What a squalid little affair the MG Rover Inquiry has become. Three documents of substance arise today and reading them makes the skin creep.
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First is the Press Release from the Department for Business Innovation and Skills which extensively quotes the maverick Business Secretary, Lord Mandelson as he squirts yet more stains on the characters of the Phoenix Four.
Then there is the retort from the Phoenix Four which is a series of pained yelping – a reflection of the fact that they were given less than a day to see what the report about them would say. There is none of the mature and measured reflection that we would all like to see.
Finally, the 800 page document that has cost GBP20,000 a page to produce over four years; we will be taking to the beach for a long and lingering digestion in due course.
But first to the section in the report entitled: “Reasons for the Structure of the Company.” This is where the sizzle should have been if there ever was any. Indeed, it starts promisingly enough with the disclosure that MGRG (the MG Rover Group) had been sub-divided into 33 companies. So the lads were obscuring the trail and having it off with the assets were they? The odd bit of land for themselves? Antique furniture from the conference centre at Sudeley Castle? Maybe some nice cars from the Heritage museum? Not a bit of it.
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By GlobalDataOf course there was some financial jiggery pokery. But then we have known that for years because the accounts were filed every year and anyone with any interest could get a copy and have had a shout about it at the time. And they did. We knew from the 2002 accounts that the GBP10m loan note from BMW had been moved around to ensure that the benefit went through the Phoenix master company. We also knew that the land assets were moved so that they would not immediately be lost in the event of the (inevitable) failure of the manufacturing company. The report says categorically that the transfer of assets and tax losses between companies in the Rover Group was “in accordance with accounting standards”.
But these transactions were not solely from the Phoenix Four’s fertile imaginations. They were managed and approved by Deloittes and Eversheds. Lord Mandelson has a snipe at them both in his overview of the report. “I am asking the Financial Reporting Council to see whether changes to audit, or accounting standards or guidance should be considered.” Why was this not done when the annual reports of MGRG were in the public domain and being debated by the business newspapers?
Then there is the additional finger-pointing at the Phoenix Four. Peter Beale is to be investigated for “eliminating evidence” on a computer the day after the inquiry was announced by the government. He is also to be investigated for possibly telling porkies to the Trade and Industry Select Committee on March 30th 2004.
It’s a fair old stain on the character of Peter Beale but in the great scheme of things is this really the best Lord Mandelson can spend his time on? Actually no: here’s the biggy: “A court is likely to find that at least some of the Directors are unfit to be concerned in the management of a company.”
Are they bothered? The threat of director disqualification proceedings is of little significance to the Phoenix Four. The four have paid their forfeit. They will never work again. They will never comfortably drink a pint in a Birmingham pub or at the bar of the CBI conference. They will forever be the men who (together with chief executive Kevin Howe) took GBP42m in pay and pensions out of a floundering company. The five men over five years ‘earned’ GBP1.68m a year. That is chicken-feed to a Deloittes partner or a middle-ranking City trader whose professional success or failure is never public property.
John Towers, the leader of the team and a former MGRG chief executive, was hand-picked by the Government in 2000 to avoid the political discomfort of the company falling into the hands of Alchemy, a venture capital fund. Towers tried partnership with the low-labour cost companies Tata Motors of India and SAIC of China. It was last gasp stuff but it was imaginative and inventive. The Phoenix Four were not the sole architects of the failure of what started in 1968 as the deeply-flawed and unsupported British Leyland. They were the pall-bearers.
More than 6,000 people lost their jobs, and yes, if HMG had let the company go after the two highly regarded carmakers, Honda and BMW, had successively failed to sort out the mess, there might have been more left to pay redundancy to them. But at the end, the timing was good. It happened in 2005 within a strong economy and the employees either retired or found jobs elsewhere. Unemployment figures in the West Midlands barely fluttered. Much of MGRG’s market share in the UK (there was no export market of any significance) went to the UK car producers of Nissan, Toyota and Honda. Who cares that these are not British-owned companies? What matters is that the economic activity is in Britain.
There will not be much more in the way of public debate because Lord Mandelson has effectively slapped another gag on the directors who face disqualification proceedings. Throughout the slothful years that this report has been in the making, they never gave their side of the story and will probably be advised to continue to refuse press interviews.
Their pained yelping describes the Government report as “dripping with the hallmarks of this government – spin, smear and point blank refusal to take any responsibility for their own actions.” They have a point.
The UK now has a phenomenally varied motor industry making volume cars managed under Japanese reliability standards, luxury cars under German quality standards and with Malaysia, UAE, India, China and America all heavily invested to make cars that cover the rest of the spectrum. What we really need to know from HMG – what they need to know – is whether or not their interests are cherished and supported. The experience Tata’s Jaguar Land Rover had with its application for a state loan suggests not.
Will there be a programme of local and Government support for the UK motor industry that will match the German model? Or are we just to wait and see whether poor old Peter Beale dishonestly used the delete key on his computer?
Rob Golding
See also: UK: Government trying to ‘disqualify’ former MG Rover directors
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