By 28 February 2006 0 Comments Read More →

News : February 2006

Chinese car maker renews factory lease – with getout clause editorial team

THE possibility of re-starting car production at the former MG Rover site on the outskirts of Birmingham moved a little closer on Wednesday with the signing of a property lease.

Nanjing Auto, the Chinese company which bought MG Rover last year, has inked a 33-year deal on the Longbridge site with its property developer owner, St Modwen Properties, which bought the facility from the car maker several years ago and leased it back.

“A landmark agreement, which opens the way for future car production at Longbridge, Birmingham, was signed today,” St Modwen said in a statement.

It was looking forward to a “long and fruitful” relationship with the Chinese group, the property developer said.

The agreement is for Nanjing to take a 33-year lease at a rent rising from £1.8m per year on 105 acres of the 469-acre site. This comprises the South Works of the former MG Rover plant, which incorporates two car assembly plants, the paint shop and administrative offices, together totalling more than 2m sq.ft. The lease terms incorporate a six-month break clause in case Nanjing is unable to confirm a viable long term future for the site.

Nanjing Automobile Corporation (UK) chairman Wang Hongbiao said: “I am delighted that we have reached an arrangement with St. Modwen Properties. This means that we can move forward with our business plan to build cars at Longbridge. The MG brand is famous and we are proud to project it into an exciting future.

Nanjing has rights only to the MG badge – though up for sale, Rover is still owned by BMW whose CEO Helmut Panke last year suggested Chinese automakers might find established brands useful for penetrating western markets.

According to the BBC, the property deal was welcomed by the Transport and General Workers Union (T&G), which reckons Nanjing’s business plan could lead to the production of 100,000 cars a year and create 1,200 jobs, but local member of parliament Richard Burdon said people needed to understand the scale of the deal.

“We are not talking about Rover’s return here, we’re not talking about the return of mass car manufacturing,” Burdon told the broadcaster. “We’re talking about a relatively small, but significant, sports car manufacturer…that could lead to a broader regeneration of the area.”

The BBC said St Modwen and local authorities have wider ambitions for the Longbridge site, which would see up to 10,000 jobs created through a mixture of housing, retail and industrial developments.

St Modwen Properties chief executive Bill Oliver described the agreement as opening a new chapter in the long history of car production in Birmingham.

“We always said that if there was a viable plan for a long term automotive use at Longbridge, we would do our best to facilitate it.”

Nanjing had earlier denied media reports last week it would shift production to nearby Coventry.

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Sorting the inscrutable from the indecisive


NO sooner was progress being reported with MG Rover than the inflated speculation was summarily punctured, taking my latest contribution to the website with it. According to stereotype, Orientals are supposed to be inscrutable but Nanjing Automotive’s denials over a possible sale of the MG name to Project Kimber were quite categorical: the plans for MG Rover at Longbridge were continuing as planned, and there was no negotiation with David James. To be frank, such protestations are laughable.

If the purpose of this denial had been to flatten frivolous media speculation then we would have had to accept it at face value, but the weight behind the published stories suggests that what we have here is no mere rumour. Not only did two highly respected newspapers, The Times and The Financial Times, publish articles by experienced staff writers but they also quoted names and figures.

A rumour monger might speculate wildly about the involvement of American fund managers but it is hardly creditable that Christine Buckley of The Times would invent the names of the funds and the investments unless she had pretty good information to begin with. I think it is fair to say that something is going on, but just what is difficult to fathom.

There are a few things we do know for sure. Nanjing Automotive have bought the assets of MG Rover and shipped a large part of the production machinery to China, though some of it may remain in the darker recesses of Longbridge. We also know that SAIC claim the intellectual property rights to the same models that rolled off those production lines but have nothing tangible.

We regularly hear about claims that Nanjing is intending to reopen Longbridge with TF and ZT production in the near future but nothing concrete happens. To go beyond these sketchy details would be to speculate, but this does not mean that it cannot be informed speculation.

The latest reliable news is that Nanjing is hedging its bets with a further six month lease of the Longbridge plant, and then only a small part of it. If we look back at the rapid, if not undignified, rush by the Phoenix Four to secure financial backing for their MG Rover plan back in 2000 then Nanjing’s glacial progress appears most suspicious by comparison.

With the UK dealer network withering daily speed is crucial so the fact that Nanjing is still putting its business case together indicates that it is failing to find financial support. SAIC is also defending its ability to develop the Rover designs it owns, so obviously the spat with Nanjing has yet to be resolved. However, with little evidence of physical progress it would appear that all parties have succumbed to corporate paralysis.

