[Truebrit]

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.

 

[Truebrit]

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.

 

[Truebrit]

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.