Bad dog! Why Rover will never learn a new trick

It’s hard to remember a time when MG Rover was not in trouble. Financial turmoil is now so ingrained it’s unlikely the company will ever prosper.

There is a kind of habitual convict that is well known to the prison service. They will never be reformed. They will always be back for more when their time is done. They will never repay their debt to society.

Similarly, there are some businesses that you know are never going to mend their ways. They are true recidivists – they have an almost genetic pre-condition to failure and offences against the community. They believe that the world owes them a living. They are constantly in trouble and are never going to improve.

Some of them have even been prosperous models of behaviour in their earlier life. Marks & Spencer comes to mind. Others are about throwing good money after bad – most of the retail financial services industry is a case in point.

MG Rover is another recidivist con that you just know the penal and reform services are never going to get into a proper job. It has been a drain on the taxpayer for years.

Like any repeat offender, it will spend most of its life in jail. Perish the thought, but sometimes its warders privately wish we could bring back the death penalty and apply the ultimate sanction – dispose of it once and for all.

Last week, we heard that MG Rover was back to its bad old ways. Sales performance is in a pitiful state – having fallen by more than half during the last quarter of the 20th century, to 240,000 units a year, annual European sales in the first three years of the 21st century are down to just 127,348.

MG Rover had promised, of course, to mend its ways. It had said it would go straight when it was acquired by the Phoenix consortium in 1999, after BMW had finally lost patience and kicked it out onto the streets.

MG Rover had promised a return to profitability in 2002, having lost &£840m in its last year under BMW ownership. Instead, it still lost &£95m and break-even has been put off until 2005, when its long-promised new mid-priced car is scheduled to appear.

You can almost hear the old nark: “I’ll pay yer back in a couple of years – honest.” Meanwhile, you just know that someone is making money. Sure enough, the directors of Phoenix took a total of &£3.7m in benefits in their first full year of ownership, falling to a mere &£2.2m in 2002.

The blow of this reduction was softened, however, by a &£13m payment by Phoenix into a trust fund, established to provide long-term benefits for directors and their families. Directors have also been benefiting to the tune of &£600,000 a year on loan notes issued in their favour by Phoenix.

You can hardly blame them. They follow in a long tradition of cash being shovelled around all over the place at Rover, in every direction except actually from customers for new cars, or towards long-suffering shareholders.

Phoenix bought MG Rover from BMW for a tenner (yes, &£10) in 2000, with its debts written off and interest-free loans from the German manufacturer. BMW was desperate to see the back of its recalcitrant foster-child. I well remember attending Trade & Industry Select Committees in the late Eighties, when the then British Aerospace (BAe) was being investigated for accepting &£38m in illegal “sweeteners” from the Conservative Government.

BAe had already acquired Rover for a knock-down price – not quite the knock-down price that Phoenix recently agreed – paying &£150m in 1988. It is a measure of the continuing collapse of Rover, later MG Rover, that those who gasped at the bargain that BAe was getting barely noticed or cared when Phoenix paid &£10 little over a decade later.

The Rover debacle in the Eighties did much the same for Lord Young’s credibility as trade and industry secretary as the post-BMW crisis did for his successor in that job, the luckless Byers. Both were more than high-handed with taxpayers’ money in their desperation to find a new owner for the car company.

The difference was that Young was a fixer, appointed to bring solutions to his Prime Minister, Margaret Thatcher. Byers was there to do what Prime Minister Tony Blair told him to. The trouble was, Blair didn’t tell him to do anything about MG Rover, largely because BMW didn’t tell him it intended to close the operation down.

So here we have a long-term loser of a company, around which senior politicians have scurried in a hand-wringing frenzy of protecting British jobs (for which read Midlands votes), while enterprises from BAe to Phoenix have been offered handsome financial inducements for looking after it.

Meanwhile, the odd overseas investor, such as BMW, has been ripped off. And do you know what the real laugh is? MG Rover actually makes good cars. In the right hands, it really could have gone straight and made an honest living.

But my fear is that it can never now make a clean start. It will always be a rascal.

George Pitcher is a partner at communications management consultancy Luther Pendragon


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