News : May 2005

Centenary Opportunity


JUST a quick reminder to all that there are still seats availale at the Austin Centenary Celebration evening meal.

The dinner will be held on the evening of July 8, at the delightful Chateau Impney Hotel in Droitwich Spa. The dinner will be held in the Royal suite. Starting with a reception 6.30pm, the four-course dinner will commence at 7.30pm. Guests wil include Sir Stirling Moss, Tony Ball (BMC’s youngest marketing director, responsible for the launch of the Mini in 1959 and the Metro in 1980), Carl Chinn, Sir Digby Jones, and many other emenent figures from the company’s history.

Dinner costs £45 and places are rapidly disappearing. If you fancy joining what promises to be a very interesting evening, send payment to Tony Osborne (chairman of the Federation of Austin Clubs, Registers and Associations), 8, Maxstoke Close, Matchborough West, Redditch, Worcestershire, B98 0EJ. Tel: 07771-521886.

See you there!

For more information about the Centenary event, click on,

Bid round-up


MG TF GT Concept: Welford-Winton promises to get it into production, if it wins its bid to secure MG from PwC.

LAST Friday saw the deadline for bids for to go into PricewaterhouseCoopers (PwC), and so far, two consortiums have gone public with their statements of Interest. The first bid is for the MG brand name and the TF production line, and it is by the Essex-based consultancy Chapman Autotomotive (see below). The company is backed up by an impressive history within the UK’s specialist car industry.

Headed up by ex-Lotus boss, Colin Spooner, the company intends to get the TF into production at an unspecified location in the West Midlands. It has also stated there is no interest within the company to produce the ‘Zed’ range of saloons, which had kept the MG name alive within the minds of younger enthusiasts. As detailed below, the consortium is backed by American finance, and appears to have a solid grounding – even if the business plan for MG is stolidly predictable.

The second bid is by Welford-Winton. Headed up by six ex-Powertrain bosses, and led by Fraser Welford-Winton, a new company called UK Sports Car Ltd has been set-up. Welford-Winton’s plan is not only to resurrect MG but also bring Austin-Healey back into the equation. The ‘Big Healey’ plans are interesting, simply because there was some desire within MG Rover to revive the brand (knowing its value, especially in the USA) – and talk of a RWD V8 powered roadster sound suspiciously similar to the long-dead ‘Project Viking’ (a V8 powered roadster based on a cut-down X12 platform).

The consortium’s plan is to re-launch the MG TF, building it at Longbridge – and supplementing it with the tasty Coupe version shown to the press last year. UK Sports Cars is ambitious that it can have a range of dropheads on sale within five years…

SAIC is also said to be interested in securing more Longbridge stock. Production lines would considerably speed up the introduction of SAC528, but now that it has got into bed with Ricardo, that process would probably be accelerated anyway. Interestingly, SAIC’s interest in MG would mainly be limited to its name – and it is feared that if SAIC gets hold of enough of MG’s assets, the appealing notion of a the company becoming a specialist producer at the hands of Welford-Winton or Chapman Automotive would be considerably lessened.

The most curious announcement came via the Birmingham post, though.

The Midlands-based millionaire, Martin Moseley, would like to buy the company. The Hockley Heath haulage boss, who was once an apprentice at Longbridge, has tabled a £300m takeover bid for the entire car plant, and is said to be ultra-keen to get a hearing from PwC, having officially submitted a bid on deadline day.

He has already claimed that if his bid was successful he would re-hire about 4000 workers and rename MG Rover as the ‘Crusader Motor Company’. The 50-year-old businessman says cash from a Taiwanese tycoon has been offered as security for the deal and claims he could relaunch volume car production at Longbridge within 45 days.

Martin, who is boss of Olton International Freight at Hockley Heath, said: “I have not got any ulterior motive. I do not want big salaries or big houses – I already have them. It’s not impossible for an individual like me to take on this lot. My role is to get this company up and running and to get people to buy these cars. Longbridge is the last jewel in our crown, but the plant is slowly being chipped away and let go.”

PwC has not commented about the bids
it has received, and there may well
be more in the pipeline – that would
explain why a delegation from Honda
was spotted going into Longbridge
last week…

He added: “I have the money to buy the plant – $400m of it. I have come up with the money, there’s nobody else who has been able to do that.”

Martin claimed his rescue plan was being blocked by PwC who had refused to meet him, despite assurances over the necessary cash guarantees. “I am trying to buy this place and they are trying to stop it. I have got the money, but it seems I can’t buy it. Why not? Am I supposed to sit back and say ‘take Rover to Tehran?'”

