I have changed the sub-heading to "MG-Rover Doomed to fail?" I certainly hope not, for the sake of its millionaire private owners and poor workers.
The following is a snipet from the Times of last week ( but similar reports can be found in most UK national papers).
>>>> "Storm over £13m for MG Rover chiefs
A trust fund for top executives has received the cash as the firm loses £95m. Report by Dominic O?Connell.
MG ROVER?s Longbridge plant in Birmingham was strangely quiet on Thursday afternoon. Production of the company?s two smallest models, the 25 and 45, had been stopped, and only a trickle of workers came down the hill from the factory gates at the end of the day. ...
... The loss-making company had paid £12.9m into a trust fund for its five directors and other senior managers. ...
No mention was made of the fund a fortnight earlier, when Phoenix Venture Holdings, MG Rover?s parent company, sent each staff member a copy of its annual ?report to shareholders?. The report, an abridged version of the annual accounts, set out the company?s trading position ? it lost £95m, compared with £187m the year before, with the MG Rover car operations racking up losses of £111m, down from £175m. ....
The Phoenix directors ? John Towers, Nick Stephenson, Peter Beale and John Edwards ? had taken over the famous brand from BMW, the German car giant, for just £10. BMW had struggled to turn round MG Rover since buying it from BAE Systems in an ill-starred attempt to join the ranks of volume carmakers. In 1999, its last year in German ownership, MG Rover lost £786m. ...
... But it is understood that the main beneficiaries of the fund are not just the four founding directors and principal owners of Phoenix Ventures ? Towers, Beale, Stephenson and Edwards ? but also Kevin Howe, MG Rover?s chief executive. ....
... The Phoenix directors could also benefit from two other financial restructurings of the group. The car company?s profitable finance arm, MGR Capital, was bought in 2001 by the four founding directors and HBOS bank. It made £13.7m on a turnover of £33.3m in six months last year, and, if it had been retained within the Phoenix group, could have helped to offset group losses. ...
The four directors have also been granted £10m loan notes by Phoenix, which are paying them 6.5%, or 1.56 percentage points above the London inter-bank rate, whichever is higher. ....
...Industry experts say MG Rover?s fate now depends on how fast it burns up its remaining cash ...
... The development of a new medium-sized car to replace the ageing 45 series is also crucial, but here the company has suffered some hefty setbacks. ...
... TWR, which was MG Rover?s main engineering contractor for the new model, has been placed in administration ....." >>
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eMBe,
Like many of the above comments I would hate to see another British car company go down.
But, when I read the article you quote, and other reports by financial analysts, I thought of a couple of things;
A) My letter to my MP 18 months ago asking about the morality of increasing pensions for MPs when 2000 of our local constituents were being made redundant with a bankrupt pension fund - I got a reply which I will not quote as I have been 'pink fluffy diced' enough already.
B) Would I buy a car from a company in financial trouble, when the Directors have arranged 4 Golden parchutes at £3.225.000 each - leaving the workers on the aircraft?
Not sure,I must sleep on this.
Matt35
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Sorry 3500s but i think you\'re being terribly blinkered to the fact that this car does not have the makings of a very good car.
Its engine, as you say is \'tried and tested\'. For that i read \'old\'. It has terrible (for its size) emissions output and below average fuel consumption, highlighting the age of the design.
For strong structure and suspension, read old and unsophisticated. Great for indian roads. cyncial on british roads.
When you say its in demand in India, they dont have a whole lot of choice of cars. Whats the alternative - a Hindustan Ambassador! I agree, it is modern - if you live in india. Not in the UK.
The Perodua Nippa (which i feel it is most similar too) may have low running costs but it is still worth absolutely pink fluffy dice all after 3 years. About £1500 i believe. About 30% generally of its original value. terrible.
Rover will have to offer it with a 3 year warranty - They have a hard enough task already convincing the british public that its a sound buy. Imagine if it had a 1 year warranty. That will be marketing forces at work, not just believe in the construction. As you say it costs less than £1000 to build. It isnt going to cost a lot to put any warranty work right.
