor for nearly four years, stood down from that role in order to devote more time to various Motor Racing projects but still contributes articles on as regular basis as his other commitments permit.

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  1. Simon Woodward says:

    THE PLOT THICKENS!!!!! HOW MUCH OF OUR MONEY DID MR BROWN SPEND ON THE BANKS????

  2. Alex Scott says:

    What did Mr. Clarkson say about Brown? I think he was right, but then Clarkson doesn’t like Rover either, which is unfortunate. I do still wish MG-Rover had survived – it’s true the cars were dated but they filled a void, which is still missing today. Alex.

  3. Hilton says:

    I think that, had the Government “loan” proceeded, the SAIC deal might have been saved and MG Rover could still be around today (though maybe not in the current recession?). I’m surprised to hear about electric hybrid versions of the Rover 25 and 75 being developed though.

    Government Ministers (Patricia Hewitt), of course, do their bit in closing a good company down, then walk/drift away and wash their hands of the matter… OK for them!

  4. Irish Rover says:

    Towers and Co. are obviously determined not to be made into the fall guys for MGR’s failure – they know just how much the Government was involved in it and are determined to fight back. This will get very messy.

  5. Simon Woodward says:

    Alex Scott – I’m not sure – was the Clarkson comment about BROWN the one about lorry drivers and ladies of the night and, if so, does Brown have a HGV licence? He will need one after next May with a bit of luck because no one else will be daft enough to employ him! Personally, I wouldn’t even pay him used bus tickets!!!! (Sorry, no offence to lorry drivers – the vast majority are a fine bunch of honest and hard working guys.)

  6. Mark Falconer says:

    That’s New Labour for you – worse than the bloody Tories. I grew up in the 80s and always said I’d vote Labour when I was old enough. I never did and now most certainly never will.

    The Government should be ashamed of themselves for what they’ve done. MG Rover never really stood a chance and the Phoenix Four are not completely to blame. As the report above says, they did manage to stem the massive losses mostly but did make mistakes (overpricing the CityRover and failing to produce the estate and saloon versions of it that I’ve read about on this site).

    Due to the lousy German asset strippers (Land Rover, MINI and, for no good reason, R30), the company was always fighting a losing battle. I despise BMW and all they stand for. I will never ever buy one of their products in my lifetime

    We all know about BL’s problems during the 70s and 80s. Some pretty dire cars were built but also some inspired ones.

    Almost every car I’ve owned has been Rover or MG. 1985 Rover 200, a 1995 Rover 800, a 200 and a 600 (all rust buckets, but the 800 could really shift!), Mk1 Disco and a 1999 Freelander. My very first brand new car was an MG ZS 120. I’m now running a ’54 plate Rover 75 Connoisseur and am dreading the day it gives up the ghost as I don’t know what I’ll buy….Maybe I’ll save for a new Jag XJ :).

  7. @Simon Woodward
    I believe that Gordon Brown does not, in fact, possess any type of Driving Licence…

  8. Richard says:

    This Government are not too keen on British-owned manufacturing – the record is pretty unequivocal on that score.

    Something smelly lies beneath their grubby fingers or, otherwise, they are incredibly incompetent.

  9. Honourary Swede says:

    Mark Falconer :

    Due to the lousy German asset strippers (Land Rover, MINI and, for no good reason, R30), the company was always fighting a losing battle. I despise BMW and all they stand for. I will never ever buy one of their products in my lifetime.

    I cannot understand how, in the case of Land Rover, selling something for less than you have paid and invested in it without receiving a penny profit from and, in the case of Mini, taking something for which you have funded 100% of the design, development and tooling can be called Asset Stripping.

    As for the R30, the production rights and tooling were offered to the Phoenix 4 for less than the cost of the investment in the tooling to date, but the Phoenix 4 were not interested. My opinion is that Towers thought he could make a quick profit by brokering a deal with either Honda or PSA to buy the business, so did not not want the distraction or cash flow issues of a big investment project like the R30. That really is Asset Stripping.

    The real crime occurred in 2000 when Mr Mandelson refused BMW a £20 million grant to offset the difference in cost between BMW choosing to redevelop Longbridge over a proposed green field site in Poland. Relative to the total investment BMW were planning and benefits to the country that was pennies.

