Collapse left region reeling

The MG Rover collapse was a massive blow to the reputation of the West Midlands. Simon Penfold recalls its rise and fall.

The collapse of MG Rover had been long expected, but still came as a shattering blow to the confidence of a region still in love with its image as the "workshop of the world".

The loss of more than 6,000 jobs and a debt of £1.6 billion left the region reeling, in an area that had already seen its manufacturing base steadily eroded by fierce overseas competition over recent decades.

Many predicted the demise of MG Rover would sound the death knell for traditional British industry, unable to cope in a world of hi-tech multinational corporations.

Manufacturing has survived, but the doom-laden predictions following the demise of MG Rover underline the grip this historic car factory had on the public imagination.

Rarely out of the news, throughout the tortuous history of mergers and Government rescues in its latter years, Rover always seemed to be on the verge of crisis.

It was all so different to its origins in November 1905, when Berkshire-born engineer Herbert Austin was driving around Birmingham looking for a site to build cars.

Derelict

He decided to buy a small, derelict printworks on the outskirts of the city, and with financial help from some friends, the first Austin car was produced in March, 1906, at a price of £650.

Within two years nearly 1,000 workers were employed at the factory.

The First World War saw the car production cease at the Austin works, which was turned over for munitions production, and by 1917, the factory had trebled in size to employ 22,000 worker at its peak.

In 1922, the company changed the face of British motoring when its Austin 7 was introduced to a sceptical public.

Intended as Britain's answer to the American Ford Model T, the tiny car became the subject of countless jokes, but also brought motoring to the masses, and thousands were produced.

Car production was again disrupted by the Second World War, and there was more change in 1946 when Leonard Lord took over as chairman. Lord, a hard-nosed and ruthless businessman, had been in charge of arch-rival Morris, but quit the Oxford-based firm after a bitter dispute.

Ten years later Austin merged with Morris to form the British Motor Corporation, under Lord's stewardship.

In 1968, after Harold Wilson said Britain's car manufacturers needed to merge if they were to compete on the world stage, BMC, Jaguar, Rover, Leyland and Triumph were brought together by government industrial planners under the British Leyland banner. Seven years later the new company was struggling financially, and was nationalised.

Also during the 70s, production at Longbridge was crippled by strikes. During 1978 and 79 shop steward Derek 'Red Robbo' Robinson was behind 523 disputes at the works, and was eventually sacked after achieving notoriety in the tabloid press.

By 1980 the company was on its knees and boss Michael Edwardes was poised to axe half of British Leyland's 100,000-strong workforce at Longbridge, Solihull, Cowley and its other factories because of falling sales. The crisis was partly averted by the success of Leylands new Austin Metro small car.

Privatised

This was a make-or-break opportunity for the company but the Metro was an instant success. Alongside much rationalisation - plus a tie-up with Japanese manufacturer Honda - the company appeared to be on the road to recovery.

By 1988, the now-renamed Rover Group was considered so secure that it was privatised, being sold to British Aerospace.

Six years later Rover was sold to the German BMW group, putting Longbridge in foreign hands for the first time in its history. BMW hoped the Rover brand would broaden its market, but after sustained losses it decided to sell the company off.

Plans by venture capital group Alchemy to rationalise the company, and drop the Rover name, were met with howls of protest, and in May 2000 the factory was sold to the Phoenix Consortium, headed by former Rover executive John Towers.

Financial commentators were sceptical about the takeover from the start, saying the company - renamed MG Rover - was too small to compete, lacking the resources to develop badly-needed new models.

The Rover 75 saloon was reasonably successful, but had been developed under BMW and was soon aging in comparison to its competitors.

The smaller Rover 25 and 45 models were even older - the 45 was still based on the old Civic platform from Rover's partnership with Honda.

Partner

A brief liaison with Indian carmaker Tata was widely seen as a disaster, and other new models remained on the drawing board without the money to develop them.

Mr Towers and his Phoenix partners who worked constantly since their takeover to secure an outside partner. In the last 18 months the focus of their attention was Chinese car giant Shanghai Automotive.

Ardent wooing continued throughout 2004 as MG Rover tried to show the Chinese it was a good investment.

But, in April 2005, the Chinese suddenly pulled out of the deal. It is understood they were frightened off by a combination of MG Rover's existing debts and the huge size of its pension liabilities.

Despite last ditch efforts by the Government to get Shanghai Automotive back on board, the Chinese were adamant that the deal was off.

Hopes of a last-minute Government bail-out came to nothing and, within a week of administrators being called in from PricewaterhouseCoopers, MG Rover's 6,000 workers were sacked and the factory closed down. Debts at the collapsed company were found to have reached the staggering total of £1.6 billion.

In July that year, another Chinese company, Nanjing Automotive, bought MG Rover's assets from the receivers, saying production would re-start at Longbridge by 2007.

While most of the production lines were moved to China, Nanjing has kept its word with limited production of the MG TF sports car resuming last year.

Sales remain small, while most of the Longbridge site is in the throes of redevelopment.

Most of the 6,000 MG Rover workers have found new jobs, but a significant proportion have been unable to secure wages that matched those they were paid at Longbridge, Rover's legacy has been one of debt and misery for many.

It also marked the end of large-scale car production by a British-owned company.

At the time many sought comfort from the fact that, ironically, car production in the UK had reached around 1.5 million vehicles a year - not far short of the industry's 1970s heyday.

Takeover

The difference after 30 years was that the "British" car industry was almost entirely owned by foreign manufacturers such as Nissan, Honda, Toyota, BMW and American giants like Ford and General Motors.

Today Indian conglomerate Tata can be added to the list, after its takeover of Jaguar Land Rover.

But those car production figures have shrunk in the grip of the worst global financial crisis in decades.

Last year, as the crisis began to bite, numbers fell five per cent to 1.4 million, but the worst came late on as car production crashed by nearly 50 per cent in December as car companies announced extended Christmas shut-downs and layoffs.

By the end of July barely half a million cars had been made - 45 per cent less than at the same point last year.

At that rate the UK car industry will be lucky if it produces a million cars this year, even with the help of the Government's scrappage scheme.

While many bemoaned the loss of MG Rover four years ago, it is hard to see how such a struggling business could have survived the most recent auto industry crisis, even with a Government bail-out or assistance from an overseas partner such as Chinese car-maker Shanghai Automotive who came so close to a takeover in 2005.

Sealed

The intervening years have also seen the closure of Jaguar's historic Browns Lane plant in Coventry and Peugeot's closure of its neighbouring Ryton works.

Much of what has happened since 2005 underlines the findings of a report compiled by the joint Cambridge University and MIT Centre for Competitiveness and Innovation in the same year.

Academics Matthias Holweg and Nick Oliver said: "By the time the Phoenix consortium took over, the fate of Rover was largely sealed.

The company's collapse was the culmination of a process that started more than five decades ago that included a failure to consolidate previously independent companies quickly enough, a persistent inability to develop products that hit the right markets at the right prices, the unfortunate severance from Honda and BMW's inability to address Rover's underlying weakness.

"When Phoenix took over, the ship was sinking. The only question was ho long it would continue to remain afloat. Sadly, in many ways the real surprise is not that Rover has gone under - it is that the process took so long to happen."