\'Incidentally, upon release of the rewarmed Metro, it received very good reviews indeed, unfortunately, the people who re-engineered it never heard of NCAP......
As for the market, well I own a 75 and it doesn\'t bother me at all. As for who\'ll buy one, hopefully young and old alike either a primary means of transport or second car to ferry the kids and shopping around. Bearing in mind the second car market is the most value conscious, least image aware of all car markets. ;)\' >>>
Firstly, yes the Metro did receive warm reviews, but then everyone figured out what a horrible little car it is. I think that is what will happen here. When the Rose tinted specs effect wears off, its true ability will become apparent.
Secondly, i\'ve never heard such rubbish as the 2nd hand car market is the least image aware of all car markets. Image (for which read perception as well) is the main driver for depreciation, and value, and in doing so the demands of the 2nd hand car market. Good image cars hold value full stop.
If you bought a 75 a thought \'stuff the depreciation\' then you have truely proved my point about you being blinkered. For the same price you could have bought an equal, if not better car that would keep at least another 20% of its value at the same age as a 75 (read BMW, Mercedes - hey even a Ford...)
I am totally neutral on the City Rover. I dont own a Rover, like some of their cars (25 GTI - very underated)but i am judging based on what i have read and seen.
You are biased of course, but i sense that Rover could bring back the 3 wheeler, give it a mahogany dashboard and a chrome nose piece and you would think its fantastic....
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I think there is quite a large gap in the market for a new car which isn't full of electronic rubbish that goes wrong and costs a fortune to fix. If this car costs £1000 to build then something even as large as a replacement engine shouldn't cost more than a few hundred pounds. . I think there could be a real winner in a car that doesn't cost an arm and a leg to run.
A car that works well on Indian roads will work well here as a lot of British roads are deteriorating to that kind of standard. This could be a car for students and old people. A cheap finance deal for students/young people and free servicing for OAPs and they would be flying out of showrooms! I can see the adverts with a British Bulldog now ;-)
Perhaps they ought to dust off Russ Swift too....
teabelly
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The fund is in-lieu of a pension fund which the directors had no access to. BMW as part of the deal provided the pension funding for the workers.
As for the rest of it, it's hardly rocket science and it's been reporting many times before in many different articles.
Furthermore, it wouldn't be reported in PVH report to shareholders because it owned by a separate company ran by those directors.
What the article also forgets to mention is that 40% of PVH share equity is held by the workforce.
Finally, these are private shareholders, not public as such, in terms of disclosure private limited companies are not required by law to enter into such detail.
However, there are two truisms in the report. Firstly, RD60 really is the make or break car. City Rover is a stop-gap designed to stem the cash burn of MGR.
Incidentally cash receipts grew last year to £311m and losses of the group were £87m. It certainly isn't desperate in terms of cash burn exceeding reserves in the short term but City Rover must contribute to reduce losses and RD60 must succeed and help turn MGR into profit. Certainly another disaster like TWR would put them in serious trouble.
My own observation is that they will get RD60 to production, however what MGR really need is engines and also a 25 replacement and that really is going to be tricky unless RD60 does well at least a top 10 seller I reckon.
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I think before you can ask whether this car is doomed to failure, you would have to really define what you mean by "failure".
Not to turn a profit? Hardly possible, it has cost them almost nothing to bring to market.
Not to take a large market share? It doesn't have to, they only plan to sell 100k units over five years.
Damage the Rover brand? I think that's why they've chosen the name "CityRover", to distance it from the other cars slightly.
It doesn't even have to sell as well as the Rover 100 in its final years, to start adding to MG Rover's bottom line. In that sense, it should turn out to be at least a reasonable success.
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When you say its in demand in India, they dont have a whole lot of choice of cars. Whats the alternative - a Hindustan Ambassador! I agree, it is modern - if you live in india. Not in the UK.
