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April 08, 2005

Rover’s Bust.

Rover’s Bust. Good.

Sounds harsh, I know, but it is the right thing to do. The brand, factory, assets, intellectual property, all will be bought by someone off the receiver and the business itself will continue in some form or other. Might succeed, might not, but those economic assets will be redistributed and used by those who value them most.

As I suggested a few days ago, if I were an advisor to the Chinese negotiating this deal I would have recommended they do this. Instead of walking in just before the bankruptcy, and thus making themselves liable for all of the accumulated debts, walk in just afterwards, and offer to buy the company shorn of its liabilities. One of the most important of these?

Workers will receive only statutory redundancy payments if the firm folds. In contrast, BMW was understood to be ready to offer them between £50,000 and £60,000 each when it was considering shutting the plant.

If there are insufficient funds to pay the statutory redundancy, the taxpayer picks up the tab. 6,000 workers on 50k each? That’s 300 million. No, that’s not what the taxpayers will pay, but that’s the minimum debt that the business will be able to shuck. Will a business free of that be viable? Absolutely no idea although it would at least appear that the MG-F does alright, if not the Rover part of the company.

As and when a receiver does get appointed I do hope they make sure that someone on his staff has a decent command of Mandarin, for they are likely to be getting a few phone calls where that might be useful.

What do I think is the most likely outcome? Shanghai ends up with the Rover brand and perhaps the Rover factory, someone else buys the MG and in essence we have what John Moulton would have done those years ago, if of course the most idiotic of our recent ministers, Stephen Byers, had not interfered.

The net effect of that interference has been that the workers have lost their contractual redundancy and are now left with statutory only, the taxpayers are picking up the bill, not BMW, and economic reality has still won. In short, nothing acheived for a lot of our money. Thanks Stevie Boy!

April 8, 2005 in Economics | Permalink


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» Cars and mines from Stumbling and Mumbling
What's the difference between a Brummie and a Welshman? By all means, supply your own punchline. But it's a serious question raised by the collapse of Rover, which threatens 21,000 jobs.The issue is: what will happen to these? If they [Read More]

Tracked on Apr 8, 2005 1:22:51 PM


Yep- nothing achieved for a whole lot of money. Might be a line that Michael Howard can pick up in the coming weeks.

Posted by: ed | Apr 8, 2005 3:38:22 PM

Shanghai ends up with the Rover brand and perhaps the Rover factory, someone else buys the MG

Really ?

So BMW will sell the Rover and MG trademarks will they ? Surprising news...........why should they ?

Posted by: Tom | Apr 8, 2005 6:40:58 PM