posted on Apr, 8 2005 @ 05:21 PM
Basically what has happened is that the company has 'gone into administration' which is a legal move to protect it from creditors. What happens in
the UK is that the companies management have to essentially step out of the way, so that either a creditor approved administration firm (in this case
PriceWaterhouseCooper) or a Government administrator can step in, do a complete audit of the books and processes, and decide if the business can be
restructured, sold as a going concern (meaning its sold as is, production will continue etc) or broken up and sold off.
The administrators will now try and work with the companies creditors to attempt to salvage the company. The creditors at this point can apply to a
court to force the business into insolvency and bankruptcy but usually they let the administrators attempt to negotiate a debt restructure or
something (basically they get paid in shares of the company rather than the money they are owed, most take this deal as its better to get something
that may turn into money rather than probably get very little from a court forced bankruptcy). A company can remain in administration indefinately
(there was a recent case of a company coming out of administration after 23 years).
Im feeling sorry for the people that will loose their jobs, but Im really not sorry for Rover or barely surprised. The company was origionally to be
closed down in 2000 when BMW decided that Rover was no longer profitable and wanted to close production. This of course 'enraged' the workers, and
a new consortium was essentially created (Phoenix Consortium) who bought the company from BMW for the princly sum of £10.
Rover basically never recovered, reporting losses of £95million in 2002 and £77million in 2003. Recently it was in talks with a Chinese company in
a joint venture, but the Chinese company (rightly) wanted assurances as to the solvency of Rover, for a miniumum period of 2 years. The British
government offered Rover a £100million loan for one year, but this wasnt enough for th Chinese company who pulled out. And thus Rover came crashing
down soon after.
It really comes as no surprise that the Chinese company pulled out, I mean who would really want to buy a large stake in a company that basically
collapses the moment the deal is pulled - it wouldnt have been a very profitable venture!
Soon after the deal died, the suppliers stopped supplying parts to Rover, citing credit issues with the company, and production stopped. The workers
have been offered £280 per year up to a maximum of 12 years service with the company as a redundancy package, which adds up to just over £3000 for
the longest serving. Also in the spotlight is the pensions of the Rover workers, beause the pension fund had a £67million shortfall. If the worst
fears are realised, workers can loose 10% of their pensions because the Government guarantees a 90% pension under recent rules.
Rovers suppliers and supporting businesses wont actually be hard hit, because the government has announced a £40million support package for them, to
help them expand into other areas and find new customers. Many people have demanded that the government provide support to Rover, but why should
they? If the company hasnt managed to become profitable or even break even in the 5 years since it was restructered, what hope does it have for the
next 5 years? If it was this close to collapse, then it really shouldnt be saved at all.
[edit on 8/4/2005 by RichardPrice]