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Year 2005 No. 52, April 20, 2005 ARCHIVE HOME JBBOOKS SUBSCRIBE

Longbridge’s Destiny Should Be Decided by the Workers

Workers' Daily Internet Edition: Article Index :

Longbridge’s Destiny Should Be Decided by the Workers

Some Ramifications of the MG Rover Closure

Corporate Accounting

Phoenix Four's Offer Won't Help the Workers

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Longbridge’s Destiny Should Be Decided by the Workers

Commentary by Birmingham Branch of RCPB(ML)

Whether it was Austin Morris, British Leyland, BMW or Phoenix who had control over the huge site at Longbridge who have come and gone, the workers from generations who have produced cars on that vast complex have remained. Today, with the destruction of the means of production threatened by capital at the expense of labour the workers continue to question why their destiny is manipulated and threatened by monopoly right.

            It is not the history of the community centred on the factory that is crumbling into oblivion by the arrangements being talked about for the future it is the edifice that is crumbling. It has been said that when Alchemy gave way to Phoenix that nothing had changed for the workers. Profits and exploitation of the workforce would remain and capital would still be up for grabs, cherry picked by others when ripe for the talking just as it had always been. Workers, who had given their lives’ work, would be discarded when thought fit by the owners of the means of production.

            Should it be the sole right of those who control production and their representatives in government who have the say in the direction of Longbridge now? Or should there be social right where the people who have always lived and worked, and whose labour has for so long produced all of the wealth have the real say?

            PricewaterhouseCoopers (PwC) the main administrators said it would now be seeking to "mothball" Longbridge and sell parts of the company.

            "We'll explore what we would describe as the break-up of the business – we will carry on with the interested parties who want to talk about pieces of the business," said joint administrator Tony Lomas.

            Analysts see the MG sports car brand as perhaps the most valuable asset left. PwC said that about 70 separate offers had been made for parts of the business but the offers were at an early stage and no significant bids had been offered.

            The outcome depends on the people. It depends on how far they see and grasp the necessity for change, the necessity to bring about the deep-going transformations demanded by history. The edifice has to be change, new structures put in place in the community centred on Longbridge and the mechanisms to do that have to be created by those who live there and have always worked there. We can say this for all phenomena of this kind, where large complexes have helped define and create a community whether it be a mine, factory complex or other great working establishment.

             Was it the workers who decided that MG Rover goes into administration with over 6,000 workers jobs at stake? Was it the workers who set the targets, decided the production and set up talks with Shanghai Automotive Industry Corp (SAIC)? Prime Minister Tony Blair who insisted in supporting management of Phoenix backed this up. He even contacted Chinese officials when talks failed on April 7 and hoped a new deal could be put together.

            Have the new controllers of Longbridge, the administrators, consulted the workers by indicating that some potential buyers had already expressed interest – thus showing the latest capitalist decision makers are already organising new plans for the community of Longbridge centred on the factory site?

              The comments of the Prime Minister came after he and Chancellor Gordon Brown attended a meeting in Birmingham to discuss the crisis at MG Rover without the workers.

            Mr Blair said: "We will do whatever we can possibly do to safeguard the livelihoods and jobs of the people here."

            The question remains, what jobs? What kind of livelihoods? You talk of £60m and retraining but are you interested in the break up of the Longbridge community centred on the Longbridge production complex and its future or not? The answer has to be obviously not. You are deciding along with monopoly right the direction of the economy of the region and how to distort its history, but that can never be.

Article Index



Some Ramifications of the MG Rover Closure

Suppliers

The workers at Longbridge know that the issue of solidarity brings out the concern for the workers spread throughout the supply industry. They know that the Longbridge community has long been a political community, which has led the workers throughout the West Midlands for a long time and has long traditions. This history will remain and the struggle for the defence of the community against its fracture and break up will be long and protracted. Already the capitalists are attempting to shift the workers far and wide so that their skills can be further exploited. This is the intention of Tony Blair who supports the monopoly right to move labour and capital wherever the monopolies demand it. This has been the trend of the free flow of capital set by the transnational corporations who have been allowed to up sticks and move capital anywhere in the world. Their global agenda, of which the EU has been part, demands these arrangements. Those established in power set the direction of the economy and it is this that should be challenged by the alternative pro-social politics which the workers need to establish increasingly in their ranks.

            The suppliers of components to Longbridge will be forced to diversify or go under. They will follow the will of the monopolies whether large, medium or small. Some of the suppliers owed a total of about £200m by MG Rover held a meeting on Friday to discuss what happens next. The Birmingham Chamber of Commerce & Industry (BCI) said about 400 suppliers in the area had been affected by MG Rover's move into administration.

            Suppliers are facing "serious and immediate cash flow problems," it said.

