Patricia Hewitt, the industry secretary, yesterday gave enthusiastic backing to MG Rover, Britain's last independent volume car-maker, despite considerable misgivings among senior Labour backbenchers about "financial sleight of hand" by its four founder-directors.
Ms Hewitt became the first government minister to express public support for the Phoenix Four in the wake of reports in the Guardian that they are in line for rewards of £31m even though the company is still losing money and suffering a steep drop in sales.
"I am very pleased with Rover's performance," she said. "There were very big risks involved in starting up Rover again when it looked as if it would be the end of the road." She also distanced herself from allegations, not least among members of the Commons trade and industry committee, that the Phoenix Four, headed by chairman John Towers, had in effect enriched themselves through large salaries, lucrative pensions and a £10m loan note while the car company had been deprived of investment.
"I am not going to get involved in discussions about individual payments," she said. "Company directors who take big risks and achieve big successes deserve big rewards."
Government sources indicated, however, that ministers were concerned about reports in the Guardian and elsewhere and were keeping a close eye on Rover. Ms Hewitt, it was suggested, had no wish to voice these concerns when Rover's future was "delicately poised".
Rover, which employs 6,000 people at its Longbridge plant in Birmingham, remains politically sensitive and the Commons committee report into the UK auto industry, including Rover, is due soon. Martin O'Neill, the committee chairman, has publicly criticised the "financial re-engineering" conducted by the Phoenix Four in separating the cars operation from other, profitable parts of the business.
Government sources indicated that ministers would not publicly criticise Rover when the group was in discussions with potential new partners.
Kevin Howe, Rover's chief executive, said talks between the company and the government were now less frequent and senior DTI officials had not raised concerns about the group's financial structure when he last met them a month ago. Rather, he said, "clarifications" had been sought.
He indicated that talks with Proton, the Malaysian car-maker, about a partnership could result in an exchange of "platforms" for new cars. This could conceivably enable Rover to launch its new car, the R60, ahead of the current schedule for the end of 2005.
But Mr Howe also suggested that an alliance with Proton could be superseded if his talks with Chinese car-makers about a strategic partnership bore fruit. "There are a number of people who want to work with us," he said.
