Sorry saga of the firm left in ashes

THE end of the road for MG Rover, the last British-owned mass car producer, could not have come at a worse time for Tony Blair and the Labour government.

The last thing wanted in Whitehall was a major industrial collapse in the Midlands at the start of a General Election campaign.

But in the event, the Government found it had little choice. The muchvaunted Chinese rescue by the Shanghai Automotive Industry Corporation (SAIS) has proven to have been no more than a pipedream kept alive by MG Rover's discredited management team headed by John Towers, one of the original Phoenix 'Four', and Kevin Howe.

They were among the five senior executives of MG Rover's owners Phoenix who personally enriched themselves as car sales tumbled and the losses built. When the Government learned earlier this week that MG Rover was no longer considered viable in the long term, and that the Chinese company had withdrawn its interest, it had two choices.

It could have followed the example of previous governments, Tory and Labour, which over the last 40 years have propped up production and jobs through taxpayers' loans and subsidies - or it could pull the plug.

To the Government's great credit, it decided that bailing out a company which had temporarily halted production and was no longer financially credible would be a terrible waste of taxpayers' money.

In so doing, the Treasury, which was to provide the £100m of bridging finance from taxpayers, has taken a gamble. It is putting at risk not just the 6,100 or so remaining jobs at MG Rover, but a further 19,000 jobs among suppliers in the Midlands which are directly dependent on Rover. There will be a strong fear among Labour's high command of an electoral backlash even if the Treasury and Department of Trade seek to soften the blow with generous retraining and industrial grants.

It is hard to believe that such suppliers as engineer GKN, the bankers Barclays and HSBC and other connected businesses have not seen this coming. Despite a healthy car market in Britain last year, when consumer spending was strong, sales of MG Rover vehicles plunged from 356,000 to 106,880. Last month, just 6,500 vehicles were sold.

The collapse into administration is a tragedy for all the workers at Longbridge and their families. It also means the beginning of the end for a car franchise with a great history - dating back a century to when Lord Austin founded the Austin Motor Company.

It came together with Morris and Rover in 1952, creating the British Motor Corporation. Yet, despite a glorious past, BMC - which subsequently became British Leyland and then MG Rover - was brought to its knees first by union power and latterly by inefficiency.

Last year, MG Rover produced just 16.3 cars per year for each of the firm's employees. Further north at Britain's Japaneseowned Nissan factory in Sunderland, the 1,000 workers are churning out 320 cars per employee each year.

If the MG Rover numbers were to make any sense, they would have to be producing Ferraris - not the moral equivalent of the Korean-made Hyundai. One suspects that ministers' enthusiasm for the Rover was not enhanced when the engines of several Rover 75 vehicles assigned to Cabinet ministers blew up within several days of being delivered. This left the ministers driving around uncomfortably in patched-up, decade-old vehicles.

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With the company now in administration and with the banks topping the list of major creditors, it does not necessarily mean the end of the valuable Rover and MG marques. As was the case when Phoenix bought Rover five years ago, there is bound to be some interest in the brands - especially MG and its sports cars.

BMW, which abandoned ownership of Rover in 2005, has demonstrated that with intelligent management, design passÈ brands such as the Mini can be turned into huge successes.

Indeed, the car industry in Britain is far from dead. Aside from the mass producers such as Ford and Vauxhall, Nissan, Peugeot, BMW (with the Mini and Range Rover brands) and Honda all have demonstrated that properly organised and managed British car workers, with the right incentives and designs, can make vehicles in demand around the world.

As for the Chinese manufacturer Shanghai Automotive, it will have the last laugh. The £67m it paid MG Rover when joint production talks began gives it access to all the intellectual property of Rover and MG cars, including the prestigious Powertrain engine system.

So don't be surprised if the next MG look-a-like seen in the local car showroom has Made in China proudly stamped on the inside of the door. The unfinished business for the Government is what to do about the Phoenix Four, who never managed to fulfil the promises they made when they took over the company dubbed the 'English Patient.'

At the very least there should be a Government inquiry into the events leading to an industrial disaster.

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