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Off the hook but under fire

MG Rover bosses' robust rejection of allegations that they have been asset stripping for their own benefit will dampen criticism from MPs but will do little to boost confidence in the company from suppliers and car buyers.

Speaking to a Commons Select Committee, MGR group chairman John Towers underlined the “personal risk” he and three other directors had taken to save MGR from previous owner BMW. He said media speculation about stewardship of the company, acquired from BMW for £10 in 2000, was simply “not true”. No assets had been moved away from the car-making operation, and payments had not been diverted to the directors, but reinvested back in the company, Towers insisted, during lengthy questioning by the committee. That might have quietened MPs for now, but it does little to change the fundamental issues facing MGR, according to Steve Young, vice-president and head of AT Kearney's Automotive practice. “It doesn't alter the fact that employees of MG Rover, suppliers and stakeholders still face a shaky future,” he says. “The company is weak and has been slow – though not entirely of its own fault – getting new products to market to fill gaps in the range. Too much of the £500m interest-free loan from BMW has been used to sustain losses rather than investing in new product. And they have been too diverted by exotic sports cars.” The implication of the negative media coverage in recent months is threefold: it affects sales, it reduces supplier confidence in the business and it loses the confidence of potential partners for new model developments. “Cosmetically, whether true or not, it looks like the management is preparing for the collapse of the company – and that is damaging when seeking potential partners,” says Young. “You have to be cleaner than clean.” Young believes the UK manufacturing industry is under great pressure and accuses the Government of doing “nothing to create an atmosphere where the volume manufacturing sector can survive”. He adds: “Within 10 years I'd be amazed if we haven't lost at least one of the five volume producers (Honda, Nissan, Peugeot, Toyota, Vauxhall).”

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