Think the CB deal is a dead duck. Also think that MGR are better off out of it.

 

There was a report about the deal in the FT.. seems like it is going pear shaped - even to the extent of the Chinese asking for the money back!! Has anyone who is at the track day tomorrow got a copy of the FT?

Or access to the FT website and can email me the story?

 

Here's the FT story: wow I remembered my username and password!

FRONT PAGE - COMPANIES & MARKETS: MG Rover's problems with China partner intensify
By Jonathan Guthrie in Birmingham, Richard McGregor in Shanghai,and Bettina Wassener in Frankfurt
Financial Times; Nov 12, 2002


Speculation that a partnership between MG Rover, the independent British carmaker, and China Brilliance Automotive was in difficulties intensified yesterday after the Chinese vehicle manufacturer's shares were suspended in Hong Kong pending an announcement.

MG Rover, whose survival has been linked by commentators to collaborative development of new models, moved to distance itself from its Chinese partner's problems. Executives said the joint venture would only have created "incremental opportunities".

The position represents a big shift. When the deal was announced it was hailed as one of great significance to MG Rover's future. Now the company is signalling the collapse of the agreement would have "little impact", largely because of progress in creating a replacement for the outdated 45 medium saloon.

The announcement from CBA is expected to detail a change in its controlling shareholder in the wake of a scandal involving Yang Rong, its founder and former chairman. Mr Yang, in exile in the US and struggling to clear his name, appears to have lost a dispute with the Liaoning provincial government over ownership of a controlling stake in CBA.

The 39.45 per cent parcel of shares is held by an educational foundation attached to China's central bank, but Mr Yang and Liaoning both claim ownership.

The Liaoning authorities have issued a warrant for Mr Yang's arrest for alleged "economic crimes". The tycoon, once judged China's third richest man, has claimed the authorities are persecuting him.

MG Rover had previously rebuffed questions about the solidity of its relationship with CBA, saying it was working with a separate business, Shanghai Brilliance. However, the MG Rover said yesterday that its partner was China Brilliance International Holdings, an affiliate of Shanghai Brilliance, part of the CBA group.

Mr Yang is believed still to be chairman of Shanghai Brilliance, which shares five directors with CBA. CBA has also claimed it is not related to Shanghai Brilliance, even though these five directors included CBA's key executives.

While MG Rover is confident it can replace the 45 without the help of Mr Yang, officials said China Brilliance had been expected to play a significant role in developing a small car to supersede the 25 model.

Industry commentators believe that an agreement to produce BMW vehicles under licence in China is likely to survive the CBA turmoil because of high awareness of the BMW brand.

 

The reference to the Chinese asking for their money back was in a seperate newspaper.

As to the deal itself, I suspect that the Indica replacement may well grow to accomodate a new 25. Telco / Tata seems a better bet IMHO than the Chinese.

As to getting their money back... good luck..... I think much of it is in Tom Walkinshaw's bank account now. So I guess from MG Rover's perspective, the Chinese have served their purpose

John

 

Plus when you think about it there are plenty of OLD austins/morris (or cars based on 'em) in India so MGR could revive the Austin and Morris brands in India.

 

Don't think that CB had much to contribute in terms of technology. It could contribute cheap componentry and assembly and the additional volume of the Chinese market. Interesting that their deal with BMW only extends to a license agreement. That means that CB don't have to get involved in investing in the design of the vehicles, and BMW don't have to enter the murky waters of Chinese regional politics.

 

yes CB were essentially an equity partner - sharing development costs of cars that both would build (a la Honda).

There's no reason, of course, why MGR could not still source components from China and take advantage of the cheaper costs, just as they could source components also from Poland etc. As Wojtek says elsewhere The Lambo Diablo has Polish parts and Jaguar buys Polish exhausts... so MGR can still profit of the CB deal falls through by having parts manufactured cheaply in China.

Personally I agree that CB are not such a necessary partner.... a partnership arrangement with Tata could be good, but in the sense of joint ventures, not rehashing a Tata product. In this respect I'm only thinking economies of scale, sharing costs and of course Tata's parent company Telco's sizable overdraft facilities. I'd like to see small MGR models made in eth MGR's Poland factory - that is anything 25 sized or smaller. These cars could all be joint ventures with Tata. Larger Cars and Sports cars - which command higher margins - could be made at Longbridge and be MGR exclusives.


