News : July 2005
SAIC warns rival: share the Rover spoils or we kill the deal
By TIM WEBB, The Independent
SHANGHAI Automotive Industry Corporation (SAIC), which failed to buy collapsed car maker MG Rover on Friday night, will threaten to block the successful bid by its Chinese rival, Nanjing, if it does not share the spoils. SAIC has already paid £67m for the intellectual property rights to most of the cars and engines and is not prepared to walk away from the final MG Rover sale empty-handed.
SAIC is expected to begin talks in coming days with Nanjing, which is also owned by the Chinese government, about gaining some of MG Rover’s assets in return for not pursuing its intellectual property claims. Nanjing plans to produce MG sports cars at Longbridge, where an R&D facility will be based. MG variants of Rover cars, such as the small and medium-sized 25 and 45, will be manufactured in China and assembled at the Midlands plant. The Powertrain engine plant will be shipped to China.
Alan Belfield, the industrial consulting director at Arup, the UK engineering group which advised Nanjing on the bid, said that using MG variants of the old Rover cars would avoid infringing SAIC’s intellectual property. But SAIC disputed this after PricewaterhouseCoopers announced that Nanjing was the winning bidder. An SAIC spokesman said: “We are considering our options carefully.”
Sources close to the negotiations between Nanjing and the administrators admitted that the Chinese company would have to get agreement from SAIC to produce the cars, particularly the old Rover variants earmarked for manufacture in China. “That is one of the things the two companies will have to talk about,” he said. A union source said: “The intellectual property issue has not yet been resolved. We have two government-owned companies which both have an interest in resolving this.”
Asked about the possibility of SAIC and Nanjing sharing assets, Arup’s Mr Belfield said: “It’s up to Nanjing at the Chinese end.”
Meanwhile, the four trustees appointed to oversee the Phoenix Trust, to be set up for redundant workers, will meet one of the former owners of MG Rover, Peter Beale, on Wednesday morning. They will demand that the former owners, the Phoenix Four, transfer millions of pounds into the trust, or they will resign. The directors of Phoenix Venture Holdings offered, shortly after MG Rover went into administration, to transfer the remaining assets of their company, which they said were worth up to £40m, into the trust.
But lawyers for the Phoenix directors wrote to the trustees last month saying the assets could not be transferred until a government inquiry into the former owners’ conduct had been concluded. This could take over a year. The trust still does not have any assets. The directors then promised to contribute a “modest cash sum” instead, but the trustees will not accept this because they do not want to falsely raise former workers’ hopes of a large cash windfall.
Nanjing springs a surprise
By TIM WEBB, The Independent
JUST after 7pm on Friday night, Tony Lomas, the administrator of the collapsed MG Rover, thanked his PricewaterhouseCoopers staff at the City offices of law firm Herbert Smith. The day of reckoning had finally come for the last British-owned volume car maker. After a three-and-a-half-month sale process – which attracted some 200 expressions of interest of varying degrees of seriousness – Mr Lomas finally announced the winning bid.
Three offers had been on the table: one from the Chinese car maker Nanjing Automobile and UK engineer Arup; another from rival company Shanghai Automotive Industry Corporation (SAIC); and a third from a British consortium called Project Kimber, led by the Millennium Dome saviour David James, which was widely seen as the outsider.
Everyone was expecting the new owners of the car company to be Chinese. But the big surprise was that the victorious Chinese hailed from the province of Nanjing and not Shanghai. The decision shocked members of Project Kimber; although they knew last week that they were probably beaten, executives believed as late as Friday afternoon that SAIC had won it.
SAIC itself was quietly confident that its bid, made with a consortium put together by a former Ford executive, Martin Leech, would beat off competition from its far smaller Chinese rival. But there had been enough false alarms to keep everyone on their toes. With MG Rover – which went into administration in April after its original joint venture partner, SAIC, pulled out over concerns about its financial position – nothing is ever simple. And so it proved, right until the end.
Nanjing plans to produce 80,000 newly designed MG cars each year at Longbridge within five years, employing 2,000 workers at full production. It will build MG variants of the large Rover 75 car and the MG sports cars at Longbridge. MG variants of the Rover 25 and 45 – small and medium cars – will be produced in China and shipped to the Midlands for final assembly. In China, the aim is to manufacture 200,000 cars eventually, possibly using the old Austin brand name, the original motor company founded at Longbridge in 1905.