My reading of the situation is that both Nanjing and SAIC are companies that are thoroughly unfamiliar with the rough and tumble of western capitalism. SAIC lacked the courage to take on MG Rover even by the expediency of temporary entry into administration, such as recently saved the van maker LDV. Nanjing was barely more dynamic since it was in a desperately poor shape at home and so it pounced on MG Rover more in panic than planning. After the battle SAIC has been able to retreat mostly intact but lumbered with a few dead-end car designs, while Nanjing has won a wasteland requiring heavy investment with funds it never had in the first place.

Nanjing believes it owns the MG product rights and is forced to use that name to maintain the fiction that it is a separate model range to Rover, even though the MG brand means nothing in China. Worse, they are stuck with the TF sports car that has no market in China but cannot be sold on to another manufacturer without the brand heritage. If Nanjing purchase the Rover brand from BMW then MG can be liberated, but SAIC has an equally pressing need for the Rover name and both companies are up against Ford which wants to secure it for Land Rover.

I am presuming that David James’ plan for Project Kimber is being held up by this gridlock over the Rover brand and designs. In order to kick movement into the participants I think he is leaking information early, in a way unfortunately reminiscent of MG Rover’s premature announcement in 2004 of SAIC’s investment. This time I feel more confident in capability of David James than John Towers. His devise might even be working if it precipitated the latest story about Nanjing seeking to buy the Rover name from BMW.

If this were to happen then SAIC might be forced to clarify the status of the designs it owns and reach an agreement with Nanjing. Meanwhile Nanjing would be free to sell the surplus TF along with the historic MG marque. There are the usual denials from Nanjing, but more significantly there have been no pronouncements from David James one way or another.

The man has a formidable reputation as a business operator, if nothing else I think we can be sure that he knows exactly what he is doing.

SMART Sold to Project Kimber, says Reuters


Gorgeous but ever so slightly pointless SMART Roadster could soon be built in the UK. Will the potential of this car finally be unleashed by a fresh management team?

DaimlerChrysler AG’s unit Smart said it has signed a memorandum of understanding to sell the licensing rights for its Roadster and Roadster-Coupe, plus some of the plants that manufacture the models, to a UK-based consortium, Project Kimber.

The agreement — covering the redesign, production and marketing of the brand — is to be finalised ‘in the next few months’.

Smart intends to sell those production facilities that are ‘no longer needed’, it added, without specifying further.

No financial details were disclosed.

Smart last year decided to discontinue production of the Roadster and Roadster-Coupe models as part of a restructuring programme.

Project Kimber is led by corporate troubleshooter David James, who last year failed to keep MG Rover out of Chinese hands.

Nanjing in talks to buy Rover name rights


NANJING Automobile wants to revive the Rover name and is in talks with BMW to buy the rights to use the famous marque on its Birmingham-built models. The Chinese company is one of several firms which has approached BMW to buy the right to call its cars Rover.

The name was licensed by BMW to MG Rover’s parent company Phoenix Venture Holdings when the German firm pulled out in 2000. But the licence agreement lapsed last year with the collapse of MG Rover, while Nanjing only acquired the right to use the MG name as part of the £53 million deal to buy the assets of the Longbridge carmaker.

Lin Xiaohu, preparing director at Nanjing, said senior executives from his company in China were talking to BMW about buying the Rover name.
He firmly dismissed reports that Nanjing was looking to sell the MG name or that it was looking to shift its manufacturing operations from Birmingham to Coventry.

He said: “It is impossible we would want to sell the MG name, absolutely impossible. We never want to sell any brands from MG Rover; in fact we want to own more. That’s why we are talking to BMW about buying the Rover brand from BMW. The Rover name is very important; it is very famous in China and we want to develop in China and other markets.”

Mr Lin said Nanjing remained committed to manufacturing at Longbridge, with the first cars – updated versions of the MG TF sports car due to come off the production line next year. He said the rumours about moving to Coventry could have followed a visit by Nanjing executives to the city.

“We have been to a company called Stadco in Coventry, which produced the body-in-white shells for MG TF. We are are in discussions with them to move it from Coventry to Longbridge, which is our headquarters in the UK. A extra six month lease has been agreed with St Modwen for part of Longbridge and we are talking to them about a more long term arrangement. We are hopeful of getting a 35-year deal to make MG Rover cars at Longbridge – first MG TF and then ZT.”

Mr Lin added that a delegation from seven Chinese banks had visited Birmingham last week to see the site. These included representatives from Bank of China, China Commercial Bank and others, who Nanjing hopes will back its plans with an estimated £100million to restart production in Birmingham.

