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There are two new Guardian articles, they seem to like this subject...

Blair tells Rover bosses: put your own money on the line: Government orders directors to risk millions in bridging loan as price of help on Chinese deal

April 1, 2005 3:02pm
Europe Intelligence Wire

Tony Blair has told the directors of MG Rover to put millions of pounds of their own money into a bridging loan for the troubled car company as the price of government help to secure its joint venture with a Chinese company, it emerged last night.

The prime minister, the chancellor, Gordon Brown, and the trade secretary, Patricia Hewitt, have insisted that the so-called Phoenix Four make a significant personal contribution to a pounds 100m-plus line of credit to keep the company going while Whitehall-brokered negotiations continue with the Shanghai Automotive Industry Corporation.

Ms Hewitt yesterday dispatched a team of senior officials from the DTI to Shanghai for a weekend of meetings to speed up progress in the joint venture talks.

Sources in Whitehall said ministers had lost patience with the "snail's pace" of the talks. Mr Blair, Mr Brown and Ms Hewitt blame Rover for the impasse and believe 6,000 jobs at Rover and thousands more in the West Midlands have been put at risk by the British carmaker's failure until recently to reveal the full scale of its financial liabilities.

The government has demanded that Rover's directors, who have taken pounds 40m out of the loss-making company, should share the financial risk involved in the bridging loan. Ministers are concerned that the new cash could never be repaid if the collapse of the deal forced Rover into administration.

They have concluded that it would be ridiculous for the government to let Rover keel over at such a late stage in the talks, but have made it clear that the taxpayers' money on offer will have to be paid back if the joint venture goes ahead.

Ministers are already seeking possible buyers should the Chinese walk away, but admit that the prospect of finding a new suitor is remote.

Mr Blair and his senior colleagues believe the impact for the local community would be "devastating" if the Chinese abandoned the deal, and there will be significant job losses even if the joint venture goes ahead. A contingency plan involving the government and Birmingham city council is already being prepared.

"Throughout this process the government has done all it can to help support the joint venture and SAIC," one Whitehall source said last night. "This is, however, a crucial deal between two companies and even with the offer of a bridging loan its success is not guaranteed. We can, however, guarantee that should this joint venture fail the government will provide immediate support and financial assistance to the workers, their families and the communities affected."

Agreement is understood to have been reached on the terms of the deal which would see SAIC take 75% of joint ventures in both Britain and China. Phoenix Venture Holdings, Rover's parent company, would own the remaining 25%.

The central unresolved issue is satisfying the Chinese that Phoenix has the financial strength to fund its share of liabilities both now and in the future. Central to these concerns are pension fund liabili ties and the long-term costs of reducing the 6,100-strong Longbridge workforce by between 2,000 and 2,500.

The government's role is seen as that of a "big brother" to Phoenix, giving SAIC a degree of reassurance about the level of risk it is taking on. "The government is constrained in what it can do but we are talking about 6,000-plus jobs directly and double that number indirectly," one source said last night.

The deal is crucial to Rover's future. The firm is losing money and without invest ment is unable to develop new models. Last year production at the Longbridge plant fell to around 106,000 cars.

SAIC, which already has joint ventures in China with General Motors and Volkswagen, needs a deal to give it ownership of the intellectual property rights that would come through a tie-up with MG Rover. Without that ownership it will not be able to develop and exploit the technology which would allow it to build cars suitable for export.

Yesterday Rover and SAIC declined to comment.

Rover's factory at Longbridge, Birmingham, which is braced for 2,500 job cuts even if the Chinese partnership succeeds Photograph: Andrew Fox

Copyright © 2005 The Guardian.
Phoenix Four make a big return on pounds 10 business

April 1, 2005 3:02pm
Europe Intelligence Wire

The four men credited with saving MG Rover and the chief executive they brought in have made pounds 40m out of the business they bought for pounds 10 in 2000.

The Phoenix Four and chief executive Kevin Howe have drawn salaries of more than pounds 11m and benefited from pounds 17m of payments into private trust funds.

Former Rover executive John Towers along with Midlands car industry executives John Edwards, Nick Stephenson and Peter Beale led the Phoenix consortium which bought MG Rover in May 2000. The Phoenix Four went on to create a private company Phoenix Venture Holdings, which they control and which owns MG Rover.

The Phoenix Four have collected almost pounds 12m in interest and capital payments on loan notes given to them as part of the corporate restructuring which followed the purchase of the car company.

A Guardian investigation last year suggested that Phoenix Venture Holdings controls businesses and assets, excluding MG Rover, with a value of around pounds 70m.

Through a complex financial restructuring, the core MG Rover car business, which is still making huge losses, has been isolated from a number of profitable associate businesses also under the Phoenix umbrella.