No cars will be manufactured under the Rover brand, which Nanjing says will enable it to avoid the issue of intellectual property. Before SAIC pulled out of talks with MG Rover, it bought the intellectual property rights to some of the Rover models. It is not clear whether Nanjing’s proposals will get round this, but Mr Lomas said on Friday night that it was not an issue.
Nanjing had won because it had the better prepared bid, Mr Lomas said, pointing out that SAIC was, until recently, interested only in buying the Power-train engine business. Nanjing, in contrast, was only ever interested in buying all of MG Rover’s assets, and tabled its own bid 10 days ago. SAIC’s bid was full of conditions because it had had less time to carry out due diligence, Mr Lomas said. Issues included the way in which assets would be transferred into the new owner’s hands and how the money would be paid to PwC.
Asked why he did not give SAIC more time to carry out full due diligence, he replied: “All the groups had three and a half months to make a bid.”
The T&G union, which represents around half of the 6,000 former MG Rover workers, said in a statement it was disappointed that Nanjing had won because it believed that SAIC’s proposals would create more British jobs. It said it would seek urgent talks with Nanjing. The union’s leader, Tony Woodley, had warned that a Nanjing bid would see the “lift and shift” of production from Britain to China.
Alan Belfield, the director of industrial consulting at Arup, could barely contain his glee at being selected. “Ours was the best bid on the table.” He denied that the plan was to move all production to China after a couple of years. “It’s a big goal for Nanjing to be a global supplier. We are focusing in the UK to do that, and on the things which the UK is good at, such as making niche vehicles and R&D.”
Nanjing, which is controlled by a local authority, is China’s oldest car maker, set up in 1947 in the Jiangsu province in the east of the country. Mainly a commercial vehicle manufacturer, it makes a fraction of the 600,000 cars that SAIC, China’s biggest car maker, churned out last year. Though both are owned by the Chinese state, little love is lost between them.
The victory will be particularly sweet for Nanjing as it was set to be MG Rover’s main joint-venture partner until SAIC gate-crashed the talks 18 months ago. Nanjing was brought in to SAIC’s plans only as a junior partner, because the Chinese government wanted to help Nanjing achieve its aim of becoming a global car maker. Now SAIC must eat humble pie and see if Nanjing will bring it on board as a partner. Mr Belfield was diplomatic about the possibility of teaming up, saying: “That is something for Nanjing from the Chinese end. We are happy to talk to anyone who can help us make better cars in the UK.”
The bidders’ battle to win over the administrators, the politicians and the public has been as high profile as the lurch of the company into administration under the old owner, Phoenix Venture Holdings, in April. It had been impossible, at times, to see beyond the spin as all the three bidders put into gear large-scale public relations campaigns to bolster their bids and discredit their rivals.
Now it is up to Nanjing and Arup to prove that PwC was right to select them. Richard Burden, Labour MP for Birmingham Northfield, said that, despite the hopes of redundant workers, it would be wrong to assume that the new owner would “bring back” MG Rover. MG Rover has failed. Nanjing must show that this is not another Phoenix-style false re-incarnation, and that this time, it will work.
PricewaterhouseCoopers press release
THE joint administrators from PricewaterhouseCoopers have announced the sale of the assets of both MG Rover Group and its engine producer, Powertrain Limited to Nanjing Automobile (Group) Corporation. The sale concludes a three month process following the collapse of MG Rover in early April. Nanjing Automobile (Group) Corporation was one of the two Chinese groups that had planned to become joint venture partners with Phoenix Ventures, prior to the collapse of negotiations.
Tony Lomas, joint administrator, said:
“In early June I reported to the creditors that there were no viable bidders for the business as a going concern. As a result, plans had been put in place for a break-up sale, unless a bidder pre-empted that process before it could be completed. SAIC had offered to buy the engine plant for relocation to China, so negotiations were underway to sell those assets separately.
“Whilst we have been negotiating with Nanjing Automobile (Group) Corporation we have been aware of Martin Leach’s interest in the car production assets, although no bid has ever been made by Mr Leach. “Until late last week SAIC had offered to acquire only the Powertrain assets. On Monday of this week SAIC submitted a conditional bid for all of the MG Rover and Powertrain assets. However the level and conditionality of SAIC’s bid left Nanjing’s bid as the preferred way forward.
