The chairman of MG Rover, John Towers, and senior executives of the troubled car company are to be summoned before a Commons committee to account for the complex refinancing that has seen them net at least £31m from a business they bought for £10.
Martin O'Neill, chairman of the trade and industry select committee, said yesterday that members of the so-called Phoenix consortium would be asked to explain the "innovative funding arrangements" as part of a more wide-ranging inquiry into the future of the UK auto industry early next month.
"We are giving a signal to them we will be interested to know about these various arrangements," Mr O'Neill said.
The Guardian disclosed on Saturday that the consortium headed by Mr Towers and Kevin Howe, Rover's chief executive, had drawn extensive salaries and benefits even though Britain's last independent volume car maker is still haemorrhaging losses.
An investigation of audited accounts published by Phoenix Venture Holdings, Rover's ultimate owner, between May 2000, when the consortium acquired Rover from BMW, and the end of 2002, shows that the German car group paid more than £1.1bn in soft loans and subsidies to the new owners.
But Rover, whose UK market share has fallen from 25% in the late 1970s to just over 3% now, has put off until late 2005 the long-delayed launch of its make-or-break new medium car amid evidence that not all the BMW cash earmarked for the company's rescue has reached it.
Richard Burden, Labour MP for Birmingham Northfield, which includes Rover's Longbridge plant, and a committee member, said: "The directors need to be as transparent as possible even if they feel they have answered these allegations before... I would remind people that there are a lot of jobs riding on this and my constituents are interested in the company's success."
But other political sources said the directors had benefited from cooperation from government.
Earlier revelations about a £13m trust fund set up to provide pensions and other long-term benefits for the five directors prompted unions to examine Rover's books at the end of last year with the aid of their own financial experts and of senior company officials.
Duncan Simpson, national auto officer at the Amicus engineering union, said yesterday that union officials would be demanding an explanation of the fresh revelations from the company.
"We were aware of and not entirely happy with the £31m and the use of negative goodwill but the controversial issue for us now is the charging of interest on the loan (from BMW) that was originally meant to be interest-free," he said.
The Guardian revealed that BMW's loan, made in three tranches totalling £427m, had been paid to Techtronic (2000), the initial vehicle set up by Mr Towers, Peter Beale, John Edwards and Nick Stephenson, to acquire Rover and later that year "sold" to Phoenix Venture Holdings.
The car company has paid interest to Techtronic on these loans.
MG Rover said last night: "The group funding arrangements have been audited by Deloittes and are not innovative. MG Rover looks forward to participating in the trade and industry select committee review of the UK industry. Since its formation in 2000 the company has regularly updated the DTI on its progress and, is prepared to develop a similar dialogue with the committee."
