The UK Government today said it plans to disqualify the executives who ran MG Rover in the run-up to its collapse in 2005. A report out today from the Department for Business, Innovations and Skills slams the ‘Phoenix Four’s involvement in the business and is highly critical of the way they withdrew £42 million in salaries and pensions despite the company’s parlous financial position.
Business secretary Lord Mandelson has vowed that the Government will take steps to prevent the four MG Rover chiefs holding company office in the UK again.
Phoenix Venture Holdings bought distressed MG Rover from BMW in 2000, winning the bidding race from private equity funds and others circling the Longbridge car maker. PVH was run by four directors: John Towers, John Edwards, Nick Stephenson and Peter Beale, the so-called ‘Phoenix Four’.
A litany of errors
Today’s report discloses some astonishing behaviour by the bosses of MG Rover, Britain’s last volume car maker:
• Beale bought software to ‘cleanse’ his computer the day after investigators were appointed – ‘despite being aware that we would want to image and then review the contents of his computer for documents relevant to our investigation’
• One of the directors gave the investigators ‘inaccurate and misleading information’
• Stephenson paid £1.6m to a consultant with whom he was allegedly having an affair
The report highlighted how each of the directors paid themselves around £9 million between May 2000 and the collapse into administration in April 2005. Managing director Kevin Howe was paid £5.7m in the same period. The remuneration was ‘unreasonably large,’ the report said, especially since MG Rover was ‘very unprofitable’.
The Government rips into MG Rover bosses
The report out today, written by Gervase MacGregor and Guy Newey QC, is highly critical of their role in saving MG Rover. According to evidence submitted to the report, ‘they knew that they were taking on a very real challenge and that there was a real risk that MGRG [MG Rover Group] would ultimately fail.’
The company’s failure can be blamed on a wildly optimistic business plan. Phoenix planned to produce 200,000 cars a year, but fell substantially short of that target. It sold 148,500 in 2002, slumping to 115,208 in 2004, its last full year in business. The report highlighted Phoenix’s failure to strike a partnership with another car maker – crucial for MG Rover’s survival.
The Phoenix Four speak
The four directors of PVH have already described the government report as a ‘witchhunt’ and a ‘government whitewash.’
‘It drips with the hallmarks of this Government – spin, smear and point blank refusal to take any responsibility for their own actions,’ they said in a statement. ‘We criticised the Government for failing to help MG Rover. As we have seen elsewhere, there is a price to be paid for criticising this government and for us the price is this report.’
A Government report that cost £18 million
The report has taken four years and cost taxpayers £18m. The Phoenix Four’s role in the collapse of MG Rover has already been referred to the Serious Fraud Office, which found no evidence of fraud.
The image of the Phoenix Four courtesy of www.AROnline.co.uk