Three Years On: No Explanation for Collapse of MG Rover and No New Production at Longbridge

No End to Inquiry in Sight

The government-funded inquiry into the collapse of British carmaker MG Rover has yet to present any conclusions, exactly three years and £11 million (US$21.7 million) after six thousand U.K. workers lost their jobs. The Financial Times (FT) newspaper has spoken to a number of local members of parliament (MPs) who are calling for an end to the investigation, whilst government ministers continue to refuse to intervene. This is despite the inquiry, which is being carried out independently by accountancy firm BDO Stoy Hayward, having so far cost taxpayers as much as three times as much as some comparable investigations.

"The inquiry has gone on far too long," Richard Burden, MP for the Longbridge constituency near the West Midlands city of Birmingham where MG Rover was based, was quoted as saying. "I don't see why this should be, when an investigation into the Iraq war reported in a far shorter period of time."

The final collapse of MG Rover, which was the United Kingdom's last remaining independent mass-market carmaker, came in April 2005. By then, the so-called "Phoenix Four" businessmen who had bought the carmaker for £10 from BMW in the year 2000, were estimated to have extracted around £40 million in benefits from the concern.

The U.K. government encouraged Nanjing's bid in 2005 and provided a small amount of financial support to MG Rover in 2005 during unsuccessful takeover negotiations with China's Shanghai Automotive. Now, however, the Department for Business, Enterprise and Regulatory Reform says it does not know when the investigation into the collapse would report. "We want them to do as thorough a job as possible," an official was quoted by the FT as saying.

No Start to Production in Sight Either

While it is three years yesterday (15 April) since the collapse of the carmaker (see United Kingdom: 18 April 2005: UK Government Launches Formal Inquiry into MG Rover Collapse) it is almost one year since another anniversary at MG Rover's Longbridge factory. Last May, officials from China's Nanjing Automobile celebrated the official restart of production of the MG TF sports car. Nanjing, which has since merged with larger Chinese carmaker Shanghai Automotive, had previously purchased the manufacturing assets of MG Rover from the administrators. Since that celebration, however, full-scale production at Longbridge has still not begun.

Chinese production of the Rover 75 is now running on the other hand, using equipment removed from Longbridge. The FT quoted a company official as saying that Longbridge is currently making "pre-production vehicles [to] iron out final problems". In February this year, the company said that full-scale production of the MG TF sports car would start in China in May 2008 and three months later in the United Kingdom.

A report in the local newspaper, the Birmingham Post, casts doubt on whether volume production will ever resume at Longbridge, however. The newspaper revealed this weekend that Stadco—a main supplier to the company—has stopped manufacturing body shells for the MG, which leaves the future of that ageing model uncertain. Stadco has said it is withdrawing from its contract to supply panels for what it called "commercial reasons", a decision that puts 30 jobs at risk. The report quotes one "influential source" as predicting that rather than being used as a car factory, Longbridge may have a future role as a servicing centre.

Outlook and Implications

Until the findings of this report are revealed, the trust fund set up by the Phoenix Four for the benefit of the local community cannot be used. The total value of the fund is not known, but the FT estimated its value to be between £10 and £30 million in 2005. It is believed that the government is so unwilling to intervene because it does not want to be accused of interfering with the investigation's results.

Fortunately, the fall-out from the collapse of MG Rover has not been nearly as severe to the West Midlands community and industry as initially had been feared. The government-funded "Rover Taskforce" provided generous grants which helped local suppliers to diversify, once it became clear that MG Rover was in serious trouble. That said, local suppliers, such as Stadco, have shown an enormous amount of patience and goodwill towards Longbridge and its operations, but this is fast running out one year on and when no finished models have rolled off the production lines and into showrooms.

In China, however, the picture is very different. Global Insight recently reported how SAIC plans to launch 30 new models by the end of 2010, some of which are expected to be built on Rover platforms (see China: 20 March 2008: SAIC Planning to Launch 30 Self-Developed Vehicles by 2010).

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