Press Report : Moving on after the death of MG Rover…
Words: Richard Yarrow and Tim Rose, AM-online, 8 July 2011 Photograph: Mark Gibson/Slant 4 Marketing
Six years on from the disaster of the collapse of the MG Rover Group its Directors, the Phoenix Four group have voluntarily agreed not to serve as company directors for up to six years.
The disqualifications were announced by the Department of Business, Innovation and Skills (BIS) after an extensive and complex enquiry but, while the news from BIS is likely to be the final chapter in the saga of the doomed Birmingham carmaker, what of the people involved?
Well, as for the Phoenix Four – John Towers, Nick Stephenson, Peter Beale and John Edwards – their spokesman said they had done nothing wrong. He said they had voluntarily agreed to the ban.
‘As they have no intention of holding company office in the UK, they have agreed to a voluntary compromise, while emphatically not accepting any allegations or suggestions of wrong-doing,’ the spokesman said.
‘They point out that they have done nothing which justifies disqualification. All of the many inquiries into the collapse of MG Rover have achieved little other than a series of massive bills.’
Birmingham MP Richard Burden said: ‘One thing they could do… would be to make good on the promise they made to put money into the trust fund set up for former employees. They could put some of their personal fortunes into the trust.’
However, what of those who found themselves embroiled in the crisis? What did they learn personally and for their businesses?
Here, some of those in the front line tell their story.
There was too little money at the beginning
Name: Richard Roberts
MG Rover dealerships in Ottershaw and Weybridge, Surrey, and a member of the MG Rover Dealer Board
What went wrong with the MG Rover strategy?
The problem stemmed back to the beginning of Phoenix Venture Holdings in 2000 and was down to the amount of money the four men had at their disposal.
It was far from adequate to see the project they took on to conclusion.
We had meetings with each of them at different times and it didn’t seem they were all pulling in the same direction. Some of the projects they took on, for example, the entry to Le Mans, were too ambitious.
They invited all the Dealers to the race, where they had a hospitality facility that dwarfed the Bentley one next door by some margin!
What I remember most from the actual day the news broke was that I was in Australia and my first reaction was: how soon can I get a flight back!
At the time, what financial, operational and emotional impact did it have on you, your business and staff?
The issue was we had 65 people uncertain over their future employment. The key task I had to was come in every morning smiling, however I felt, to try to reassure them things would be fine.
We had suffered for a number of years during the decline of MG Rover, then at the collapse we held 110 new and 120 used cars in stock and lost an awful lot of money selling our way out of them.
What impact did it have on customers?
It hurt that on the MG Rover Franchise Board we had argued on behalf of our customers over the entire period of Phoenix’s ownership that they should put in place an externally funded warranty to ensure that if ever MG Rover went into liquidation, our customers would be protected.
During all the conversations, we were told that this wasn’t affordable. Interestingly, Phoenixcould afford to put £13 million into its pension scheme to protect itself. We have some customers who have wanted to stay in their MG or Rover car, and have done our best to continue to support them. To this day we still service and sell them.
Has it made you stronger as an individual and as a business?
Looking back it was a very painful experience, but I believe it was probably one of the best things that could have happened to our business.
The reason we had stayed with MG Rover may well have come down to a ‘too strong’ sense of loyalty to a brand we had represented for over 40 years.
Now it means we have two very strong Honda dealerships in a great territory for a brand which is very strong, producing cars that are getting more exciting by the day while being phenomenally reliable.
Do you think another brand could ever go bust in such as massive way again?
History can repeat itself as the market is still in position of over-supply. I am amazed Saab is still hanging on in there. It’s just a case of when and who.
Dealer believes Phoenix Four have had ‘unfair battering’
Name: Richard Cort
MG Rover dealerships in Oldham, Rossendale, Bury and North Manchester, and Chairman of the MG Rover Dealer Board in 2005.
What do you remember most of the collapse of MG Rover?
I remember how badly the Government treated MG Rover. Tony Blair and Patricia Hewitt have blood on their hands.
They purported to care when they were only interested in the upcoming General Election. They led the country to believe they were advancing money to PricewaterhouseCooper to keep MG Rover going. They advanced £6.5 million and got £5m of it back.
What went wrong with the strategy?
People talk about the Phoenix Four but there was a fifth man, Kevin Howe, who was appointed Chief Executive because he had been production chief at Rover.
He didn’t understand sales and used to get very irate with his sales people and the dealers when they weren’t shifting enough cars.
He was a nice chap, but he had too much power and was left too much to his own devices. Communication between MG Rover and the Dealers wasn’t as good as it could have been.
There was lots of talk of ‘jam tomorrow’ and tomorrow never came.
The network was massively loyal. Twelve dealers, including myself, put forward money to help MG Rover perform due diligence in 2000 when they took the company from BMW, and we’re not talking about a couple of hundred quid. We got the money back, but it shows how keen the dealers were to make it work.
What are your thoughts on the Phoenix Four now?
