Newspaper article The Evening Standard (London, England)

Rover Bosses Accused of Squandering [Pounds Sterling]1bn

Newspaper article The Evening Standard (London, England)

Rover Bosses Accused of Squandering [Pounds Sterling]1bn

Article excerpt


A FINANCIAL rescue of MG Rover is "beyond any possibility", according to Britain's top automotive analyst Garel Rhys, who today accused bosses of the failed motor manufacturer of squandering well in excess of [pounds sterling]1 billion.

Rhys spoke as MG Rover's administrators confirmed that any rescue by Shanghai Automotive Industry Corporation (SAIC) had evaporated after the Chinese company told the administrators in a letter today they were walking away.

A week after MG Rover collapsed into administration, Rhys, a professor at Cardiff Business School and director of its Centre for Automotive Industry Research, said the so-called Phoenix Four consortium of businessmen led by John Towers who bought MG Rover in 2000 received huge indirect financial support from former owner BMW.

On top of a [pounds sterling]427 million no-interest loan, BMW handed over [pounds sterling]300 million of existing stock and wrote off debts. In addition Phoenix raised another [pounds sterling]200 million by a sale and leaseback of Longbridge and the disposal of its spare parts business.

"That was the amount of money the Phoenix Four received and the company still did not succeed," Rhys told financial website Cantos. "The amount of money that would be needed to put this enterprise back onto a firm footing, given that it's losing about [pounds sterling]20 million a month according to the administrators, really is beyond any possibility."

The loss of the lifeline for MG Rover and its 6100 workers at the Longbridge plant in Birmingham would mean "significant redundancies" despite the [pounds sterling]6.5 million given by the Government earlier this week, administrator Ian Powell, a partner with accountants Pricewaterhouse-Coopers, said today. "In light of this important development we have concluded that there is no realistic prospect of obtaining sufficient further finance."

Joint administrator Tony Lomas added: "It was apparent that very significant funding would be required to sustain the business as a going concern and that a sale of the complete business would be extremely complex and would take a long time to conclude. …

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