“That money will act as security for borrowings. The plan is to keep MG Rover cars in production until new models are brought in. They have accepted our bid but they want more information. We have not met the administrators face to face, but it is not for want of trying.”

Birmingham historian and Phoenix Trust trustee Carl Chinn said: “The Moseley family has been involved in Midland business for 100 years – it is good to see them coming forward with these plans.” Mr Moseley, who was today due to meet Advantage West Midlands chief executive John Edwards to discuss his plans, said he was convinced Longbridge had a future.

It’s an interesting plan, but it remains to be seen whether it will prove to be an unattainable dream.

Which ever bidder wins, it would seem that there are definite signs that car production will be re-started. The other fascinating fact is that PwC has not commented about the bids it has received, and there may well be more in the pipeline. And that would explain why a delegation from Honda was spotted going into Longbridge last week…

We are definitely in the waiting game now. May the best team win.

The mysterious bid for MG begins to materialize


The evergreen MG TF range will survive if Chapman Automotive gets its way…

IT HAS been a strange day in the continuing MG Rover drama. Ricardo Engineering announced it had started working with SAIC on the process of setting up a UK technical base. As reported earlier in the week, this could represent a significant jobs lifeline for a number of ex-MG Rover staff, who have yet to secure alternative employment.

SAIC is obviously taking its plans to resurrect the Rover 75 and 25 very seriously indeed, and has recognised that it cannot complete such a massive undertaking with significant assistance from UK specialists.

MG’s chances also looked a little brighter than they had immediately after Alchemy annouced it was puilling out of further negotiations. Obviously, it felt the loss of 25/75 and engine IPRs was too much of a obstacle to gey over in quickly re-establishing production at Longbridge. However, just as things began to look bleaker than they had for a while, a new player (possibly the one Autocar alluded to a couple of weeks ago) announced it had been seriously planning a takeover…

Chapman Automotive Limited announced today it is in the final stages of putting together a bid to purchase assets related to MG from PwC. Finance for the bid – which relates only to the MG brand, the TF two-seater sports car and associated manufacturing equipment – is supported by a consortium of investors including an overseas vehicle manufacturer, a US-based investment fund and a wealthy entrepreneur.

The Chapman Automotive plan sees the revival of the MG TF model only and the transfer of its production from Longbridge to another facility in the West Midlands. It does not include the MG range of saloons, hatchbacks and estate cars. It is envisaged that production will commence later this year, with sales through a revived dealer network in the UK, Europe and other right-hand drive markets. A return to the US market is predicted within the medium term.

Chapman Automotive was founded by Colin Spooner former design director of Lotus Cars; Colin Cushing, founder of Canewdon Consultants Group; and Barrie Wills, who, for the last 20 years has acted as a consultant to mature and emergent car OEMs. Past clients of the three include: Proton, Lotus, Lamborghini, Ford, Fiat, Yulon Motors, Eicher Motors, Iran Khodro, Tianjin Auto, Kia and Tata Motors.

Obviously, the TF would need to find a new power unit, but it remains a seriously saleable car, with an excellent badge mounted on its snout.

It will be interesting to see how this one develops.

Moulton and Alchemy pull out…


JON MOULTON, head of Alchemy, the venture capital group, has pulled out of buying the MG sports car operation, leaving administrators of the collapsed MG Rover group with few prospects of reviving any activity at Longbridge. The move comes as PricewaterhouseCoopers has just three more days to find a buyer for the whole group before splitting it up for asset sales.

Some expectation has been raised that Shanghai Automotive Industry Corporation (SAIC), MG Rover’s former potential partner, could establish a research and development and engineering centre at Longbridge creating more than 1,000 jobs. But so far SAIC has asked to buy only tooling for the Rover 25 and 75, the series K and L engines and some R&D equipment. SAIC previously said it did not want to employ anyone directly in the UK.

SAIC owns the intellectual property rights to the 25, the 75 and the two engines, which makes it difficult for other bidders to make use of the production equipment that remains at Longbridge. Mr Moulton said Alchemy had not made a proposal for MG because of problems with intellectual property rights, supplies and warranties.

It is thought that there may be one bid so far for the whole group, although many previously interested parties have ruled themselves out. Several bidders are thought to have expressed interest in the MG brand. The Rover brand is retained by the British carmaker’s previous owner, BMW.

SAIC looking to set-up operations in the UK


SHANGHAI Automotive Industry Corporation, is offering to save up to 1,500 jobs at the former car manufacturer’s plant in Birmingham. The development is the most upbeat piece of news for the Midlands car maker since the cash-strapped manufacturer laid off more than 5,400 of its 6,100 workers last month. The arrangement will establish a British “engineering development” base for SAIC.

