News : April 2005
Rover 75 LWBs to be built in China… or is that Iran?
But PricewaterhouseCoopers will fight for MGR’s design rights if there’s a case
By KEITH ADAMS
SAIC’s Rover: SAC528, as it is known, is 110mm longer than the standard 75 – something similar to the UK market’s Limousine model…
AMID claims by SAIC that it will be producing Rover 75s in a new factory just North of Shanghai, it has emerged that there could be enough reasonable doubt in the IP rights sale that SAIC may not actually own enough to call the car its own.
Austin-Rover.co.uk learned before the meltdown on April 6, that Rover 25 was already on its way to pastures new (as early as this October), but the 75’s fate was always a little less clear. SAIC certainly doesn’t feel there’s a case to answer and is already advanced enough in the 75’s productionisation process to have given it a SAIC codename (SAC528) and is already planning its production volume details (launch, mid-2006, 110,000 cars per annum).
Bought from MG Rover last year for £67m, SAC528 is actually 110mm longer than the standard 75, and the company is so confident that it is going to become a production reality that it has already approached a number of UK components producers about potential supply deals.
Does SAIC actually own the Rover 75?
However, PricewaterhouseCoopers (PWC) feels SAIC may well have jumped the gun.
Reports of the concerns of the administrators, PricewaterhouseCoopers (PwC), first surfaced last week, and it could well be that the administrators would be prepared to settle the matter of rights ownership in court, if it feels SAIC isn’t entitled to produce the car for real. A PwC spokesman said: “All we’ve said is we have a team of lawyers checking that everything is right and in place.”
PwC’s spokesperson, Jon Bunn, would not be drawn on why PwC was investigating whether the sale of intellectual property rights to the Rover 25 and 75 to China was valid, but a couple of theories to surface are that it may intefere with the potential deal with the Iranians, but also, if MGR still own the rights to these cars, it will be worth more to any potential buyers of what remains of the business.
Shanghai Automotive Industry Corp (SAIC), which believes it now owns these rights, is planning to make cars based on the designs in China, although as to who owns the rights to the 75’s tooling rights remains unclear at the moment.
Iran steps into the fray
On Thursday, Britain’s Daily Telegraph said senior British ministers held a series of meetings with the Iranian government before the collapse of MG Rover, hoping to clear the way for a deal that could have doubled Rover’s worldwide production and perhaps saved the company.
According to the paper, the talks involved an Iranian firm, Dastaan, which had been negotiating with MG Rover since early 2004 over plans to assemble 150,000 cars each year in eastern Iran – more than the entire output of the MG Rover group in 2004. It is said that Dastaan was a company interested in importing and assembling Rovers when MGR displayed at the Tehran Show in 2001.
The Societe Annonyme Iranienne De Production Automobile (SAIPA), Iran’s second biggest carmaker has also announced that it could be interested in taking on parts of MG Rover. The company, which currently produces the Citroen Xantia, and a couple of variations of the Kia Pride, is looking at working with MG Rover’s administrators.
Now the company is interested in taking it a step further. “Some talks have been held; we’re now in the assessment stage to see what the ceding terms are,” Iran’s Minister of Industries and Mines, Eshaq Jahangiri, told reporters. He continued: “We reckon our auto industry is capable of reforming a troubled European carmaker and churning out a car to world markets under the same brand,”
Iran Khodro, the Middle East’s largest carmaker, and producer of the recently deceased Paykan, has said acquiring Rover would not fit with its plans. SAIPA, Iran’s second-biggest, has said it would be interested in salvaging parts from the British firm.
But Jahangiri said a full buy-out could still be on the cards, particularly if Iran were to team up with other Asian countries. He said: “I think Iran and China, and maybe India at a later stage, can manufacture some Rover parts in their countries.”
PVH’s corporate structure
(Picture: Dan Lockton)
But if commentators are wondering why PwC is taking its time in getting announcements out, then they should take a little time to study the PVH corporate structure, as produced by Dan Lockton. As is evidently clear, the business is made up of many free-standing entities, many of which remain under the control of PVH and not the administrators.
It will be interesting to see how long it takes for other divisions within the company go into liquidation.
One disappointing fact that has emerged in the last day or so is that the last MG Rover appears to have been built on April 6, and that the production line is currently not scheduled to re-start. And that may well mean the last car to be produced at Longbridge has not been photographed for posterity. When we asked Daniel Ward about this, he said: “This remains the case, unless a decision is made to restart the line”.
As there is still a large number of cars stockpiled, the likelihoold of this remains slim, at best.
A tribute to Longbridge.
Peter Stevens applauds the MGR’s talented designers
By PETER DRON
Peter Stevens, MG Rover’s Consultant Director of Design, announced on Monday that he is no longer involved with the stricken Longbridge company, after almost five years as design chief. His association with MG Rover ended on April 11.
Early in the life of the newly formed company, bought from BMW for £10, Stevens said that he felt he was part of a very brave experiment in attempting to revive the Rover and MG brands as an independent group. Even then, he admitted that it was an experiment that could fail.
“That this has now happened is very sad indeed,” he said. “My greatest disappointment is that the tremendous loyalty and energy of the dedicated workforce who built the cars will now go unrewarded. Without them, any efforts in MG Rover Design to sustain interest in the current models while working on new cars would have been pointless. I would like to thank every one of those people for turning even our most simple dreams into reality.”
Stevens singled out his now-disbanded design team for praise. “The part of my role at MG Rover that I truly enjoyed was working with a hugely talented group of young designers who never lost their enthusiasm for design, while enduring often dramatically differing demands on their talents. We were a tiny team who, despite very limited resources, challenging deadlines and occasional uncertainties, produced an enormous amount of superb work, most of which will unfortunately never be seen or appreciated.
