News : December 2003
CityRover hits the streets
THE first all-new Rover to hit the streets since the formation of MG Rover back in 2000 has been a rather low-key affair. The launch date was set for the 6th November, and yet, many MGR showrooms across the country did not seem to have any in stock. That is not to say that public interest was not high – and the company acknowledges that the CityRover is a car that the company has needed in order to replace the Rover 100/Metro. Rod Ramsay, Sales Operations Director, said: “The arrival of CityRover marks our return to selling cars in the ‘city sector’. The combination of a powerful small car, attractive modern style and good interior proportions ensures it will have wide appeal.”
The CityRover range is pitched in the ultra-competitive city car sector, and in the UK, it will go head-to-head with the Fiat Panda and Seat Arosa. Prices range from £6495 to £8895, and equipment levels are “competitive”. Initial impressions in the press have been largely positive – certainly its straight line speed has come as something of a surprise, and interior accommodation has to be counted as class-leading.
Let’s hope that the launch has not been marred too much by controversy.
Financial questions asked in the media…
The “Phoenix four” (left to right): John Towers (chairman), Nick Stephenson (director), Peter Beale (director) and John Edwards (director).
AFTER minute analysis of the annual shareholder’s report issued by Phoenix Venture Holdings on October 20th, the financial press brought to light a rather unnerving story involving the company’s chairman, John Towers, and its three directors, Nick Stephenson, Peter Beale and John Edwards. Essentially, these four and managing director, Kevin Howe set-up a trust fund of £12.9 million for themselves and their families (referred to by some as a pension fund).
It has been said by the parties concerned that the £13 million has not come from the car side of Phoenix Venture holdings, but through the division of MGR’s assets into separate financial entities. This can clearly be seen in the way that Longbridge’s property and parts businesses have been successfully set-up aside from the car-producing division. The property division has already raised significant funds through the selling of redundant land adjacent to the factory.
It should be noted that MGR’s finances are still in deficit at the time of writing: it lost £95 million last year, compared with £187 million the year before, with the MG Rover car operations racking up losses of £111 million, down from £175 million. It is a move in the right direction, especially given 2002-2003’s tough trading conditions, but was still disappointingly far from a profit.
According to The Daily Telegraph’s Christopher Hope, “analysis of the latest full-year accounts of Phoenix reveals that as part of a restructuring Mr Towers and three other Techtronic directors were issued with loan notes valued at £2.5m each on 18 December 2000. This £10 million loan is due to be paid back to the four directors in May 2005. In the meantime, the four are earning 6.5 per cent interest. The accounts show that the four received £655,000 in the 12 months to the end of December 2001. The accounts also state: ‘These loan notes are guaranteed by a bank account held within the group.’ The accounts show that Phoenix has kept the ownership of MG Rover and Powertrain, which supplies engines for MG Rover, within Techtronic.”
|The company categorically denied
allegations of asset stripping and
said that current speculation was
David Osborne, Transport and General workers union
This news has not done MGR’s public image the world of good, and has raised concerns within the Union movement. As a result of the flurry of press activity, there is to be an independent report into the finances, commissioned by the unions. Tony Woodley, the secretary general of the Transport and General workers union – and a pivotal figure in the recue of Rover in 2000 – stated that he wanted, “a satisfactory explanation” of the fund, and that, “It doesn’t appear to be in the spirit of co-operation and willingness to share success and sacrifice alike which was established between the company and the workforce three years ago”
Once union representatives had met with MGR management, there seemed to have been some softening of attitudes. They were assured that Phoenix were not in the business of “asset stripping”, and that everything was being done in order to maintain a long-term future for the company.
However, according to Sunday Express, the independent report into MGR is to be carried out by ex-BL Finance director Peter Regnier. To many observers, the long term future of the company is still seriously in doubt. MGR desperately need the RD/X60 in order to halt the slide in sales (mainly of the 45/ZS range of cars), but this will only go ahead once a deal with a collaborative partner (probably in China, as Kevin Howe himself stated in AUTOCAR magazine) has been struck.
The further sales fall, the less likely MGR will achieve a turnaround with the RD/X60; as its arrival on the market will get later and later (already the idea of it hitting the market in early 2005 now seems fanciful). The company’s cash fund of something like £300 million still looks good, and the financial performance of the company should look increasingly positive, given the movement in the international currency market this year. However, this figure probably would not be enough to see the RD/X60 into production.
And in the background, it should be noted that MGR has yet to start heavily investing in the RD/X60, and this is probably because of the collapse of the China Brilliance talks and the wait for a new collaborative partner to fill the breach. Delaying investment in the RD/X60 will merely delay the point in time at which the company goes into the red, and yet, without it there simply is no future in the “volume” business for MGR.
Production temporarily halted at Longbridge
ON the 26th November, production at Longbridge of the 25, 45 and 75 models was halted for three days. According to the company, this hiatus has come about thanks to poor sales during November, but that it was also fairly standard industry practice. Obviously, this has been disappointing news following the largely positive sales story for the company, who looked set to do rather better in 2003 than it did in 2002.
According to BBC News “…A spokeswoman for MG Rover said the move at its Longbridge base would ‘balance dealers’ stock levels’. She added: ‘A small halt in production at this time of the year is fairly standard practice in manufacturing, where a number of companies have an elongated Christmas shut-down.’ It cannot have come at a worse time for MGR, who have suffered a loss of buyer confidence in recent weeks, and without doubt any negative media coverage is hardly going to rectify the situation…
NOVEMBER’S sales performance looks pretty bleak – there is no other way of saying it. Continued negative press coverage over the company’s financial affairs, and the “Watchdog effect” all seem to have taken their toll on the company. There have been some other big drops reported by other manufacturers (and November’s total sales in the UK are down on last year), so perhaps negative press cannot be held entirely to blame.
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