One source familiar with the talks said: “They are close to signing a deal which will give them the technology and people who do the R&D.”

The offer will be put to Price Waterhouse Coopers (PwC) in the next few days. SAIC declined to comment. However, last month an SAIC spokesman said: “We have to have our own brand. But we don’t want to start from zero. We have to build on something. Something like Rover will help us.” PWC is understood to have asked bidders to signal any interest about bidding for parts of MG Rover by last Friday. This deadline was then extended into this week.

Tony Lomas, one of the administrators, tried to play down the suggestion that there was some hope for large-scale employment at Longbridge from the Chinese. He said: “It sounds like a nonsense to me.” SAIC has been seen as the best hope for MG Rover because it bought the intellectual property rights to the Rover 75, Rover 45, parts of the Rover 25, and the K, KV and L series engines for £67m last November, although this was disputed by PWC.

This put SAIC in pole position to pick up parts of the company from administration. Other bidders, such as the Iranian government and two Russian billionaires, have said they are unlikely to table an offer. MG Rover employed between 500 and 600 engineers before the collapse, many of whom are now in high demand. “There are two jobs for one engineer in this industry,” said Professor Garel Rhys, director of automotive research at Cardiff Business School.

The arrangement, under which British engineers will design cars in the UK to be constructed in China, is similar to a planned joint venture between MG Rover and SAIC, which was under discussion before the collapse. Prof Rhys said the facilities at Longbridge, particularly in engine development, were “world class”. He said: “SAIC will be getting a big operation right in the UK. It is their window on the West – literally. It is good news.”

The news came as one of MG Rover’s main pension schemes – the MG Rover Contract Related Pension Scheme – became the first to be accepted by the Pension Protection Fund for entry into its one-year “assessment period”. The period is a prerequisite for paying benefits to scheme members. However, a spokesman for the PPF warned: “Even for members of the scheme, no benefits will be paid for at least a year.”

Two other MG Rover schemes have yet to meet the qualifying criteria for entry into the assessment period. The PPF was established to pay the pensions of final salary scheme members whose employers go bust after April 6 and where there are insufficient assets to pay at least PPF levels of benefits.

Iran is off…


CONFUSION over just what MG Rover still owns came to a head yesterday, when it became clear that Chinese ownership of Intellectual Property Rights (IPRs) for the Rover 75, K-Series and others were being cited as Dastaan’s reasons for not wanting to continue with the deal that could have allowed Longbridge to continue…

Iran’s Minister of Industries and Mines, Es’haq Jahangiri, said: “Given the purchase of MG Rover’s license by the Chinese, it is out of question now for Iran to buy it. We were not after bringing the Rover machinery to Iran; our aim was to manufacture the car in Britain under the company’s license and (have access to) its research and technology centre. Now that the Rover company’s licence has been bought by the Chinese, we don’t need its machinery and our experts no longer advise us to buy it.”

Iran’s about-face comes days after Jahangiri announced that the country was considering buying the MG Rover, and had held talks with representatives from PricewaterhouseCoopers (PwC), MGR’s administrators. PwC confirmed the Iranian interests, even though both parties sought to play down the reports.

He continued: “Talks have been held and we are at the stage of assessment now, our auto industry is capable of reforming a troubled European carmaker and presenting it to world markets under the same brand.”

Even before, reports had it that leading carmakers Iran Khodro and SAIPA had approached MG Rover for a deal before its collapse. And that had been confirmed to by an MG Rover executive, who asked us not to release details, until the deal was signed. Iran Khodro is the biggest carmaker in the Middle East and also makes Peugeot under license while SAIPA is the second largest car manufacturer in Iran.

With the Iranian government out of the picture, it remains unclear as yet whether the private company Dastan of Iran would go ahead with its bid to assemble Rover cars, but it is beginning look increasingly unlikely. MG Rover’s chief of business development, Russ Thomas, has said the Iranian company seems to be having trouble raising money. Dastaan’s aim, he says, is to obtain Rover’s intellectual property, brand rights and engineering capability.

Dastan had reportedly been in exploratory talks with Rover for about 15 months over plans to build a plant and assemble some 150,000 cars a year in Sistan-Baluchestan province before the collapse. The first trial shipment of 2,000 Rover 75 and 45 models, worth £20m, was said to have been due last month, with further batches following in May and June, and with another £30m delivery later in the summer. The shipments to Iran were apparently aimed to test the market and establish a trading relationship before Rover and Dastaan moved on to the assembly stage in 2006 that could have doubled the car company’s production worldwide.

