Topic: Politics
The story of the collapse of Rover, five years after being given a new lease of life, illustrates many of the failings of 'New Labour'. In 2000 Rover reached the end of the road. BMW could not make money out of it and in fact was losing a fortune - an average of #39m a month for the previous six years. Think about that the next time you hear a union leader attack the German company. Alchemy Partners had a realistic plan for cutting the company down to profit, focusing on the MG brand. Then came the Phoenix offer, which promised everything to everyone. The government went with the fantasy rather than the reality. So too did the unions.
As Pete Birks says on his blog:
"Phoenix inherited #427m from BMW to fund redundancy settlements, plus #350m worth of unsold stock. It also got land and other businesses that it sold off for #1bn, If all this had been used to pay off the Longbridge workers in 2000, then the workers would have got an average of (wait for it), more than #150,000 apiece. Instead those workers got the satisfaction of working another four years and being thrown on the scrapheap, four years older, with only statutory redundancy pay. Oh, and there is STILL a hole in the Rover pension fund.
But the buyers of Phoenix managed the following; There is a #16.5m directors' pension pot. They have personal control of a (profitable) financing business which might (I am not absolutely sure of this) have been bought via a #10m loan note from, yes, Rover. What might be equally staggering, more than 30 years after Edward Heath called Robert Maxwell* "the unacceptable face of capitalism", is that none of this was illegal. Rover was kept alive solely by burning money, week in, week out. And it wasn't the directors' money. This was a brilliant financial mugging. Immoral, but quite within the law. Depending on your attitude, the directors of Phoenix were brilliant, or amoral gits."
* It was actually Tiny Rowland.
This BBC news article covers it well. Note the unions' attitude at the time: "We are fighting for jobs and Alchemy did not give us that option, so with Alchemy out of it at the moment the mood is ecstatic," said union official Carl Chinn at Longbridge."
Interestingly, the youngest person interviewed was the most clear-headed: "Sammy Singh, 18, said: "Our futures are still unclear. Alchemy had a long term strategy and whoever takes over we could be faced with the same problem in three months' time."
The whole affair has been a gigantic waste of money for taxpayers and a squandered opportunity for the workers, who could have retrained for something else when they were five years younger than they are now. It reveals that New Labour, as well as the trade unions, are breathtakingly ignorant about commerce. It is poetic justice that this has blown up in their faces at the start of a general election campaign.
_ DY
at 9:46 PM BST
