News : July 2004

Sales figures continue to slide…

However there could well be a silver lining.

MGR put on a brave face after the SMMT published June’s UK sales figures, showing that both ranges had slid further down the charts. MG’s sales dropped 18.9 per cent over this time last year, but more alarmingly, Rover’s fell even more: a collossal 42 per cent. it would be very easy to say – yet again – that we should wait for the new cars to get fully up to speed, but the 75/ZT has now been around for a few months. The 45/ZS and 25/ZR are a little newer, but both should now be freely available. So why are June’s figures so bad?

Looked in isolation, these figures are not bad; they are disastrous. Taken as a whole from the beginning of the year, MGR’s sales in the UK have been a bitter disappointment: sales are down to 45,168 from 51,081, an overall drop of 11.6 per cent in an expanding market.

The company’s half term report, therefore, could be summed up thus: pull your socks up. The reason behind the company falling backwards must surely fall at the feet of the cars themselves: each model in the range has been lightly facelifted, and although each represents a useful improvement, it would seem that they are not different enough for buyers to re-consider their opinion on them. The 45/ZS’s plight is especially bleak, considering the VW Golf and GM Astra have just been replaced, and a new Focus is just around the corner.

So bad news all round then? Well, maybe not.

MG Rover has been ramping up production, which has had the strange effect of landing Longbridge with a shortage of components at a couple of times during the month. Even so, the factory has been working flat out. There was also a marked slowing down of production of the run-out models in the lead-up to the re-launch, and that left many dealers without stock. As the roll-out of the new models has been slower than it could have been, supplies have not been as plentiful as dealers would have liked.

So, logistics are to blame? Perhaps. Perhaps not. As discussed in the blogs for the 6th July, marketing must play a part in poor sales too. MGs are being advertised properly, but Rover – well, where are the effective Rover adverts?

Basically, then, we should give MGR another few months before writing any obituaries just yet. The company has delighted us in the past with its ability to bounce back from the direst of situations, and it could well be able to do it again. The rise in production is an encouraging sign, as is the fact that it seems to be taking the issue of CityRover quality a little more seriously of late. Deals with SAIC and Proton (see news June 2004) are in the bag, and expansion in the Pacific rim now seems inevitable.

However, the effects of these deals will not come into play until 2006 at the earliest, and in the meantime, MGR needs to tread water in order to stay on course. At the moment, it looks like the company cannont manage to tread water. If the sales fgures continue to fall at this rate for the rest of the year, then there could be cause to worry…

New board appointment overshadowed.

As promised by John Towers back in March, MGR has finally appointed a fifth member of the board. New non-executive board member Nigel Petrie has been appointed with the intention of ensuring that the there is a move to “to improve oversight of its board.” The “Phoenix Four”, as they were nicknamed, sparked controversy over their £12.95 million personal pension fund allowance. The press had a field day over the matter, and in the end John Towers was asked to explain the company’s actions to a Westminster Parliamentary Select committee. One of Towers’ statements was that in order to ease public, press and union concerns over the board members’ actions, Phoenix would appoint an “overseer”. Welcome, then, to Nigel Petrie.

So what will Mr Petrie do for MG Rover, apart from collect a £50,000 per year salary? More than anything else, it seems that his appointment may well be simply to appease those doubters out there that feel the “Phoenix four” are not looking after the company’s interests, but merely feathering their own nests. And that being the case, his appointment is a brilliant one, because a cynic would say that for £50K per annum Phoenix has bought itself a nice deflector shield for the management. Certainly, the Unions are pleased by his apppointment: Dave Osborne of the Transport and General union stated, “‘We believe the appointment of an independent non-executive director will assist the company in restoring the confidence of workers, customers and investors.” In other words, the Unions are onside…

Personally speaking, the cynical view is not the right one: the Phoenix board looks to all intents and purposes like it genuinely wants MGR to succeed, and Nigel Petrie’s appointment is a public affirmation of this view.

So it makes for positive publicity for the company.

Sadly, this announcement came around the same time as MGR annouced that it would be making compulsory redundancies at Longbridge. This is in direct breach of a high court ruling, and the original “Jobs for life” agreement penned years before the current incarnation of MG Rover was formed. This contract is a hang-over, and in 21st-Century Britain, an anachronism from a bygone age. However, whether that is the case or not, MG Rover could have timed the announcement with more skill: it is a business, and it needs to make decisions beneficial for the long term success of the company, but also, an element of PR needs to be taken into consideration. So, several contracts are being terminated at the end of July, and some white collar workers are being made homeless. Sad news for the workers, but MG Rover is showing that it is prepared to act in the typical post-Union way towards employees…

Whether the decision is right or wrong is irrelevent; the fact that this has gone public at the same time as Mr Petrie’s appointment shows, yet again, that MGR’s PR department needs to work harder. One bad piece of news always more than cancels out a good one.

Keith Adams

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