Wednesday, March 08, 2006

All over for Rover

According to the Financial Times - which is offering free access to its website until March 11 - around one third of MG Rover workers are still unemployed, almost a year after the last British-owned volume car manufacturer folded. The treatment these men and women were forced to endure was, and remains, scandalous.

I appeared on a BBC Radio Scotland phone-in show to discuss the issue at the time, and my remarks formed the basis of this article, which subsequently appeared in Scottish Socialist Voice, April 28 2005 edition. I still stand by the comments now.

Hear the one about the four men who bought a major car manufacturer for a tenner? Sadly, this is not the opening line of a joke.

When John Towers, Peter Beale, John Edwards and Nick Stephenson acquired Rover in 2000, they even got a £427 million interest-free loan as part of the package. It's hard to imagine managerial incompetence on the scale necessary to fluff a business proposition like that.

But this quartet of entrepreneurial geniuses somehow managed. Now the company has collapsed. But unlike many of their former employees, the so-called Phoenix Four won't be finding themselves on the dole.

Collectively, they have pocketed something like £40 million over the last five years. Most of the 6,000-strong workforce, on the other hand, are eligible for just £280 per year of service, capped at a maximum £3360.

Many workers had been promised jobs for life. Tony Blair describes all this as 'a terrible shame'. The reality is, this is a terrible scandal. Even business-friendly New Labour recognises that, and has ordered the Financial Reporting and Revue Panel to mount an inquiry.

There is already speculation that findings may uncover wrongdoing. Trade secretary Patricia Hewitt notes cautiously: 'At this point I have no evidence of illegality or misconduct ... What I do know is there are a hell of a lot of questions to answer.'

Some of the Phoenix Four's book-keeping techniques were interesting, to say the least. Their master company reportedly gained net assets each year, even as the group was making an overall loss.

The master company also lent some of the huge interest free loan to other group companies, charging the borrowers interest of over £10 million a year. Meanwhile, Rover's finance arm was separated from its manufacturing operations.

Towers, Beale, Edwards and Stephenson paid themselves £15.1m as directors of the new company, MGR Capital, and set up a trust fund for themselves on the basis of an unsecured loan.

None of this need have happened. Five years ago, a potentially viable company could have been taken into some form of public or common ownership for no cost whatsoever.

It would have needed financial support, of course. But probably no more than what New Labour was willing to give Rover's private sector owners of the time anyway. In 1999, then trade secretary Steven Byers offered BMW an aid package worth £153 million.

If that kind of cash was on the table for a private business, why couldn't similar sums have been made available for a workers' co-op? As with all companies, nobody is better placed to come up with a business plan than the women and men that actually do the work.

Even if an experiment with workers' control had failed, the outcome could hardly have been worse than what happened under the misrule of Towers and his chums. After five years of intensive asset stripping, Rover is in far worse shape now than it was in 2000. But even today, possibilities along these lines must at least be worth exploring.

Sadly, such is the state of most of the labour movement and the political left that unions lack the self-confidence and assertiveness even to raise the idea. Instead, the dominance of free market ideology will leave thousands of skilled workers standing idle. At least Scotland has a serious political party capable of making the alternative case.

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