Government ineptitude has dogged Rover’s fate

Rover’s miserable state reflects the Government’s incompetent intervention. If politicians interfere further it will only make matters worse, says George Pitcher.

Rover has always been a dog. The cars themselves have had moments of high critical acclaim – the most recent praise among would-be Jeremy Clarksons being for the Rover 75. But the company itself has been a mongrel since it was mis-bred in the Sixties, artificially sustained by nationalisation in the Seventies and left on a motorway by the government in the Eighties.

So news that the Germans think the kindest thing to do is to put it to sleep in the Nineties is not really that shocking. We’ve been here before – somebody would eventually have to put Rover out of its misery. It’s revealing that it takes BMW to do it after all these years, the British public and private interests that have owned it over the years having never had the stomach to do so.

As ever, the threatened closure of Rover’s Longbridge plant and the talk of a state-aided rescue plan tells us more about politicians and their stewardship of industry than it does about the business involved. Normally, companies either make a profit or they don’t, and their executives decide the companies’ fate on such criteria.

Politicians have different priorities. Not least in this Government’s mind is the issue of a number of marginal seats in the West Midlands. But it’s not just about votes. It’s about industrial policy, whether you have one and what you do with it if you do. These are questions that Trade & Industry Secretary Stephen Byers should be addressing and we can only hope that he is.

Those of us old enough to be on the industrial commentary beat in the Eighties will remember a former Trade & Industry Secretary, the unelected Lord Young, who memorably brought Margaret Thatcher “solutions, not problems”. One of these solutions was the sale of Rover, owned by the government, to British Aerospace (BAe) for the somewhat unprincely sum of &£150m in 1988.

It was Young’s contention that Rover was on its knees and had to be sold sharpish; that he had not improperly thrown in &£38m-worth of sweeteners and that, far from being completely legged over in the deal by a far cannier professor Roland Smith, chairman of BAe, the good Lord had in fact single-handedly rescued the British motor industry.

At least, that was the case that Lord Young made to the Parliamentary Select Committee for Trade & Industry and to the House of Commons. How we laughed. The European Commission took a rather different view and, in 1990, competition commissioner Sir Leon Brittan – still smarting from taking the rap during the Westland helicopter crisis that left Young unmarked – ordered BAe to repay &£44.4m in illegal subsidies.

The penalty may have been higher but for suggestions at the time that the commission, in the shape of Brittan’s predecessor Peter Sutherland, had not been exactly hands-off over the arrangements for the sale of Rover to BAe. Odd, since it was always a central tenet of Young’s defence of his position that he had never been required to discuss the matter with the commission.

In any event, just what a good deal Smith had struck for BAe’s shareholders, especially since the actual acquisition cost for Rover within the deal was only &£15m, was shown in 1994, when BMW paid &£527m for the company. I wasn’t alone at that time in concluding that BAe’s shareholders had done rather well at the expense of British taxpayers.

But that was the way of things in the Eighties. The government was still gripped by the fever of privatisation. The attitude was: “Stuff taxpayers – they’re doing well enough with the cuts in income tax that we’re giving them – what we want is a vibrant share-owning democracy.”

In one sense, it wasn’t a free-market economy at all. If it had been, Young would have left Rover to die. Thatcherite industrial policy was tremendously interventionist when there were public assets to be transferred to the private sector.

Now BMW has thrown some &£3bn into the maw of Rover and decided, like the British Government and BAe before it, that enough is enough. Venture capitalist Alchemy picks up what is left of Rover when BMW has finished with it for less than nothing.

Enter another Trade Secretary desperately trying to keep Rover alive, the hapless New Labour individual who has been dubbed Bozo Byers. He offered BMW a &£150m bung to keep Longbridge open and BMW had been negotiating a &£152m grant from the European Union before it threw in the towel. Byers has been jolly cross with BMW about all this, and his boss, Tony Blair, has joined in by trying to persuade Alchemy to build a technology park in Longbridge. Perhaps they could build a Dome.

Alchemy may be able to turn base metal into gold, but the lesson of Rover’s history is that governments can’t. As I’ve said before, Blairism meanders meaninglessly between state intervention and privatisation and Byers’ policy is impossible to track, if he has one. A private sector company since 1988, Rover should either be left to its fate or, heaven forbid, re-nationalised. Blair’s and Byers’ pussyfooting is the worst and most meaningless option.

Lord Young made some awful mistakes, but at least we knew where he was coming from. I never thought I’d say it, but Young makes this lot look shallow.

George Pitcher is a partner of issue management consultancy Luther Pendragon.


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