By Jim Denham
The jobs of 6,100 Longbridge workers and of a further 20,000 working for Rover’s suppliers hang in the balance after the collapse of the proposed partnership deal with the Shanghai Automotive Industry Corporation (SAIC). Longbridge workers are on the payroll, at least until 15 April, thanks to a £6.5 million cash injection from the government.
Everyone was counting on the Chinese deal for investment that would allow the company to develop new models and give it a chance of survival. Now, it has been placed in the hands of administrators.
It is possible that SAIC or some other buyer may “cherry-pick” those elements of the MG Rover operation that are of potential value and keep limited production going at Longbridge, unencumbered by liabilities like pensions (where there is a huge shortfall) and redundancy bills. But even this is a long-shot. There is talk of a workers’ and management buyout, and a even a workers’ coop, but the manager drawing up those plans is still looking to a SAIC buy-out.
Five years ago, when BMW pulled out of the Rover Group, electorally New Labour could not risk letting Longbridge close. Ruling out nationalisation, the government looked for another means to bail out the company and threw its weight behind John Towers’ Phoenix consortium, which bought Rover for a nominal £10.
The Phoenix deal proved the worst of all possible worlds for Longbridge workers. The money left by BMW and pocketed by Towers and his chums could have funded a £50,000 pay-off for every Longbridge employee: now they look like getting the statutory minimum of £280 for each year of service.
Towers and his fellow Phoenix directors promised investment in new models. Instead, they put £16.5 million into their own trust fund, awarded themselves a £10 million loan note, gained control of MG Rover’s car leasing business worth £2.6 million, and last year paid themselves £16 million each. All that is in addition to owning £427 million and a stock of unsold cars worth £350 million, left as a “dowry” by BMW. Towers & Co also sold assets for many tens of millions more.
The bosses’ paper, the Financial Times commented last week: “This is capitalism at its ugliest. There is no suggestion that the Phoenix team broke any laws. They did what any ruthless entrepreneur would have done in the situation: incentivise, strip assets, take cash out early.
“But they betrayed the trust placed in them by their workers, the government and the public. Yes, they kept the business going for five years. But they did so by burning through someone else’s money and without delivering the new generation of models that might have given Rover a slim chance.”
Rover should have been nationalised under workers’ control in 2000, and production diversified into trains, trams and buses. Europhobes and government apologists who claim that EU competition policy prevents government aid to MG Rover ignore political reality: in France, Renault and Peugeot are profitable thanks to state aid. The Alstom bus, train and tram-producing company was rescued last year by the centre-right French government with no EU obstruction. Alstom’s plant in Castle Bromwich, on the other hand, closed with no opposition.
Tony Blair and Tony Woodley are urging MG Rover workers to report for work as usual: they should, indeed, turn up as usual at Longbridge. They should then occupy the plant to prevent the removal of machinery and to demand of the government that all jobs will be maintained.