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EDITIONS
Tuesday, 9 May, 2000, 10:07 GMT 11:07 UK
Can Phoenix turn Rover around?
New Rover cars
Phoenix says Rover could be in profit by 2002
When venture capitalists Alchemy Partners emerged as a buyer for Rover, many asked what they knew about making cars.

That question doesn't arise with the Phoenix consortium.

Led by an ex-Rover boss, John Towers, and including Mayflower, the engineering group, and Lola, the sports car producer, the people running Phoenix know how to put a car together.

With Phoenix, the pertinent question is can it make money as a volume car producer?

Ex-Rover boss

The consortium was put together by Birmingham millionaire and councillor John Hemming.

But John Towers has emerged as the lead player.

The fact that the consortium is headed by an ex-Rover boss can either be seen as just the injection of Rover savvy and manufacturing know-how it needs, or a return to a past which failed Rover.
John Towers
Mr Towers left Rover in 1996
The truth could be somewhere in between.

During his time at Rover, John Towers had a reputation for being hands on and likeable. In the four years before he left in 1996, he is generally credited with improving Rover's financial performance.

His time at Rover was marked by its relationship with Honda - the two made cars for each other - and Rover's subsequent sale to BMW.

In an interview following his departure, Mr Towers said he had ideally wanted both BMW and Honda to link up with Rover.

He joined Rover in 1988, having previously headed Massey Ferguson Tractors.

Prior to that, he worked for 20 years at Perkins Engines, leaving in 1986 as a general manager.

Since leaving Rover, he has run Concentric, an engineering group.

What does Phoenix want to do?

Phoenix's popularity with unions and government centres on the fact that it will save more jobs.
Some speculate Rover could link up with Honda again
Some speculate Rover could link up with Honda again

There would be 1,000 to 2,000 redundancies from the 9,000-strong workforce - less than half those thought likely under the Alchemy plans.

It wants to keep high volume car production at Longbridge, producing up to 250,000 cars and it says it could be profitable by 2002.

But to keep volume car making at Longbridge, it needs cars it can produce that people want to buy.

That means developing a new model range to replace the ageing Rover 25 and 45, which are derivatives of the Rover 200 and 400.

It could develop a new model range with another car company and some reports say Mr Towers might want to renew the link with Honda.

The speculation is that Mr Towers' game plan is to sell on to another mainstream car manufacturer, such as Volkswagen, who may be interested once Rover stops losing money.

But Rover will also have to overcome the problem of the high pound, which has hit sales of Rovers in Continental Europe.

Questions over financing

The Phoenix bid has been backed by a 200m loan from an American bank, First Union.

The consortium is also expected to receive up to 500m from BMW to pay for redundancy costs for the thousands of Longbridge workers who will still be made redundant.

It was the costs of redundancy that eventually forced the venture capital firm Alchemy to pull out of the bidding.

There is still considerable uncertainty about the further financing of the rescue bid.

BMW was planning on spending more than 1bn on retooling the plant and launching a new mid-range model.

It is also unclear whether the UK government will be prepared to put in any substantial subsidy to help Phoenix.

It had pledged around 150m in return for the substantial investment by BMW, but that had not been approved by the European Union when BMW decided to sell Rover.

See also:

09 May 00 | Business
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28 Apr 00 | Business
28 Apr 00 | Business
16 Mar 00 | Business
26 Apr 00 | Business
16 Mar 00 | Business
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