UK: MG Rover directors boost pension fund despite latest loss
The directors who run MG Rover, Britain's last independent volume car maker, rewarded themselves with another £3.6 million in their pension fund last year while the company posted its third consecutive year of losses, according to the Daily Telegraph newspaper.
The paper said four men who bought Rover from BMW for £10 in May 2000 also received £2.5 million each in 2003 - their cut from a £10 million loan note which they awarded themselves six months after the deal was signed.
The 2003 accounts for MG Rover's owner Phoenix Venture Holdings, which were announced yesterday, also show that its highest paid director - Phoenix declined to say who it was - received a basic salary of £817,486 in 2003, the report added.
The Daily Telegraph noted that the payments came in the same year that Phoenix posted pre-tax losses of £77 million in the year to the end of December, against a loss of £95 million in 2002. Sales were down 4% to £1.67 billion.
Peter Beale, Phoenix's vice chairman and one of the "Phoenix four", reportedly defended the pension fund payment. According to the Daily Telegraph, he said: "It is appropriate given that when we took this company on it was going to be put into liquidation."
Beale reportedly said that he and his three colleagues chairman John Towers, Nick Stephenson and John Edwards had invested £60,000 each in Techtronic, the bid vehicle which originally bought Rover.
His share of the £3.6 million sum - which swells the director's trust fund from £12.95m to £16.5m - added only £19,000 to his annual pension, he said, according to the newspaper. "Against that background we reduced losses from £786 million in 2000 to the £77 million in 2003. We would not have done it if we did not think that it was appropriate."
The Daily Telegraph said Phoenix chief executive Kevin Howe warned Phoenix will lose more than £77 million this year because of a dramatic fall-off in car sales in the UK. Sales of Rovers in Britain are 23% down to 37,640 cars in the first nine months, while sales of MGs fell 14% to 25,959 vehicles.
Beale reportedly continued: "We have taken our eye off the ball and our marketing has not been good enough. The customers we get into our showrooms are happy but we are not getting enough of them in." A source told the newspaper that it was unlikely the directors will receive any payments into their trust this year.
According to the Daily Telegraph, Beale said that the company had been internally distracted by MG Rover's joint venture with Shanghai Automotive Industry Corporation. The two parties have now exchanged legal paperwork and will give details of the deal in January.
Beale reportedly said the deal could result in MG Rover and Shanghai building "hundreds of thousands" of cars for the Chinese market, badged as Rovers or MGs. He was now 100% sure the deal would be done, he said.
The paper said that Phoenix is banking on fresh investment from the Shanghai deal to fund new models, in addition to MG Rover's new medium-sized car which is due on sale in early 2006, while the prospect of this Chinese deal led Beale to forecast that Phoenix will break even from next September.
However Peter Wells, senior research fellow at Cardiff University's centre for automotive studies, told the Daily Telegraph the joint venture's chances of success are "uncertain" because of poor distribution networks in China and Shanghai's deals with manufacturers such as Volkswagen and General Motors.