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Discussion Starter · #1 ·
I've just been doodling on a bit of paper about BMW's £850million loan to Phoenix and where it all went.
The conclusion I've come to is - most of it's gone on wages and salaries.
Assuming a conservative estimate of say £25,000 per employee per annum, then 6,000 workers at Longbridge must be costing the company about £150million each year.
In just four years that would cost MGR £600million pounds, so MGR's inability to scrap the 'Jobs for Life' agreement and trim the workforce levels to match sales/output, has put the skids under the whole enterprise.
I suspect that Phoenix fully expected to have the ability to cut back the staff numbers at an early stage but found they couldn't even chop out contract staff without a battle in the courts.
It certainly explains why the finance to roll out the R45 replacement simply wasn't there - they just couldn't produce enough cars to make a profit with the number of workers thay were stuck with.
Whatever happens now, the role of the Unions in fighting MGR on the Jobs for Life problem should definitely be remembered as a prime example of shooting yourself in the foot.
 

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Quite a lot of engineering staff took voluntary redundancy/early retirement, and contractors have come and gone on extremely short term contracts (eg 4 weeks).....but you don't hear about that.

Jobs for life was something that came in the mid 90s, but I would have thought that should have gone when the BMW backed out. It didn't, and the bulk of the staff at L/B are probably manufacturing staff. As output has dropped, has the manufacturing workforce??

It's hard, I know, but perhaps those jobs should have gone rather than the engineering expertise to develop the NEXT range of cars. Hopefully with SAIC, the engineering side can be built up again, and the volumes rise to allow manufacturing staff to be kept on.

There was also the China Brilliance, Prodrive and TWR fiascos which would have ripped into the BMW dowry with little to show for it afterwards..... :eek:mg:
 

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Discussion Starter · #8 ·
king arthur said:
Where did you get £850m from? It was £500m originally, and then later around another £50m plus Powertrain.
It included the large number of manufactured but unsold vehicles transfered to MGR. When the numbers of vehicles handed over turned out to be much less than BMW had claimed, (as one of the reasons they couldn't continue supporting Rover - a lie of course ) MGR demanded they hand over Powertrain to make up the difference but had to threaten legal action before BMW gave in.
 

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Looking at all the entries above, doesn't seem that wages were such a drain afterall. The first entry doesn't consider revenue at all, just the loan and wage bill. You have to calculate how much the company turned over - the number of cars sold, multiplied by the average sale price. That will have been in the billions...So by and large, the wage bill was covered.

The job-for-life agreement, which actually may have begun as far back as the late eighties, was a vital iniative to build up more trust between management and production staff. Honda, then Rover Group's 'partner' but sadly not now, like all Japanese companies, has a workforce whose instinct was that at work they should do their best, workhard etc etc. Rover Group, like many/most? companies had workers at all levels who felt the company owed them a living and there was the oft quoted 'them and us' attitude to management.

My father, never an enthusiastic union man, did his best I think but he would always talk as if job losses were coming soon.

The 'jobs-for-life' agreement brought about real changes in the confidence and attitude of employees, and surely improved build quality and the overall success of the business, in the process.

The ability of the company to sustain this was undermined of course by BMW, who destabilised the company when they took away Land Rover and Mini.

What to do about it since then I guess is a bit of a thorny question. :boxedin:
 

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Discussion Starter · #11 ·
iaan said:
Looking at all the entries above, doesn't seem that wages were such a drain afterall. The first entry doesn't consider revenue at all, just the loan and wage bill. You have to calculate how much the company turned over - the number of cars sold, multiplied by the average sale price. That will have been in the billions...So by and large, the wage bill was covered.
The wage bill certainly wasn't covered.
I didn't take revenue flow into account because everyone knows MGR has never made a profit.
When a company has a cash flow problem as MGR had from the outset, one of the primary responses is cut back on staff costs including pay levels and numbers employed.
MGR found they couldn't affect the number of employees because they had a jobs for life agreement which took four years to unwind through the courts.
If MGR could have reduced the number of workers by 1,000, there would have been an exra £25million pounds a year to invest in the new models programme.
£100million over the last four years would IMHO made all the difference.
 
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