“Nanjing will now begin to take control of the assets and develop its plans for the future. It has indicated its intention to relocate the engine plant and some of the car production plant to China, to retain some car production plant in the UK and to develop an R&D and technical facility here in pursuit of the same global expansion ambition that it had when it joined with SAIC as the intended joint venture partners to Phoenix Venture Holdings before the collapse of MG Rover.
“For a transition period a residual workforce will continue to be employed by MG Rover Group and Powertrain, assisting the Administrators as they have for the last three and a half months. In the meantime Nanjing Automobile (Group) Corporation intends to begin to hire staff to assist it in implementing and developing its strategy.”
The race is on…
By KEITH ADAMS
The announcement that SAIC and Martin Leach’s company, Magma, have joined forces and will be bidding for MG Rover’s assets from the administrators, PwC.
SAIC has sensationally entered into the bidding race to pick up the assets of MG Rover from PwC. Alongside industry mainstay, Martin Leach, the two parties are in the process of negotiating for MG Rover’s production facility at Longbridge.
This move would make Magma the overwhelming favourite to pick up Longbridge from PwC, is SAIC already owns the rights to build Rover’s model range and the K-Series engine. Leach and Ed Sabisky, a former General Motors finance specialist, have obviously convinced SAIC of the validity of Longbridge (MGR and Powertrain), and one can assume that SAIC will be using Birmingham as its centre of operations in a European push.
It remains to be seen whether the cars that emerge from Longbridge will be wearing Rover badges or not, but with the MG marque still in British hands, there will be no legal or financial hurdles to re-starting production of the existing range wearing MG badges.
However, PwC announced today that it is still in discussions with three interested parties – two overseas, and one British. The overseas end is taken care of by the proposed (before April) Joint Venture partner in SAIC-MG Rover, Nanjing (the bid is being assisted by Phoenix Venture Holdings’ director, Nick Stephenson). As for the British party still in the running, are we possibly looking at Magma (with SAIC), company ‘doctor’ and Dome rescuer, David James (see below), or Triple-A.
With RDX60 engineering near competion (but mothballed in 2003), would this form the basis of a mid-range push to complement the Rover 75/ZT, or would this be scrapped in favour of a new venture? After all, as has been suggested, Martin Leach is a ‘Fiat’ man, and MG Rover did try to negotiate for the Stilo platform in the past…
Former Ford Man eyes up MG Rover
By Richard Bremner, Autocar magazine
Martin Leach and the Ford GT at the 73rd Geneva International Motor Show
FORMER Maserati and Ford of Europe boss Martin Leach is heading a bid for MG Rover that could rekindle the deal with Shanghai Automotive (SAIC).
The future for the ailing MG Rover brand could be bright if a new bid for the recently deceased company is successful. The plan, reckoned to be the most credible so far, would result in using Longbridge as a research and development centre, before vehicle production restarts early next year. SAIC is said to be taking the bid ‘extremely seriously’.
Former Ford and Maserati supreme Martin Leach and Ed Sabisky, a former General Motors finance specialist, have been working with Transport and General Workers Union general secretary Tony Woodley, a long-time champion of Rover. The three believe that the industrial logic for a deal with SAIC still holds, and have been talking to the Chinese group for some time.
The insolvency and pension liabilities that stalled the deal previously have ceased to be obstacles now that MG Rover is in administration. It’s thought that SAIC will have to find £100 million to to restart the deal, with additional funds from Leach and Sabisky. The UK Government is likely to be supportive of the deal. SAIC would build the Rover 75 and 25 in China and move the K-series engine facility there, too.
Besides the Leach bid there are thought to be two other bids for the whole company, and five centred around reviving MG and the TF. Among the bidders for MG is former Powertrain boss Fraser Welford-Winton, as well as Chinese company Nanjing, assisted by Phoenix director Nick Stephenson.
Midlands millionaire haulier Martyn Moseley has joined forces with Middle East-backed consultant Krish Bhaskar and intends to bid for the whole company, while corporate troubleshooter David James (see below) has also bid to restart MG sports car production. It is not clear when an announcement of winning bids will be made, but it is thought to be close.
MGR dealers were signing over to SAIC weeks before meltdown
By KEITH ADAMS
AS RECENTLY as March 2005, SAIC was issuing information packs to UK MG Rover dealer chiefs, requesting that they sign over from Phoenix Venture Holdings (PVH) to the new Joint Venture Company.