The Phoenix Four are also benefiting from an investment in MGR Capital, a joint venture with HBOS, which was set up to manage car leases retained by BMW after the sale of MG Rover.

Copyright © 2005 The Guardian.
 

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There's also this:


Guardian Home Pages
Blair steps in to save Rover


Larry Elliott Economics editor
108 words
2 April 2005

English
© Copyright 2005. The Guardian. All rights reserved.
The government lost patience with the directors of MG Rover last night and sought to prevent thousands of jobs in the West Midlands being lost in the run-up to the election by intervening directly in joint venture talks with the Chinese.

Officials from the Depart ment of Trade and Industry flew to China for weekend talks with the Shanghai Automotive Industry Corporation aimed at securing a deal.

A plan was agreed by Tony Blair, Gordon Brown and Patricia Hewitt, the trade and industry secretary, to keep MG Rover a going concern.

Business, page 22

Such detail - "A plan was agreed by Tony Blair, Gordon Brown and Patricia Hewitt, the trade and industry secretary, to keep MG Rover a going concern." What does that mean?
 

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Some proper details...

News
Rover gets £100m from state to avoid pre-election collapse


Michael Harrison Business Editor and Clayton Hirst
602 words
2 April 2005

English
(c) 2005 Independent Newspapers (UK) Limited . All rights reserved. This material may not be published, distributed or exploited in any way.
THE GOVERNMENT has offered MG Rover an emergency loan of more than £100m to prevent the car maker collapsing before the election and causing thousands of job losses in marginal West Midlands constituencies.

The loan is conditional on the four businessmen who own MG Rover putting up several million pounds of their own money to keep the ailing car maker alive. The four have made an estimated £40m from the loss-making company since they bought it from BMW five years ago for a symbolic £10.

MG Rover has been attempting to secure a rescue deal with the Chinese car maker Shanghai Automotive Industry Corporation for the past six months but the talks appear to have stalled.

With the backing of the Prime Minister and the Chancellor, the Trade and Industry Secretary Patricia Hewitt yesterday dispatched a team of senior officials to Shanghai in an attempt to break the deadlock and clinch a deal.

Negotiations with the Chinese are due to take place over this weekend. Government sources warned last night that there was now a possibility of SAIC pulling out of the rescue, adding that the talks in Shanghai could prove "crucial".

Officials refused to comment but there are fears that MG Rover will run out of money in the next four weeks unless a deal with SAIC is done or emergency funds are pumped in by the Government. One government source said the closure of MG Rover would deal a "devastating blow" to the local economy.

The firm"s Longbridge plant in Birmingham employs around 6,000 workers but three times that number of jobs are dependent on it in the wider West Midlands economy. The surrounding area contains a number of key Labour marginals.

Officials stressed that the £100m would be a bridging loan, which would last for "a few months" and would need to be repaid by MG Rover and the Chinese if they succeed in reaching agreement. The money is in addition to the £40m deferral of VAT payments which Customs and Excise has granted MG Rover to ease its cash flow crisis.

SAIC has already injected £67m into MG Rover and is proposing to invest a further £133m. In return it would take a controlling 75 per cent stake in the joint venture between the two companies. If the talks cannot be revived, then ministers are ready to help MG Rover seek a new partner, although officials admitted that the prospects of that succeeding were "bleak".

In the event that the company does collapse, contingency plans are being put in place to limit the impact on the local economy. Schemes offering retraining to workers and help to set up new businesses are among the package of measures being drawn up with local enterprise agencies.

Even if a deal can be struck with SAIC, there will still be at least 2,000 job losses at MG Rover, with the production of engines switching from Longbridge to Shanghai.

Direct government aid for ailing private companies is extremely rare. The previous time a company was helped in this way was when the Government provided the nuclear power company British Energy with a £250m emergency loan in 2002 to avert insolvency. The loan was justified on the grounds that the Government had a duty to safeguard the company"s nuclear reactors and protect security of supply. The aid was approved by Brussels and Whitehall sources said they were confident the loan to MG Rover would also comply with EU state aid rules.
 

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other_manufacturer
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There's a few of these stories about today, all saying essentially saying the same thing - MGR's got a cash flow crisis, either through the Chinese getting cold feet over MGR's liabilities or MGR not disclosing them until last week, or a combination of both. I was worried that MacKintosh's article yesterday wasn't pure speculation and these seem to confirm it. I still think its last minute Chinese brinksmanship but its getting to the stage where I don't care what the deal is, so long as someone saves MGR.
 

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Okay I can't be bothered to read every article published (and posted here) about the supposed cash crisis, and the need for the government to dispatch their people to China to salvage the deal, so maybe I missed it. But can someone direct me to 'one quote' by an actual named source, rather than the mysterious "unamed sources" the press love to quote. This all sounds like more hysterical nonsense on the part of the UK press. I am not buying it! I'll wait until MG-R come out and issue a statement one way or the other on this issue. That is the only source I am choosing to believe.
 

