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Last Updated: Tuesday, 30 March, 2004, 16:41 GMT 17:41 UK
MPs grill Rover bosses over money
The new City Rover
Rover may move some of its production to Poland
Bosses of UK car maker MG Rover have angrily rejected allegations that they milked the firm for their own benefit.

Speaking to a Commons committee, group chairman John Towers said many media reports about the stewardship of MG Rover were simply "not true".

Compared to the "opaque" structure of the firm under previous owner BMW, its accounts were now transparent for all.

Mr Towers said he and the other owners of MG Rover had taken great personal risks to save more than 30,000 jobs.

Four years ago Mr Towers - together with John Edwards, Nick Stephenson and Peter Beale - formed the Phoenix consortium to buy Rover from BMW for 10.

It has been alleged that since then millions of pounds have been paid into trust funds set up for the benefit of the four.

But in at-times emotional statements to the trade and industry select committee, Mr Towers and Mr Beale said the payments queried in newspaper reports had not been diverted to the directors, but put back into the company.

'Fundamentally important deal'

No assets had been moved away from the car-making division of the MG Rover Group and none had been ringfenced to benefit only the four directors of the company, Mr Beale said.

"In the end there were four individuals who put their hands into their pockets when no bank was prepared to back MG Rover... and saved 6,250 jobs directly at Rover, and indirectly another 25,000 jobs," Mr Towers said.

Analysts had predicted that a collapse of Rover was imminent when the consortium took over, Mr Towers said, adding that bearing this situation in mind he could not understand the criticism he and his colleagues now faced.

The most contentious transaction - BMW's sale of car finance firm MGR Capital directly to the four directors - came years after the 10 sale of the MG Rover Group.

But Mr Beale and Mr Towers defended the deal, saying that it was "fundamentally important" for Rover to control MGR Capital.

The company could not have taken it on itself because of the potential impact on MG Rover Group's balance sheet.

The four directors had therefore decided to take the "personal risk" of buying MGR Capital themselves, with the backing of a bank.

After putting up hundreds of thousands pounds each they hoped for some "personal reward" as well, Mr Beale said, who added that he would be "wiped out" if anything went wrong at MGR Capital.

The MPs' questioning of the two MG Rover bosses was lengthy and detailed, and in sharp contrast to the amicable discussions committee members had earlier in the day with the bosses of other UK-based car factories, among them Toyota and Ford.

Rover in the red

MG Rover is still loss-making, and during questioning Mr Towers acknowledged that with an annual output of 150,000 cars at Longbridge the firm was at least 30,000 units short of reaching profitability.

During BMW's reign the company manufactured about 225,000 cars a year at Longbridge.

Mr Towers said MG Rover had so far invested more than 100m pounds in the development of a new "platform", which could form the basis for a number of new MG and Rover models.

The car would be a little bit larger than the current Rover 45 model and could go into production at the end of 2005, possibly in co-operation with a joint venture partner.

The West Midlands-based carmaker is currently negotiating to move some of its operation to Poland.

The company is said to be close to sealing a deal with the Polish government to buy a former Daewoo plant.

"MG Rover has been negotiating on the Daewoo plant for two years. Those negotiations are ongoing. No agreement has been reached," a Rover spokesperson told BBC News Online.

Trade and industry select committee chairman Martin O'Neill said ahead of the day's hearing that there was anxiety over reports that Rover might move production to Poland.

"Our main concern is whether or not Britain's last carmaker... is going to be able to continue to do the work it's been doing in the UK and do the work I think the settlement with BMW some years ago was intended to create," he said.

"That is to say a viable car industry in the West Midlands... which provides employment for British workers."

The BBC's Rory Cellan-Jones
"The future of Rover and its Longbridge plant remain uncertain"

Talks over future of car factory
29 Mar 04 |  West Midlands
Call for MG Rover board shake-up
10 Mar 04 |  Business
MG Rover sells Longbridge land
06 Jan 04 |  West Midlands
MG Rover heads back to Japan
15 May 03 |  Staffordshire
MG Rover 'misjudged mood'
02 May 03 |  West Midlands
New MG Rover built in India
20 Dec 02 |  England

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