Link to this page: http://www.socialistparty.org.uk/issue/593/7989
Rover - Gangster capitalists were treated as saviours
Government inspectors have published their report on the scandal of the 'Phoenix four' directors who bought MG Rover from BMW in 2000 for £10 and allowed it to collapse in 2005. The direct cost to Longbridge and other workers in Birmingham was 6,500 jobs, plus there were a further 20-30,000 jobs lost due to the knock-on effect in the local economy.
The inspectors who produced the 850 page report costing £16 million were only allowed to investigate the financial dealings of the directors. Therefore the report did not comment on the role of Labour ministers who approved the deal at the time. But it condemns by implication their approval of the Phoenix consortium rather than the other bidder, Alchemy Capital Venture.
The report is scattered with financial shenanigans and downright thievery that would make any Russian oligarch proud. The latter looted a whole country after the collapse of the soviet economy in the early 1990s, whereas the Phoenix four only had one company to play with. Nevertheless they were able to squeeze the company for all it was worth, without any overseeing - under the guise of commercial secrecy - including by the trade unions. The interests of the Longbridge Rover workers never once came into their calculations, heaven forbid.
What takes your breath away when reading the newspaper accounts about the four, is their concentration on getting as much out of it for themselves, without spending any time on building up the company to give it a future, even under capitalism.
From the beginning, in secret meetings, they gave the company no more than five years before it would collapse, so that was the time they had to profit from its existence.
This was while Labour ministers and unfortunately trade union leaders were drinking the health of the four as the "saviours" of what was left of the British owned car industry.
The Rover directors used double bookkeeping, financial sleight of hand and other methods, to get their hands on the bulk of what was available. The inspectors highlight how they filched at least £42 million for themselves over a five year period and had their eyes on another £75 million of the £500 million that BMW had given them to take Rover off its hands "with a pledge from the four that it would not pursue BMW for indemnity payments".
A week after the government appointed the inspectors, Peter Beale, one of the four directors, loaded software onto his computer called "evidence eliminator" which removed all evidence on his hard drive including a sub-folder called "MG Rover".
The four set up various projects to allow them to hide the money they were filching. One was entitled "project slag" (a stock lending agreement), another was "project aircraft" - which netted over £10 million by getting Rover to buy a share in an aircraft leasing company that owned two Boeing 737s and writing off the cost of that transaction against tax.
The £10 million was put into a Guernsey trust to pay their pensions.
Another director, Nick Stephenson, employed his partner, a Dr Li, as a consultant for 15 months at a cost of £1.6 million to Rover. "That didn't seem to add much" to the company, other than translating documents, according to the inspectors.
The Phoenix consortium were able to do all this with no risk to themselves. We should not be surprised this went on. But we should also ask what the trade union leaders were playing at when they gave the takeover their support in 2000.
They expressed not one word of criticism at the time and resisted calls by many workers for the company to be nationalised.
Will history be repeated?
100,000 Birmingham workers marched through the city in April 1999 when the crisis first developed. The union leaders didn't make any demands on the government to take over the plant to save jobs, but instead allowed the Phoenix gangster capitalists to appear as saviours.
Is history going to repeat itself when we watch the fate of the Vauxhall plants now that they have been sold by General Motors to a Canadian company, Magna?
Magna have been given a £4 billion pound bribe by the German government to not close the four German Opel plants, which are also being sold by GM. No reassurance has been given to the Vauxhall workers in Britain by Magna or to the Belgium workers either, whose Antwerp plant now faces closure. It has been reported that Magna may cut 10,500 Opel and Vauxhall jobs across Europe.
Trade Secretary Peter Mandelson is saying nothing. Unless the union leaders insist that the government takes over Vauxhall if threatened with closure, we could see another Longbridge, only this time in Luton where the Vauxhall van is due to end production in 2011, or at the plant in Ellesmere Port in Merseyside.
Car workers should be demanding now that their union calls for industrial action in defence of jobs, on the slogan 'nationalise Vauxhall'. If it's good enough for the banks, it's good enough for car workers as well.
In The Socialist 15 September 2009:
No Job Cuts
War and occupation
Socialist Party workplace news
Socialist Party feature
Socialist Party women
Socialist Party review
International socialist news and analysis