Phoenix has signed a contract with BMW to buy Rover Cars for a nominal sum of £10. The deal follows almost two months of frenetic negotiations involving Phoenix, BMW, the original bidders Alchemy Partners and the UK Government.
“It’s a very satisfactory outcome for us. It’s an emotional day,” said Mr Towers. “We have a huge amount of work to do to get the cash flow into a positive balance. We are determined to do that.”
Not all industry analysts are convinced that Phoenix can bring about the transformation of Rover needed for long-term survival. But for now there is a huge sense of relief at Longbridge and across the West Midlands.
Workers get a share
To add to staff celebrations, Mr Towers said he planned to give the workforce a share in the business. The former Rover chief executive said the idea was to set up a trust into which he would put “more than a third” of the firm’s share value, giving staff a direct interest in its future success.
He also said he expected “less than a thousand” job losses, many fewer than would have gone had the original bidder, Alchemy Partners, been successful in taking control of Rover. This point was immediately welcomed by Tony Woodley of the Transport & General Workers Union, who said: “We are delighted.”
Mr Towers described Rover cars as “tremendous products” and said there were “many opportunities” for the future involving collaboration with other car makers. He also pledged to make Rover profitable “within two years”.
Officially, Phoenix took responsibility for the development, production and distribution of Rover cars from 0800 GMT on Tuesday. Sir Ken Jackson, general secretary of the Amalgamated Engineering and Electrical Union, said: “This is tremendous news. “It saves thousands of jobs and gives Longbridge a secure future. I am absolutely delighted for the whole workforce.”
Production of the Rover 75 will be shifted from Cowley, Oxford, to Longbridge in Birmingham as part of the deal. Phoenix retains production of the full Rover range, MG and the current Mini, and plans to develop an estate version of the award-winning 75 model.
BMW keeps the new Mini, to be produced at Cowley, and retains rights to the Triumph and Riley marque names. BMW had already agreed to sell Land Rover to Ford. The news came the morning after one of America’s largest banks, First Union, offered £200m ($306m) to finance the Phoenix bid for the loss-making UK carmaker.
As part of the deal, BMW is lending Phoenix about £500m ($765m) to help cover the cost of redundancies and restructuring. UK Trade Secretary Stephen Byers warned that some big decisions lay ahead. He said: “There are still difficult decisions. The proposals will involve a number of jobs being lost”.
But he said that the government stood ready to help facilitate any future negotiations between Phoenix and other car companies, and would still make about £120m available for the regeneration of the West Midlands. He also praised BMW for its constructive attitude in the past few weeks.
Mr Byers ran into political flak when it emerged that he had not known in advance of BMW’s plans to sell Rover. The biggest long-term question centres on the future of the mid-range cars, the Rover 25 and 45, which will need to be replaced in due course.
One possibility would be the involvement of another car maker who might be able to supply the technology and platform for a new model.
Bank backing crucial
Rover’s previous owner, German car giant BMW, had threatened to close its subsidiary’s Longbridge plant by the end of the month if it could not find a buyer. Until recently, BMW had voiced doubts about whether Phoenix had enough money to take on Rover, which has been losing its German parent about £2m a day.
Closing Longbridge would have cost at least 9,000 jobs at the factory and up to 15,000 others at suppliers and in the local economy. The finance for the deal was assembled with great speed over the weekend.
A spokesman for First Union said on Monday its offer of financial backing was conditional and subject to “due diligence” – an examination of Phoenix’s business plan. The money has been offered as “working capital” – a loan paying interest – and not in exchange for a stake in the company.
Sales rise boosts hopes
The Phoenix consortium, which includes two Rover dealers and racing car group Lola, has declined to disclose the full financial details of its bid. It had been reported that Mayflower, on whose board former prime minister John Major sits, was part of the consortium, but it said on Tuesday that it was not part of the deal.
A dramatic rise in Rover new car sales in April brought fresh hope that the Phoenix bid would be successful. Figures from the Society of Motor Manufacturers and Traders (SMMT) show that Rover car sales leapt by 116.5% to 22,665 units. The sales boost has been attributed to discounts, but Rover officials are hoping it signals a wave of patriotic support in the face of the threatened demise of the marque.
The Phoenix consortium had been the favourite of the UK government and unions to take over the car firm. It stepped into the running for Rover after the break up of talks between BMW and venture capitalists Alchemy Partners, whose plan had been to concentrate on small-scale production of cars under the MG badge.