British automobile brand MG is now a subsidiary of China's SAIC, a major automobile manufacturer in its domestic market. However even after a relaunch in 2013 its profile in the UK is minimal. Following the collapse of the old MG Rover business in 2005, the MG brand and its factory were rescued by the Chinese company, although UK production wasn't restarted until 2008, and then only in very small numbers. It remains to be seen whether SAIC will consider sticking with this European experiment in the medium or long term. The Chinese group also manufactures and markets cars in China based on the old Rover brand, but under the name Roewe. SAIC's attempt to resurrect MG follows an earlier unsuccessful attempt by BMW of Germany.
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MG Motor UK
Birmingham B31 2BQ
Production of the MG car brand restarted in part of the old MG Rover plant at Longbridge in July 2008, under the control of Chinese manufacturer Shanghai Automotive (SAIC). At the time, that group was best known as the local joint venture partner in China for both General Motors and Volkswagen Group. It continues to produce Buick, Chevrolet, Wuling and other vehicles in China for GM, and VW and Skoda for Volkswagen.
The wholly owned MG business is very much smaller in scale than its previous incarnation, though the company has gradually introduced a number of different models. There are eight in all globally, including the crossover MG GS launched in 2015. However only three are currently sold in the UK, the MG3 "supermini" and MG GS and ZS SUVs. An attempt to target the luxury market with the TF sports car was largely unsuccessful. Total sales of MG-branded vehicles in the UK rose by more than a third in both 2015 and 2016, but are still very small at under 4,200 vehicles. It ranked outside the top 30 automobile brands by sales. Slightly larger quantities are being manufactured by SAIC MG in China, where the group sells eight different models. Around 140,000 units were sold in 2017, although the brand is dwarfed by SAIC's two joint ventures with GM and Volkswagen, which sell more than 1m cars each.
The Rover brand is currently in suspended animation. SAIC acquired rights to several Rover designs, and launched several cars in China under the brandname "Roewe". Sales soared by 70% in 2017 to 411,000 vehicles, making Roewe - surprisingly - the single biggest climber of any global automobile brand during the year. The company had already attempted to acquire full ownership of the Rover brand from BMW in 2006, but was trumped when Ford (which acquired the Land Rover business in 1999) exercised an existing option to match any other offer for the brand name.
Until its demise, MG Rover was the UK's last remaining British-owned volume carmaker, producing two marques, MG sports cars and Rover saloons and family cars. The group's vehicles were sold in around 70 markets worldwide. Exports accounted for around half of all sales. The closure of the main car manufacturing had seemed almost inevitable for some time, despite repeated attempts by the government to prop the business up with loans and tax breaks, largely designed to protect its 6,000 manufacturing jobs. Sales had steadily fallen since the group became independent, from just over 200,000 cars in 2000 to around 115,000 in 2004, followed by further sharp decreases in the first three months of 2005.
Hao Wang is managing director of MG Motor UK. Hayley Williams is marketing & events co-ordinator.
MG and Rover have long played supporting roles in the sad story of the decline of British automobile manufacturing. When BMW bought Austin Rover Group in 1994, it was virtually all that remained of The British Motor Corporation, once the largest car manufacturer outside the US.
The British Motor Corporation (BMC) was created in 1951 from the merger of MG and Austin, then Britain's two biggest car makers. Tragically, the business was doomed almost from the beginning. William Morris, later ennobled as Lord Nuffield, had built his own company Morris Motors into the UK's foremost auto manufacturer by the 1930s, making a broad range of family cars under the Morris marque as well as a small number of sporty models under the MG brand (which originally stood for Morris Garages). Much of the company's success could be credited to Morris's tireless general manager, Leonard Lord. But in 1938, Nuffield and Lord fell out bitterly after the latter asked to become a partner in the business as recompense for his years of service. Nuffield refused and Lord quit. Instead he joined much smaller manufacturer Austin, and quickly became chairman. Lord completely overhauled the rival company, and by the mid-1940s, Austin was closing on Morris's lead. Yet the two chairmen refused to talk to one another, even after Nuffield's board proposed a merger of the two companies to create a British industrial giant. In 1951, after three years of negotiation, Morris and Austin were combined as The British Motor Corporation, then the world's 4th biggest car manufacturer (after Ford, General Motors and Chrysler). The group dominated the UK car sector with just over half of the local market.