“It is particularly sad that in February and March, a period during which I constantly made unreasonable demands on the team’s energy, time and concentration, they should see their hard work come to nothing. Those two months were dominated by our efforts to satisfy the wide-ranging requests from Shanghai Automotive for a number of future model proposals, and yet not one designer complained about the challenging pace of work that I set them.
“Whilst developing my own design consultancy, Peter Stevens Design, I am hoping to have the opportunity to assist any group that may have plans to preserve employment for at least some of the workforce. It is crucial that this pool of talent is not allowed to go to waste.”
• For more information e-mail firstname.lastname@example.org.
Alchemy talking up chances: new MG in three years.
Could Alchemy turn MG into Britain’s Porsche?
By KEITH ADAMS
MG Sport & Racing in Longbridge: Could an upscaled version of this operation be the brave new world for car production at Longbridge? (Picture: James Crofts)
ALTHOUGH Alchemy’s Year 2000 plan to turn what was left of The Rover Group into a new, lean, mean fighting machine called The MG Car Company fell out of favour after John Towers’ Phoenix plan was thrown into the ring, Jon Moulton is trying again with a similar package…
Moulton has brought a respected name into the game, Terry Playle, former Chairman and Chief Executive of Lotus Cars – a behind the scenes figure heavily involved with the original rescue plan in 2000, as one of his consultants. Between Mouton and Playle, they built up an interesting business plan, which he hopes will tap the rich seam of Longbridge talent, thereby allowing kernal of the current company to rise from the ashes at Longbridge…
The plan, which centres on the principle of Niche Vehicle Architecture and Manufacturing (NVAM) processes. In layman’s terms, a programme which allows a small company to have the flexibility to produce vehicles designed specifically to meet consumer demands – and quickly react to changing demands. Typically, NVAM allows a small company to take a car from design concept to production reality in the space of months, rather than years.
Alchemy Partners and ARP Associates have devised a plan modelled on practices employed at Lotus – which should come as no surprise considering the chairman of ARP is. The feeling within ARP is that MG Rover’s most valuable asset is its workforce, and to not make the most of this wonderful asset would be to miss a golden opportunity.
ARP Associates is confidently talking about taking MG and turning it into a larger scale Lotus – selling desirable sports car, heavy on MG DNA, selling at volume levels of around 20,000 per year.
The company would not need the sprawling Longbridge factory, which has massively under-utilized since time immemorial, and although its busines plans centre on designing a new sports car, which would incorporate “an indentified” engine/gearbox package sitting on a new platform designed with flexibility of production in mind, it is not inconceivable that MG TF production could be restarted (assuming the body in white situation can be solved, and a new paintshop built) in order to keep the plant ticking over.
As to whether the new MG Car Company could get the new car into production within the 36 month target it has set itself, that remains to be seen – and it is a long shot – but the engineering excellence that resided within Longbridge’s Product Development Centre would certainly be a great asset in achieving the goal. A pool of expertise like that needs to be retained and taken on board, otherwise it is lost forever.
In the past few months, there has been much talk of a new aluminium sports car (X120?) and perhaps a cost-constrained XPower SV, but would the clean sheet approach advocated by ARP be the way forward? It’s a gamble, and one that Terry Playle thinks is achievable – does Alchemy intend to back it?
Much now depends on PricewaterhouseCoopers, and its ability to court any other potential suitors for MG. The marque is defintely an asset right now, but the administrators need to act quickly and make the wisest move. Sell MG to an inappropriate party, and all that goodwill could be lost very quickly.
Adding fuel to the rumours, John Towers has stated that he is still talking to the Chinese, and one can only assume these talks could revolve around SAIC buying MG Rover’s production lines and factory, but one does question the long term benefits of the Chinese taking on Longbridge – and also there is the matter of the moral position towards MG Rover’s workers.
Perhaps volume car production at Longbridge isn’t dead – but the chances are, the ‘million to one’ shot Union officials spoke about last Monday still stand today.
Government orders enquiry into Phoenix accounts
By BBC News
A TASK FORCE set up after the collapse of MG Rover has paid grants of £300,000 to 34 suppliers affected by the crisis. The body, set up to help workers at the Longbridge plant in Birmingham, said the payout had prevented 700 redundancies among supply firms.
It has £150m of government aid to hand out in the wake of Rover’s demise. During a visit to the West Midlands on Monday, Prime Minister Tony Blair pledged to continue supporting the 5,000 MG Rover workers facing job cuts.
The task force has also decided to extend a package of training and help to 750 workers at the Peugeot factory in Coventry who are losing their jobs. Task force chairman Nick Paul said the grants, to firms which have been laying people off since Rover went into administration, would last for six weeks. A total of 350 supplier firms have been in touch with the task force.
Mr Paul said Jobcentre staff would see 1,000 Longbridge workers every day this week to offer other work or training, and that a “job-matching” system had also been set up to link skilled workers with local engineering vacancies. Local Jobcentres, which were open over the weekend, say a number of firms have offered positions for ex-Longbridge workers.
Helplines have been established for the 5,000 workers, who have now started to receive redundancy notices in the post. One of them, Kevin Flanagan, employed for 34 years, said: “It is a very sad day. To be retrained doesn’t mean I will get a job – it is just another tool to get another job.”
The task force includes politicians, union leaders and business officials. The £150m support package includes more than £60m to help diversify industry in the Longbridge area, and to support MG Rover’s supply chain.
