A government-commissioned report just released shows how five senior executives earned almost £42m in pay and pensions from carmaker MG Rover before its eventual collapse in 2005. The 'Phoenix Four' of John Towers, Nick Stephenson, Peter Beale and John Edwards bought the company from BMW for £10 in 2000.
MG Rover, originally part of the Leyland ran into trouble in the 1970s, and survived only on cash injections from the government. British Aerospace, a privatized planemaker, took it over but sold the ailing business on to BMW in 1994. Five years later, BMW realised it had bought a pup – losing £600m in a single year – and pulled the plug. There was much pressure on the government to bail it out and 'protect British jobs', but no deal. So the four managers stumped up £10, saying they could turn it around.
They did indeed cut its losses, but the company still collapsed, in April 2005. The withdrawal of a £100m bridging loan promised by Tony Blair's government did not exactly help. Meanwhile, the Four had paid themselves £9m each, and another £5.7m went to the Chief Executive, Kevin Howe. There were accusations that the executives asset-stripped the company to line their own pockets, rather than investing in it to save all those British jobs – 6,300 of them, plus many more in firms making components and supplying services to MG Rover.
While the executive team might have acted over-optimistically and even immorally, their actions (as owners of the company) don't exactly seem illegal. But the government has used all its power and spin, and taxpayers' money, to conceal its own shabby role in the whole affair and pass all the blame on to the executives. A lot of public money had gone into MG Rover, and governments were to say the least a bit careless in what then happened to the company – putting the fear of job-cut headlines ahead of its long-term soundness. MG Rover went bad just before the 2005 General Election, after all, which is why ministers went so headless-chicken about saving it. When it failed, they commissioned an investigation by accountants and lawyers which conveniently kicked the whole issue into the long grass, and avoid Freedom of Information requests, until well after the election. And how. Four years later, £16.3m of taxpayers' cash, and an 850-page report that naturally says nice things about the government that commissioned it. But then, do you think they would have published it, if it had criticised them?