News : January 2004
Longbridge, circa 1980. The huge site had a capacity to produce over 500,000 cars per year. Given MGR’s current volumes, doesn’t it make sense to start slimming down the facility, whilst managing the land properly?
Taken from icbirmingham.co.uk
“The band of die-hard critics who have continually questioned the very existence of MG Rover may well view St Modwen’s acquisition of the car firm’s Longbridge site with a jaundiced eye – but from a business point of view, it makes perfect sense. Birmingham-based St Modwen has made it plain that it is not – repeat not – looking to make a fast buck from the deal. The Edgbaston developer would be more than happy if the UK’s biggest independent car manufacturer stays there indefinitely.
And that is the essence of the agree-ment – St Modwen may well now own the site but MG Rover still controls it, at least for the next 35 years and probably well beyond. It also gets a £42.5 million cash injection which will be ploughed into new products – not least the development of a new medium-sized car which observers say is long overdue.
So what lies ahead for Longbridge itself? In the short term, the answer would appear to be “business as usual”. The agreement between St Modwen and MG Rover means there will probably be little physical change to the site for some time to come. But long-term predictions are more difficult to come by. However, one thing is certain. Land eventually deemed surplus by MG Rover – not St Modwen itself – will change hands.
Over the past few years St Modwen has been quietly carving out a strong reputation for its sale and leaseback deals – and in the way it manages its property portfolio. In the Midlands it has been snapping up some of the best industrial sites in the region. Late in 2002 St Modwen bought the Alstom Transport train making site at Washwood Heath in Birmingham as part of a £111 million sale and leaseback deal with the debt-laden French group, which took fixed-term leases of between five and 15 years on most of the properties.
The rental, in the case of Longbridge some £3.6 million a year, provides a valuable stream of income to use in the interim period while ‘marshalling’ – preparing for when the land is free to be redeveloped – is carried out. By buying land at today’s prices – not tomorrow’s hypothetical price – and by not being in any hurry to clear the tenant from the land, St Modwen also strongly reduces its cost base. It can afford to wait. It can take a longer-term view, giving its tenants – in this case MG Rover – time to resolve issues while exploring the full development potential of the site.
Traditionalists may regard MG’s decision to sell the site as treachery, a betrayal of Britain’s once-proud motor industry. But they should, perhaps, look to the reaction of the workers at Longbridge. One might have expected them to throw their hands up in horror. Instead, they regard the deal as “an investment in the future”. They remain positive about the survival of Longbridge as a centre of car manufacturing – and, as one shop steward succinctly put it – “who cares who owns the land as long as we are here in the next 35 years?”
Quote of the month
Clarkson on the XPower SV:
|I am trying to find a way of conveying in words
what the sound of the SV’s engine is like, but
it’s a struggle. I actually dont think I have
the writing skill to do it. Normal engine type
words – bellow, groan, roar – are hopeless…
Towers: “Wondering why we bothered”
The Daily Telegraph, 16th December 2003
According to the UK Broadsheet, John Towers has began to find it increasingly difficult to hide his frustration over the UK Press’s handling of the company’s financial affairs: “John Towers has said that the four men who bought MG Rover for £10 are “fast approaching the stage of wondering why we bothered”, after weeks of criticism of the way they have run the company.”
Despite not actually speaking diectly to Towers or any of the three other Phoenix directors, the newspaper’s article went on to explain how the company’s fortunes are taking something of a nosedive. Towers himself did post his defence via local MP Julie Kirkbride. He said that he “would very much like an opportunity to have a public debate of just who did what to save this company”.
“The four of us took a huge financial risk in May 2000 and have continued to take financial risk over the last three years. We appreciated the vocal support and good wishes from many parties claiming to be associated with ourselves but at the end of the day we were the only people who took the gamble.”
“We have certainly received well-publicised rewards for our risk, but have taken far less benefits than most other entrepreneurs would in these circumstances. We all accepted a major change to our lifestyles in taking on this company and the responsibilities associated with it and are fast approaching the stage of wondering why we bothered.”
According to the Telegraph, “Ms Kirkbride, Conservative MP for Bromsgrove, said she was surprised by the tone of the letter which was “very defensively written”. She added: “They did not feel uncomfortable about what they had done. If they did they would not have been so defensive.”
One’s heart has to go out to Towers, who must now feel that as a result of this media attention, the public’s goodwill is beginning to run thin. Back in 2000 when he Triumphantly returned to Longbridge, most industry experts gave MG Rover no more than two years. The company’s continued existence has proved many sceptics wrong, but now that it is now entering into Rover’s Centenary year, there are many tough challenges to surmount. Not at least, getting the RD/X60 nearer to production.
UK Sales 2003: final report
|Single month||Year to date|
MG Rover’s year end performance could have been so much better… Up to November, MGR had been steadily recovering from the its low point at the start of the year; this process had progressed to such a degree, that by the end of October, MGR was actually ahead of 2002. Then came November, and all the bad press. The cumulative effect of November and December was that MGR’s 2003 sales had been dragged down to below that of 2002.
If November’s crash had been bad, at least MGR management could take solace in December’s figures; yes, they were still down on 2002, but less so than the previous month. Despite a lukewarm press reception and a lack of any meaningful publicity campaign, CityRover is now on-stream and the effects of this car’s sales should hopefully kick-in by the end of January 2004.
So, what can we expect from 2004; Rover’s centenary year? Well, one thing is for sure, it is not going to bring the RD/X60. According to my sources, there was absolutely no activity on that front at Longbridge – even the robots had yet to be ordered (that is, by late December 2003), and following the abandonment of the idea of using some of the Rover 75’s facility (subframe “stuff-ups”, for example), it would seem that a hefty investment remains to be made. Accepted wisdom is that MGR now need to tie-up with its as-yet unnamed Chinese partner (Kevin Howe hinted this would be imminent) before the RD/X60 takes its next step towards production. Given a favourable following wind, we could yet see RD/X60 by the end of 2005…
There are the facelift models waiting in the wings though. Allegedly, a heavily revised 45/ZS and lightly revised 25/ZR will make an appearance in the Spring, followed slightly later by a re-jigged 75/ZT. As 2004 is an extremely important year for Rover in more ways than one, let us hope that these product launches will pass without incident…
Whatever the case, let us hope that MG Rover has a trouble-free centenary year, and those green shoots of recovery that we are all hoping for, start to appear soon.