  10. Simon Woodward says:

    We all know the Tories did some pretty crap things but one thing they did do well was encourage foreign investment. Honda, Toyota, Nissian, Ford, Peugeot and even BMW to name but a few but what has this Government done to encourage investment?

    Just look at the problems: JLR, Honda at Swindon, LDV, the Transit plant in Southampton and this just the tip of the iceberg. Why do we have a unelected president MANDY running things? You only had watch his performance on the GM sell off last month to see what a waste of space he is.

    We cannot survive unless we invest NOW – all this training people up for the future is great but, in the meantime, the foundations of that future are crumbling TODAY!!!! Why hasn’t the Government stopped OUR Police Forces buying Volvos when Jaguar and Land Rover have the range of vehicles to fulfill all the needs of the police in the UK. Do the French police drive around in British-made cars or the Germans or the Swedes …….? The answer is a big NO!!!!!!

  11. Tony M says:

    Once again we see a total lack of interest from this Government which is why its voters are deserting by the millions. This, once more, is a cynical ploy to divert attention from the issues that are plaguing its popularity (or lack of!). Somebody has had to take a kicking to deflect the flack from the current administration’s recent woes and, unfortunately, it’s the Phoenix 4.

    How many of the good decent and loyal people employed by MG Rover and the supply chain and retailers will vote for Gordon? The truth was that they were easy to get rid of because you wouldn’t have seen the French Government, for example, close down Peugeot or Renault for wanting a trifling, in GDP terms, small loan. Let’s face it, it’s about half of the recently disgraced RBS Chairman’s pension!! I know what I’d have done with the Serious Fraud Squad’s time in this case…

    At the time, money was getting spent on illegal wars etc. where the popular vote was needed so another bit of manufacturing took the brunt of the pain. Just because throwing money at firms didn’t particularly work back in the 70s and 80s doesn’t mean that it wouldn’t work now.

    Conservative (and I’m not one!) investment was indeed given and paid off over the years with MG turned around and making headway with some decent models since the mid 80s. I’d rather have trusted 4 businessmen who knew what they were doing than the current idiots who are running the country. I’m pretty sure the Phoenix 4 are the victims in this case and not the taxpayer who has had to suffer endless financial mismanagement from our paid minions.

    The Dome?
    Iraq?
    The Banks?
    ID cards?
    Prison management?
    The Olympics?

    Need I go on…?

    Tony Miller

  12. Simon Woodward says:

    Nice one Tony! You forgot to mention MRSA,The Post Office, Rail Track, Railway franchises, ill-equipped troops and the ever widening social divide. What is done is done but we can learn from this and stop it happening to the rest of our engineering industry?

  13. Tony M says:

    Sooooo many, even I forgot. They’re even worse than I thought!

    However, the employers and employees won’t forget in a long time and that’s the serious issue here.

    Tony.

  14. Simon Woodward says:

    Yep, that is a fact. I come from the South Birmingham area and know a lot of people, friends and family who either worked at Longbridge or had an indirect connection with MGR. It was a very sad loss – I just hope that it doesn’t happen to the rest.

  15. Mark Falconer says:

    @Honourary Swede
    Whilst I agree with some of what you said, Rover Group was bought for around about £800million by BMW. BMW did invest in Rover but, under their stewardship, the company’s finances nosedived. I mean what new models came online? The 75 and the Freelander, which was already pretty much designed and a built on a shoestring 200.

    You say that BMW didn’t make a penny profit! Well, the way I see things, they sold Land Rover for £1.5 billion approx., have gone on to build 1.5million MINI’s, managed to get their own line of 4×4 vehicles (with, I’ll wager, no shortage of input from Land Rover) and, not least of all, pretty much taken out a once fierce rival in Rover on the cheap by “selling it for a token £10.”

    BMW made no profit? Bollocks…

  16. Paul says:

    There is no way you can compare loaning money to Rover in 2005 to propping up banks in 2008/9. If the banks had gone down everything would have gone down. We would now be living in tents and standing in line at soup kitchens.

    The reality is that Rover was burning through £5m a week. It had sold all its assets to property developers and already sold the rights for its cars to the Chinese simply to bank roll the day to day operations of the company. The £120m loan would have allowed MGR to limp on for another 6 months tops and then it would have gone bust with the taxpayers out of pocket for £120m and nothing to show for it.