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TheGuardian said:
Sources in Whitehall said ministers had lost patience with the "snail's pace" of the talks.
god, they're worse than some of the posters on this site!

How dare MGR not get this all done before the election! How thoughtless!

I thought the government served the society, but clearly it's the other way round.

Seriously, though, this is another Whitehall Sauce (possibly with added sour grapes and bitter lemon), so how reliable is that?

Personally, I prefer Chef Sauce or even HP Sauce to the sauces used by The Guardian. Maybe this is another job for ... Jamie Oliver?!
 

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TheGuardian said:
Sources in Whitehall said ministers had lost patience with the "snail's pace" of the talks.
god, they're worse than some of the posters on this site!:cus:

How dare MGR not get this all done before the election! How thoughtless!

I thought the government served the society, but clearly it's the other way round.:devil2:

Seriously, though, this is another Whitehall Sauce (possibly with added sour grapes and bitter lemon), so how reliable is that?:sick2:

Personally, I prefer Chef Sauce or even HP Sauce to the sauces used by The Guardian. Maybe this is another job for ... Jamie Oliver?! :idea:
 

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Hmmmmmmmmm. I'm starting to smell a rat. A big one, too.


SAIC have had a lot of K series equipment shipped east.
They have already signed for the MG & Rover badges.

In return, they have already made a tranche of payments to MGR, some of which has gone to prop the pension fund up.

You don't think, knowing MGR could never buy these back, they know they've bagged a bargain and are going to cut n' run??
 

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This is a desperate last ditch attempt to save something from this deal.

That is, a desperate last ditch attempt to save face on the part of the media and the Government, because if you cast your minds back a couple of days you will remember that negotiations have finished and legal contracts are now being drawn up, according to another story. Does that sound like the Chinese are walking away?

On the cash front, yes some journalists predicted that MG-R could run out of money by April - that was before they knew about the £67m already recieved from the Chinese and the other £133m being paid, for the K-series tooling and access to the Rover brand.

Stop panicking.
 

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Its all very well the Government leaking these stories now, but they are only doing it to win seats. They know the deal is going through and they want it to look like Dear Tony organised it. He's doing the same thing he has always done- squeezing himself into the limelight.

But some of the language here is very damaging to MG-R-
'Whitehall losing patience',

'Whitehall-brokered negotiations continue',

'Ministers are already seeking possible buyers should the Chinese walk away, but admit that the prospect of finding a new suitor is remote'

This makes it look like MG-R have done nothing and its all down to the Government.:wtf: And the article about P4 cashing in- its just another rehash.

Notice that SAIC and MG-R refuse to comment- either some of this article is true, or its all rubbish and speculation and they want to avoid a row. Even if this is true, why on earth are they leaking this stuff? It will KILL the confidence in Rover rather than strengthen it!

Time will tell, but Rover sales will take another hammering this month no doubt...
 

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Who the hell does Blair think he is? :mad:
This is typical new labour spin which is aimed at keeping them in power so they can make the country worse.
I'm sorry but if any one believes anything in these reports they ought to think again. How dare he think he can gain political capital out of this? This is a pretty low trick by a bunch of pond dwellers!!!!

I'm waiting probably in vain for some common sense to break out both in the British Press and the Government and I think it will be a vain wait!
 
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I'm sick to the ****ing back teeth of the UK media, the UK public for not supporting our own industries and the New Labour government for sticking their noses into this deal. If the deal collaspes then all of the above will be responsible for the demise of MG Rover.

I've sent this to the BBC:

MG Rover - The media (BBC included) will not be happy until they get their wish of destroying this mighty fine company and putting about 50000 people on the dole. Your organisation and the likes of the Guardian disgust me. I hope that some of you suffer as a consequence if this company goes under.
 

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JCBZT160+ said:
Who the hell does Blair think he is? :mad:
This is typical new labour spin which is aimed at keeping them in power so they can make the country worse.
I'm sorry but if any one believes anything in these reports they ought to think again. How dare he think he can gain political capital out of this? This is a pretty low trick by a bunch of pond dwellers!!!!

I'm waiting probably in vain for some common sense to break out both in the British Press and the Government and I think it will be a vain wait!


Unfortunately I think the time has come for MG-R to respond. These reports will only serve to decimate MG-R's sales again, as they undermine the public's confidence in the long term future of the company. Normally I am one to say ignore the press, but I feel MG-R need to respond soon as the damage the media is causing is getting worse by the day. The British media thrive on this stuff.
 

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The last time Towers spoke to the media about the JV the Chinese did take offence. I would love to see him come out all guns blazing for them, but they might think it unwise at this stage with the deal (apparently) concluded but the contract not yet signed.
 

