UK government right to not bail out MG Rover cars

By Alex Singleton | 9 April 2005

MG Rover Group Ltd - the last remaining "British-owned" car manufacturer - has collapsed. The car company was totally inefficient at what it did. Fortunately, the British government is not planning to bail it out. What a change from the 1970s, when "Tony Benn spoke to the House of Commons on the 6th December [1974] and stated that as a 'leading exporter', and a huge employer of people in the Midlands, it was of paramount importance that government money should be used in the assistance of the company."

The average worker at MG Rover's Longbridge plant in Britain's Midlands produced just 16.3 cars last year. Meanwhile, the Japanese-owned Nissan factory in Britain's Sunderland produced 320 cars per worker.

The MG Rover business plan was not credible. That's why when the Pheonix Four were buying Rover Group from BMW in 2000, I backed the alternative option. That option - the purchase by Alchemy Partners - would have involved large job cuts, but it would have had a sensible business plan: concentrate on building high-margin, high end MG-branded cars.

The Pheonix Four have received considerable criticism. Maybe some of that is justified. But the real villain in this is the interfering Stephen Byers, far and away the worst Secretary of State for Trade and Industry Britain has suffered for a quarter of a decade. By supporting the Pheonix bid, he sealed the fate of MG Rover.

Andrew Neil in today's Business newspaper writes: "MG Rover has been a drain on the British economy for decades, destroying more value than it created; that neither the government nor the Conservatives want to bail it out shows that at least some of the lessons learnt in the Seventies and Eighties have not be forgotten."