MG Rover report: Response from Phoenix Four
We have been accused unfairly of having a complex company structure. The criticisms of the structure of the company ignore business realities, and ignore similar structures in other car companies.
Protecting profitable areas of the company simply makes good business sense and is commonplace, and was done on the advice of the company’s professional advisors.
The group already consisted of 20 companies when it was taken over from BMW. Other companies were created to enable JVs and acquisitions, to reflect changes in shareholder structure and to protect intellectual property. The structure of PVH was simple relative to other car companies. At the time BMW had 250 companies worldwide and 30 in the UK, DaimlerChrysler had 500 companies worldwide and PSA had 300. The inspectors deliberately ignored these comparisons because they did not fit their pre-decided narrative. They also ignored the fact that our structure and the transparency of our reporting meant that people knew more about the detailed activities of the company than ever before in its history. And to suggest that the structure made information about the group more difficult to discern is to ignore completely that all information such as that on remuneration was readily available in the notes to the accounts of the parent company every year.
Profits made by other parts of the group were poured into the manufacturing activities to help their survival, for instance £23 million of profit resulting from the MGR Capital transaction was ploughed into MG Rover to help its operating costs. This was ignored by the inspectors, as was the fact that Xpart sale proceeds were sought and provided to fund MG Rover.
It would be absurd to suggest that we did not make mistakes. For example, our efforts to seek a joint venture partner in China got off to a bad start, subsequently realising we had failed to comprehend fully the complexities of doing business in China. We succeeded in remedying the situation but it cost us valuable time. We learned from it. We also failed to engage properly with the media in the early days. Whilst we were reactive to negative PR we failed to understand the importance of positive PR to inform others of what we were trying to achieve with our business strategy. Hindsight is a wonderful thing but we learned from our mistakes and focused our concern at all times on the survival and future prospects for MG Rover – a company we were proud of, with a workforce for which we had the utmost respect.
Conclusion
The directors submitted 325 pages of defence documents covering every aspect and every criticism in the report. These have been almost entirely ignored. The result of that omission is a report which is seriously flawed, prejudiced, incomplete, slanted towards Government and which – most damning of all – completely fails to explain why MG Rover was allowed to collapse.
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Part I + Part II