A further £50m will fund retraining, while £40m will be used for statutory redundancy payments. In addition to the 5,000 MG Rover jobs already lost, a further 1,000 workers kept on to complete orders could also go once the work is complete. There was bad news for a number of Phoenix Venture Motors dealerships, with administrators PriceWaterhouseCoopers (PwC) announcing that three would close immediately with the loss of 86 jobs.
The dealerships were based in Northampton, with 18 staff, Oxford, with 25 staff, and Muswell Hill, London, with 43 employees.
Meanwhile, the details of Rover’s finances and those of its owner, Phoenix Venture Holdings, are up for investigation by the Financial Reporting Council, the Regulator for corporate reporting and governance. Phoenix’ directors said they did not see the need for the probe into how the firm had used £450m left to it when it took over from BMW in 2000.
Its chairman, John Towers, dismissed talk of a £400m financial black hole in the accounts as “ridiculous” and said he was the victim of a “character “assassination”. He said other company bosses received more than his £200,000 annual salary and £105,000 pension. Sir Bryan Nicholson, who heads the FRC, said: “We are primarily concerned with whether the accounts meet the accounting standards requirements.”
MG Rover enthusiasts converge on Longbridge
By KEITH ADAMS
SEVERAL hundred MGR enthusiasts converged on Longbridge as a show of support for the workers of Longbridge and their families. The cars and their owners were met by a wave of suport in Longbridge, and many people who made the trip were overwhelmed by emotion, as the finality of Longbridge’s situation began to sink in…
The rally of support aroused strong emotions in the locals, and many residents left their homes and applauded the convoy as it travelled through Longbridge.
A full report of the event including the impressions of young MGR enthusiast, Stuart Bishop, can be found elsewhere on the site…
MG Winner picks up prize…
Chris Moore (left) picking up the Metro on Saturday morning from Jonathan Willams (right)…
IT MIGHT have been a sad day in Birmingham, but down in London, one MGR enthusiast was having a great day. Winner of our ‘Win an MG’ competition, Chris Moore picked up his new car from former owner, Jonathan Williams…
We can’t wait to hear more from the new pairing…
By KEITH ADAMS
AFTER the longest week of its 100 year history, Rover finally came to an end today, following an announcement by SAIC that it would not be returning to the negotiating table. The news came as a terrible blow, and although it was not unexpected, the swiftness of the announcement follwing the government’s pledge to continue its funding of negotiations with PwC, to the tune of £25m.
When PwC announced to the press it was over, it was described as a terrible day for the company – because SAIC has not come back, PwC would not be going back to the government for any more money, and this was confirmed an hour later by the DTI, which also added that it would be issuing 5000 redundancy letters over the weekend. The 1000-or-so workers left, were either in the administrative sector of the company, or were line workers retained to build the last of the uncompleted cars in the factory.
Ian Powell, one of the joint administrators said: “We have received a copy letter from SAIC early this morning which communicates to the DTI that they are not willing to acquire either the whole or part of the business on a going concern basis. In light of this important development we have concluded that there is no realistic prospect of obtaining sufficient further finance to retain the workforce while the position with other parties is explored. As we indicated earlier in the week significant redundancies will now be effected.”
Tony Lomas, joint administrator and partner, added: “We have worked closely with the unions, Government, employees and directors to understand the position and the options for the business. It was apparent that very significant funding would be required to sustain the business as a going concern and that a sale of the complete business would be extremely complex and would take a long time to conclude. In addition to exploring the interests of SAIC we have received a number of other enquiries. In our view, none of these is capable of resulting in a sale of the complete business. During the course of this week we have made every effort to establish SAIC’s intentions. We have had regular contact with SAIC’s advisers and had established direct contact with the company. SAIC has now stated its intentions and unfortunately does not wish to acquire the business.”
Ian Powell continued: “We are extremely disappointed that SAIC has decided not to progress discussions to acquire the business. We are very conscious of the impact this news will have on the employees, their families and the businesses dependent on MG Rover Group. Regarding the employees and their families, this is obviously devastating news. There was some hope regards the SAIC situation – and that hope has gone on for a long, long period of time prior to the administration. With their certainty we felt we no alternative but to to take the decisions we have taken and communicate them as quickly as possible to the employees…”
Workers too stunned to go home linger around Q-Gate. One said: “Five years ago, we welcomed John Towers with open arms and a glass of champagne – I don’t know what to think of him now.”
John Towers spoke to the press and maintained his strategy had been the correct one: “I don’t feel guilty about the process we’ve been through – wind the clock back and I would do exactly the same.”
Tony Blair and Gordon Brown halted election campaigning to go up to Birmingham, and immediately announced that the government would be providing a £150m support package, which would be used to help redundant workers, and the areas hardest hit by the closure. Tony Blair was appearing on Radio 2 ‘phone-in when the announcement was made, and when asked by a Longbridge worker, Phillip Hanks, why Labour couldn’t help more, by re-nationalising the company, he said: “There’s no point me giving you false hope when I can’t – I can’t, myself, save the company…”
Blair went on to say: “We will put together a big package for the employees – and we’re doing everything we can help people, particularly in the short term with regard to paying their bills. Everyone will be getting a personal adviser to help with retraining…” The government obviously feels the West Midlands economy is strong enough to absorb the 6000 job losses.
Tony Woodley, the secretary of the Transport and General Workers Union said: “This is devastating news – our worst fears have been realised. It is the darkest day – ever – in the history of the British car industry.”
So, without a bail out, and no money, that leaves the factory to be slowly wound down. A sad and desperate end to a long history.
John Towers: “We feel absolutely devastated, but our feelings are nothing compared to the thousands of people we employed and their families.”
Statement by the Directors of Phoenix Venture Holdings Ltd
DURING the course of this past week the administrator, PWC, the Trades Unions, the DTI and members of the management team have explored every avenue aimed at avoiding today’s redundancy announcements.
