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MGR dealers secure £25m discount pot

MG Rover dealers, owed £48m in bonuses and other payments by the failed manufacturer, were this week handed a £25m fund enabling them to offer a 15% discount to clear remaining stock.

Their franchising board fought for a better deal – several dealers have told AM that cars were retailing at 30% discount prior to the MGR collapse – but chairman Richard Cort has now urged his network colleagues to accept the offer from Capital Bank Motor.

“It is up to each dealer to decide but I have not heard of anyone turning it down,” says Cort, who estimates around 10,800 cars remain unsold.

Capital, a subsidiary of Halifax Bank of Scotland, took ownership of cars leaving Longbridge before MGR collapsed in April, the month when, ironically, UK car production rose 10.6%.

Tom Woolgrove, Capital Bank Motor managing director, says: “This is a straightforward commercial measure in the interests of ourselves and the dealers. There is good demand for MG Rover cars and our new commercial arrangement is all about ensuring it is met.”

Limited production continues at Longbridge where 400 staff are still employed, and the last car is like to be built in July. More than 400 ex-employees have new jobs, says the MG Rover Task Force, and 800 are on training courses.

There is “still an outside possibility” that production of MG sports cars could resume at Longbridge, according to administrator PricewaterhouseCoopers. It continues to evaluate three bids – Chapman Automotive, a Powertrain consortium, and an undisclosed party. Two separate bids are interested in the entire MG Rover business.

On June 10, at a meeting in Birmingham, PwC is likely to offer creditors payments of 1% to 5% of outstanding bills from a £80m assets fund. They include dealers, Phoenix Venture Holdings (owed £469m), Rover pension fund (£325m) and former Rover owner BMW (£8.1m).

Cort says: “I will ask how much MGR auditor Deloitte has received over the past five years, and the size of PwC’s likely bill.”

Trade and industry secretary Alan Johnson this week announced a DTI investigation into the failure of MGR, saying: “People want to know what happened.” He has appointed two inspectors, Guy Newey, QC of Maitland Chambers, and Gervase MacGregor FCA of BDO Stoy Hayward, and asked them to prepare a report as quickly as possible, and in a form that enables it to be made public.

Johnson’s move follows a statement by the Financial Reporting Council that its initial investigations into MGR and Phoenix had raised “a number of questions”.

The FRC has examined the accounts of MGR and Phoenix over the five years to December 31, 2003, the most recent available. Several reports have suggested possible irregularities or a “black hole” in MGR’s accounts.

  • MGR: what really happened – managers speak out, page 54
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