MG Rover's inability to pay for parts was the final straw for the companies supplying Longbridge, writes Manufacturing Editor John Revill...

Rising steel prices, cost-down pressures from their customers, and then an apparent inability by MG Rover to pay them.

For many companies supplying Longbridge, it seems this was the final straw.

Wagon, which manufactures door systems and body parts, has decided to suspend supplies to Longbridge because it is owed #900,000.

But the Solihull company is not thought to be the only supplier which has stopped sending components to Longbridge.

Although most suppliers will have reduced their credit lines following uncertainty over the fate of the car maker, The Post understands at least 12 other manufacturers have also stopped supplies.

Wagon was the first to break cover yesterday, in an announcement to the London Stock Exchange.


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It said: "The Board of Wagon announces that, in view of MG Rover's current inability to meet its payment obligations, it has decided to suspend supplies to MG Rover with immediate effect.

"Wagon currently has approximately #0.9 million of receivables outstanding with MG Rover."

It was not a decision taken lightly - Wagon manufactures products for MG Rover with annual sales of approximately #14 million.

But the company was already drawing up plans to deal with the possibility that suspension became permanent and Longbridge closed.

It said it would look to restructure its UK manufacturing operations, at a cost of #1.5 million.

Chief executive Pierre Vareille said: "For the sake of MG Rover and all its stakeholders, we sincerely hope that a positive route forward can be found for the business.

"However, our first duty is to protect our own business and the interests of Wagon's shareholders, leaving us with no alternative but to pursue this course of action."

Wagon is just one of the dozens of suppliers which feed into MG Rover.

An estimated 15,000 people work in companies producing parts for Longbridge, in addition to the 6,000 who work at the plant.

Martin Lane, managing director at Tyseley-based Wilco Manufacturing, said MG Rover was up-to-date so far with its payments to his firm.

The company produces turned parts for MG Rover engines and gearboxes, but has diluted its business with the Longbridge firm over the last ten years.

Mr Lane said: "If Rover closes it is going to be catastrophic. There are not many people in Birmingham who don't know someone who works at Longbridge or supplies Rover in some way.

"But we will survive. Over the last ten years we have diluted our involvement with Rover and generated new customers.

"Ten years ago about 60-70 per cent of everything we did went into Rover. Now we are down to less than eight per cent.

"It is going to have an effect on us because we supply other first tier companies that feed into Rover.

"It will have a knock-on effect across the board."

Mr Lane said the suspension of production of Longbridge could finish off many companies which are already reeling from rising raw material prices.

He added: "Steel prices have doubled in the last 12 months while there are increasing cost down pressures from customers.

"There are going to be some casualties. Coming on top of Jaguar's decision to close Browns Lane last year it is more bad news."

Brian Cooke, chairman of the Brownhills foundry company Casting said his firm no longer had any direct business with Rover, while its indirect supplies to Longbridge were very small.

"Several years ago we thought the writing was on the wall and we stopped," he said.

"It has been a disaster for 25 or 30 years. Whatever money the Government puts their way doesn't do any good at all.

"People should look at Toyota. They are very different, very professional." Automotive industry expert Prof Peter Cooke, from Nottingham Trent University, said: "For every worker at Longbridge, between three and four people work making the components.

"The events of 2000 were the really big shock, and we lost some of the components manufacturers then.

"Those which survived have diversified to work with other players.

"The tier one firms who deliver direct into Rover will take the big hits, but they are big enough to seek business elsewhere. They will take some of the tier twos, who feed into them, with them.

"The automotive industry is very robust. People do not give up easily."