However in a Daewoo type warning I'd advise away from any lure to sell a controlling stake in MGR to Telco. Large conglomerates have been taking a beating lately and Telco might want to buy back Air India at the moment, but they had to sell them to the government for a reason (or is my memory of the 80s hazy?)

 

This is how a journalist writing for The Independent lends their support for manufacturing in britain - I can only hope the Independent newspaper needs public support at some time in the future:

"OLD DOGS cannot be taught new tricks and MG Rover's latest attempt to cuddle up to an alliance partner looks like ending as miserably as all its previous efforts.

When the deal with the inaccurately named China Brilliance was unveiled in March, MG Rover could not find enough superlatives to describe the huge cost savings and market opportunities this long-term strategic alliance promised. China is looking anything but Brilliant now. The chairman, Yang Rong, is in exile in the US struggling to clear his name of charges of "economic crimes" , Meanwhile, shares in the sister company, China Brilliance Automotive, have been suspended in Hong Kong. In between dodging an arrest warrant issued by Liaoning province, in China, Mr Yang found time to drop into Longbridge three weeks ago and reassure MG Rover that everything was tickety-boo. Understandably, the chief executive Kevin Howe is far from reassured. In the meantime, the China Brilliance tie-up has suddenly become less strategically important than it was. Eight months ago it was "a wide ranging global alliance that spans the full-breadth of both companies' activities". Now it hardly matters at all.

MG Rover says that even if the deal collapsed altogether, it would have little impact on strategy because Longbridge already has the funding and development in place to launch a new medium-sized car. What MG Rover really means is that it still has pounds 300m left of the dowry BMW handed over to the Phoenix consortium when the Germans pulled the plug two and a half years ago. Even so, Rover is not cutting its losses as quickly as promised when it rose from the ashes. Production will be lower this year too.

Rover has gamely attempted to rebrand itself as a niche player with ever more exotic and implausible MG super models, but the fact is that it needs a partner to survive. At the moment it is low on the Government's radar of accidents waiting to happen. But watch this space"

 

Off topic but if you want to entertain yourself read the first post in this thread in a French accent, and you will find yourself doing a perfect impression of the French Police officer in Allo Allo.

:beer:

 

LOL- Good ovening Rene

 

I have to say I dont disagree with what the independant has to say.

I may not be that positive but If the china deal does colapse then while Rover will put a brave face on it I think its a big blow to them.

The fact is a company the size of Rover cannot produce new mass models on its own it needs a strategic partner.

OK if the Tata deal happens it may help negate the effects but as Rover has made no announcement on this yet, well who knows.

Plus if Tata are only interested in small cars then in the long term it leaves Rover with a problem for the 45 and 75 sectors.

OK the medium car sector is sorted for quite a few years but they are going to have to think about how they replace the 75 in the not too distant future.

Its also true that Rover are going to be some way off their 200,000 target for this year.

 

The concerns expressed may be legitimate, its the way The Independent relishes rubbing mgr's nose in it that I resent. After all, bmw were also persuaded that this was a sensible relationship to foster so it would have been impossible to predict how the situation would unfold.

It's bad luck, but mgr just have to get on and develop their alternative strategies. And at least they are still there fighting back instead of rolling over...

 

This may not be too bad for MGR, if they've drawn down development money under contract and that contract has been broken then they may have a claim to keep it. Then you have the added bonus that you find out your business partner is dodgy early in the realtionship before some real damage can occur and you don't get to sell their vehicles which I wasn't convinced about anyway. With any luck BMW will also get their fingers burnt and it will be win-win for MGR...maybe.

 

But here's the good news! (source: Daily Mirror 12 Nov 2002)

Independent sales down 9.4%!
Independent on Sunday sales down 14%!

(Over 1 year)

Editor Simon Kelnor predicted for the sack.

Quote:

"The broadsheets are obsessed with commenting on the sales performance of the tabloids, but seem rather reluctant to report on their own disasters"

Whatever the future holds for MGR, it is at least brighter than that of The Independent!

Hugh, was there an e-mail address for the journalist? I want to tell him what a c**t he is.

 

Hmm, I don't think they are rubbing MGRs nose in it, they're just stating the facts albeit rather blunty. I think they're saying MGR has been promising a great deal but as far as they're concerned not delivering.

