By Howard Wheeldon.
Well, you can almost bet your last dollar that the British Government will end up with serious egg on its face when eventually forced to publish the results of the vast four year report into the horrid MG Rover affair, following the Serious Fraud Office’s decision not to seek a prosecution for the so called “Phoenix Four” – the company directors at the helm when the company collapsed.
Whilst it is true that I might just have a few private thoughts on the matter and as to whether there might or might not have been any wrongdoing by the four [Messrs John Towers, Nick Stephenson, Peter Beale and John Edwards] what I think matters not one jot. However, what does matter is that even though the SFO of any crime. That of course is certainly not the situation for the British government of course and in which the verdict of guilty in failing to offer sufficient support clearly stands out!
The history of MG Rover is of course inextricably linked to the history of the UK automotive manufacturing industry. As a corporate historian of certain UK manufacturing industries, including autos, I could take you back through a very long history. I will not do that here, preferring to open this story with an event that in hindsight might better have never occurred – that unfortunate day back in 1994 when Rover was purchased by BMW. As some of my older readers and contacts will probably remember, working on the BMW side of the equation I had personally had some not inconsiderable involvement in the original research and advisory process that eventually led to the purchase of Rover Cars by BMW from BAE Systems.
I can say now with some impunity that back in 1992 when this work was first being undertaken, well before there had been any discussion between BMW and BAE to acquire the company, my advice had been that if BMW was to purchase Rover they would have little if any alternative but to consider closing the Birmingham plant at Longbridge. Sadly, following the acquisition in 1994 it appears that the BMW board changed its mind, making the mistake of giving the British management of Rover a hand for too long. Investment and cash continued to pour in of course but productivity and sales failed to improve. The result was a compounding of losses that couldn’t be allowed to continue.
Not that BMW completely failed in its mission at Rover though. For a start it had invested in a completely new plant at Cowley, Oxford, to build the new Mini and just a couple of years following the original acquisition of Rover there emerged the first new car in a generation [the Rover 75] that was perceived by public and car writers alike as a great success.
If proof were needed that niche luxury car producers should stay away from volume car production, BMW’s failed example of Rover was it. Ford made similar mistakes and arguably Daimler too. The difference between these three though is that BMW managed to get out intact. And, miraculously, without damaging the BMW brand. Hence to some extent the clever if somewhat illogical and hugely expensive manner that it shod itself of what was by now MG Rover, though at the same time walking away with its huge and very valuable Mini plant intact. In fact, rather than to sell to very much better parties that had expressed very serious interest, BMW chose to sell MG Rover to a little known group of former managers, led by one John Towers, that was soon to become known as the Phoenix Four. Thus it was Towers that was charged to head a small team that paid just £10 and received a free interest loan of £427m for MG Rover during late 2000. Towers, a man who had worked very closely with George (Lord) Simpson, himself the man who was in charge of Rover at BAE and the man regarded as being part responsible for all but destroying Arnold Weinstocks’ former GEC empire which had become Marconi following the sale of its aerospace activities to BAE and who was the same man that some believe had sold Joseph Lucas shareholders short when he was sold that company to the US Varity Corporation.
The rest, as they say, is unfortunate history.
Indeed, for the next four miserable years even in a much slimmed down form from the one that less than ten years earlier had almost brought BAE to its knees, MG Rover continued to make heavy losses totalling above £600m. What may or may not have subsequently gone on amid unproven claims that during the four year period, having put nothing additional in, the Phoenix Four might have amassed large pensions and pay packets for themselves amounting to in excess of £40m remains open to conjecture. Both the National Audit Office and MG Rover’s administrators PWC carried out an enquiry – both concluding no wrongdoing had been done. However, it was the separate four-year enquiry held under the auspices of the Company Act by independent inspectors of the Department of Business Innovation and Skills (the former Dept of Trade and Industry) that really mattered to the 6,500 that lost their jobs in Birmingham and elsewhere, plus maybe many hundreds of sub contractors as well. They deserved answers of any potential and perhaps unnecessary failure and yet, the government has so far deemed that it should not be publically released. This is an absolute disgrace and we are left to conclude that whether or not part of the reason for the MG Rover failure early in 2005 lies outside government hands, its subsequent handling of attempting to secure a future for the company was an unmitigated disaster.
I can have no idea at all whether or not company law had been broken at any stage of the MG Rover process, but the Serious Fraud Office says not. It is of course though, not the SFO’s job to look into how the government handled this crisis. That work has already been done and, in the wider public interest, it is high time that the government releases the full BERR report into the MG Rover affair immediately.
Howard Wheeldon is the Senior Strategist at BGC Partners