But according to the Daily Telegraph, Dastaan began to have cold feet as reports reached Tehran about growing difficulties at the car’s Longbridge plant in Birmingham, central England. It quoted a senior British official saying that Trade and Industry Secretary Patricia Hewitt held six meetings this year with Iran’s ambassador in an attempt to shore up the deal.

The talks, the paper said, suggested that the British government had been more involved in the search for a rescue deal than has so far been revealed. It reported that Foreign Secretary Jack Straw also discussed MG Rover in a series of meetings with the Iranian Ambassador to London, Mohammad Hossein Adeli.

Dastaan reportedly hoped to build a Rover plant in Sistan-Baluchestan, which has a free-trade zone with special tax incentives for foreign firms.

So, with Iran all-but out of the deal, the Russian interest being strongly denied, and China’s only real interest in Longbridge being the purchase of the assembly lines to ship out to Shanghai, the 100-year old British factory’s future is looking increasingly bleak. Rumour has it that PwC has until July 30 to find a buyer for the the plant…

MG Rover: the last lifeboat

By MICHAEL WYNN-WILLIAMS of the Cardiff Business School

ECONOMY of scale has always been a critical factor in car production, but now globalisation means that all producers are vulnerable to the scale advantages of their rivals. MG Rover is the latest to fall victim to global competition, but next it will be the vehicle assemblers in the developing world. One of them will have a chance to leap into the world’s front rank if they grasp the opportunity of taking on MG Rover’s design capability and sales network. But is there enough time? Michael Wynn-Williams investigates.

We have an expression here in England that says the darkest hour is just before dawn. A crumb of comfort for MG Rover perhaps, but dawn is also the favoured time for executions. In our morbid pessimism we take the second view, the company’s poor reputation an embarrassment to the nation. Yet research at Cardiff Business School suggests MG Rover presents a unique opportunity for ambitious new car companies, and that out of partnership a new kind of car company might be born.

It is the blunt truth of this industry that a producer must count its output in millions of units or face extinction. If we look at the top thirty automobile manufacturers in the world we find that they can be neatly categorised into two divisions, the first division and second division, comprising fifteen members in each. Companies in both leagues have the kind of output that qualifies them as volume producers yet in style they are quite unrelated. The first division companies are fully vertically integrated so they have control over all their processes, from research and development through to marketing and distribution. They have global sales networks and enjoy the cost advantages of economy of scale. Size is not a reliable indicator of success, we only have to compare GM and Toyota to see that, but they are all masters of their own destiny.

The second division has outputs ranging from just below a million down to a hundred thousand. Without reasonable economy of scale these fifteen companies can find themselves at a significant cost disadvantage to the first division companies. Worse still, they are also handicapped by a critical product technology gap in comparison to the first division. This means that they must either go through the tortuous process of developing their own vehicle design capabilities or else host vehicle assembly for the first division. Those that have their own designs will find that the technology gap dooms them to the low profits of competing on price, while those that host final assembly will be at the mercy of their partners’ global strategies. Only two companies stand out in the second division: Subaru, who have support from GM, and MG Rover, the smallest vertically integrated independent car manufacturer in the world.

It has always been assumed that MG Rover’s diminutive size would inevitably prove to be its downfall. Certainly, this seems to have been proven by its recent financial collapse. Yet according the business model put forward by the Cardiff research programme, it is MG Rover’s size that makes it a unique opportunity to the companies of the second division. It has two great assets to offer the ambitious local assembler: vehicle development for volume production and a European sales network.

In the automotive industry the first division manufacturers have been able to maintain their capabilities throughout all their vertically integrated functions. While they might have found partnerships convenient from time to time, essentially they prefer to control all the processes of production in order to realise the full cost advantages. There is no reason for a global manufacturer to produce a dedicated product for a new market when they can simply pick an existing one off their own shelf. They use local partners in vehicle assembly when it is required or if it allows them easy access to a small market, but in the future free trade rules will allow them to control even these processes without reference to their partners.

This means that there is a very limited period within which the local assemblers can become globally competitive. Many have made great progress in a remarkably short period of time, Iranian manufacturers in particular showing enormous potential. But there is no time for potential, local companies need the essential capabilities now so that they are ready for the full onslaught of the imminent global competition. They need to be able to slot high technology skills into their corporate structures by forming partnerships with established volume producers. The Cardiff research suggests that the most cunning way of doing this is by a vertical joint venture, a collaboration with partner that has the technical knowledge but is lacking production capacity. The vertical joint venture permits the two partners to form one integrated company without the huge expense of one buying the other. If this is not possible then an outright purchase is the only way forward. In the end, though, the result is the same: a partnership between an established volume designer and a volume assembler.

