A high-level delegation from the city of Nanjing in China will be in Birmingham today to talk to the city council about plans for Longbridge, the former MG Rover car plant. The future of carmaking at the site depends on the Chinese company, which has announced plans to bring back the MG TF sports car, followed by other models, and creating up to 1,000 jobs over the next few years. Nanjing has signed a 32-year lease on part of the Longbridge site - though with the caveat of a six-month break clause.
The talks come a year after MG Rover halted production at Longbridge, saying it expected the stoppage to be temporary: a handful of suppliers had halted deliveries of components.
Thousands of miles away in Shanghai an MG Rover team led by John Towers, one of the Phoenix four businessmen who had bought the carmaker from BMW in 2000 for £10, was watching hopes of a life-saving deal with the Shanghai Automotive Industry Corporation collapse.
The government had flown a team of DTI officials to Shanghai and offered a £100m bridging loan. But the Chinese, deeply worried about MG Rover's financial health, wanted the loan before committing itself. The government said the deal had to be done first.
By the end of that day in April the drama had become a crisis. That night the then trade and industry secretary, Patricia Hewitt, announced that MG Rover was calling in the receivers. The company said merely that it was taking advice about its future. After some confusion, the next day it was a team of administrators from PricewaterhouseCoopers who turned up at Longbridge.
A general election was just four weeks away. Longbridge sat in an area dotted with key Labour marginal seats. Thousands of jobs were at risk at MG Rover and its suppliers. The prime minister and the chancellor rearranged their election schedules to take in the West Midlands. In a move later criticised by the National Audit Office the government stumped up a £6.5m loan to help the administrators keep the plant open for another week. The hope was that SAIC could still be persuaded to take on MG Rover as a going concern. It was in vain. The following week, SAIC made it clear it was not prepared to buy MG Rover on that basis. On the 15th, the administrators issued 5,000 redundancy notices. Others were to follow. A century of carmaking at Longbridge was in effect at an end.
Recriminations
Recriminations were inevitable. Some argued the government should have backed the sale of MG Rover in 2000 to Jon Moulton's Alchemy, which planned to turn it into a niche carmaker - it would have meant fewer jobs, they said, but more chance of long-term success. Others said the government should have done more to keep MG Rover alive.
Judging by the callers to a local radio station on the day the redundancies were announced, much of the anger was directed against the Phoenix four: Mr Towers, Peter Beale, John Edwards and Nick Stephenson.
Creditors, who were owed £1.4bn, were similarly hostile. The four were accused of squandering the legacy from BMW, which had sold Land Rover to Ford but endowed MG Rover with a £427m loan (with little expectation of repayment) and a stock of unsold cars worth more than £500m. Unfavourable comparisons were drawn between the £40m in pay and pension contributions the Phoenix four were reported to have taken out of the business, and the bleak future faced by the Longbridge workers.
DTI inspectors are now investigating events leading up to the collapse. The House of Commons trade and industry committee is to look at the affair and the Accountancy Investigations and Disciplinary Board is looking at the conduct of MG Rover's auditors, Deloitte & Touche.
In the West Midlands the collapse hurt the economy, though not as badly as expected. An estimated 9,000 jobs were lost, 6,000 of them at Longbridge. Around a dozen firms went bust. But government support worth £175m over three years helped. The rapid response by the government and agencies, and the fact that many suppliers had already made moves to diversify after the 2000 sale of MG Rover and its subsequent contraction, combined to soften the blow.
Ironically the future of car making at Longbridge remains in Chinese hands. PwC may have received inquiries from around the world for assets or parts of the business, but in the end two companies were left to slug it out: SAIC, which had precipitated the crisis, but had also already paid £67m for a series of Rover intellectual property rights, and its domestic rival Nanjing Automobile. Nanjing won, but the race is on to see which of the two will be first to build a car from the MG Rover legacy.
Using its intellectual property rights Shanghai is putting together a new model based on the Rover 75. Nanjing has shipped much of the production equipment from Longbridge to its home base. In another twist, the two are bidding against each other for the rights to the Rover name - it is still owned by BMW, but Ford, jealous of its Land Rover brand, has first refusal.
At Longbridge any future carmaking depends on Nanjing. One year on, the saga of MG Rover still has plenty of mileage.
Turning a tenner into a £50m fortune
The Phoenix four Midlands businessmen who bought MG Rover for £10 in 2000, together with the chief executive they brought in to run the business, will profit to the tune of about £50m from their stewardship of the collapsed car group.
There is lingering resentment around Longbridge that while 6,000 workers lost their jobs with little or no compensation, the company's most senior executives were able to observe the demise of their empire from the comfort of luxury homes padded by matching pay and pension packages.
The salary bill run up by the Phoenix four: John Towers, Peter Beale, Nick Stephenson and John Edwards, together with the former MG Rover chief executive, Kevin Howe, came to £12m. But payments into a private pension fund for the executives cost a further £17m
No information is publicly available on the salaries or pension benefits the executives received in 2005 in the run-up to the car company's collapse.
The Phoenix four have netted £12m from loan notes they were given after they had secured the firm from BMW, complete with a cash and assets dowry estimated by the Guardian at about £1.4bn. The executives can expect to pocket up to £9m from their investment in a car financing business in which they have a 50% stake.
