MG Rover pins hope on Chinese deal

By Rebecca Pike
BBC News business reporter

2000: Mr Towers is cheered as he arrives in his Rover 75

In May 2000, John Towers arrived at Rover's Longbridge plant in Birmingham, to a hero's welcome.

Mr Towers and a group of local businessmen known as the Phoenix Consortium had just bought Rover from BMW for a nominal £10.

Rover had been saved from closure, and from being broken up and sold off.

For the first time in months the future for what was now to be known as MG Rover looked a little more secure.

Not competitive

But since then not much has gone right.

MG Rover's ageing model line-up faces stiff competition

Despite predictions it would be in profit by 2003, the company remains stubbornly in the red and sales have been falling steadily.

Last year it sold just under 96,000 which observers say makes the company too small to compete in today's car market

"They underestimated the difficulties of being a small independent and they underestimated the difficulties of this car business," said Gavin Green, of Car Magazine.

"The problem is that the MG Rover model range is an old model range, the brand doesn't stand for very much, they're not particularly inexpensive.

"You add all those things together and you don't sell cars."

Saviours

Things have not been helped by controversy over how much MG Rover's directors have been paying themselves.

They have been heavily criticised for taking several million pounds out of the business in pension contributions and dividend payments.

Not only is MG Rover still the one remaining British owned significant volume producer of motor cars, but there's a whole number of component suppliers which rely on the company Local MP Richard Burden

But defending himself in front of a committee of MPs, Mr Towers said critics should remember who saved Rover.

"Not the banks, not the government, not the financial institutions. No one else," Mr Towers said.

"Without [us stepping in] the business would not be here. 6,500 people directly and over 21,000 people indirectly would have lost their jobs."

Survival

The local MP Richard Burden helped Phoenix in its rescue bid four years ago.

He does not approve of the directors' actions, but he thinks the company is vitally important for the area.

"Longbridge is still a really important part of the West Midlands' industrial landscape," he said.

"Not only is MG Rover still the one remaining British-owned significant volume producer of motor cars, but there's a whole number of component suppliers which rely on the company."

In order to survive, MG Rover needs cash to produce a mid-range car with mass-market appeal.

It has pinned its hopes on a deal with the Chinese Shanghai Automotive Industry Corporation, which still needs to be approved by the Chinese government.

The deal involves MG Rover giving Shanghai information about new technology, in return for cash. The Chinese company would become a minority shareholder.

If the deal does go ahead, much of the company could end up being owned by the Chinese, with production remaining in Longbridge.

It would be an interesting new chapter in the soap-opera-like tale of what was once Europe's biggest car maker.