You can also choose the FiatPalio( a tougher Punto!), Fiat Uno, Hyundai Amica, Daewoo Matiz, Suzuki Alto/ Swift, Opel Corsa, Ford Ikon ( Fiesta notchback). We have global competition in India.
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Firstly, Phoenicks I was talking about the second (more than one car per household) car market, not the second-hand market.
Secondly, a 75 is rated by Alliance and Leicester as one of the least depreciating cars in its sector only the BMW 3-series depreciated less over 3 years. It was also recently voted best secondhand family car by WhatCar.
Lastly, engines in small cars.
Ford Ka - started out in a Ford Anglia circa 1960s.
Polo 1.0L - only recently replaced after the previous one gave 30 years service.
Punto - The Fire 8v is again, 15 years old.
Cinquecento - started out in the 1960s.
I'm sure you are neutral about the City Rover, dated, old technology, poor dealership, unreliable, dubious manufacturing processes, terrible depreciation.
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Trying to keep a vague relevance to the thread...why do people worry about percentage depreciation? Surely it's the actual monetary loss that matters; not % from original! My bank manager, for one, is only interested in pounds; not percentages.
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The second car market *is* image conscious. That's why people often buy Polos as a second car, despite dynamics and equipment which are inferior to a Fiesta, say.
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Totally agree Peter.
I am neutral to the CityRover. Unlike you 3500s who is so blatantly biased. Why would i not be neutral? I'm very open minded and will 'support' any car, until i feel otherwise.When the CityRover was announced i was open minded, and hoped it would be great. However i feel its a novel idea, that once people take off the rose tinted specs will realise its a very basic, dated old little car.
With any car, will keep an open mind until i see anything to contrary. Now i've seen the spec sheet, pictures (inside and out) and related it to what i know already, and have made my intial judgement. If i'm wrong i'll stand up and say so.
In this instance I'm just giving my thoughts. Just like everyone who supports the MG ZT V8 before its released. 3500S and other were saying how great it was from pictures and spec sheets. So why cant the opposite be used? Its almost like its not politically correct!!
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With the greatest of respect I think the doubters here are looking at the CityRover from the wrong angle, namely that of a car lover/petrolhead (why are we on these forums after all?.....).
The truth is that there are an awful lot of people out there who don't have money to burn who just want a solid, reliable, dependable motor that doesn't go wrong very often and doesn't cost them an arm or a leg when it does.
They don't care about gadgets, immaculate handling and roadholding, swish styling or anything else.
As far as I can tell the CityRover looks OK, not stunning but certainly not a disaster. The specs are reasonble, the platform is proven, if Rover can sell it on low insurance, low running costs, reliability and cheap servicing/fixes - I think they could do well with it.
I know of many people who are sick to the back teeth with expensive servicing, rip off dealers, extortionate part prices, unreliability and the general wealth drain that a car can easily represent.
If Rover can address those issues, maybe CityRover can be a good earner for them.
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Trying to keep a vague relevance to the thread...why do people worry about percentage depreciation? Surely it's the actual monetary loss that matters; not % from original!
Exactly. I'd be far more concerned about a £20000 car losing 50 per cent of its value than a £7000 car doing the same. If something is cheap to begin with it doesn't have far to fall.
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Is it relative to your financial circumstances?
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I don't think it's relative to your financial circumstances : 50% of 20 grand is still 10 grand & 50% of 7 grand is still 3 and a half grand. There's plenty of rich folks don't like spending money ;-)
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I don't think it's relative to your financial circumstances : 50% of 20 grand is still 10 grand & 50% of 7 grand is still 3 and a half grand. There's plenty of rich folks don't like spending money ;-)
I'd agree. Of course a few grand is not much money if you're rich and a lot if you're poor. I don't consider myself to be either but could have spent far more money than I did on a car if I'd been so inclined. It's not just rich folk who don't like spending money. I looked at the lower end of the market because I have other priorities.