According to the document, two Joint Venture Companies were about to be formed between Phoenix Venture Holdings (PVH) and Dong Hua Automobile Investment Holding Corporation (DH). DH is a Joint Venture established between SAIC and the Nanjing Automobile Group (NAC) – the company that looks almost certain to take on MG Rover’s Longbridge production equipment, as well as the Powertrain engine plant.
The unnamed Joint Venture Company was to be registered in China, would be split 75-25 between DH and PVH, and would form the umbrella organisation for the second JV, provisionally named UKA.
The same split would also apply to the second Joint Venture, which was known as ‘UKA’. This would encompass the Longbridge production facility, XPart and the worldwide distribution network (excluding China).
SAIC also stated that it was working on re-acquiring the MG Rover’s spares distributor, XPart, from Caterpillar Logistics – after the hard-up Birmingham carmaker sold it off in 2003.
The document also reaffirmed SAIC’s desire to become one of the world’s ten largest manufacturers, ambitiously promising to build over one million cars a year. It promised that the new Longbridge- and Shanghai-built medium car, codenamed RDX60 (Project Nexus), would be revealed at the Paris Motor Show in 2006. It also stated that the car had already been tested favourably against rival lower-medium cars – and was confidently predicting Longbridge would be producing 200,000 cars per year after 2007.
In an effort to reassure embattled dealers unsure about making the switch, SAIC promised that it would be financing the Joint Venture, and all MG Rover needed to do was remain solvent…
The failure of MG Rover to remain solvent meant the Joint Venture was never cemented, and following the SAIC purchase of the design rights of the 25, 75, MG TF, and the K-Series engine, it is now working on its own plans to build the 75 (under the codename SAC528) alongside UK Consultants, Ricardo Engineering and a number of ex-Longbridge engineers.
However, it is said SAIC is running into difficulties with SAC528, and the outright purchase of Powertrain would alleviate potential problems building and developing the K-Series engine.
British bidder plans £40m MG restart at Longbridge
By Christopher Hope, Business Correspondent, The Telegraph
DAVID JAMES, the company doctor who prevented the Millennium Dome from deflating in 2000 and negotiated with Colonel Gaddafi for the release of British hostages in Libya in the 1980s, is leading an all-British bid to buy the MG sports car business for £40m.
Mr James lodged details of the offer with administrator Price Waterhouse Coopers (PWC) earlier this week. He is hoping to re-employ 500 former workers to build the sports cars at MG’s Longbridge plant in Birmingham.
The news will bring fresh hope to the West Midlands, which is still reeling after MG Rover collapsed in April with debts of £1.4billion and the loss of more than 6,000 jobs.
Mr James has been brought in to refresh an offer made by a group of Birmingham businessmen. Other bids have come from Nikolai Smolenski, owner of the Lancashire-based TVR sports car business as well as Dastaan, an Iranian business.
The offer is for the assets of MG and for its Powertrain engines plant. Mr James said the offer – called “Project Kimber” – was fully funded, but declined to give details.
He said: “The money is on the table. We are proposing to buy the assets and return production to Longbridge for the MG. Ours is a British-backed bid for jobs in Britain.”
Mr James needs to hire 500 former car workers to make his plans work, while another 1,500 new jobs hinge on whether other manufacturers can be persuaded to make cars at Longbridge. Mr James said he was in talks to build “niche brands” there.
If the offer is accepted Mr James, 67, will be chairman of the new business and take a 5pc stake. A team of motor industry executives would run it on a day-to-day basis.
Alchemy Partners, the venture capitalist that tried to buy MG Rover in early 2000 before it was sold to four local businessmen for a nominal £10, had been contacted about funding.
Jon Moulton, chairman of Alchemy, said: “We have been in contact with some elements of this group but we are not funding it.”
Mr James, who started his career at Ford Motor Company, said he was keen to work with Shanghai Automotive Industry Corporation, which bought intellectual property rights relating to some Rover models and engines for £67m late last year. A spokesman for PWC said: “We don’t talk about individual bids.”
Yesterday, it emerged that Nick Stephenson, one of the “Phoenix Four” who netted more than £30m from MG Rover, was working unpaid with another possible bidder, Nanjing Automotive, after executives from the Chinese company reportedly visited the plant last week.
It also emerged that the Phoenix Four, who pledged to give assets worth between £10m and £30m to a trust for ex-workers, had been advised not to release the assets until completion of an inquiry by the Department of Trade and Industry, which could take more than 18 months.
