MG Rover closes its doors

5,000 redundant as government sets up inquiry

By PH Staff / Monday, 18 April 2005 / Loading comments

MG TF -- going cheap?

MG Rover is no more. As you will know by now, the Longbridge car company has shut its doors, making 5,000 workers redundant, with more to come.

The government is to set up an inquiry to find out what went wrong but the answer is likely to boil down to a basic issue: MG Rover, two once-proud British marques, wasn't making cars that enough people wanted to buy. And the much-touted rescue deal from the Chinese Shanghai Automotive Industry Corporation (SAIC) simply didn't happen.

Company administrators PriceWaterhouseCoopers, reckoned that the company was losing £20m to £25m a month and had liabilities of some £800m when it collapsed on Friday, after SAIC withdrew.

Today, the boss of Rover's parent company Phoenix Holdings, John Towers, denied irregularities, and sad he'd been the victim of character assassination. He said that accountants had been over the books and found nothing. This followed news that trade secretary Patricia Hewitt is ordering the City of London's top accounting regulator, Sir Bryan Nicholson, to set up and manage the inquiry.

At stake is an alleged £400m hole in the company's balance sheets, with come commentators suggesting that the money was used to pay the company directors large salaries and pensions.

There is a possibility that the immediate redundancy of the rest of the workforce may be avoided as the government has pledged £6.5m to pay salaries for a week. However, PH wishes those whose livelihoods depended on MG Rover the very best of luck.

From a buying perspective, the cars themselves are likely to fall in value but parts are available and will remain so, as MG Rover sold its parts business to Caterpillar some time ago.