Clearly, not enough progress has been made on this to provide comfort for the administrators, and for the DTI, to continue the payment process that began last week.
In May 2000, when Rover was saved from BMW’s liquidation process, a lot of people said that the business could not last for more than 14 months. The management and employees of MG Rover have defied those conventional predictions and worked tirelessly to create a positive result. Almost five years later, and within weeks of what we believe to be its natural long-term outcome, it is devastating to be stopped at the final hurdle.
In a meeting with the administrators this afternoon, the directors of PVH discussed whether any other possibilities, including use of PVH and personal assets, could provide a further mechanism to allow employees to continue to be paid. The conclusion of this discussion was that the best use of those assets would be to quickly realise their value for the benefit of the Trust established to benefit the families and dependants of the Longbridge workforce.
This will enable the initial Trustees, Carl Chinn and Nigel Petrie, to start providing financial assistance to the employees of Longbridge, and their families. We can also announce that the Bishop for Birmingham, has approached us, and has agreed to become a Trustee of that fund.
In addition to the many millions of pounds being made available for the Employee Trust, we are also committed to provide any other support that the administrators request in creating the best possible employment outcome for this business emerging from insolvency. Despite a concerted view to the contrary, we remain hopeful that car making at Longbridge is not at an end.
For all of us this is a desperately sad day. Our hearts go out to all of our employees, their families, and the local community, at this terrible time.
John Towers , Peter Beale, John Edwards, Nick Stephenson
Government on the verge of handing over more money…
By KEITH ADAMS
British-built Rover 75 in China… will we soon be seeing Chinese-built Rover 75s in Britain?
ACCORDING to The Times, the Department for Trade and Industry (DTI) has set aside £25 million to keep MG Rover afloat while attempts are made pursuade SAIC back to the negotiating table. The cash injection could potentially be enough to keep the company afloat for a further four or five weeks (a cost reputed to be about £6m per week) – which could be just the lifeline the company needs in order to make a deal with the Chinese.
The £25m would be used to provide any number of subsequent emergency payments, handed over to MGR to avoid workers being laid off. SAIC originally stated it would not be returning to the negotiating table with MGR as it already has the 25, 75 and K-Series engine, and would be able to build these cars in China without British help. MGR countered this by stating this was unlikely…
A BMW executive stated it would negotiate with anyone interested in buying the Rover marque name, but stressed it is currently in German hands.
This strategy seems to be a case of ‘China or bust’, especially considering the DTI would be expected to stop the payments that are keeping the workforce employed if the Chinese carmaker definitively rules out further talks. So far SAIC has said that it is ‘highly unlikely’ that it would be re-entering talks while MGR is in administration – but with a £100m bridging loan on the table, offered by the DTI, and a lack of compant liabilities could well be enough to bring the comany back into play.
With all that in mind, the company’s workers face the unsavoury consequences of PwC’s announcement that it has suspended MGR’s company car scheme. Based around a lease package, employees could least cars from the company and run them without the worry of breaking into a negative equity situation – in other words, if an employee went to return their lease car and found it was worth less than the final balloon payment, MGR would foot the bill. Now the scheme has been cancelled, and residuals are in freefall, people on the scheme could find themselves with large negative-equity bills…
This comes as a double whammy for those who could be affected by the suspension of all new car warranties, too.
Public show of support
Much is being done keep the agenda on the political table – with families of Longbridge workers making the trip to Downing Steet yesterday, to meet the Prime Minister and Patricia Hewitt, the Trade and Industry secretary.
At the weekend, enthusiasts of MG and Rover cars will be showing their support for the workers, by attending a rally at Longbridge. Starting at Gaydon at 10.00am, the rally will run in convoy up to Longbridge Q-Gate, where they will meet up with factory workers, their families and local supporters. It promises to be a massive event… For more information, go to, www.savemgrover.com and go to the ‘Action area’.
MG Sport and Racing joins MG Rover in administration
By KEITH ADAMS
MG Sport and Racing (MGSR), the company that brought us the XPower SV Supercar, and countless tuning modifications for the MG ‘Zeds’ has been put into administration – the board members of Phoenix Venture Holdings (PVH) requested PricewaterhouseCoopers begin proceedings immediately. Steven Pearson and Rob Hunt, partners at PricewaterhouseCoopers, have today been appointed joint the administrators.
The company, an independent entity within PVH, reponsible for the £20m SV, emplyes 48 staff – and it is hoped that a buyer can be found for this business, taking it on as a going concern.
Steven Pearson, joint administrator at PricewaterhouseCoopers, said: “Significant investment has been made in the MG XPower SV, and sales of the car have recently commenced. There is an immediate opportunity for an investor to acquire a niche car manufacturer that has unique design and production capabilities. We are currently exploring how the company can be restructured and are keen to hear from anyone who is able to take the business forward.”
In this climate of uncertainty, MGSR is a significant asset – and the XPower SV has real potential. Sadly, the market is littered with niche supercars, so the SV may undergo some changes – and senior sources within the company recently hinted there were plans afoot to make it significantly cheaper to build, and easier to produce in higher volumes.
MGR’s longest week begins…
By KEITH ADAMS
PricewaterhouseCoopers (PwC), the administrators brought in to work out MG Rover’s finances and work out a rescue package, if one is available, admitted that it is looking at getting MG Rover’s talks with SAIC back on track, and is using this week to try and get the two parties talking again.
