MG collapse calls for administrators

The 100-year-old carmaker MG Rover Group, the last major British-owned car manufacturer, which once made the iconic Mini and the Land Rover, succumbed to its mounting debts Friday and filed for a form of bankruptcy protection.

They had hoped China’s Shanghai Automotive Industry Corp. (SAIC) would step in and invest in the company, allowing it to continue production.

But failure to secure a deal with SAIC forced the collapse of the company, putting 6,000 jobs at risk at its Longbridge plant near Britain’s second city Birmingham. Another 15,000 jobs could be affected at suppliers.

Apparently nervous over the possibility the carmaker might fail, suppliers stopped providing goods and credit earlier this week, prompting the company to halt production on Thursday.

MG Rover confirmed Friday that the talks with SAIC in China had come to an end and that the negotiating team, including Rover chairman John Towers, had left Shanghai.

Shortly afterwards, MG Rover confirmed it had appointed accountancy firm PwC to act as administrators. “We have appointed PWC to look at the state of the company and that may well indeed lead to receivers being called in,” said spokesman William Baldwin-Charles.

Prime Minister Tony Blair talked by telephone with Chinese Prime Minister Wen Jiabao on Wednesday night and government officials had offered Rover a 100 million pound (US$188 million) bridge loan to keep the company solvent to assist the deal. However, the government said that loan was always dependent on the deal going ahead.
“Once there was no prospect of a deal there was of course no possibility of a bridging loan,” Trade and Industry Secretary Patricia Hewitt said.

Hewitt instead moved quickly to reassure workers in Britain’s declining manufacturing industry, announcing a 40 million pound ($72 million) support package for companies that supplied Rover before visiting the Longbridge plant.

“This is a terrible day for the work force of MG Rover and their families and for their suppliers,” she said, adding that the government would work with unions and Rover’s future administrators to try to secure future car production at the factory.

MG Rover had called on the government Thursday to firm up the offer of the loan after it was forced to suspend the building of cars at its Longbridge plant in central England. The company said speculation about its ability to survive had affected the confidence of its spare parts suppliers, with several suspending their contracts.

Peter Beale, vice chairman of Phoenix Venture Holdings, MG Rover’s parent company, said Thursday that directors had committed to providing 10 million pounds ($18 million) of personal money as part of the deal to persuade the government to speed up its loan.

However, Hewitt said that SAIC had “made it clear that they were not confident about the future solvency of MG Rover, and therefore there was no reasonable prospect of a deal.”

Workers arriving at the 100-year-old Longbridge plant said Friday they feared for their jobs.

“We thought the Chinese deal was going ahead but it’s collapsed,” said assembly worker Donald Davies, 61, who has been at the plant for 15 years. “I think they will be telling us we won’t be returning to work.”

“They’ve told us to turn up Monday,” said 43-year-old Ashley Wilkes, who has worked at Longbridge for 18 years. “They’ve just told us we’re entitled to 280 pounds ($524) for each year’s service, up to the maximum of 12 years.

“It feels terrible.”