Although there are a number of successful assemblers in Iran and other countries the available volume designers are much less; in fact, there is only one. We can forget about specialist design houses, they produce design concepts rather than designs engineered for high volume production. We can also dismiss the idea of taking over a global company: it would be prohibitively expensive and impossible to integrate the operational functions. There is only one possibility left: MG Rover. This is not about the current range of Rovers, this is about future design and sales outlets. The vehicle development facility has benefited from the influence of Honda and BMW and at its core is world class. It also has an enviable sales coverage in the UK that extends into Europe. If an assembler were to integrate itself with MG Rover it would gain control of world class designs and European sales coverage, capabilities that would take decades to develop alone. This would catapult the assembler from the second division straight into the first division and the global first rank. However, this opportunity will be short lived. MG Rover is fading fast while globalisation is squeezing the world’s local assemblers out of existence. The auction has already begun for the last lifeboat.

Buyers queueing up to buy a liability-free Longbridge?

But the price will have to be right…


Is there still a hope for the 100-year old factory?

FOR those people out there waiting for closure on this whole affair, the wait gets longer, but if you’re waiting for a miracle, PwC offered a sliver of hope…

Hopes that MG Rover could be saved were rekindled when administrators of the failed carmaker said yesterday they had begun talks with two potential buyers who want to restart its Birmingham factory – Dastaan being one, and the Russians, being another…

Tony Lomas, joint administrator and partner at PwC, said there were two serious buyers, one of which is understood to be Iranian. Mr Lomas declined to identify the other. However, the complexity of getting the plant running again after the company collapsed three weeks ago was shown yesterday when attempts to restart engine production failed.

The future of MG Rover could be decided in Russia following reports that administrators PricewaterhouseCoopers have received approaches from metals mogul Oleg Deripaska and Nikolai Smolenski, owner of sports carmaker TVR.

Mr Deripaska – a close friend of the Chelsea football club chairman Roman Abramovich – already owns Ruspromavto, maker of Volga cars, and is said to be keen to expand his business interests in Britain.

Yesterday’s Mail on Sunday quoted Alexander Yushkevich, deputy chairman of Ruspromavto as saying Mr Deripaska, whose multi-billion dollar fortune is based on his acquisition of Russian Aluminium, was keeping a close eye on developments at Longbridge. “MG Rover has some interesting models which in Russia are more popular, for example, than Fiats. Another attractive side of MG Rover is its strong engineering centre and state support.”

But Ruspromavto said it needed answers to a series of questions, including who would ultimately bear the cost of MG Rover’s liabilities, the size of its debts and whether the existing management and engineering teams would remain in place. Yesterday’s Observer said that Mr Smolenski, the son of banking tycoon Alexander Smolenski and dubbed the “baby oligarch”, was interested in acquiring the company and manufacturing a full range of cars. Mr Smolenski bought TVR last July and there has been previous speculation that he could be interested in acquiring MG Rover’s MGF sports car line to add to the TVR range.

The Iranian company Dastaan is also said to be considering its options over MG Rover, which has shed more than 5,000 jobs since it went into administration last month. A spokesman for the administrators yesterday declined to go into detail about specific bids, saying only that “we have had a number of expressions of interest from around the world”.

One issue which will need to be settled is the issue of intellectual property rights (IPRs) over a number of models and engines. Shanghai Automotive Industry Corporation, which had been negotiating with MG Rover over a joint venture but which stepped back because of concerns about the UK carmaker’s financial health, paid £67m for at least some MG Rover IPRs last year and it would be difficult for another carmaker to step in unless it could reach a deal with SAIC. (However, rights for the 75 reside with Caterpillar, MGR’s parts supplier – SAIC is said to own the rights to the 110mm-stretch 75 – Ed)

The Shanghai company, which has joint ventures in China with General Motors and Volkswagen, is keen to build up its own automotive technology base and has expressed interest in some of MG Rover’s assets. There have been suggestions that the ad ministrators have been looking at the terms of the original MG Rover/SAIC deal but this is regarded as routine.

Efforts will continue this week to help ease the problems facing MG Rover dealers who are facing the burden of having to repay loans on unsold cars.

Capital Bank, part of HBOS, which acted as a financial intermediary between the carmaker and the dealers, paying MG Rover as soon as cars were assigned to the dealers and then collecting the cash later, is said to be adopting a sympathetic approach.

Keith Adams

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