What a striking coincidence! The publication of the lengthy, expensive and utterly predictable government report on MG Rover’s failure coincided with the (German) government’s bail-out of GM Europe.
The MG Rover inquiry took four years and cost £16 million and concluded what everyone already knew. Namely, four Brummie businessmen, way out of their depth, had little chance of reviving a dog of a car company. Nonetheless, they trousered millions, proving themselves far more adroit at financial engineering than vehicle engineering. Furthermore, wishful-thinking UK politicians (automotive business experience: zero), desperate to win a forthcoming election (sound familiar, Mrs Merkel?), bunged MG Rover millions to keep the production lines rolling and the workers busy, making cars for which there was no demand. So yet another glorious chapter of UK government ‘assistance’ to the motor industry finished with… no large indigenous UK car company at all.
The German government’s €4.5 billion ‘rescue’ of Opel/Vauxhall similarly puts political considerations before business sense. GM Europe failed. It ran out of money for a reason (poor management, mediocre brands, mostly middle-of-the-road cars). If it were any other business – apart from a bank – it would have closed and stronger rivals (VW, Ford of Europe, Peugeot etc) would have stepped in to woo customers and grab top employees, growing organically in the process.
What’s more, due to political rather than business considerations, more efficient GM plants in Belgium, Spain and the UK will now likely close or be downscaled to the benefit of German factories and to the detriment of the GM Europe’s business.
Just as turnaround specialist Jon Moulton offered the best business solution to MG Rover nine years ago – substantial downsizing by ditching Rover and concentrating on MG sports cars – so Fiat offered the best long-term model to GM Europe earlier this year. By integrating their European businesses, and sharing expensive new technology, the deal would potentially have made both Fiat and Opel leaner, stronger and helped Europe’s chronic production overcapacity. Yet short-term job losses in Germany made this option politically unacceptable.
Instead the German government has propped up a sick company to the detriment of all healthier rivals (ironically, many of them German), exacerbating overcapacity and weakening the whole European motor industry.
Naturally, the biggest losers will likely be those countries without a large indigenous motor industry, which lack political clout with the major motor makers. That means all Western European countries apart from Germany, France, Italy and Sweden. Which just exacerbates the tragedy of the MG Rover failure.
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