Ironically, the creation of BMC was also the first step in the ultimate collapse of the British car industry. As a result of the personal animosity between Lord and Nuffield, no attempt was made by their respective management teams to consolidate production facilities, and Morris and Austin operated as entirely separate businesses, competing fiercely with one another over price and market share. In fact they were so preoccupied with their internal wrangling that they failed to notice that their market share was steadily falling, while that of American-owned rivals Ford and Vauxhall was on the increase.
Instead, BMC began digging itself an even deeper hole. Lord's successor George Harriman spent the early 1960s attempting unsuccessfully to engineer the takeover of the UK's other big homegrown marques, Leyland Trucks and Rover. The latter was in fact the British car industry's oldest brand. John Kemp Starley had established the Rover Company in the 1880s to make bicycles. He introduced his first motorised tricycle in 1888, and the company began full-scale automobile production in 1903. As the industry blossomed during the 1920s and 1930s, Rover established a reputation as one of the country's more conservative manufacturers, producing solid but unexciting family cars for well-to-do professionals. The Rover was the archetypal bank manager's car. Although Harriman was unable to tempt Rover to join BMC, he was able to buy Jaguar in 1965. But later that year the group unveiled its new upmarket family car, the Austin 3-litre, backed by a huge launch. It proved to be a disaster. Since nothing had been done in the mean time to reduce costs or improve efficiency, the failure of the new Austin plunged the group into deficit, generating a loss of nearly £4m in 1967. Market share had almost halved to just 28%, only fractionally ahead of Ford.
Believing Harriman's claim that bigger would be better, the government only made matters worse by forcing the combination of BMC with Leyland Trucks and Rover to create British Leyland Motor Corporation in 1968. True, the new British Leyland was a European giant, selling over 1 million cars a year, with a greatly increased market share. But still nothing was done to consolidate the huge network of factories. Worse still, the enlarged group's first model, the Morris Marina, turned out to be another flop. At the same time, the country was plunged into a series of industrial disputes that ran through the early 1970s. All manufacturers were affected, but the damage to British Leyland, already bloated with unnecessary production costs, was catastrophic. Attempts to cut costs by reducing the workforce or prune supplies led to a string of strikes by workers. By 1975, the business was close to collapse. That year, the new Labour administration placed the business under state control, but this only added to its problems because the socialist government felt politically unable to intervene in the labour disputes that were paralyzing industry. In 1976, half-hearted attempts were made first to recruit Ford's US chairman Lee Iacocca, then to sell the business outright to Ford, but with no success. The same year, as British Leyland sales continued to tumble, Ford overtook it to become the UK's leading car manufacturer.
In 1979, Margaret Thatcher's Conservative government swept to power, promising to crush the trade unions that had brought British industry to its knees over the previous decade. Within months, British Leyland's new chairman Michael Edwardes announced the complete or partial closure of 13 factories and the loss of up to 15,000 jobs. A year later the government began to take steps to re-privatise the business. The government turned down an offer from Ford to buy the brands but not the factories. Instead Jaguar was floated in 1984 (it was bought anyway by Ford five years later). In addition, an alliance was brokered between the remainder of British Leyland, now the Austin Rover Group, with Honda.
Talks with both Ford and General Motors continued behind the scenes. Yet finally negotiations collapsed after a group of rebel Conservative MPs demanded in Parliament that the government "resist the sell-off of the remains of the British motor industry to the Americans". In 1988 the business was sold instead to British Aerospace for £250m. There was minimal fit between the two companies, and BAe soon became eager to carve up its unwieldy subsidiary. In 1990, Honda and Rover formalised their alliance, with Honda taking 20% of Rover in return for 20% of Honda's UK subsidiary. By 1993 the two companies not only shared suppliers and technology but three out of Rover's four models depended on Japanese technology, while the Rover 600 was simply the Honda Accord with different bodywork. But British Aerospace was tiring of its car business, still struggling to do more than break even. Honda was asked to consider increasing its stake. The Japanese company, with limited available cash, suggested a 50:50 joint venture. Instead BAe turned around and sold its entire 80% stake to BMW without offering Honda a chance to put forward a rival bid. Outraged, Honda warned that there was more to the two companies' working relationship than met the eye, but at the time BMW dismissed this as sour grapes. Subsequently they were forced to concede that the problems at Rover were far more serious than they had anticipated.