            The crisis at MG Rover has already started to have an impact on jobs in Wales. TRW Automotive, which operates plants in Resolven and Pontypool, said it would have to let some staff go, while production at Rover remains halted. A total of 42 workers are to be laid off temporarily at TRW'S plant in Resolven in the Neath Valley. The company has warned it may also have to terminate some short-term contracts at its base in Pontypool. Up to 25,000 people work in the motor industry in Wales and unions say they are worried more jobs could yet be at risk because of the crisis at Rover. However, there remains a worry that continued government support could fall foul of European Union competition rules which prevent firms from receiving state aid.

            Rover's difficulties have started to have a knock-on effect on its suppliers across the Midlands. Stadco, which makes panels for MG and Rover cars, is to cut 280 jobs at two of its plants. It will cut 230 jobs in Coventry and 50 in Shrewsbury, as "a direct consequence of the probable demise of MG Rover".

            The collapse of MG Rover has put 28 jobs under threat at a Peterborough firm. Triplex, which made components for the motor manufacturer, has started a 30-day consultation over redundancies. Union officials say 28 staff could be made redundant from Triplex – even though 30 posts have already been lost at the plant this month. About 120 companies in Wolverhampton could be hit by the knock-on effect of Rover going into administration. Scores of smaller firms in the automotive industry which supply parts to the threatened Longbridge operation could go out of business altogether.

            Amicus fears the 1,500 who have already been told the jobs are going will only be the first casualties in a tidal wave of redundancies among car parts suppliers staring into the MG Rover abyss. The union grimly predicts that up to 20,000 component jobs will eventually disappear with the axing of Longbridge.

            Tony Murphy, national automotive officer for Amicus, warned the full effects from a complete end of MG Rover would be "disastrous" and estimated 60-70 per cent of jobs lost in the parts industry would be in the Midlands. He said: "Already we have been advised of about 1,500 jobs going. But a lot we will not know about because of firms finishing agency people or ending short-term contracts. A lot more will be in smaller companies who will not notify us or those that are not unionised." He added: "People think we exaggerate when we talk about 20,000 jobs being lost but that is what it is going to be. There are usually three to four going for every one on the assembly line."

Dealers

            As the crisis over the future of MG Rover continues, there was bad news for a number of Rover dealerships, with administrators PricewaterhouseCoopers (PwC) announcing that three would close immediately with the loss of 86 jobs.

            The dealerships were based in Northampton, with 18 staff, Oxford, with 25 staff, and Muswell Hill, London, with 43 employees.

            There are 264 MG Rover car dealerships nationwide and the value of a Rover car is now "very difficult" to know, says Peter Coleman, who owns a MG Rover dealership in Weston-super-Mare, north Somerset.

            PwC confirmed that they did not have the money to reimburse dealers for honouring warranties on new Rover cars. As many as 150,000 customers could be affected. Dealers are owed about £25m by MG Rover, much of which relates to warranty-related work they have already carried out on customers' cars.

Pensions

            The administrators added that the pensions position at MG Rover was "really complex", saying that they had met officials from the government's recently introduced Pensions Protection Fund to discuss the situation.

Abuse of workers at Longbridge over redundancy payments

            PwC have said that workers will receive £280 for each year worked at the company, to a maximum of 12 years, meaning long-term employees face a capped package of just above £3,360.

            Phoenix' directors said they did not see the need for the probe into how the firm had used £450m left to it when it took over from BMW in 2000. Its chairman, John Towers, dismissed talk of a £400m financial black hole in the accounts as "ridiculous" and said he was the victim of a "character assassination". He said other company bosses received more than his £200,000 annual salary and £105,000 pension.

Article Index



Corporate Accounting

Extract from Independent News article, 19 April 2005

MG Rover's biggest liability is a £427m interest-free loan which the Phoenix directors received from BMW when they bought Longbridge for a token £10 in 2000. In the event of an insolvency, BMW is entitled to demand the loan back, which would wipe out trade creditors who between them are owed about £250m.

            Technically, however, the BMW loan was made to a master company called Techtronic 2000, set up specially by John Towers, the chairman of PVH, and his three fellow directors. Techtronic 2000 then lent the money to MG Rover and charged interest.

            Because Techtronic 2000 is not in administration, the issue of whether BMW can call in the loan does not arise. A spokesman for PVH said: "Since Techtronic 2000 is solvent and has no costs or expenses, there is no issue."

            A BMW spokeswoman also said questions over whether BMW could demand repayment was a non-issue because it was not made direct to MG Rover. "The loan is still in place and will not appear in the list of creditors being drawn up by the administrators," she added.

Article Index



Phoenix Four's Offer Won't Help the Workers

Ian Griffiths, April 12, 2005, Guardian

The "Phoenix four" Midlands businessmen who bought MG Rover for £10 have conceded that the private empire they built for themselves is better used for the wider welfare of the car and engines companies and their staff.