Workers at Longbridge came into work to be told their jobs were safe for another week, and after a mass meeting, were sent home on full-pay. Although this is a breathing space for the workers at the factory, it cannot make the wait for concrete news of MG Rover’s fate any easier for all those concerned. The £6.5m loan from the government will only finance operations for a further week, although a spokesman for PwC told Radio 4 that if they could find a willing party to negotiate with, they would go back to the government the same time next week, and ask for further aid.
To add complications to the issue, restrictive anti-competition regulations could be working against PwC and the government. There are concerns that the money going to MGR constitutes ‘state aid’ in the eyes of the European Union, and government ministers will be asked to explain themselves to the parliament in Brussels tomorrow.
Although PwC might favour SAIC returning to the table, the Chinese company outwardly is not at all keen – and as it already owns many jewels in MGR’s crown, it is in no rush to secure any other parts. A spokesman for the company told the BBC: “Our position is unchanged at the moment, and we still believe it is highly unlikely that SAIC would want to be involved with MG Rover while it is under administration.”
Although there is optimism at PwC that another suitor could be found, and it has said there has been interest from others, the fact is, none are willing to invest any money – and although many have suggested Ford could be interested in picking up MG for its PAG portfolio, it is said that the company has already rebuffed MG Rover. The main issue now is time, and it remains to be seen how long the government will be prepared for MG Rover to keep ticking over while a partner or buyer is found.
John Towers also issued a statement that the Phoenix Four are offering to throw £40m of Phoenix Venture Holding’s money into the pot in order to help alleviate MG Rover’s current plight. In a letter to PwC, John Towers, PVH’s chairman, said that neither he nor his co-directors wish to benefit from the administration. He is therefore keen to make available PVH’s assets to help fund the administration with a view to selling the businesses as a going concern.
An alternative partner – and one MG Rover knows…
In the Early Nineties, The Rover Group was approached by Taiwanese chemical and plastics giant, Nan-Ya (Also known as the Formosa Plastics Group), as the company was interested in diversifying into car production. In the pre-BMW era, Rover was keen to expand globally, in an effort to reach volumes which could support the development of new model platforms – and finally become less dependent on Honda’s input.
The Taiwanese company approached Rover, among others, and proposals were drawn up for making Rovers in Taiwan, with exports to overseas markets through the Rover distribution network.
In the end, the Nan-Ya deal did not proceed – and shortly after, the Southeast Asian economies went into a downturn.
Late in 2003, the company again decided the time was right to make a deal with a car producer. Nan-Ya is Taiwan’s largest industrial conglomerate, and is still evaluating proposals to build a huge steel and car assembly complex in the island’s mid-west county of Changhwa. With the company already being familiar with MG Rover’s methods and management, could it be possible to strike up a deal between the two parties? After all, it’s a plan that could have benefits for both parties – are rumours of an approach unfounded?
PwC may have already re-ignited talks, but if not, then now would seem like a good time, even if there is a real shortage of time…
Internet community rallies round for MG Rover
A CONVOY of over 100 cars converged on Longbridge this afternoon – their owners intent on showing support for the carmaker.
The group of enthusiasts made up of members of a number of online community forums made the trip to Longbridge and ensured the company’s employees were aware of the support these communities feel for them.
One member of the convoy said: “Just to see all the families and workers coming out and waving at us as we drove past was absolutely amazing, and reading some of the responses so far on various forums from employees at MG Rover reassures me that it was all worth it. We may not save the company, but we certainly managed to show support for the people who matter, i.e, the workers and their familes.”
Another said: “The first moment when the employees came over and started the round of applause was the bit that bought a lump to my throat and a tear to my eyes.”
Longbridge Centenary event continues…
THE mood might be more sombre when it takes place this July (8-10), but the Longbridge centenary celebrations are still going ahead as originally planned. The event, which is being organized by the Austin Federation is not dependent on the funding of MG Rover, so still needs cars and their owners to turn up during the course of the weekend.
To turn up, will be to show that you care…
For more information about the event, click on, www.austinmotor.co.uk.
Government cash used to maintain operations.
By KEITH ADAMS
PwC administrator, Ian Powell (Right) straight talking…
THE administrators at PricewaterhouseCoopers have been busy over the weekend, and appear to have extracted a government largesse in order to keep the operations at Longbridge ticking over.
Ian Powell, acting for the accountancy firm confirmed that the financial situation at PVH could well fall under the scrutiny of the company. He said: “the directors are considering the solvency of Phoenix at the moment”. In addition to this, Powell added that it would be approaching the government for funds, as the operation should remain active.
“We will ask the Government for funding to give us an opportunity to explore what we can do with the group to keep it going”, he said.
In response to this request, the government confirmed it would lend £6.5m to the firm in order to prevent redundancies being made at MG Rover tomorrow. Following negotiations between PwC, Trade and Industtry representatives and the Unions, Trade and Industry Secretary Patricia Hewitt confirmed the funds had been agreed to avoid job losses, while action was taken by PwC to find a way of keeping the firm alive.
The loan would allow wages and other expenses to be paid for a week, in order to give the firm a breathing space to negotiate with SAIC or other possible suitors for what is left of the company, and this would be on top of a £40m support package, for suppliers to the industry.
Rover workers have been told to report for work tomorrow morning, although one we spoke to was unsure of what he would face when he got there. He said: “We are going in, but it has been a rough weekend – with worries about our mortgage, family and future to consider.”
However, SAIC issued a statement saying it already owned enough of the company to begin production of Rovers in China. It has come off the fence, confirming that it believes the £67m it ploughed into MGR last year was enough to secure production of the K-Series engine and the 25/75 ranges. A representative from the company said: “We bought the technology for a reason. We liked it. It is possible that we could make these cars in Shanghai, but before we can do this, we would have to get permission from BMW to use the Rover name.”
