Fleet News

MG Rover: optimism to doom in five years

THE mood of optimism at MG Rover in 2000 when it was thrown a lifeline is in stark contrast to the atmosphere at the doomed car firm this week.

Just five years ago, MG Rover’s new bosses broke their silence to the fleet industry in a confidence-building presentation. The Phoenix Consortium assembled tog-ether 300 fleet decision-makers for an event billed ‘The Facts and the Future’.

At the meeting, the company’s then fleet sales director impressed upon the audience ‘the viability of Rover in all sectors of fleet for the long term based on making a profit rather than achieving bulk sales, which is a sentiment we have expressed before’.

However, this week a company spokesman conceded that any fleet orders which have not yet been built cannot be supplied.

Last week, it was officially announced that a century of car making by the company had come to an end. It had been hoped that a rescue deal would come from Chinese company Shanghai Automotive Industry Corporation (SAIC), but it fell through after MG Rover was put into administration earlier this month.

This week, an MG Rover spokesman said: ‘Any fleet orders which have still to be built cannot be supplied. However, we will engage with fleet customers to support them through disposal cars in stock.’

The company is to build a further 1,000 cars before production ceases at its Longbridge factory. It has declined to comment on whether newly-appointed fleet boss Kevin Brown is still with the company.

A number of leasing firms will this week be talking to their fleet customers about MG Rover cars and vans which may have recently been supplied or ordered.

David Graham, head of operations at Interleasing, said: ‘Companies with MG Rovers on fleet have nothing to worry about if they have a maintenance agreement in place, as any reputable leasing company has an obligation to maintain the vehicle.

‘At Interleasing we are reassuring customers that if they have a maintenance agreement with us then we will authorise warranty work.’

He added: ‘We are assuring all MG Rover preferred franchised repairers and the major independent groups that if vehicles are covered by an Interleasing maintenance lease and they get authorisation from us then they will be paid for warranty work.’

Nick Auld, trade services manager at Custom Fleet, said the company had stopped quoting on MG Rover product but would do all it could to ensure that fleet customers’ existing cars would continue to be serviced to prescribed standards to ensure reliability and safety were maintained.

He added: ‘We will do all we can to service existing cars within the dealer network until it crumbles and then outside the network afterwards. The vast majority of service situations will be covered for the time being as there is still an adequate supply of parts and trained mechanics.’

Mike McRae, operations director at vehicle leasing and fleet management company Velo, said the company had put a stop on any future MG Rover quotes to fleets ‘in the fear we may not receive the manufacturer support we would normally claim from the company’.

He added: ‘Parts may also become a problem in future, which additionally gives cause for concern, as does the fulfilment of warranty obligations.’

He said demand for MG Rover from its customers had declined over recent years, adding: ‘This is due, from the driver perspective, to a largely outdated model range with limited appeal and, from the commercial viewpoint, low residual value performance which largely off-sets any front-end support.’

ALD has also stopped quoting for MG Rover and has no outstanding orders from fleets for the manufacturer’s cars.

Martyn Gallop, head of commercial operations at Tuskerdirect and Inspire Fleet Solutions, said that a risk assessment had shown there were about 1.5 million MG and Rover cars on the road in the UK and more than three million worldwide.

He said: ‘Although we’ve stopped quoting on the brand, there are enough vehicles on the road for there to be a good profit opportunity for the service network in the continued servicing and maintenance of the vehicles. And the parts supplier, XPart has issued a statement saying it will continue to produce parts for both MG Rover and Tata products for the foreseeable future.’

Gallop added: ‘In residual value terms the MG Rover brand was already relatively low before this happened, and that position may deteriorate in the way that markets often react to bad news.

‘But we may also see a renaissance later as more people buy the cars on the secondhand market from a nostalgia point of view, and values could start to go back up again – although just now I wouldn’t put money on it.’

Demise has a silver lining for fleet buyers

SO, it’s over for Rover, but fleets should not instantly dismiss buying the cars.

