Press Comment : John Hemming MP on MGR ahead of the DBIS Report

Jonathan Walker, Birmingham Post, 11th September, 2009

Today marks the end of a four-and-a-half year wait for a report into the collapse of MG Rover. The Birmingham Post has spoken to three people close to the Birmingham car giant about its collapse and the legacy it left.

MP John Hemming (Lib Dem Yardley) led what became the Phoenix bid to buy MG Rover – only to be forced out of the project at an early stage. He still believes Rover could have been saved if community representatives like him had been involved in running the firm.

Although I was a witness for the inquiry into Rover I am not one of the people who have had an early sight of the report. From my point of view, therefore, it remains quite an interesting issue to find out what it actually says.

I have had a number of detailed involvements with Rover since 2000 although I effectively got kicked out of the bid that I brought together in April 2000. Although I could have issued legal proceedings to deal with this at the time I decided not to as it would have almost certainly done irreparable damage to the business itself.

The announcement of Alchemy’s proposals to effectively close down Longbridge caused shockwaves across the region. Initially, few people thought anything could be done. Three key players, however, started working on alternate proposals. These were John Towers, myself and John Edwards. At the early stages John Towers told me it was not possible to put together an alternate bid as too much funding would be required. This had been considered previously but discounted.

What I discovered at an early stage was that BMW were willing to offer a massive dowry for Rover. This was the key thing that made it possible to put together a deal.

I then called together the key players who were all at that stage willing to work together. I asked Albert E Sharp to organise a meeting and this happened on Friday March 31 2000 in the evening. The people present were John Towers, John Edwards, Peter Beale, [lawyer] Andrew Sparrow, Mike Whitby, Dom King [from financiers Albert E Sharp], Brian Parker [who eventually became a non-executive director], Carl Chinn and others including union representatives.

The key to this meeting, which I chaired, was that it brought together the key stakeholders: unions, engineers, dealers and community, and at the same time funding had been identified (from BMW) that enabled a successful bid. This is the date upon which, according to Rover accounts, the Phoenix Consortium was formed. It is worth noting that it was the first date upon which John Towers had met John Edwards.

I find it very sad that the community angle was pushed out of the business. I still hold the view that the business could have been far more successful but the key to this was selling cars. Considerable damage was done to the brand by the financial manipulations such as the setting up of the Trust fund.

What I discovered relatively quickly was that the four Directors who remained in control (having pushed everyone else out) turned their £240,000 investment (among four people) into a £10 million debenture by the end of the year. It will be interesting to see what the report makes of this. I will be also interested to find out what the report says about the £9.8 million dividend paid by Techtronic at the end of 2000.

The challenge for the region, however, was that the business was in the control of the four Directors. I did look at whether it might be possible to wrest control of it from them but was concerned that it would do damage to the business and I should try to assist where possible to keep things going as well as I could.

We then move forward to 2005 when I was Deputy Leader of the council. On April 1 2005 there was a conference call involving Mike Whitby, myself, Jacqui Smith [then a trade minister, former Conservative industry spokesman], Stephen O’Brien and [former Lib Dem industry spokesman] Malcolm Bruce about the Government providing a bridging loan to Rover to ensure a sale could proceed to SAIC.

I was aware of the need for the loan because I had discussed it previously. What shocked me later was that the DTI had briefed the newspapers about this. The reason why this shocked me was that in doing so the DTI would undermine the credit of the company. All companies need confidence (as we know from the banks). For the DTI to reveal that the company was teetering on the brink was in essence for the DTI to push it over the edge. I wonder if this will appear in the report.

Inevitably, then, the business went into administration. What happened then is quite clear it is good now that there is a small amount of manufacturing but it is sad that the ball was dropped.

Nine years down the track one can look back and think ‘what if”.

The first question is what if we had not created the bid. The problem then is that, whereas in 2000 there was a wake-up call for the supply chain which had not diversified, in 2005 much more diversification had occurred and the damage of closure was much less.

The second question is what if I had remained in control of the bid and the community members of the consortium had not been kicked out. In this situation the large sums of money which were withdrawn by the Directors would not have been withdrawn and the business strategy would have been different. I still think it was possible for that configuration to succeed. The third question is what if the DTI had not leaked the loan. I still think it would have been possible for a sale to have occurred.

I have been unhappy about many things that were done by the Directors but I must make it entirely clear that John Edwards, particularly, always seemed to me to be very committed to making the business succeed. His family was steeped in Rover. I am also very unhappy with the behaviour of the Government.

How much of this will come out in the report, however, remains to be seen.

[Source: Birmingham Post]

Clive Goldthorp

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