  17. Mr_H says:

    I’m afraid I agree with the point of view that all the £120m loan would have done is to prolong the agony. The sad fact was that the only decent car MGR had in its range at the time of collapse was the 75. Had effort been put into producing the R30 instead of putting more tinsle onto the existing 25/45, which were clearly out-moded, then MGR may have stood a chance.

    Interestingly, the Chinese are developing the 75 platform to produce smaller cars – and rightly so, the 75 is a fine product. Pity the Phoenix 4 couldn’t see that. As always, the issue here is with product. MGR had a loyal and highly experienced workforce and suppliers. However, you can’t rely on the loyalty of workers and suppliers to keep on buying shoddy products – by 2005 they were the only people still buying MGR cars.

  18. Gary H says:

    An extremely complex issue I think. I visited the factory after it closed and noted Citroens and Peugeots parked outside people’s homes in the residential area across the road. I think we all share a collective responsibility here.

  19. Gary H says:

    ….. We’re all armchair experts now.

  20. Mark Falconer says:

    Gary H :
    ….. We’re all armchair experts now.

    Not armchair experts, just people with opinions who cared about MGR!!

  21. Tony M says:

    Maybe…

    We own
    Peugeot 406
    Morris Marina
    CityRover

    Oh dear…

  22. Steve says:

    Paul :There is no way you can compare loaning money to Rover in 2005 to propping up banks in 2008/9. If the banks had gone down everything would have gone down. We would now be living in tents and standing in line at soup kitchens.
    The reality is that Rover was burning through £5m a week. It had sold all its assets to property developers and already sold the rights for its cars to the Chinese simply to bank roll the day to day operations of the company. The £120m loan would have allowed MGR to limp on for another 6 months tops and then it would have gone bust with the taxpayers out of pocket for £120m and nothing to show for it.

    …Have to go along with this. It had to happen and, if not then, it would have by now with the way the car market has declined. Too many old and out-dated models to survive, I’m afraid.

  23. Gary H says:

    An early Scrappage Scheme for MGR? Electric hybrid vehicles – price tag? And then what? Shortened, shrunk down, variations on the Rover 75?

  24. Adam Bond says:

    Seems like a lot of lazy swipes at the Government going on here so let’s add another thing to the list of things I’m not happy about…

    Tony M :

    The Dome?
    Iraq?
    The Banks?
    ID cards?
    Prison management?
    The Olympics?
    Need I go on…?
    Tony Miller

    The truth with Rover is that it was ruined when sold to BAE, ‘a successful British company,’ which then refused to invest and left it to limp along… till it fell of the cliff. We might, though, have a different situation if MG Rover had bought the R30…

    The banks have needed bailing out to a greater or lesser degree every generation… That is not down to Labour or the Tories… Though it sticks in the throat that MG Rover couldn’t be underwritten but then, if the Government had ‘taken over’ as such, and it had gone wrong… I mean if GM can go bust? Everyone would be blaming the Government for that… An easy and very lazy target…

    The Dome was commissioned by the Tories and someone had to do something with it – looked like a nice idea but was a mess. Do you have a Crystal Ball regarding the Olympics? If it goes badly the next Government, whomever it is, will blame this one but, if it goes well, they will take the credit…

    The Tories killed plenty of industries they didn’t like and they wished they could’ve done the same with Rover. The external investment was encouraged as it meant jobs without the irritating unions and restrictive practices of the 70s… Just a thought?

  25. Adam Bond says:

    Simon Woodward :
    Nice one Tony! You forgot to mention MRSA,The Post Office, Railtrack, Railway franchises, ill-equipped troops and the ever widening social divide. What is done is done but we can learn from this and stop it happening to the rest of our engineering industry?

    MRSA??? Who was it introduced contracted out cleaning services to the NHS? Who was it who privatised the Railways, created Railtrack and the franchises and sold them off for peanuts? Who was it who cut the Defence budget in the early 90s and stymied funding and development for the next 20 years?

    I’m not saying that the current Government is doing a great job but the impact of the decisions made 15-20 years ago by the Tories for short term gain has been reaped by the current Labour Government. Decisions like these take years to work their impact through the system – something that no Government is very good at recognising and dealing with.