Currently there are some instances where there could be bargains to be had, according to Stewart Whyte, a director at consultancy Fleet Audits. He says that in general, he would find it hard to recommend any client putting MG Rover models on their fleet. But he added: ‘If, for example, you’ve got to replace a few pool cars and you’re going to run them hard for a couple of years, then it would be worth looking at MG Rover, especially if they are being offered with extremely low front-end prices.

‘Residual values at the end of term have been relatively low on recent Rovers anyway, and if you’re using them for the sort of work where they would have been worth little and you’re likely to get rid of them within a maximum of 30 months, irrespective of the current situation of MG Rover, then certainly see what deals are about.

‘But be very careful. I would not touch with a bargepole cars which were built after the collapse.’

Dealers in a dilemma over warranties

THE Retail Motor Industry Federation (RMI) is to look into the decision by MG Rover administrator PricewaterhouseCoopers to cease honouring the firm’s warranty commitments.

Franchised dealer director Alan Pulham said: ‘It has put dealers and their customers in a difficult position.’

The RMI has said it is consulting with its legal team and dealer representatives to try and find a solution for businesses and consumers.

In a memo to the company’s dealer network, PricewaterhouseCoopers (PwC) said that MG Rover would no longer reimburse dealers for any warranty work done after ‘1.05pm on April 8’, the time the administrators were appointed. It said: ‘Any warranties offered for vehicle sales after the appointment date will continue to be a matter for the dealer to consider, subject to the fact that the company will not be able to reimburse these costs. Hence, dealers and authorised repairers will need to make their own assessment in dealing with customers.’

Historically, MG Rover has reimbursed authorised repairers and dealers for the cost of warranty repair claims. PwC will also not meet sales incentives or rebate obligations.

Other obligations, such as AA Roadside Assistance packages, free service promotions, goodwill accounts and recall work reimbursement are being investigated by PwC.

A PwC spokesman said: ‘We acknowledge that these decisions leave dealers in a difficult position, but given the current financial position of MG Rover there is no other option. We will issue further communications to dealers in due course.’ A sign of dealer confidence was shown this week, after it was revealed that one MG Rover dealership in Sheffield was selling a Rover 75, which normally retails for £19,195, for £11,999.

Recriminations begin in earnest

THE Government has launched an investigation into how the Phoenix Four – the directors who bought the firm from BMW in 2000 – could make so much money from an uncompetitive business.

The Department of Trade and Industry has asked the Financial Reporting and Review Panel (FRRP), an independent watchdog which investigates alleged breaches of proper accounting procedures, to investigate.

John Towers, John Edwards, Peter Beale and Nick Stephenson bought MG Rover from BMW for £10 in May 2000.

National newspapers have reported that they and other directors have since taken about £40 million in salaries, pensions and other benefits.

The consortium split MG Rover into 28 subsidiaries under a parent company, Phoenix Venture Holdings, with other operations outside the main group. The three main subsidiaries: MG Rover, Powertrain and MG Sport and Racing, are in the hands of administrators.

Reports have centred on the apparent discrepancies between Phoenix’s resources and its declared losses, as the former exceed the latter by up to £400 million. They will want to know how its owners sold off land and buildings for £60 million and also what happened to £110 million raised from the sale of MG Rover’s XPart parts business last year.

Newspaper reports also suggest that 11,000 cars are also missing. Towers has dismissed reports of a £400 million black hole in figures as ‘ridiculous’.