They added: “An important aspect to this is that nobody else can (meaning anyone else who considers taking on Longbridge – Ed) make the Rover engine or the 25 and 75 ranges without our permission.” Having said that, a new company called, ‘MG Rover UK Ltd’ was registered at Companies House on March 22, and it is linked to Eversheds – an organization, which advised PVH during the BMW sell-off…
Curiouser and curiouser…
The situation as it stands:
According to one contributor to austin-rover.co.uk, a senior MGR marketing executive sums up PwC and MGR’s situation in these terms (as unpalatable as some of these seem).
In its current form MGR and mass production at Longbridge is no more.
SAIC has been quick to withdraw from negotiations due in some part to government involvement; SAIC has begun to smell victory at a liquidated price, and are now viewed as worst enemy.
The Tata/CityRover contract is terminated (or is to be formally so next week).
The Indian SUV and Diesel engine ventures are being offered the Indian companies in order to simplify MGR and raise cash.
Tata has been in formal contact with the administrators about acquiring Powertrain completely, with a view to transfer to India and supply and British manufacturing plant.
A small American firm is interested in purchasing the MG SV for production in the US (and has been for a few months although it was initially just the distribution rights in the US).
A 2000 sale clause with BMW means that Ford/Land Rover are to be offered the Rover name and production rights. It is thought that if MGR goes into liquidation they will purchase the name.
Ford has stopped supplying V8 engines for the SV and ZT/Rover 75, with no more to come until the situation is finalized.
After an approach by the Administrators Ford/PAG confirmed that it does not want MG. The senior managers (not the top table people) think that the problem is this:
A. Too much time spent on wooing the Chinese/Proton.
B. X80/ MG SV project wasted cash for little benefit
C. 75 RWD platform ditto
D. CityRover did damage to brand, and the company spent too much time and effort on deal.
E. Lack of government support.
F. No new metal only pointless and costly refreshes of range with little effect on sales
G. Press attacks stopped showroom traffic
R45 replacement 10 months (and about 80 million) from production build if cash could be found.
Plan B is now MG and Powertrain to retreat to MGR owned Engine plant land, plant set up and TF and ZT to be produced along with if cash can be raised a MG version of the R45 replacement.
Rover brand to be dropped, due to terminal damage.
Possible small volume medium car (R45 replacement) to be built alongside MG version (if cash available) for sale in the UK only as an Austin (or something else not a Rover).
BMW being very helpful at this time (allowing parts still to be shipped etc)
3575 jobs to go at Longbridge.
Studley Castle to be sold and cash to new company, offers already in.
Proton/Tata/SAIC/ unnamed small car company (thought to be Porsche interested in MG only?) approached Administrators about all or part of current MGR.
Current P4 owners still want to be part of business, but feel they will be forced out, no way out but administration to clear problems.
MG Rover’s fall into administration – a day-by-day account.
By KEITH ADAMS
7 Apr 05
Storm clouds gathering: Rover’s generational line-up – will there ever be any new ones to add? (Picture: Mike McCabe)
MG Rover had been a hot topic on the news wire for a few days, and the buzz was that the SAIC/MGR Joint Venture was in great jeopardy, thanks to the Chinese company’s fears over the future solvency of the company. It seemed to be the final sticking point in a deal, which had been close to being signed for a period of weeks.
The problem the Chinese had, was that it didn’t want to co-create a joint venture, if its junior partner was to go bankrupt before it started producing new models (of course, anyone who believed SAIC did not know the financial situation at MG Rover was pretty dire by this point, were pretty naive – Ed.) News of the forestalling of the SAIC/MGR talks was all over the media, and as some newspapers were attributing them to ‘reliable’ Whitehall sources, it was a fair assumption for people to take it as read.
Bosses of component suppliers certainly thought so, and in the end, informed MG Rover that certain parts would not be supplied to the company, unless guarantees about future solvency could be given – and the £100m bridging loan from the government was forthcoming. As MGR is an exponent of Just-In-Time (JIT) methods, it had no stocks of parts to call on. The result was that the production lines drew to a halt.
At 11:00am, Birmingham local radio announced the sad news: car production had been suspended.
If the situation had been bad before, with rumour and counter-rumour doing the rounds, it now looked extremely sick indeed. News soon spread, and the possibility of an MG Rover close-down had now become a probability. MG Rover sought to calm down the situation by downplaying the size of the components issue, but in the end it proved increasingly difficult, as the news spread. It soon became apparent that the £100m loan would depend on SAIC’s continued involvement in the talks, and as each hour passed, this looked increasingly unlikely.
The news wires were now buzzing – and although MG Rover was putting on a brave face, it was a situation that the company came close to last November. Component suppliers had been spooked that long ago, and it was for this reason the SAIC venture was announced (well, leaked) prematurely to the world’s media when it was.
With MG Rover’s production suspended, and the word from China that the talks were terminally stalled, Patricia Hewitt travelled up to Longbridge to clarify the company’s current situation (or to do some shouting, as one colleague put it).
If there was any hope at all, the last shred of it staggered out of the last chance saloon, when Patricia Hewitt announced to the press at 10:15pm that MG Rover had gone into administration. MG Rover quickly countered that by stating it had only brought in the accountants to try and clear up an impending mess, but as it soon would became apparent, this was a simple matter of semantics…
8 Apr 05
As had been correctly predicted by the Guardian on Monday, Friday did indeed prove to be a day for announcements.
The first news to come through was from SAIC. A brief statement, which confirmed what was now an inevitable situation: SAIC wanted MGR to demonstrate that it would be solvent over the next two years, and because it could not, the deal had been called off. The statement intimated that, had the £100m been available for two years, it would have been more likely that the deal would have gone ahead. Unfortunately, the government was only prepared to offer a six month loan – and in SAIC’s opinion, this was not good enough.