    It maybe that, being very charitable, the Tories didn’t realise the long-term impact of their decisions and the problems they would cause seeing only the short term 2 year impact of cost cutting… A current maxim in the NHS is ‘spend to save’ investment, which brings me back to MG Rover – it’s hard to invest adequately for 5-10 years into the future when you’re not sure you are still going to be around then…

  26. JohnnyZero says:

    @Adam Bond
    Thank you Adam, you have saved me having to reply to the ill-informed commentary further up the board.

    MG Rover didn’t have a cat in hell’s chance of surviving. It was being run out on the BMW pay-off and on selling off of every useful and profitable part of the organisation, in addition to the selling of company real estate. With the sale of the intellectual property rights for the 75, Longbridge and MG Rover’s finance arm, the writing was on the wall – it really couldn’t get much more desperate!

    British Leyland was divided by the Tories in this way, selling off every profitable part (Alvis, SCG, Cov Climax, Jaguar, Unipart, etc. etc. etc.) until the only part that was left was the volume car business – the part that was difficult to make money with.

    When you sell the factory from under your own feet and the design rights to your main product, you are on a road to nowhere.

    Nice try by the Phoenix Four’s (probably very expensive) PR company, but the blame lies squarely with the amateurs in charge of MG Rover.

  27. Mark Pitchford says:

    @Tony M
    It’s a bit rich to suggest that “this Government” is responsible for the downfall of either MG Rover in particular or the engineering industry in general. The idealogically motivated regime led by one Margaret Thatcher admittedly killed off the union stranglehold, which should have freed manufacturing industry, but then went on to kill off that industry with it.

    If what is written here is true, then Labour (and particularly Gordon Brown) haven’t covered themselves with glory but all they have done is deliver the final blow. It certainly wasn’t them who put Rover into intensive care in the first place.

  28. Mark Pitchford says:

    @Mark Falconer
    Quite. Well said.

  29. Graham says:

    Doesn’t anyone in Britain take responsibility for anything anymore?

    Yes the Government could have done more. We could still be in the 1970s with the Government running the CEGB, the Gas Board, Amersham, BA and Leyland.

    But the public decided long ago that that was not what a government was for and voted time and again to continue that, until even “New” Labour had to embrace that reality.

    The Directors were paid handsomely to do just that – direct. Direct MG Rover and thereby its fortunes and of those dependent upon it. Their track record speaks for itself – a catalogue of misfortune and incompetence.

    To blame the Government for the collapse of MG Rover is just another example of today’s executive management abdicating all their over-paid responsibilities.

  30. Gary H says:

    So many ifs and buts… Whatever MGR were selling, the Brits didn’t want to buy their own home product.

  31. Tony says:

    @Honourary Swede
    Oh come on! BMW used Land Rover to develop the X series of cars – maybe they didn’t use the actual running gear but they did learn the technology.

    The MINI… what BMW did there was develop the design (with was drawn up years ago under Rover) and then get it to market… what they ‘stole’ was the goodwill of nearly 50 years of the original Mini.

    As has been said many times before, BMW only invested in the parts of Rover they knew they could use when the time came to drop and run. I have worked for BMW (a dealer) and hated the way they ran their business -they (BMW HQ) were so far up their own behinds it was hard to believe!

  32. Steve McGill says:

    @Clive Goldthorp
    That doesn’t surprise me. I have worked with plenty of people who don’t have licences and most are anti-car morons!

  33. Steve McGill says:

    @Simon Woodward
    You couldnt be more right!! The Labour idiots must, I’m sure be all anti-British, as they have tried their best to undermine, discourage and destroy any British-made or British-owned concern from day one. Since they came to power, we have lost more national assets than ever before…

    Why are we using crappy Mercedes-Benz police vans when LDV make a much more reliable and better made van in Britain??? Why do our Police Forces buy BMW, Mercedes and Volvo traffic cars when we have always had superior British-made cars like the Jaguar X-TYPE, XF and, formerly, the Rover 75/MG ZT? Labour scum!!!!!!!!

  34. chris says:

    @Paul
    Just look at Goldman Sachs results released yesterday to realise what a shifty lot the banks are. Profit and yet more profit, that’s all they care about and, oh, their bonuses.

    If the Government can save these greedy profit and bonus oriented institutions, then they could do alot more for manufacturing.

    The banks and this Government have a lot in common – untrustworthy and unethical.

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