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April 12, 2005

UK: Rover production stopped by suppliers

The widely expected collapse of Rover Group last week was triggered by supplier concerns about the group’s prospects.

The widely expected collapse of Rover Group last week was triggered by supplier concerns about the group’s prospects.

MG Rover idled assembly lines at the Group’s Longbridge plant  after a lack of components made continued production impossible. Rover’s management called in administrators from PricewaterhouseCoopers after production stopped on Thursday 7 April 2005.

The news follows increasingly negative feedback from the proposed joint venture with Chinese OEM Shanghai Automotive Industry Corporation, which now appears to have fallen through.

An MG Rover director said suppliers had suspended credit terms with the sole surviving British-owned volume car maker, and would not deliver more components until their bills were paid.

One Longbridge worker, speaking to British newspaper, The Independent, said “There has been a shortage of parts for two months. They haven’t been paying their bills.”

Low levels of exposure

UK-based Wagon, which supplies Rover with door frames and structural roof parts, announced in a company statement Thursday 7 April that it is owed nearly £1 million (€1.3 million) by Rover. The statement said: “in view of MG Rover’s current inability to meet its payment obligations, [Wagon] has decided to suspend supplies to MG Rover with immediate effect.”

Wagon’s statement also said that the supplier generated £14 million in annual sales to Rover or around 3% of its total sales.

Another UK supplier, TrafficMaster, which supplied Rover with navigation systems, is owed £554,000.

Local supplier organisation, Surface Engineering Association, represents more than 250 Rover supplier companies. CEO David Elliott told the BBC that few of his members relied on Rover for more than 15% of their overall sales.

Johannes Winterhagen, spokesman for Siemens VDO said that MG Rover accounted for less than 1% of its overall sales. “We supply from several European sites,” he said, “and Rover business accounts for a small amount of turnover” at each one.

Most supplier companies contacted were unwilling to discuss the matter. TRW was “monitoring the situation”, according to a spokeswoman. On Saturday, BBC reports said that TRW planned to lay off 42 staff from its Resolven, UK plant. The plant makes steering systems and components for Rover.

SupplierBusiness.com

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