| They paid just a tenner for the whole company. Five years on, the directors have pocketed an estimated £40 million, the pension fund is bare and the jobs have gone. It's not enough to call this a tragedy. The lesson is that nothing but struggle can secure a future for our industry... |
Rover: a tale of home-grown vandalism and asset-stripping
WORKERS, MAY 2005 ISSUE
MG Rover has collapsed with the attendant misery for the Longbridge workers and the thousands employed in the various supply components industries. Despite possible Chinese orders to Rover's suppliers, redundancy announcements are starting, with Corus announcing 50 in Wolverhampton. Current overall estimates stand at 30,000 job losses. Network Rail hopes to benefit, declaring that there will be vacancies for skilled engineers (but not at the wages paid by Rover).
Rover owners reacted quickly to the closure news with a rally outside the Midlands factory
As the whole sorry mess unravels it is easy to point the finger at those who are perceived to be the main villains — the Chinese — but there are other elements, some closer to home, who are culpable in this vandalism against manufacturing industry.
Gang of Four
John Towers and Phoenix Venture Holdings, or the Gang of Four, as it was popularly called, was later joined by chief executive Kevin Howe. The Gang of Four bought MG Rover for just £10 from BMW in 2000. Since then the directors have pocketed an estimated £40 million in five years.
They have drawn salaries of more than £11 million and benefited from £17 million of payments into private trust funds. In addition, they have collected more than £12 million in interest and capital payments on loan notes given to them as part of the corporate restructuring that followed the purchase of MG Rover.
Techtronic, the ultimate holding company used by Towers and his fellow directors to acquire MG Rover, paid a £32.5 million dividend to Phoenix Venture Holdings, even though it made an operating loss of £119 million.
Meanwhile, Phoenix Venture Holdings paid £11 million of interest on the BMW loan back to Techtronic. Since 2000 it has received £70 million in dividends and paid £40 million in interest payments. The directors' pension fund is somewhere between £13 and £16 million.
Rover might have survived if the directors had ploughed the BMW money into a new car as soon as they took over in 2000. However, Phoenix was just merely another venture capitalist or asset stripper (as was Alchemy), and as such it quickly separated the loss-making car-producing division from its profitable businesses such as property, engine manufacture and its car-leasing facet MGR Capital, which are all owned now by Phoenix directors. The sale of MGR Capital by BMW to the four directors was even done without the backing of a bank.
Among the huge sums raised by the disposal of MG Rover was £60 million from the sale of 60 acres of the Longbridge site to property developers St Modwen in 2003. A year later the MG Rover car parts business, Xpart, was sold by Phoenix to Caterpillar Logistics Services for £10 million. Studley Castle, a hotel and conference centre, formerly owned by MG Rover, making £3.3 million profit in 2003, is now a separate company owned by Phoenix directors.
From the moment Phoenix took over there was never any intention of saving and rebuilding Rover.
What actually was the role of government, and more to the point that of unions such as the TGWU and Amicus during the 10 months of negotiations between Rover and Shanghai Automotive Industry from June of last year? It would seem that the Chinese firm has got everything it wanted: it has bought the "intellectual property rights" of the Rover models 25 and 75 and their engines, and Powertrain — all for a mere £67 million. British workers were never going to be employed by a Chinese firm when they could employ Chinese workers at a fraction of the cost. The Chinese were supposed to have found a £400 million pensions deficit — when did unions and government find out about this?
The pensions deficit, which the company and government are strangely silent about, means that the administrators, Price Waterhouse Coopers, can separate the assets of the business and sell them off individually (such as the production line to China), leaving the pension fund just another unsecured creditor. As to the money raised by the administrators, the banks and financial institutions will be paid first — the workers and their pension scheme will be at the end of the line.
Who ever thought the Chinese would come to the rescue?
Rover suppliers in the Midlands have received the first enquiries to supply parts to the Chinese firm SAIC, confirming that they are getting ready to build Rover cars in China.
Only hours before, John Towers, boss of MG Rover, had said ownership of the designs for the Rover 75 and 25 and the M-Series engines was useless to SAIC without the machines and expertise to build cars.
Last year SAIC paid £67 million for the designs and right to manufacture. They also invested £50 million in tooling to produce cars there and had 65 Rover workers helping to set up their factory. These workers have just returned to Birmingham to face redundancy with 5,000 other Rover workers.
Any machines SAIC lack they will soon acquire very cheaply when the receivers auction the plant. They will probably also get any expertise they lack from the Rover unemployed.
The local press speak of "the Chinese having taught Rover a lesson in ruthless capitalism", or "clinical and cynical". SAIC had also approached that name well known to British workers facing privatisation or takeover, Price Waterhouse Cooper, which is the administrator for Rover, and we can all guess what their enquiries were about.
The Chinese Ambassador had also learned well from British governments. In perfect English he said it was "purely a matter for the two companies acting in their own interest, the government was not involved." They believed in "market socialism".
With the certainty of no investment for Rover from Britain, letting Rover collapse so they could pick up its assets was easy for SAIC. They estimate that they will be producing cars in China within eight months.
EU regulations
Government made much of its £100 million bridging loan for 6 months. This was merely play-acting with the Chinese, who insisted on two years. Both of them knew, of course, that a two-year loan would contravene European competition regulations restricting the use of long-term state aid to ailing firms, something that the British government would not do.
Saving and building British manufacturing industry is certainly not on the agenda of the Labour government or the other two parties in this silly season of general election knock-about politics. All three parties are signed up to their version of neo-liberalism and globalisation — though they dare not proclaim it to the electorate.
The politicians' belief in EU rules against state help for British industry has become so zealous as to rival religious fundamentalists. This must come as a relief to the EU Commissioners, who are finding it hard to enforce these rules on the Continent. Over the last year Germany and France combined gave 25 billion euros to their industry. Britain gave only 4.2 billion, and that was mostly in short- term emergency aid for "retraining" schemes.
The Gang of Four bought MG Rover for £10; why could not Longbridge workers have done the same? Are we saying we cannot run our own industries? Miners at Tower Colliery do not believe that. Any crooks can sell off the family silver, but it takes skill to make things. We cannot leave it to others to defend what is ours. Tony Woodley can only say the collapse is tragic — that is not good enough. Do we really believe that we are doomed to repeat the same mistakes again and again?
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