Mr Lin would not be drawn on how much capital investment Nanjing was seeking, but said the company was expecting an answer “very soon.”

He added that he did not understand why Project Kimber, the consortium led by troubleshooter David James, was saying it was now in talks to build sports cars under the MG name. He said: “I do not know why Kimber would say this. There are no talks with Kimber.”

Instead Mr Lin said that Nanjing was looking to exhibit its first car at the Heritage Motor Centre at Gaydon in Warwickshire. He said: “We are restarting production of this car, and we want the first car we produce to go on show at the Gaydon. This car will be part of the new history of MG Rover.”

A spokeswoman for BMW said: “We have been approached by several parties with regard to the possible purchase of the Rover trademark. “We are not at liberty to disclose who we are talking to at the moment because we are bound by commercial confidentiality.”

MG on the move


CONSIDERING that MG died a good six months ago it is proving to be surprisingly mobile. As the production equipment sails gracefully over the horizon and on to China, it looks like the brand could be moving to Coventry. Project Kimber, named after Cecil Kimber the founder of MG, has emerged with corporate physician David James in his new role as the white knight. This is the first time for years that a bona fide businessman has been fighting for the little sports car.

If the stories are correct then Project Kimber is more than just a name on a file. David James first tabled the idea when MG Rover collapsed back in April last year. Since then his tenacity has not diminished. It looks like he has purchased from Nanjing Automotive what he originally wanted, the MG name, but for around half the £53m the whole company fetched. While Nanjing have failed to come up with a credible plan for restarting Longbridge Project Kimber has been quietly gathering momentum. It is thought that the MG-TF might be part of the deal with Nanjing since there is not much call for sports cars in China. It is equally likely that the SV supercar was given the shortest of shrifts.

The MG-TF might have been the highest selling sports car in the UK but jump starting production would entail delicate negotiations with wounded suppliers. In any case, one sports car does not make a summer. Mercedes Benz have been trying to unload the luckless Smart division for some time, and it looks like David James has been canny enough to rescue the Roadster. Early suggestions are that he snapped up the design and production capability for a bargain £13.7 million. This is might even include some kind of dowry, rather in the fashion that BMW offered financial inducements to rid itself of Rover. The main financial backing, though, comes from Access Capital with European American Securities and a mysterious wealthy individual. The success in arranging this further underlines the lack of progress in the ambitions of Nanjing and GB Sports Car to relaunch the MG range from Longbridge.

David James has gathered a team of around 30 engineers, not enough to design a new car but well capable of sorting an existing design. This suggests that the Smart Roadster can be effectively reworked as an MG Midget. Although it was an economic failure for Mercedes Benz it was well designed and perhaps only lacked heritage. The MG badge will change that, along with tangible modifications for added authenticity. While the TF could take a year to put back into production, more if an engine supplier does not come forward, the Roadster can be more easily transferred. Mercedes Benz will do all it can to smooth the handover and crucially should guarantee supply of critical parts such as engines.

There are considerable risks attached to the programme. A factory has yet to be confirmed and the government still have not grasped the strategic importance of the car industry to Britain. There is also the destruction of the MG Rover dealer network, once 270 strong and now probably less than half that, subsisting on servicing and used car sales. Fortunately, sports cars do not require such comprehensive national coverage and what remains of the network would suffice.

On the positive side we have one of the most respected names in the business world who is resolute in his belief in the commercial logic of the proposal, one that bears an uncanny resemblance to the plan of an equally adept business operator, Jon Moulton. There is solid financial backing by a group of hard nosed capitalists, plus practical support from Mercedes Benz, the oldest and most famous car manufacturer in the world. With the shelf life of a sports car being longer than for mainstream models at around ten years there is time for MG to find its feet in the market and create its own designs for the future. It seems that all the elements are in place for a rapid revival. It might be possible to have new MG Midgets on the road within six months, or just in time for the start of the English summer.

Posted in: AROnline News
Keith Adams

About the Author:

Created in 2001 and watched it steadily grow into AROnline. Is the Editor of Classic Car Weekly, and has contributed to various motoring titles including Octane, Evo, Honest John, CAR magazine, Autocar, Diesel Car, Practical Performance Car, Performance French Car, Car Mechanics, Jaguar World Monthly, Classic Car Weekly, MG Enthusiast, Modern MINI, Practical Classics, Fifth Gear Website, and the the Motoring Independent... Likes 'conditionally challenged' motors and taking them on unfeasable adventures all across Europe.

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