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e668ecp said:
Yes I think Towers needs to get on the TV over this weekend and crucify the press


If this is all essentially scare mongering and SAIC and MG-R are just hashing out the finer points(Like any huge business arrangement) then JT and Co. need to issue a statement saying "The negotiations are continuing as planned, and we expect a successful conclusion shortly. The reports in the press are without merit, and will only serve to undermine the public's faith in MG-R and it's products. We are asking for the media and the general public to be patient prior to an official announcement" or something similar.
 

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Getting on the phone to someone I 'know' this morning I got this.

This story actually has a credence of truth in it, the BBC story being the far more accurate one. Basically, to sign this kind of joint venture the books have to be opened up and this can put a burden on cash flow as the tallying up is done. This is known as 'due diligence' and anyone that knows contract law will know this is the very last stage prior to signing. The Government are merely throwing their hat in the ring to assist this process by acting as a backer to assist this final stage. Basically, most firms will have an independent auditor or agent to assure that this due diligence is correct. All the Government are doing is assuring SAIC and the Chinese Government that MGR is acting in good faith, what better way than to offer financial assistance. They are also being responsible with a Plan B for anything unforeseen, remember, there is an election in the offing.

Also a number of MGR's suppliers have been put on notice of termination as the Chinese component manufacturers sign up to the deal. I am told this in itself is very complex as Chinese contract law is a total nightmare. This would definitely explain some of the 'supply problems'.

However, this does not mean that there is a problem at MG Rover, most firms usually secure a bridging facility to cover this period of due diligence and it is also common for partners to deposit funds into an escrow-like account to 'bond' the deal. MG Rover's problem is that securing facilities like this is tricky, mainly thanks to the sentiment generated by the media. Hence the Government seeking to aid MGR but EU rules are very strict on this matter it seems for anyone else except the French and Germans.

As for the Guardian story. The take on this that I got was very simple... advertising. MGR talked with its advertising contracts and pulled them from the Guardian also they have been "unavailable for comment" to the newspaper since the 'pension scandal'. Ever since the Guardian have been 'upset' to say the least. I really wouldn't worry about what they are saying, whilst the vein of the story is the same as the BBC's, the rest is the usual spin of Guardian fiction and lies.

I would hope once the deal is done, some well chosen John Towers invective at the likes of the Guardian and the Times would certainly be long overdue. No doubt coupled with the full disclosure of the deal which no-one other than P4 can comment on, most of the press attention to it has been pure speculation.

Incidentally, P4 have had Tony Woodley in on this from day one, read what he says in the BBC article because I am told he is speaking from a position of fact.
 

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Rovertron said:
Getting on the phone to someone I 'know' this morning I got this.

This story actually has a credence of truth in it, the BBC story being the far more accurate one. Basically, to sign this kind of joint venture the books have to be opened up and this can put a burden on cash flow as the tallying up is done. This is known as 'due diligence' and anyone that knows contract law will know this is the very last stage prior to signing. The Government are merely throwing their hat in the ring to assist this process by acting as a backer to assist this final stage. Basically, most firms will have an independent auditor or agent to assure that this due diligence is correct. All the Government are doing is assuring SAIC and the Chinese Government that MGR is acting in good faith, what better way than to offer financial assistance. They are also being responsible with a Plan B for anything unforeseen, remember, there is an election in the offing.

Also a number of MGR's suppliers have been put on notice of termination as the Chinese component manufacturers sign up to the deal. I am told this in itself is very complex as Chinese contract law is a total nightmare. This would definitely explain some of the 'supply problems'.

However, this does not mean that there is a problem at MG Rover, most firms usually secure a bridging facility to cover this period of due diligence and it is also common for partners to deposit funds into an escrow-like account to 'bond' the deal. MG Rover's problem is that securing facilities like this is tricky, mainly thanks to the sentiment generated by the media. Hence the Government seeking to aid MGR but EU rules are very strict on this matter it seems for anyone else except the French and Germans.

As for the Guardian story. The take on this that I got was very simple... advertising. MGR talked with its advertising contracts and pulled them from the Guardian also they have been "unavailable for comment" to the newspaper since the 'pension scandal'. Ever since the Guardian have been 'upset' to say the least. I really wouldn't worry about what they are saying, whilst the vein of the story is the same as the BBC's, the rest is the usual spin of Guardian fiction and lies.

I would hope once the deal is done, some well chosen John Towers invective at the likes of the Guardian and the Times would certainly be long overdue. No doubt coupled with the full disclosure of the deal which no-one other than P4 can comment on, most of the press attention to it has been pure speculation.

Incidentally, P4 have had Tony Woodley in on this from day one, read what he says in the BBC article because I am told he is speaking from a position of fact.


Very good post! You are the voice of reason. Hopefully what you are saying is essentially correct and the press are merely assuming that the Government sending people to China means trouble, rather than the deal drawing to a successful close..
 
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