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I'll say that I *hope* it succeeds and that MG Rover do too. As an automotive design engineer it sickens me that the country's only other volume car maker is LTI who make the Taxis.
However, when I look at the City Rover I wonder if it has more in common with the exciting new breed of modern small cars from Europe and the far East, or whether it's a Metro / Maestro for the new millennium..... I'm sadly waiting for them to release the "Clubman" version.
The car market as a whole is quite small, the British market is even smaller, then to narrow it down further doesn't seem like a way to make a lot of money (and let's not forget that's why they should be in business)
Gareth
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It depends wht you mean by volume car maker.
Ford (which includes Land-Rover and Jaguar), Peugeot, Nissan, and Toyota all assemble cars in Britain and there may be others. I'm not sure whether Vauxhalls are still made here or are all re-badged Opels.
It's obvious that you mean British-owned but don't forget Rover only came back into British hands when BMW bailed out. Prior to that episode most of their cars were made as joint ventures with, or under licence from, Honda.
With the benefit of hindsight the early 90s (post Maestro/Montego but pre-BMW takeover) looks like a a golden era for Rover. They made cars to which Honda were willing to attach their own badge and gave their workforce guarantees of job security.
It could be that the present Rover 25 will come to be looked on as the last truly British volume car. As far as I know it wasn't developed with any extensive Honda input and was completed before BMW took over.
For more on the subject, see the unofficial history at www.austin-rover.co.uk/ I'm not a petrolhead or even a car enthusiast but I found this web site absolutely fascinating.
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Welliesorter, you assumed correctly that I mean British owned.
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.. you assumed correctly that I mean British owned. >>
Apologies for digressing off topic. But this concern about ownership can sometimes be misplaced.
Okay, in the case of Rover and Virgin, they are owned by private British citizens (although they may possible choose to take their wealth offshore to some exotic islands in the West Indies). For the rest of the world's publicly quoted companies, most shareholding are spread globally - mainly amongst Pension Groups and Mutual Funds. So if you have a pension or an ISA/PEP or unit-trust (with the exception of Companies like Boots who do not invest in the stockmarket), you and I will most likely have some stake in publicly quoted companies.
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clarification: I meant Boots Pension scheme which does not invest in stocks & shares.
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Speaking as someone who has bought several cars in the same price range and spec. I would say that reviews in the motoring press will be very important. The Indian origins will I am sure not help the initial impressions of buyers. However, look at the Skoda Fabia. It had to fight against prejudices and sells well due to good reviews from the press and owners. I've looked at pictures of the Indian car and it doesn't look very appealing, but then in my view price and what you get are more important. I suspect a lot of people will put up with dull looks if it has other good points. The poor fuel economy struck me as a significant bad point. The five doors point is a good one, as many people want a small car for shopping and the school run, and 5 doors is very desirable if you have more than 1 child.
3500S makes a good case for it, but this all assumes that it gets a good write up. It is up against some strong competition. After all you can get a UK dealer supplied Ford Ka for £5,500 or even as low as £5,000 if you are lucky. UK dealer supplied old style Nissan Micras were also going very cheaply (~£5.5K) until recently.
I do think the pension 'scandal' is awful. I read about it in a weekend paper. It seems that ~£20million has been paid into a trust fund for ~5 directors. Now if that is not blatant snout in the trough-ism I don't know what is!
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The threat, I would say, is this new V/W Fox car.
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Whatever, it will probably ride better than most Euro-hatches. Why have new cars now got ultra low profile tyres requiring loads of energy sapping PWS and giving a bumpy ride. Give me 70-section tyres, 15" rims any day. No bumpy rides after that. The indicar will be fine in that respect.
Whats the best riding car on the roads today - answer Mercs. Why? because they fit higher profile tyres. Try a volvo S60 - ridiculous 55-section tyres for a family car. I felt every pimple on the road the day I had one.Merc C200 65-section tyres - no problem; no pain.
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