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BUSINESS: MG Rover, Begins Bankruptcy Proceedings

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posted on Apr, 8 2005 @ 10:20 AM
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MG ROVER, the last surviving great name in British car making, was declared bankrupt by the government last night amid chaotic scenes in London where the company itself claimed it is still fighting to survive. The collapse of Rover would bring to an end a 101-year history of the plant, which has spent much of the last three decades in financial peril. In the 1970s, called British Leyland, it required several rescue packages to stay afloat.
 



news.yahoo.com
Cash-strapped car manufacturer MG Rover Group — the last major British-owned car manufacturer — succumbed to its mounting debts Friday and filed for a form of bankruptcy protection after a deal with a Chinese automaker fell through and a government loan was not granted.

Phoenix Venture Holdings, the parent company of Rover, said it had asked PricewaterhouseCoopers LLP to take over administration of the company after it was forced to suspend production at its British factory Thursday when suppliers — spooked by reports the Shanghai Automotive Industrial Co. was pulling out of a takeover deal — stopped providing goods.

MG Rover confirmed Friday that the talks with SAIC in China had come to an end and that the negotiating team, including Rover chairman John Towers, had left Shanghai.



Please visit the link provided for the complete story.


From what I can gather by reading relating articles this may result in at least 6,000 employees being laid off and those are just MG employees and do not include those being laid off by their suppliers. If this is true I am sure it may have a devestating effect on the British economy and that is not a good thing.

I am not familiar with bankruptcy procedures in the UK, so I have to ask those that know; is there a possibility the company may survive and continue to build new cars. Here in the US we have I believe 3 forms of bankruptcy, chapters 13, 11 and 7 is this similar to the process in the UK or is it final?


One last qeustion I have is what political ramifications might there be over this failure?


Related News Links:
www.usatoday.com
news.yahoo.com

[edit on 4/8/2005 by shots]

[edit on 4/8/2005 by shots]

[edit on 4/8/2005 by shots]




posted on Apr, 8 2005 @ 04:19 PM
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This will be a HUGE hit to the UK economy, resulting in well over 6000 job loses, more like 20000. All the suppliers to the factory, building workers, factory workers, cleaners, canteen staff, also all the local businesses around the area will be affected because they´ll be seeing 6000 less customers. I live about a twenty minute drive from the plant and it is huge, I dread to think about all the workers who may face getting the sack. Many lives will be messed up.


TPL

posted on Apr, 8 2005 @ 05:16 PM
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Although i feel sorry for those who will lose their jobs, i don't think the effect will be that major on the British economy.



posted on Apr, 8 2005 @ 05:16 PM
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interesting i think it was last week there was a post about gm doing badly as well. is this perhapse because of the pressure to build more efficiant cars? or mabe a result of fuel prices climbing so high, we are now seeing prices here arround $1/liter? the price of fuel has now gone over double what it was just 10 years ago. i know my wages haven't doubled.


TPL

posted on Apr, 8 2005 @ 05:19 PM
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Originally posted by drogo
interesting i think it was last week there was a post about gm doing badly as well. is this perhapse because of the pressure to build more efficiant cars? or mabe a result of fuel prices climbing so high, we are now seeing prices here arround $1/liter? the price of fuel has now gone over double what it was just 10 years ago. i know my wages haven't doubled.


It has nothing to do with fuel prices, they made cars which were slaughted by the critics which obviously resulted in them losing out.



posted on Apr, 8 2005 @ 05:21 PM
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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]



posted on Apr, 8 2005 @ 05:30 PM
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Originally posted by drogo
interesting i think it was last week there was a post about gm doing badly as well.


GM is indeed doing bad; in fact I think it was on Wed or Thur they dropped the price on all models by 1,000.00. They also mentioned they may in fact cut other lines just which ones are not yet known. Oldsmobile was trashed last year and I would not doubt it if Pontiac gets it this time or perhaps Buick who knows?



posted on Apr, 8 2005 @ 06:40 PM
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All may not be lost immediately after his return from the Pope's funeral PM Blair has tried to take action.

story.news.yahoo.com.../afp/20050408/bs_afp/britainchinaauto_050408183411



posted on Apr, 9 2005 @ 10:12 AM
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Blair doesn´t care. The general election is less than a month away so Blair´s just saying what the people want to hear. "Yes we´re going to do all we can and try and get the plant back on track". It´s just an election speech, maybe he thinks he can win a load more votes by pledging to save the plant. I´d be surprised if it will be saved.



posted on Apr, 9 2005 @ 10:34 AM
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Dont see why MG cars got slated my dads had a MG ZS and I have to say it was one of the best cars i have driven. He now has a MG ZR the smoothest drive i have seen takes corners like there aint any in your way and 0 - 60 aint slow with its 180bhp.

I read somewhere that if MG managed to stay afloat for another year or so they would of broke even.

As they had reduced there 400million in the red down to 70million in 4 years which is hell good bit of saving.

I feel sorry for ppl that will loose there jobs and all ppl that just bought new MG as there warrentys aint going to look to good unless the dealership honour them.

I believe personally that the rover side will probably go under but some one will buy the MG name as it is a class car and anyone i have spoken to all love the design and shape of the MG models.



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