MG Rover – charting a century of British car building

  • 1905: Lord Austin founded the Austin Motor Company.
  • 1952: Austin and Morris merge to become the British Motor Corporation (BMC).
  • 1968: BMC becomes British Leyland.
  • 1988: British Aerospace buys the Rover Group, comprising Rover Cars and Land Rover, from the Government in a deal worth about £150 million.
  • 1989: Rover sells a 20% stake to Honda.
  • 1994: BMW buys Rover from British Aerospace and Honda for £800 million and assumes another £900 million in debt.
  • March 14, 2000: BMW admits the sale of Rover Group is one of several scenarios being looked at after Rover losses weigh heavily on BMW’s 1999 profits.
  • March 16, 2000: British venture capital group Alchemy Partners says it has reached an outline agreement with BMW to acquire the bulk of the loss-making Rover Group, which will be renamed the MG Car Company.
  • April 1, 2000: 80,000 people march through Birmingham to protest against the Rover sell-off to Alchemy amid fears the sale could affect 50,000 jobs in the area.
  • April 14, 2000: BMW says it has received a counterbid for Rover from the Phoenix Consortium led by John Towers, which is widely welcomed by trade unions opposed to Alchemy’s bid.
  • April 28, 2000: Alchemy’s talks with BMW unexpectedly collapse over a financial wrangle, leaving Phoenix as the sole bidder. BMW remains sceptical of Phoenix’s ability to raise enough money to back its bid.
  • May 9, 2000: Phoenix signs a deal with BMW to take over development, production and distribution of Rover cars.
  • June 18, 2004: MG Rover and Shanghai Automotive Industry Corp (SAIC) sign a co-operation agreement to fund new model programmes.
  • Oct 28, 2004: MG Rover announces 2003 pre-tax losses of £77 million.
  • Nov 20, 2004: SAIC and MG Rover say they are in talks to set up a joint venture company controlled by the Chinese firm.
  • Dec 16, 2004: MG Rover says it expects to finalise a deal with SAIC by January or February 2005.
  • Feb 22, 2005: Chancellor Gordon Brown travels to China for talks with SAIC on MG Rover’s future.
  • April 2, 2005: The Government says it is considering offering a £10 million bridging loan to support a tie-up between MG Rover and SAIC.
  • April 3-4, 2005: The Government, MG Rover and SAIC hold joint-venture talks in Shanghai.
  • April 7, 2005: MG Rover stops production at its Longbridge plant. The Government says the car maker has gone into administration.
  • April 8, 2005: Pricewaterhouse-Coopers appointed administrators to MG Rover.
  • April 10, 2005: The Government grants a £6.5 million lifeline loan to secure jobs at the Longbridge factory for one week.
  • April 15, 2005: SAIC formally advises the Government it will not resume talks with MG Rover. Administrators say there is no hope of saving the company and inform workers of mass redundancies.

    Who’s still building in Britain?

  • Aston Martin – the firm’s renaissance continues under Ford control at a new factory in Oxfordshire

  • Bentley – Crewe is still the home of the legendary marque, now under Volkswagen ownership

  • Bristol – ultra-low volume, ultra-exclusive and ultra-quirky London-based luxury car firm

  • Ford – the only vehicle built in the UK is the Transit van in Southampton, although there are engine factories still here

  • Honda – the Civic and CR-V are built in Swindon

  • Jaguar – the range is built in the Midlands and Liverpool

  • Land Rover – everything from Freelander to Range Rover is built in the Midlands

  • Lotus – still built in the firm’s spiritual home in Norfolk

  • MINI - Plant Oxford is the home of BMW’s baby

  • Morgan - retro roadsters built at the foot of the Malvern hills

  • Nissan - the Micra, Almera and Primera are built in Sunderland

  • Peugeot - the 206 continues to be produced at Ryton, near Coventry

  • Rolls-Royce - massive Phantom is built at state-of-the-art plant next to the Goodwood racing circuit

  • Toyota - Burnaston in Derbyshire builds three and five-door Corollas as well as Avensis hatchback, saloon and estate cars

  • TVR - specialist sports car maker from Blackpool

  • Vauxhall - five-door Astra is built at Ellesmere Port, while the Vivaro van is produced in Luton

    This list does not include the myriad specialist car companies in the UK, such as Ariel, Caterham, Radical, Westfield, etc.

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