            Phoenix Venture Holdings, the private company that the four control, is the product of four years of corporate restructuring. But now it is being offered to help the very business that spawned this controversial umbrella.

            In a letter to the administrators of MG Rover Group and Powertrain, its engines and transmissions sister, John Towers, PVH's chairman, explains that neither he nor his co-directors wish to benefit from the administration.

            He is therefore keen to make available PVH's assets to help fund the administration with a view to selling the businesses as a going concern.

            It is a fitting gesture. The Phoenix four and chief executive Kevin Howe have collectively extracted £40m from the business over the past five years.

            The letter is silent on how much of this cash, if any, might be offered back to the administrators.

            It is also somewhat vague on the precise amount of the assets on offer. Of the £49m mentioned in the letter, some £35m already has claims from creditors against it.

            Neither does the letter offer any insight into whether the corporate structure that has governed MG Rover and Powertrain yielded the best results.

            Published accounts have always given the impression that PVH is a much more prosperous entity than its ailing car subsidiary.

            In the year to December 2003, the last for which accounts have been published, PVH reported a loss for the year of £64.1m. In the same period, the loss for the year at MG Rover Group was £92.6m. A crude subtraction suggests, therefore, that PVH's other companies made a profit for the year of £28.5m.

            Those same 2003 accounts also show how the same transaction was treated differently in the hands of PVH and MG Rover Group.

            The PVH note on post-balance sheet events reveals that on August 27 2004, the parts business was sold to Caterpillar Logistics for consideration in excess of £100m.

            But the MG Rover Group note on post-balance sheet events tells a rather different story. The consideration reported here is in excess of just £35m.

            Company executives remain too busy working with the administrators to offer an explanation.

            For the same reason, they could not explain other differences between the PVH and MG Rover accounts. For instance, MG Rover had £166.6m of finished goods and goods for resale at the end of December. But PVH boasts £284.6m in the same category.

            The letter from Mr Towers to the administrators makes no mention of any finished goods languishing under the PVH umbrella.

            Nor does it mention the Italian sports car company PVH spent £7m on in 2001. The two leasing companies PVH has acquired do not warrant a mention in the despatch.

            But the Phoenix four's generosity in respect of PVH's assets does not extend to their investment in MGR Capital. That business was acquired in 2001, using a curious joint venture between what is called the Phoenix Partnership and a subsidiary of banking group HBOS.

            MGR Capital in effect runs the car loans book relating to Rover vehicles. This had previously been run by Rover Financial Services and was retained by BMW after the original sale of the car company in May 2000.

            The Phoenix four all own preferred shares in MGR Capital. John Edwards and Peter Beale are directors.

            It is a profitable business that is gradually being run down as car loans are paid off. Last year it was estimated the four directors stood to reap £6m from the business when it is wound up, and this figure is likely to have grown.

            Although the acquisition was heralded as an important move for the car company, none of the benefit migrates automatically to MG Rover.

            In parallel with that acquisition, PVH, through new subsidiary RV Capco, negotiated a deal with MG Rover whereby it would take on the job of marketing the used cars that came from MGR Capital as loans and leases were repaid or expired.

            That company bought £63m worth of used cars from MGR Capital in 2002 and a further £53m worth in 2003.

            In the past the company has argued that MGR Capital is not part of PVH. But a press release issued by MG Rover in 2001 said: "MG Rover has reconnected with a historic base of 58,000 customers, through their retail finance contracts, and taken steps to maximise the future residual values of Rover, MG and Mini vehicles leased under BMW ownership. The acquisition of Rover Financial Services from BMW has been made through MGR Capital, a newly formed joint venture between HBOS and the Phoenix Partnership. It has bought the customer contract portfolio for a total consideration of £340m. MGR Capital will manage the financing arrangements relating to the portfolio and, with MG Rover Group, the eventual disposal of vehicles at the end of their finance leases. This represents a further consolidation of MG Rover's activities."

            The transaction was described as a significant achievement in PVH's 2001 accounts. But its significance has not yet pushed it in the direction of the administrators.

            If the administrators cannot find a way of taking advantage of the Phoenix four's generosity then Mr Towers says they will place their shareholding in trust for the benefit of the Longbridge workforce.

            This is the ultimate irony. The Longbridge workforce is already a major shareholder in PVH. Unfortunately, the shares workers were granted gave them no votes and scant benefits. The Phoenix four are the only owners of voting shares - and it is their shares that offer the greatest prospect of some payout should PVH ever be wound up.

            Whether winding up is on the agenda remains to be seen. But by offering its assets to the administrators, PVH appears to accept that it is now appropriate for assets that had been carefully segregated from MG Rover to be returned to their roots.

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