 

I think the phrase "ever more exotic and IMPLAUSIBLE MG super models" is below the belt, especially when you consider the VW "Bugatti" Veyron and Ford GT40 etc.

He is, quite frankly, sneering. That said, many "metropolitan" journalists write in this style no matter what the subject, so it may not be personally aimed at MGR.

Still, with a bit of luck he'll be out of a job soon.

 

I just don't understand what it is that journalists get from writing in this way. German papers don't write about German car makers like this, French papers don't write about French car makers like it, so what is it about the British?

Journalism must be oh such a hard job, eh? Not like keeping a British manufacturing company afloat and thousands of people in jobs - that's a piece of cake, obviously.

 

Does anybody know how much funding MGR have received from CB?

I would think that CB's claim to try to get their money back would be a bit flimsy if the development work has already been done according to the agreement.

You would think that the British press would take a rather less gloating attitude. Perhaps they think it helps to sell papers (with the results already noted above). Perhaps we should be watching The Independent's space.

You cant blame MGR for saying that the crumbling of the agreement hardly matters. What do you expect them to say? Sounds to me like they are better off without the deal, and if they've got some money out of it, so much the better.

The way forward seems to be with Poland & Tata. I'm sure this is where their strategic planning is focused now.

 

I wouldn't say MG-R are exactly better off without the deal, because it would certainly be very handy to have income from the sales of cars built under licence for the Chinese market, for one thing. But the deal was announced way back....erm, earlier this year, before we knew anything about the potential Daewoo-FSO factory deal and the talks with Tata. In the light of these latest two developments, the Chinese deal does seem less critical now.

 

Hugh, was there an e-mail address for the journalist? I want to tell him what a c**t he is. [/B]

With respect, I think the right way to handle this would be a response from MGR itself. They should write a proper response dealing with the points one at a time, and under the name of a senior exec.

MGR cant afford to have damaging material like this published.

Also any emails we might send should refrain from abuse and simply remain factual, that way they are more likely to make the point rather than be ignored.

(BTW Australians are noted for their great diplomacy and circumlocution).

 

The reference to the Chinese asking for their money back was in a seperate newspaper.

As to the deal itself, I suspect that the Indica replacement may well grow to accomodate a new 25. Telco / Tata seems a better bet IMHO than the Chinese.

As to getting their money back... good luck..... I think much of it is in Tom Walkinshaw's bank account now. So I guess from MG Rover's perspective, the Chinese have served their purpose

John

John I agree with you! I would think that at the very least if CB are in breach of the original agreement, then they must be liable for some of the development costs on this joint project. So perhaps MG-R and Tom Walkinshaw will get to "legally" keep a healthy chunk of the money that CB paid into MG-R's coffers earlier in the year. And if that is the case..... Great!! That means indirectly CB will help MG-R finance their foray into the Polish market!(If it actually comes to fruition). Stephen

 

Phil - thanks for the good news about the Independent's circulation figures! Sadly, I read the article online and the journalist wasn't identified.

And now a general question about the money that CB gave to mgr. Although it might be difficult for CB to recover the money already spent on the joint venture, is it possible they could ask their friends at bmw to deduct the funds from the £500m interest free loan bmw made available to mgr - or has all of the dowry now been spent?

 

The bloke who wrote it in the independent was;
jeremy.warner@independent.co.uk

 

He's called JEREMY!!!!!

Well that explains it all! A childhood having ointment rubbed into his puny shoulders by Matron at Public School, followed by a cushy entry into his uncle's profession without dirtying his hands in a factory in his life.

F***ing Jeremy! This was what becomes of the kids you bully at school, guys......

SteveinOz,

I bet you don't have any Jeremys in Australia.......

 

Unfortunately, most of the papers were anti-Rover when they were busy being shafted by our 'chums' from Bavaria. Only 2 consistantly showed any support. They were The Guardian and The Express (before it was bought by Shaven Ravers). The Sun positively danced on Longbridge's grave. Shameful given that it's a working-class paper, with no doubt, a large readership on the production line. The Mirror was exactly the same... and they're supposed to be left-wing. Jeez! You can almost understand The Telegraph sneering at oily factory workers with funny accents... but NOT these guys.