MG Rover

'To the sound of stable doors being shut, trade secretary Patricia Hewitt's response to the MG Rover collapse has been to excoriate the Phoenix directors and launch a financial inquiry.' -- Private Eye

It was a nice little earner for some, pay a tenner for a car company, then milk it for millions.

There are those, including the Phoenix Four and up until the collapse Trade Secretary Patricia Hewitt, who would say that was a reward for risk.

What risk? The taxpayer ploughed money into MG Rover, as did BMW to the tune of several hundred million. The only risk taken by the Phoenix Four seems to be the risk of being found out, and even that risk was fairly minimal from the DTI.

Enron, Worldcom and now MG Rover.

Trade Secretary Patricia Hewitt has launched an investigation, or should we say, an extremely limited investigation, into why MG Rover has failed. An investigation launched by the very same Trade Secretary who in the not-too-distant past was praising the Phoenix Four for the miracle they had achieved.

The only miracle was that they got away with it for so long.

We had a clean bill of health from our auditors claimed the directors. And who appointed the auditors? Why none other than the directors.

We often hear of too much regulation, too much red tape, and from the viewpoint of small business this is true, but it is not true of Big Business which seems to operate in a regulatory-free vacuum.

If directors engage in wrongdoing, it is the company, ie the shareholders who foots the bill. When directors fail, as too often they do, it is the shareholders who foot the bill.

A dodgy auditor faces little penalty if they cook the books on behalf of their corporate clients.

Who was checking on Shell when they boosted their share price by claiming fictitious oil reserves?

Auditors, apart from being appointed by the directors to act on behalf of the shareholders, have another conflict of interest when on the one hand they audit the books and on the other supply consultancy and other services to the same client.

Enron had auditors who were also their consultants. The auditors for MG Rover were also suppling consultancy services.

When the liquidators open up the books at MG Rover they will see the cupboard is bare.

Longbridge, a 403-acre site, was sold to property developer St Modwens at a knock-down price of £57.7 million, then leased back at £5 million per annum.

The name Rover is owned by BMW.

The intellectual property rights, that is engine and car designs, were sold to the Chinese for less than £100 million.

When Shanghai Automotive Industries looked at the books of MG Rover they found they were looking at an insolvent company, which is why they walked away.

Were Shanghai Automotive Industries ever interested in buying MG Rover, or were they just after the intellectual property rights, which they now own?

Prime Minister Blair delayed the inevitable for a few months in the hope the scandal would not erupt until after the election. It is thus poetic justice that it has erupted in the midst of a General Election. Once again, as with the illegal war on Iraq, bringing into sharp focus the integrity of Blair.

UKIP, but for EU competition policies, would have poured millions more of taxpayers money into the insolvent MG Rover.

Whilst it is easy to be wise with hindsight, the only realistic offer at the time was to close down Rover and concentrate on MG production. Why did Tony Blair and the discredited former Trade Secretary Stephen Byers back the Phoenix Four instead?

If taxpayers' money is to be poured into a car company, it should be for a revolutionary car design that drastically cuts emissions and fuel consumption. One such example being the hypercar developed by Amory Lovins and his team at the Rocky Mountain Institute in Colorado.

The hypercar is lighter, thus needs a less heavy engine, is a hybrid electric car, with electric motors powering the wheels directly. Such a car could have been a prestigious car carrying the MG badge, with to follow saloon cars carrying the Rover badge

But more cars means congestion. More cars less pedestrians, less demand for public transport.

London Mayor Ken Livingstone introduced the Congestion charge in Central London. A lost opportunity and little more than a stealth tax. The congestion charge should also be a permit to travel free on public transport.

Any inquiry into the demise of MG Rover has to not only look into the financial black hole and creative accounting, but also the role Blair played in the sale of MG Rover to the Phoenix Four and his shenanigans and pretense it was a viable business worth rescuing prior to the collapse.

Any inquiry into the collapse of MG Rover also has to look into the acquisition of the Longbridge site by St Modwens.

Unlike the suppliers and car dealers, who have not been paid, St Modwens, who leased Longbridge back to MG Rover, have been paid upfront up until the end of June 2005. Now that the car company is defunct, that land that was bought on the cheap is worth a small fortune with planning consent for redevelopment.

Wherever St Modwens operate, there is always a nasty smell in the air.

The Phoenix Four have been referred to as the 'unacceptable face of Capitalism'. A close scrutiny of the practices of St Modwens would reveal the same unacceptable face.

Reference

Keith Parkins, Globalisation - the role of corporations, September 2000
 http://www.heureka.clara.net/gaia/global05.htm

Keith Parkins, St Modwens the destroyer, Indymedia UK, 30 March 2005
 http://www.indymedia.org.uk/en/2005/03/307921.html

Keith Parkins, Longbridge and St Modwens, Indymedia UK, 25 April 2005
 http://www.indymedia.org.uk/en/2005/04/309777.html