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Last Updated: Friday, 27 May 2005, 17:30 GMT 18:30 UK
Rover's billion pound blunder
By Terry Messenger
BBC producer

A Union Jack flown outside MG Rover's Longbridge plant
In the end, MG Rover ran out of cash

Five years ago, four businessmen bought MG Rover and saved the firm from extinction. They were hailed as heroes. But now the firm has collapsed.

And they are widely condemned for greed and failure.

They are the Phoenix Four, so named because they promised that, under their control, Rover would rise from the ashes.

They were left a 1bn dowry by previous owners BMW. It was meant to help them revive the firm but instead they burned through the billion, making gigantic losses year after year.

But they handsomely rewarded themselves - 40m in pension, pay and other benefits.

When the cash ran out last month, over 5,000 Rover workers were thrown on the dole and thousands more jobs were put at risk in dealerships and supplier companies.

The Phoenix Four were condemned by fellow bosses. Sir Digby Jones, director general of the CBI, commented: "I find it appalling that you can supervise failure... and take what everybody seems to be saying is about 40m on the way through."

And they were condemned by former staff. Paintshop worker Gordon Lane declared bitterly: "Those four have got a lot to answer for."

German 'dowry'

In Rover's Billion Pound Blunder, the Money Programme examines the record and the legacy of the four businessmen from the West Midlands who first gained fame and then notoriety as the Phoenix Four: John Towers, Nick Stephenson, Peter Beale and John Edwards.

Mr Towers was welcomed as a hero when he and the three other members of the Phoenix consortium bought MG Rover from BMW in May, 2000.

They paid BMW just 10 - in return they received the 1 billion dowry in cash and assets.

If you're looking at what Towers did for the region, he kept 6,000 people in work for five years at reasonable rates
Professor Chris Brady, Sir John Cass Business School

They put in 60,000 each of their own money to MG Rover and took out loans for further investment, but this amounted to a small fraction of the BMW dowry.

BMW were desperate to shed Rover. They'd invested 3bn in an attempt to make a success of the company, but in their final year, because of their vast investment, the Germans lost 750m.

Rather than close the company and turn Brits against BMW, they were willing to pay the 1bn dowry to the Phoenix Four.

But that billion was never going to be enough to save the company. To survive, motor manufacturers have to constantly develop new models to keep up with changing tastes. And that would cost yet more billions.

Pension payments

The Phoenix Four began their own urgent hunt to find a car company to buy a stake in MG Rover and provide the funds for new models.

They were rebuffed by Malaysian company Proton and Chinese company China Brilliance. They managed a minor collaboration with Indian firm Tata to produce the City Rover but the car was widely panned.

Meanwhile the losses continued to mount - 611m in the first four years. That didn't stop the Phoenix Four setting up a 17m pension fund for themselves.

With pay and other benefits from MG Rover and associated companies, their total reward is thought to be around 40m.

Rover workers leaving Longbridge
Some former MG Rover workers are unhappy about the firm's demise

In 2004, the firm was getting nearer and nearer to collapse, and again they turned to China for salvation. Talks began with Shanghai Automotive Industry Corporation (SAIC).

By November, their accountants were warning them that without the SAIC deal they faced bankruptcy.

SAIC did buy the intellectual property rights for Rover cars worth 67m. Commentators reckoned that's all they ever really wanted and never had any real interest in saving mass car production at MG Rover's Longbridge factory, a claim denied by the Phoenix Four.

But the deal to save the whole company never materialised and in April, SAIC pulled out and MG Rover collapsed.

'Time to diversify'

As for the legacy of the Phoenix Four, led by John Towers, most agree that there were some benefits.

Professor Chris Brady of Sir John Cass Business School told the Money Programme: "If you're looking at what Towers did for the region, he kept 6,000 people in work for five years at reasonable rates. He gave them time for the suppliers in the area to diversify and not to be so reliant on Rover."

If he [John Towers] had delivered a success story, he's entitled to not only what he got, but five times that
Sir Digby Jones, CBI director general

And that's a verdict the Phoenix Four agree with. They're less happy with views expressed about their own personal rewards.

They told the programme in a statement: "We are proud to have sustained car making at Longbridge for well over twice as long as many 'experts' predicted and it was a tragedy that we failed when so near to securing long term success for the company."

Sir Digby Jones, however, has a different view of the Phoenix Four and specifically John Towers. He told the Money Programme: "If he'd delivered a success story, he's entitled to not only what he got, but five times that.

"That's not the issue. The issue is - he supervised not just failure, but very worrying failure, involving thousands of people. And that to me means that he should really be looking at his own conscience."

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