Page last updated at 19:39 GMT, Friday, 11 September 2009 20:39 UK

War of words over Rover collapse

Lord Mandelson: "We've not seen an ounce of humility from them"

A row has broken out between the government and the ex-bosses of MG Rover over who was to blame for the collapse of the UK's last big car firm.

Following a damning report, ministers said the so-called "Phoenix Four" should apologise for taking millions of pounds out of the failing company.

But the bosses described the report as "a witch-hunt and a whitewash".

After being sold for £10 in 2000, the UK's last major car firm collapsed in 2005, with the loss of 6,000 jobs.

Business Secretary Lord Mandelson said work had begun to disbar the Phoenix Four - John Towers, Peter Beale, John Edwards and Nick Stephenson - from running companies in the future.


Mr Beale £8.981m

Mr Edwards £9.024m

Mr Stephenson £8.976m

Mr Towers £8.958m

Mr Howe £5.708m

Source: MG Rover report

"If they themselves don't voluntarily disbar themselves by going to Companies House and signing an undertaking- a binding undertaking that will disqualify them - then I will initiate proceedings in the courts to do so," he said

It emerged that Phoenix director Peter Beale had installed "Evidence Eliminator" software on his computer, despite being aware government inspectors intended to review data on his PC as part of the investigation.

Mr Beale also stood accused of giving "inaccurate and misleading" explanations to a select committee of MPs.

The government-commissioned report found the bosses had awarded themselves pay and pensions worth £42m, which was described by inspectors as "out of all proportion".

The men bought the Longbridge-based firm from BMW for a nominal £10 in 2000 and paid themselves £9m each between then and April 2005 when the firm went bust.

Lord Mandelson said ministers had received no criticism in the report and then Industry Secretary Stephen Byers's handling of the Phoenix deal had been "faultless".

He told the BBC the Phoenix group had not shown an "ounce of humility" about the firm's demise and they owed an apology to the firm's employees and creditors.

"These people feathered their own nests and filled their own pockets full of a lot of cash during the course of their time as directors," he said.

He rejected as "brass neck" the executives' rejection of the report, in which they blamed the government for Rover's failure.

In statement the Phoenix bosses said: "The report is entirely as we expected - a witch-hunt against us and a whitewash for the government.

"It drips with the hallmarks of this government - spin, smear and point blank refusal to take any responsibility for their own actions."

In particular the directors blamed the government for not providing a £100m bridging loan to keep the firm going.

2000: Sold by BMW to the Phoenix Four for £10
2000-2004: Made losses of £611m in the first four years
2004: Started talks with Shanghai Automotive Industry Corporation (SAIC)
2005: SAIC pulled out of a deal to save the whole company and MG Rover goes into administration
2006: MG Rover's assets sold to Nanjing Automobile
2007: Nanjing resumes MG production at the Longbridge plant
2009: Serious Fraud Office investigates circumstances of collapse but says no plans for criminal charges
2009: Long-awaited report, which has cost more than £16m, is released

Ministers argue the loan would have been illegal under EU law.

But the directors insisted: "Our remuneration was not the reason for the collapse. The real reason is the government bungled the last chance to save MG Rover."

Conservative business spokesman Kenneth Clarke said it was right the report criticised the Phoenix Four, whose behaviour was "disgraceful".

But he said ministers had shown bad judgement in siding with the Phoenix deal when there were better alternatives.

They had also failed to realise before too late "the project was heading for disaster", he said.

Mr Clarke said questions also should be asked about why Rover was offered a £6.5m public loan on 10 April 2005, two days after the firm went into administration and less than four weeks before the 2005 General Election.

He said the inspectors should have investigated the use of taxpayers' money in the middle of an election campaign to keep the company going beyond polling day.

The Lib Dems said the government must ensure a repeat of the Rover debacle never happened again.

The party said the proceeds of remaining Rover assets frozen pending the report's publication should now be distributed among former workers.

The 800-page report into the saga, which cost more than £16m, claimed MPs investigating what happened were given "inaccurate and misleading information".

The report also identified "questionable briefings" to the press by government officials - dismissed by Lord Mandelson as an "observation not a criticism".

"Personal relationship"

Other findings by the inspectors included evidence of a "personal relationship" between a Chinese consultant and Phoenix vice president Mr Stephenson.

The inspectors found that a "Dr Li" and companies associated with her received more than £1.6m in the 15-month period up to April 2005.

The "Evidence Eliminator" software installed by Mr Beale claims to "deep clean" a computer's disk of any sensitive material, said the report.

The inspectors said deleted documents were likely to have been relevant to the investigation and they accused Mr Beale of giving "untruthful" evidence during interviews.

Mr Beale said the deleted documents were personal, and were not relevant to the investigation.

The majority of Rover's assets were sold in 2006 to China's Nanjing Automobile which revived the MG sports car brand, but moved most of the production to China.

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