They have taken an unfair battering. They took dividends they were entitled to, they bought a company for £10 that came with a £1 billion dowry because, while I wasn’t party to the meeting, I don’t think there was ever an intention the money from BMW should have been paid back.
If they took £40m themselves, that’s not a lot from the whole – don’t forget they kept 6,000 people in work for five years. I remember having a conversation with John Edwards 36 hours before MG Rover went into administration and him saying it’s all systems go for the SAIC deal.
He believed that. I’ve known him for 25 years and he’s not a liar.
I spoke to him recently and he’s still a broken man by all this. Don’t forget, he was a car dealer who was approached to join the Phoenix Four.
He’s lost his company and has been pilloried because of the spin Labour put on it. I believe he’s still fighting to get money put into the employee trust fund. He’s a good man, but maybe not a good businessman.
Dealership lost £750,000 in MG Rover collapse
Name: Andrew Soul
MG Rover dealerships in Olney and Milton Keynes, Bucks
What impact did MG Rover’s collapse have on you and your business?
I had opened the MG Rover dealership inMilton Keynes 18 months earlier and had been running that at a loss to get it established.
Then the whole thing goes down. All in all, it cost me £750,000 – a lot of money for a small business like ours – and it affected the balance sheet for a number of years.
It had an impact on family life because I was working flat-out seven days a week trying to overcome it all. We felt let down by MG Rover.
They led us to believe the Chinese money was coming. I was at the factory a couple of weeks before it all collapsed and was persuaded to buy more cars, which I then lost money on.
You’ve taken on MG again. Why?
We initially chose Fiat for the Milton Keynes dealership, but that didn’t work out, so it’s now Mitsubishi and, yes, MG again.
It’s the first Chinese brand in the UK, the first of many to come I think, and we’ve decided to give it a go.
We’ve had some interest though not as much as I would have liked, and we’ve got our MG6 demonstrator. It’s a terrific little car and we’ve already sold a few.
Timeline to collapse of once proud carmaker
2000: Phoenix Venture Holdings buys MG Rover from BMW for £10. The new Directors – the Phoenix Four – are John Towers, Nick Stephenson, Peter Beale and John Edwards.
2001-04: Facelifted versions of the Rover 25, 45 and 75 launched, along with sportier MG variants.
2004: Losses in the first four years were £611 million. Talks about financial support from Chinese firm Shanghai Automotive Industry Corporation (SAIC) begin.
2005: Talks stall and MG Rover goes into administration. Debts are put at £1.3bn, 6,000 jobs are lost.
2006: MG Rover’s assets are sold to Nanjing Automobile.
2007: Limited production of the TF two-seater begins at Longbridge.
2009: The official independent report accuses the Phoenix Four of enriching themselves while mismanaging the company. They are said to have paid themselves a total of £40m in salaries and benefits. A month later the Serious Fraud Office said no criminal charges would be brought.
2011: Production of the British-designed and engineered MG6 begins at Longbridge.
2011: The Phoenix Four voluntarily agree not to serve as Company Directors.
Out of the ashes a new MG is born
Chinese ownership has ensured that the MG marque will live on.
Almost six years since the collapse, a new generation of MG Dealers was given a civic send off by Midlands politicians in April after they collected the first UK-produced MG6 models to mark the start of a new era for the brand.
The Dealers collected the first MG6 demonstrators from MG Motor UK’s factory at the Longbridge site then drove to Birmingham’s Council House where they were waved off by Mike Whitby, the Leader of Birmingham City Council.
The first deliveries of the MG6 – the first ground-up new car for MG in 16 years – began last month.
Priced between £15,495 and £18,995, MG wants 2,000 sales this year and double that in 2012 when the line-up will be joined by a 1.9-litre turbodiesel. The Longbridge facility has capacity to assemble 5,000 units annually at present.
The 39-strong MG Dealer Network, which was established in 2008 as MG rejuvenated the TF roadster, will grow to 60 sites this year. MG has a target of 85 dealerships for the end of 2012, when its range will also have a compact hatchback.
Guy Jones, MG Motor UK’s Sales and Marketing Director, told AM the Dealer Network could support 115 outlets by 2015 when an SUV will also be introduced to its model line-up.
‘The MG6 means we start with two models, but prospective Dealers need to look at the potential growth of the franchise when it has two or three different car lines in the market.’
He said: ‘We’re keeping investment costs for new Dealers extremely low at £20,000, most of which is accounted for by signage costs and branding.
‘We want to give them the best possible chance of a return in their first two years of trading, but this should not be a problem with the arrival of additional products from year three.’
Asked about the extent of a collaboration deal with GM, SAIC Motor’s principal partner in China, Jones said: ‘We are working on a new range of collaborative engines for small cars and we’re also looking at commercial collaboration such as sharing resources and support services, vehicle distribution finance and the potential of working together.
‘The idea is to generate savings and it is an interesting project. But we’re not looking to sell our cars directly through Vauxhall showrooms.’