With that, it seemed the dream was finally over. By the mid-morning, MG Rover confirmed it had called in the administrators – PricewaterhouseCoopers (PwC) – and made the statement that it would be trying to secure the best possible future for the company and its 6000 workers.
Ian Powell, one of PwC administraters stated several companies have shown interest in MG Rover during the day, and would possibly consider accquiring the firm. The sorting of MGR finances are at a very early stage so nothing can yet be done in terms of finding a potential buyer, but this is a glimmer of hope for the company.
Tony Blair visited Longbridge to make a sympathetic statement about the plight of the workers – and rather unfeelingly, turned up in his Jaguar…
John Towers returned from China, and was adamant that the company wasn’t doomed, and that some kind of agreement could be reached.
9 Apr 05 – What does MGR still own?
The problem for PwC seems to be this: what assets does MG Rover actually possess now? It has sold the land the factory stands on (to St Modwen), the parts business (XPart) is gone (sold to Caterpillar Logistics), and the Rover 25/MG ZR platform and K-Series engine were sold to SAIC last year for £67m. The fate of the MG marque and the 75/ZT platform (or at least a derivative of it) seems to be in question, too, with Autocar magazine stating this had also been sold to the Chinese – in order to provide funds to keep MG Rover in business. However, this may well not have been completed before SAIC’s pull-out.
That leaves MG Sport and Racing – the producers of the SV Supercar. The X80/SV Project had a start-up cost of £10m (the purchase of Qvale) and another £10m was spent getting the car into production – this was funded by the MG Rover car division, but now belongs to Phoenix Venture Holdings (PVH). There is also the deal with TATA – which could still have promise – but this is also administered and ‘owned’ by PVH.
Another factor is a Pan-European sales and distribution network, which although is small and supports a company with 0.7 per cent share of the European market, it could be valuable to any start-up company, wishing to get a toe-hold in Europe… TATA for instance.
In effect though, MG Rover probably owns little more than the Studley Castle conference centre, the 45/ZS and the MG TF, and their production facilities, both of which are not exactly in the first flush of their youth. The exact details, will probably already be known by PwC, and it will be with these scraps that it will try and entice new buyers into the game.
£200m hole in the accounts?
Already the question of priorities has raised its head in the running of the company during the past four years – with there being a £200m ‘hole’ in the company’s accounts:
The press has seized upon the issue of these ‘substantial losses’ during Phoenix’s tenure in charge of the company, and many have questioned the reasoning behind the spending on the X80/SV project (as detailed above), and the X12/ZTV8 RWD programme, budgeted for £5m, but following delays, probably cost nearer £25m (Prodrive came back and said it needed double the funds to complete the project – it then took another year of development and productionisation on top of that!) The motor sport programme – Le Mans, BTCC, Junior WRC – all of which, probably cost another £20m.
The rest of the £200m shortfall could possibly be accounted for by the companies (such as XPart) being removed from MG Rover, transferred to PVH, then sold on – these could add up to £100m. Also consider MGR Capital, which took on the lease cars, and was making £12m a year for Phoenix while MGR was losing more than that on the associated buyback deals. Include the £40m or so, the directors paid themselves, the £200m ‘hole’ in the accounts begins to look more explainable…
Either way, in a bout of electioneering North of the border, Gordon Brown stated there may well be an investigation of the company’s finances – and the actions of the ‘Phoenix Four’. Let’s hope it is not an excuse to find a scapegoat – the actions of four men who have been in charge since 2000 should not be considered the root of the problems suffered by a company in terminal decline since 1972.
There have been noises that SAIC could pick up the rest of the company’s assets and transfer them to China, thereby achieving what it set out to do with the Joint Venture, but at much less cost, and without the worries of running a factory in the UK (which would be rather remote from its management centre in Shanghai). Given how much it has invested in MGR, a few more million to secure the rest of the company must seem like a bargain to acquisitive Chinese.
However, unsavoury this scenario looks in the UK, in business terms for the Chinese, it must seem like a tempting proposition.
A potential suitor, which has escaped everyone’s notice in recent days is TATA. It may have not achieved success with its CityRover project, but it is a young and hungry company, keen to break into the European market. It has an established relationship with PVH, and is rumoured to have tried to secure the rights to the K-Series engine back in 2000. There are many MGR people working with the company in Pune, India on upcoming projects, which go beyond simple city cars. According to one informed observer, “Indeed, quite a lot of cash has come through PVH’s coffers, largely unreported, as a result of consultancy work British engineers have been doing over there. The new TATA Safari off-roader, for instance, has already had a few good reviews in its current incarnation, with lots of ex-Rover/LandRover expertise having gone into the model, and with more such developments to come.”
Either way, whatever comes out of PwC’s work, it doesn’t look good for the factory, even if elements of the company can be saved.
Today’s events in the MG Rover soap opera…
By KEITH ADAMS
SINCE the weekend, the news regarding MG Rover’s Joint Venture deal with the Shanghai Automotive Industry Corporation (SAIC) has been a grim affair. As has been widely reported across the media, it would seem that the government has become more deeply involved with the two companies’ negotation process because it is said the Chinese contingent have become alarmed at the depth of MG Rover’s financial abyss.
Initial reports spoke of a pension deficit of £400m – which is proposterous, given the state of affairs in last year’s accounts – but this was rightly been dismissed by MG Rover management as sheer speculation. However, a so-called government source let it be known to the media that MG Rover is in financial peril, and would be prepared to offer the £100m bridging loan to help smooth the process.
