Rover MG. The Solution.

So Rover MG is in even worse shape than thought. What a surprise.

One official said: "The talks have stalled and the Chinese are looking for the PVH directors to come forward with new proposals." The official added that the DTI now believed there was a risk that MG Rover would be "technically insolvent" even if the £100m loan, which remains still on the table, was agreed.

"The Rover position is worse than both we and the Chinese thought. The issue is about solvency past the deal," he said.

Now this is a bit of a guess but I would imagine that the real problem is over redundancy pay. As a business you need to have sufficient funds to pay all the workers their statutory redundancy pay, if you don’t,  you are "technically insolvent". The very large size of that number is why BMW was happy to give Rover away for that 10 pounds, plus hand over a cheque for 500 million. Redundancy pay owed was more than that figure....does Rover have that money now? Obviously not.

So, what should be done? Put it into bankruptcy. What seems to get missed in these things is that the brand, factory, expertise, stock and all, what makes up the real business, does not vanish in bankruptcy. All of that gets sold to new owners. Perhaps John Moulton could be persuaded to take it on? The people who would really get hit are the taxpayers, as the difference between what the assets get in a bankruptcy sale and the redundancy owed gets picked up by the Government (statutory redundancy only, not whatever extra is in contracts or union agreements). But then we’re on the hook anyway, as Hewitt starts spraying money around to keep the talks going.

The actual business, workforce, factories, designs, brands etc, may or may not flourish free of the 500 million redundancy debt, but the only way we’ll ever find out is to pull the plug on the current owners, sell it all off and watch what happens. If I were advising the Chinese in this that’s exactly what I would do, dither, haver, let it fail then bid for the assets, free of liabilities, and then attempt to construct a viable business from the ashes.

BTW, yes, it was Stephen Byers who stopped this solution being used last time round. Adding this to Railtrack and he may be the most expensive politician the country has had.