The auction no one believed would happen is now in full swing. Only a month ago MG Rover administrator PricewaterhouseCoopers was preparing to break up the Longbridge company after its collapse. Now there is an almost unseemly scramble, not to pick the entrails apart, but to buy the group, lock stock and steering wheel, and start making cars again in the west Midlands.
By the end of last week, three bidders were left talking to PWC administrator Tony Lomas, whose first duty is to accept the bid that will do most for the creditors of MG Rover, owed an estimated £1.4bn. And these are not pie in the sky approaches. PWC has already refused several bidders, including from Russia and Iran. Professor Garel Rhys, of Cardiff Business School, says: 'These are likely to be serious bids. Bidders all know what is involved. There is a viable business there.'
Throughout the week they jostled and elbowed their way in and out of the spotlight: at the beginning it was company doctor David James who seemed ahead, with his plan to link up with Shanghai Automotive Industry Corporation of China, the collapse of whose joint venture plans with former owners Phoenix Venture Holdings plunged Rover into administration in April.
James and SAIC fell apart and by Tuesday were spitting bile at each other. By Thursday morning, Lomas was reported to be moments from announcing Nanjing, a second Chinese player, and a minority partner in SAIC's original deal with Phoenix, as the winner. In the nick of time - 1.35pm, to be precise - SAIC announced that it had signed a letter of intent with former Ford of Europe and Maserati boss Martin Leach to take over the whole group. SAIC had, until then, only bid some £10m-20m for the Powertrain engine business. Now, with Leach's Magma bid vehicle proposing to take the assets, funded by Chinese money and with union backing, the Shanghai team became the favourite.
But James was not out of it. He pressed on with plans to take over the group, leasing the assets to build Rover's 25, 45 and 75 saloons to other operators, while concentrating his own efforts on developing MG sports cars. The James/SAIC talks broke down amid acrimony.
His bid involved paying £40m for the MG sports car business with a loan of £80m for Powertrain and Rover. But the banks would only lend this working capital if the Chinese accepted a 'put' option on the assets, forcing them to buy them back within a given time period. They didn't accept. James, an experienced public performer as well as financial engineer, snorted of a 'tragedy' for Longbridge, and blamed SAIC and its advisers, NM Rothschild, for not fully understanding the plan. For their part, SAIC advisers were dismissive: 'He thinks of himself as a turnaround specialist, but he has never built cars in his life before ... He wanted us to do all the financing, effectively, and we said no.'
He did not give up, opening talks with the Department of Trade and Industry to guarantee his scheme by offering to shortfall guarantee on the assets, allowing him to raise £40m-£50m working capital. On Friday, DTI officials told him a paper had been sent to Trade and Industry Secretary Alan Johnson, and he could expect an answer by Tuesday. He immediately wrote to PWC asking it to delay the sale until Wednesday.
This weekend, he is locked in parallel discussions with private-sector asset financiers to get backing for his plan, which he says could create 2,000 jobs at Longbridge and deliver four new MG cars within the next five years.
Meanwhile, talks between SAIC and Leach got serious. On Wednesday SAIC president Chen Hong and Leach met for breakfast and discussed a letter of intent for a tie-up. While SAIC trashed James's credentials, it talked up Leach. 'What Martin brings to the party is that he is a world-class person, very skilled and experienced in the development of new cars. This is the guy who brought the Ford Focus into the world. He has got huge credibility,' said a source close to SAIC.
SAIC's tactics, moving from a limited bid for Powertrain to a joint venture incorporating the whole company, puzzled other players. One said: 'SAIC has been playing two games. On the one hand it has been sitting back since April saying "we own all the intellectual property to make the cars [it paid £67m for them before the collapse of the Phoenix talks], so no one else can do anything". On the other, they have been saying "it is our duty to entertain sensible proposals to restart the business".' As the week progressed, SAIC negotiations reached a pitch they never seemed to hit when talking to Phoenix through the winter and spring.
Why was this? One theory is that they were jolted by reports that Nanjing, which makes Fiat cars under licence in China, was the frontrunner because it was a single bidder going for all the assets. And it was prepared to challenge SAIC's intellectual property rights.
Details remained patchy, but a similar but smaller joint venture structure to the original Phoenix proposal - where SAIC took 70 per cent (with Nanjing taking 20 of that) and PVH took 30 - was suggested, with design and engineering and manufacturing at Longbridge, employing some 1,300 to 1,600. Rover and MG cars would be made in the west Midlands, along with engine manufacture and further car production in China. 'We are looking at a number of options, it's too early to say which we will choose. But we'll manufacture where it is most economical,' said a spokesman.
Other sources close to SAIC added some details. One said: 'This is a long-haul business. Whether it is £40m or £80m is neither here nor there. The fact is this is going to take major investment, hundreds of millions over the next five years. We are not expecting to make a profit for five years. But we have plans to invest. We will be developing new models; around a dozen are planned. And this [the Leach joint venture] is far more substantive than the Phoenix one.'
Nanjing continues to believe that the intellectual property only covers components exclusively used by Rover cars, not by MG variants, so it can make versions of the entire range. SAIC sources rubbished this, saying it was confident of its intellectual property rights, and that Nanjing had found it difficult to get the money for its part of the Phoenix bid, so it was unlikely to be able to raise enough for the lot. Meanwhile, it was finalising its bid, understood to have been sent in on Wednesday. Nanjing is planning to make a range of new models, with two new sports cars and the large 75 car and its successor manufactured and assembled in the UK. The medium and small cars would be manufactured in China, where there is expected to be a huge market, and shipped to the UK for assembly then sale in Europe.
It says it is considering Longbridge as a site, but has not ruled out elsewhere in the west Midlands, which raises the prospect of a new plant like Honda's at Swindon or Toyota's at Burnaston. It dismissed allegations it did not have funding, and the notion, suggested by Transport and General Workers Union boss Tony Woodley, that this would 'lift and shift' production to China.
'We have a business plan and a roadmap for new models,' says a spokesman. 'And as for our ability to fund this, our two shareholders own 80 per cent of the entire province of Jiangsu in China. We can fund it.'
Nanjing and SAIC insist that their bids are separate. However, Professor Rhys points out that the Chinese government lay behind Nanjing's entry into the original joint venture in order to ensure that the benefits of proprietory technology and know-how - SAIC makes Volkswagens and General Motors vehicles under licence like Nanjing does with Fiat trucks - were spread across more than one company. 'I would not be surprised if the Chinese bids ended up coming together,' says Rhys. 'It seems to make no sense having them bid apart from one another.'
One thing all of the bidders have in common is that profits are some way off. But followers of MG Rover are used to that. The last time it made any money was in 1994.