One cannot help but feel that the government ‘source’ is politicising MG Rover’s plight, and making it clear to anyone who will listen that it is doing all it can to help the two parties reach an agreement. You see, publicising this helps no-one except government… And in the lead-up to a May 5 election, government needs to be seen to be doing all it can do to help the company – there are a lot of marginal seats around the Longbridge area.
However, with intense and mounting pressure from the media, MG Rover’s board members have been forced to come off the fence and make a public statement about the talks, which everyone has been describing as ‘stalled’ – even though it is highly unlikely the media is privy to such information.
The crux of John Towers’ statement was this: the ‘Phoenix Four’ would do all they can to ensure that this deal goes ahead – even making personal guarantees to ensure the company will pay back the proposed £100m loan, going as far as pledging an undisclosed amount of their own money if it helps bring the affair to a satisfactory conclusion.
There are two ways of looking at the state of this affair:
1. We are looking at a classic case of brinkmanship – the Chinese are holding off as long as possible in order to get the most advantageous (for them) deal – knowing full well that the government will probably not give a fig about helping close the deal after May 6.
2. Things really are as bad as the media are saying – and why on earth would government say they weren’t if this weren’t the case – and MG Rover really is on the verge of going under.
Either way, falling sales are a factor in this sorry tale – and it is almost possible to identify (to the day) the point in time this process of diminshing sales went into freefall (i.e., monthly drops of 30 per cent or thereabouts): November 2003. Around the time the ‘Phoenix Four’ trust fund controversy came to light…
Let’s hope things aren’t that bad – and the optimistic ‘brinkmanship’ scenario is the one being played out at the moment.
Five days to rescue deal…
By Michael Harrison, Business Editor, The Independent, April 4
MG Rover, the only remaining British-owned volume car maker, will be forced to call in the receivers by the end of this week unless an emergency £100m loan is made available from the Government.
The Longbridge-based company is understood to be days away from running out of cash as talks continue in China to try to secure a rescue deal with Shanghai Automotive Industry Corporation (SAIC). Sources close to the Chinese company indicated last night the chances of reaching agreement appeared to be worsening. They said that the acute financial difficulties at MG Rover, which they had been made fully aware of only in the last two weeks, had raised concerns about the company’s future stability.
(Note: the sources were not named, so how reliable is this? – KJA)
A crucial issue is the terms on which the £100m loan is made available. One source said: “If it is a bridging loan repayable in six months, then all that does is provide a stay of execution. If the loan were to be repayable after a number of years, that would be a different matter.” A collapse of the company, which employs 6000 directly and generates thousands more jobs in the West Midlands, would be highly damaging for the Government because of the large number of marginal Labour constituencies in the area.
A team of senior Department of Trade and Industry officials, sent out to China on Thursday with the blessing of Tony Blair to try to rescue the deal, spent all weekend in talks with SAIC executives and are expected to remain in Shanghai for several more days.
Whitehall sources said the situation remained as it was on Friday when it emerged that the DTI had made the offer of the emergency bridging loan. Ministers stand ready to support MG Rover financially over a short period if a deal with SAIC is in sight. But they also recognise it is now quite possible that the Chinese will withdraw from the deal and have instructed officials to put contingency arrangements in place should MG Rover collapse. Ministers are looking at a number of job retraining schemes and other incentives to create alternative employment in the area.
DTI officials refused to comment yesterday on reports that the Department’s Permanent Secretary, Catherine Bell, had advised the Trade and Industry Secretary, Patricia Hewitt, against granting the £100m loan. One source said the issue remained “hypothetical” since no money had yet been paid and would only be handed over if ministers were confident of securing a deal with SAIC. “In the end it is a judgement call which is down to ministers, which is why they are elected,” one source said.
(Just how far does the government think £100m will go? Does it have a clue about the costs involved in running a car company? – KJA)
The Government has made the loan conditional on the four West Midlands businessmen who bought Rover from BMW five years ago for a symbolic £10 putting up several million pounds of their own money. The so-called “Phoenix Four”, led by John Towers, a former chief executive of Rover, have made an estimated £40m from the company since the buyout in May 2000.
Two of the Phoenix directors are understood to be in Shanghai taking part in the talks with the DTI and SAIC. The DTI is being advised on the Rover bail-out by KPMG; the senior official leading the talks in Shanghai is understood to be Mark Russell, the head of the department’s automotive division. SAIC has so far given MG Rover £67m and plans to invest a further £133m to enable it to develop a new mid-sized car to replace the Rover 45. In return, the Chinese would take a controlling 75 per cent stake in the joint venture with MG Rover.
Reports over the weekend that the Phoenix Four would make £150m from a deal with SAIC were described as “plain daft” by an MG Rover spokesman. He said that if they had that kind of money then MG Rover would not be in the financial crisis it now faces. The company also dismissed claims that there was a £400m black hole in its finances arising out of its pension liabilities. MG Rover said the deficit in the pension scheme at the end of 2003 was only £67m and had fallen further since then.
(From £67m to £400m in just over a year? That’s daft at best, and damaging ill-informed speculation at worst)
Is the Editor of the Parkers website and price guide, formerly editor of Classic Car Weekly, and launch editor/creator of Modern Clsssics magazine. Has contributed to various motoring titles including Octane, Practical Classics, Evo, Honest John, CAR magazine, Autocar, Pistonheads, Diesel Car, Practical Performance Car, Performance French Car, Car Mechanics, Jaguar World Monthly, MG Enthusiast, Modern MINI, Practical Classics, Fifth Gear Website, Radio 4, and the the Motoring Independent...
Likes 'conditionally challenged' motors and taking them on unfeasable adventures all across Europe.