Within a year of Honda's exit, performance at Rover had slumped. In 1995, the company slipped from breakeven to a loss of over £150m. CEO John Towers resigned that year. In 1996 BMW more than doubled annual investment in the company to £500m and installed an experienced BMW veteran as chief executive. The following year, after a modest improvement in Rover's sales, investment was increased by a further £700m. But the crisis reached a head in 1998, right in the middle of BMW's hard-fought battle to seize Rolls Royce. Although exports had recovered slightly in volume, exchange rate fluctuations had led to a slump in value, while domestic sales of Rover's core models had continued to fall in a fiercely competitive market. At the end of 1998, UK chief executive Walter Kasselkus announced his resignation, and speculation increased that BMW might be forced to close Rover's key plant at Longbridge and move production abroad. However, after agreeing pay reductions and cost cuts at Longbridge, BMW's chairman Bernd Pischetschreider finally confirmed that the factory would stay open.
The decision was met with fierce criticism from a group of shareholders and management led by sales and marketing director Wolfgang Reitzle. Publicly criticising his chairman's decision, Reitzle argued that the only value in Rover was its niche Land Rover and Mini models, and that the business should be scaled down. Finally, at a tense, day-long meeting in February 1999, both protagonists were forced by BMW's board to resign in order to heal the damaging divisions within the company. In fact, the size of the problem didn't emerge until a month later, when BMW finally unveiled a loss for the year at Rover of £645m, more than seven times worse than the previous year.
New BMW chairman Joachim Milberg, sympathetic to Rover's dilemma, told the subsidiary to improve performance before the end of Spring. BMW stated that it would replace the Rover 200 and 400 saloon cars, but threatened that it would shift production away from the ageing Longbridge factory to Hungary, unless the British government offered around £200m in financial support towards a £2bn investment to upgrade the plant. After some hardball negotiating on both sides, the government relented and agreed to the grant. But by summer 1999 the pain still hadn't ended. Performance slumped even further as the company cleared out stocks of its Rover 200 and 400 models in preparation for the launch of the new Rover 25 and 45 models. As a result, Rover's operating losses for the first 6 months of the year were estimated as high as £330m. Effectively, the company was being rebuilt from scratch, with all existing models taken out of production and replaced with brand new cars.
In October, new registration figures showed that Rover's sales had fallen by more than 20% in the first nine months of 1999. Later that year BMW admitted to Die Welt newspaper that its British subsidiary's losses would be even higher than anticipated. In fact Rover's total losses for 1999 were later confirmed by BMW to be a staggering £2.1bn or €3.36bn, including restructuring provisions. Pressure mounted steadily for BMW to act or itself become a target for other auto manufacturers. Finally, after years of patience, support for Rover finally ran out in March 2000. In another tense board meeting, a year after the removal of Pischetsrieder and Reitzle, three further board members were ousted and BMW confirmed it was switching off the life support system for the business now widely described by the German media as The English Patient (a reference to a popular film that year).
It was announced that Rover Cars and the Longbridge plant would be sold to venture capital group Alchemy Partners for £50m. Alchemy planned to cut more than half of its 7,500 jobs and reposition the business as a niche manufacturer of high-performance sports cars. Unions described it as "the bleakest day in British manufacturing industry", and a bitter political row ensued as BMW, the British government and trade unions argued over who exactly was to blame for Rover's fate. Unions blamed the government for not protecting them; the government blamed BMW for not making it clear enough that the business would be sold off. The situation threatened to turn into farce when the deal with Alchemy suddenly collapsed over a disagreement on terms. Former Rover CEO John Towers quickly assembled the Phoenix consortium in a bid to save the company, but this also failed to gain ground, largely for lack of sufficient funding. It became increasingly likely that Rover would simply be closed down.