Eric MacDonald, an officer with the T&G and a trustee of the trust, said: “We are extremely unhappy about this. We understood very clearly the Phoenix Four had made an absolute commitment to hand over the assets.”
‘Region is more attractive since MG Rover crash’
Birmingham Post Jul 1 2005, By John Revill At The World Investment Conference In La Baule
THE West Midlands’ response to the MG Rover crash has made the region more attractive to foreign investors and could help turn it into a European economic powerhouse, it has been claimed. Sir Albert Bore, former Birmingham City Council leader, said the region had learnt from the aftermath of the 2000 Longbridge crisis to improve its skill levels and diversify.
This now stood the region in good stead for increasing the value added and knowledgebased qualities which could attract more overseas firms. Speaking at the World Investment Conference, Sir Albert said the region had all the fundamentals in place to achieve greater economic success. A skilled and flexible workforce together with support from local agencies and infrastructure meant Birmingham could soon take its place among the European front-runners.
But in order to do so, it needed to focus increasingly on knowledge-based and value added industries, said Sir Albert, who was in La Baule in his role as vice president of the European Union’s Committee of the Regions. He said: “New jobs are not going to come in some of the traditional low value added industries which the West Midlands has been renowned for. They are going to come from developing the human capital of the region by improving educational achievement standards, upskilling and moving into higher added value areas, moving into the knowledge economy. That is where Europe is going to succeed against the tiger economies of India and China the Far East, through the UK being a knowledge economy.
“We have got to reflect that in the West Midlands. Birmingham much of the last ten years has been about addressing that agenda.”
Sir Albert said lessons had been learned from the 2000 MG Rover crisis, which meant the number of job losses was now significantly lower as companies diversified away from Longbridge.
“The current crisis is a lesson which has been learnt. The West Midlands over the past five years has learnt it has to diversify, and has done so. We have made a lot of progress with some of the components companies moving over to supplying aerospace for example from motor manufacture. The way we have restructured the industry and up skilled over the past five years is a demonstration of what we have to keep on doing and the chances of moving the West Midlands economy on to make it more competitive are quite realistic.”
Sir Albert said people in Europe wanted to see how the region had done it, with schemes like the A38 Technology Corridor an attraction to inward investors.
“People in Europe want to see how we have increased our skills, training and flexibility.”
But despite this change, there was still a long way to go with Birmingham lagging behind the EU average GDP per head. Sir Albert said: “We are not competitive yet. In EU per capita GDP we are not among the most competitive regions in Europe. Birmingham is around 90 per cent of EU average GDP, but there are regions where there is 130, 140 per cent of the EU average GDP. Places like Munich and Milan are the tiger economies of their nations. We have got a long way to go in being a competitive region, but the West Midlands can become more of a powerhouse than it has been in recent decades.”
…but General Motors disagrees
GM Europe’s funny beliefs
Taken from Autowired
OUR POLITICAL leaders in the UK came in for a bit of a bashing this week from GM Europe’s president, Carl-Peter Forster. He said it was a dangerous game being played by Britain in replacing its high-skilled manufacturing base with low-skill service jobs. “The UK has a funny belief that you don’t need manufacturers and I doubt that this sort of structure is right,” he said.
The London-born economist, with a degree in aviation and space technology, wasn’t with General Motors at the beginning of the millennium when it closed the Vauxhall plant in Luton and dispensed with 2,000 skilled manufacturing jobs. He was with BMW, which itself was getting excited about buying Rover to ensure thousands of other UK manufacturing jobs would not be lost.
These days, at the top of Forster’s ‘To Do’ list, must be a note which says ‘Dispense with 12,000 jobs from GM Europe’. A few hundred of those jobs will go here in the UK but the bulk will go from the Opel plants in Germany. A minute percentage of those skilled workers will be re-employed in manufacturing. Most will be selling burgers or employed in call centres.
Seems to me that he, too, has a funny belief that he can rid his ailing company of 12,000 manufacturing jobs whilst believing other manufacturing companies in economically-strapped Germany will hire them. The jobs in Germany, like the ones in Luton, are going because Europe is building too many cars. The sadness is that manufacturing, generally, has been improved immeasurably by computers, other technology and newer materials and no longer needs armies of workers.
The regret is that we still seem to need burgers, supermarkets and people in call centres trying to sell me life assurance. Those Widows in Scotland, who have always been prolific writers to me have now taken to phoning me, bless them.