Last week, two days before news broke that the administrators were going into MG Rover, the Institute of Directors argued the end had come for the Birmingham carmaker. Bob Michaelson, West Midlands chairman of the IoD, explains
When last Tuesday the IoD issued a press release entitled Let Rover go, before the news hit of Rover's administration, we were not wishing for this tragic demise of one of the last pillars of UK manufacturing.
We were simply recognising, and perhaps being the first to state openly, what everyone else in the West Midlands business community already knew in their heart of hearts.
What else could you conclude about a company that had lost £250 million in the previous three years, and last week announced a 17 per cent drop in sales compared with March last year?
As early as the IoD's annual dinner at the Council House in Birmingham on March 22, we were being told the Government might be about to make a statement that night in the House of Commons, advising that talks with the Shanghai Automotive Industry Corporation had broken down.
Everyone knew that for Rover to survive a partner had to be found. We have known this for five years.
What is important now is that rather than cast around for who to blame, everyone involved in the West Midlands economy needs to pull together to ensure the best possible outcome for both MG Rover workers and those who are employed by Rover suppliers.
This will mean a massive commitment to regeneration, to training and reskilling
thousands of workers and will require substantial investment in the region.
For once, one might feel a deal of sympathy for the Government. Regardless of its hue, any administration, be it Labour or Conservative, would have found itself between a rock and a hard place over MG Rover.
If it did help MG Rover with a £100 million bridging loan, some would have been quick to condemn it for propping up a lame duck. And anyway, how recoverable is a £100 million loan from a company that later goes into receivership?
If it did not offer help to MG Rover and, as happened, the company simply ran out of cash, it would be seen as condemning thousands of West Midlands ' jobs to the scrapheap.
Whereas under EU competition policy, the Government was constrained from offering direct aid to MG Rover, the IoD would now urge all the agencies concerned to tap into every possible source of aid that is available both from the EU and other institutions.
The regeneration of a significant part of the West Midlands and the saving and creation of thousands of jobs is
something that we must all work towards, regardless of political persuasion, and the IoD pledges its support for all efforts towards rebuilding the economy in and around Longbridge and among its many component suppliers.
We want to be part of any taskforce set up to rebuild our local economy.
We want to bring our focus, our business microscope if you like, to the table to ensure that whatever plans are mooted are sound and are solidly rooted in good business and economic sense.
We want to establish at a very early stage, whether the £40 million the Government has pledged to support MG Rover's suppliers is new money
or simply money moved from one DTI pocket or another.
Is this real hard cash, or just £ 40 million that either Advantage West Midlands or other government agencies will not be spending elsewhere in the region?
Is this another phase of the arrangement whereby MG Rover was given £40 million of Government support in being allowed to stop paying National Insurance and VAT bills?
We need to establish at a very early date exactly what assets MG Rover still has.
The MG Rover brand, we are told, was set to be sold to the Chinese for £50 million as part of the deal.
The Chinese already own
the valuable K series engine range, St Modwen bought a 228-acre tranche of the 275-acre Longbridge site in January 2004, with MG Rover paying an annual rent of £5 million back to the property group.
Its components business was sold to Caterpillar for £100 million last year and the company, unlike most car makers, did not own its lucrative car finance businesses, having outsourced it to the four directors of Phoenix Venture Holdings.
It is believed that under a deal with SAIC, the Rover 75 and 45 models would have moved to China leaving just the aged 25 series as the base for a new " European"
manufacturing base. 2,000 of the 6,000 jobs at Longbridge would almost certainly have gone anyway, and did anyone really think that the Chinese would source their components from the West Midlands for cars they were now manufacturing in the Far East?
The company does however still own a castle, Studley Castle to be precise, the Warwickshire stately home, hotel and conference centre thought to be worth about £8 million.
However, we will look in vain in that direction for a white knight.
Perhaps from the ashes of MG Rover some new businesses can be born. Businesses with adequate capital resources, with full ownership
of their intellectual property, and the skills, drive and goodwill of both employees and suppliers to make them succeed.
Businesses like the now highly successful LDV, itself once part of the old Leyland Group.
We hope so. Further, we hope that the name "director" is not set to be dragged through the mud again when the full dealings of the four directors of Phoenix Venture Holdings are held up to scrutiny.
The IoD's motto is " Enterprise with Integrity" and we will continue to promote all that is best in UK and West Midlands business.
Only through an open and transparent approach to regeneration, by being honest and realistic in what we can, and cannot, achieve in rebuilding a shattered West Midlands automotive industry, can we hope to build for the future and reskill and retrain thousands of workers across the region.
After all, we are forever being told there is a West Midlands-wide skills shortage.
Perhaps fate is nudging us in the right direction in the cruelest and harshest of ways?