At the last minute, the Phoenix offer was rescued by US bank First Union, which pledged the funds necessary to allow production to continue. The Rover plant was sold finally for just £10 ($15), and BMW effectively loaned Phoenix a further $500m towards redundancies and restructuring. BMW retained ownership of the Rover brand but agreed to licence it to Phoenix for at least seven years. In a surprise additional transaction, the Land Rover brand was also sold. BMW had been expected to hold onto the marque, long perceived as the jewel in Rover's crown. Instead it was sold to Ford for €3bn. It was later revealed that Land Rover had also failed to make a profit in 1999 despite increases in sales.
Despite BMW's $500m loan to Rover, the two sides continued to dispute the value of the assets transferred. This long-running disagreement was finally ended when BMW handed over Powertrain as well, a separate UK subsidiary making engines and gearboxes, as well as an additional €106m in cash. Yet the business continued to sit on a financial knife-edge. Towards the end of 2001, facing the prospect of a labour dispute over pay, the company warned workers that just seven consecutive days of all-out strike would be enough to finish the business off entirely. In the meantime, Phoenix bolstered its portfolio mid-2001 with the surprise purchase of Qvale, a US-Italian sports car manufacturer. One reason for the purchase was Qvale's existing, though small, distribution network in the US market. The group also agreed a strategic alliance with China Brilliance, then the largest domestic Chinese carmaker, to develop new models and share sourcing. However this partnership collapsed in 2002 after Chinese authorities accused the local company's management of fraud and seized control of the business. At the same time, plans to acquire one of the former Daewoo manufacturing plants in Poland were delayed by the Polish government and Daewoo's creditors. In a welcome piece of good news the group agreed to import the Indica small car manufactured in India by local company Tata, branded in the UK as the CityRover.
In late 2003 the group was embroiled in controversy after it was revealed that the four directors of Phoenix had established a £13m trust fund for themselves despite the fact that the business was continuing to make heavy losses. In 2004, The Guardian newspaper reported that the Phoenix directors had effectively isolated the MG Rover business from more profitable sidelines such as Powertrain and would actually benefit financially if the car manufacturing arm was to close. To raise additional cash in 2004, parent company Phoenix sold off the Longbridge plant and much of its large surrounding estate to a property developer for around £42m, then repurchased a 35-year lease on the factory. Finally in 2004, the group signed a cooperation deal with Shanghai Automotive Industry Corporation, also the joint venture partner in China for Volkswagen and General Motors. By the end of the year, that deal had started to evolve into a fully-fledged takeover of Rover by the Chinese company, with SAIC agreeing to acquire a stake of up to 75% in MG Rover.
Yet those negotiations were consistently delayed by concerns on the part of Chinese over the long-term financial resources of Phoenix, which would continue to control the remaining 25% equity. Under that arrangement Phoenix would be expected to pay its share of MG Rover's ongoing projected losses. Despite the offer of a £100m bridging loan to Phoenix from the UK government, SAIC was ultimately unconvinced of the viability of the deal and suspended talks in April 2005. MG Rover had no alternative but to call in administrators. The company's production lines were suspended, and the 6,000 workers from the Longbridge factory were sent home. According to administrators the group was losing more than £25m a month at the time it closed. At the time of its eventual demise the business had debts of £1.3bn. Some 6,000 workers lost their jobs.
Several bidders entered negotiations to acquire the assets of the failed group. The strongest bidder was considered to be Magma Holdings, a vehicle for former Ford Europe CEO Martin Leach and former Vauxhall CFO Ed Sabisky, backed by SAIC. In the end however it was another Chinese manufacturer, Nanjing Automobile, which appeared to have won the prize (if prize it is), with an offer of £50m, accepted by Rover's administrators in July 2005. Plans to commence production in 2007 were halted when Nanjing was itself acquired by SAIC.
In 2011, following a long investigation, the four directors of former owner Phoenix were found to have behaved disreputably, enriching themselves while the company collapsed. They took a total of £40m from the business. All four men were barred from serving as company directors for periods ranging from three to six years. Auditor Deloitte was eventually handed a record £14m fine for failing to manage conflicts of interest in the advice they gave to the company.
Last full revision 3rd January 2017
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