www.channel4.com/apps26/4car/jsp/main.jsp?lnk=211&...6
After recent troubles, I guess a quick cash fix had to be found, but wonder if this really is the slippery slope, at least for UK production. For a company that from personal experience brings the excellent 75/ZT (and though not from personal experience, the apparently fantastic V8 versions of the latter) that would be a shame (even if balanced by the apparently woeful City Rover).
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Oh dear, they have no decent, modern cars, and no money to develop one. £43m is nothing, and not enough to develop even one new decent model.
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<<< no decent, modern cars >>>
Not true. 75/ZT is excellent in all but the suspect 1.8 turbo guise that appears to have been cobbled together to meet a need.
<<<£43m is nothing, and not enough to develop even one new decent model.>>>
Unfortunately very true.
Probably covers the cost of type approving a wing mirror if you're lucky!
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Especially if that wing mirror has built in indicators :-)
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I'm not sure why Rover have chosen to have a cheap quality supermini. I am sure it would have been better to make a more luxurious small car that was a like a baby 75 inside with maybe an MG version that was hotter than the mini cooper S. The cheap small car segment is saturated and I don't think many will buy just because of the Rover badge. The association with India has also come at a bad time. Perhaps they should have talked to Honda and rebadged a Jazz but with a walnut and leather interior ;-)
teabelly
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I'm not sure why Rover have chosen to have a cheap quality supermini. I am sure it would have been better to make a more luxurious small car that was a like a baby 75 inside with maybe an MG version that was hotter than the mini cooper S.
Like the 1100 with Vanden Plas and MG derivatives? Forget cup-holders, get on the new bandwagon with rear picnic tables!
Gareth
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I gather you are talking about the city rover.I havent seen it yet in true life.But gather most are pretty much against it anyway.One thing annoyes me but may not have a bearing on this post.How many buy a video that looks good but is substandard but because they bought it won`t run it down.because it is cheap and also works the other way.it could be more than any other video they looked at but liked it.Then bought it Most will agree if you like it you will buy it and as it has a pretty good name in india could work here.Well not know for a while?
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I thought the reviews of the new cityrover were quite good, not great but good? Personally i hope rover do well they certainly are trying i know the cars are quite old that they are still selling but isn't the new 45 replacement coming out this year or next? Maybe this cash small cash injection may help speed its introduction.
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I've read the article twice and still don't see the commercial sense if MG Rover going to stay put.
Sale of site realises £42.5M
Leased back at £3.6M per annum. Assuming rent is fixed, within 12 years the £42.5M has gone on rent. OK, it frees up some capital now, but they will have to do something pretty successful in order to generate the cash to keep paying the rent. This doesn't seem very sustainable.
Or otherwise do they terminate the lease, and move production overseas? My gut reaction is that this must be on the cards.
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I wouldn't read too much into this. BT did a similar thing a couple of years ago but on a bigger scale: sold virtually all its property to a company called Telereal and leased it back. As far as I can see it was just to raise a bit of cash because the markets were screaming about the company's massive debts. I can't see the sense in these arrangements either.
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Its mainly an accounting trick.
One large asset vanishes from the balance sheet and is replaced by a lump of cash. Profit & Loss account now reflects the true profitability as there is no artificial subsidy given by free use of land.
Accountants are happy. Everyone else is confused.
Essentially, Rover's business is making cars (allegedly- there's another thread!) not renting out land. So, owning the land is not their business. Sell the land and rent the space they need to make cars.
I'd say its a sensible move and points towards rather better management than we have been used to from Rover in the past.
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there is no artificial subsidy given by free use of land.
Isn't this 'artificial subsidy' a good thing from the company's point of view? Doesn't the lack of it increase costs in the long run?
It still confuses me but maybe that's why not a businessman.
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Not really - it does increase apparent profits as the car business doesn't have to pay for the use of the land, but the question is whether that subsidy is the best use of the asset.
In theory, if the land is both sold and leased back at its true value then nothing has changed - the cash realised from the sale could then be invested to yield the rent. BUT, once you've done that you have in effect converted an illiquid asset (land) into a liquid asset (cash). Then, if you think you can get better returns from the cash than you would by renting out the land (to yourself) you're quids in.
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"Then, if you think you can get better returns from the cash than you would by renting out the land (to yourself) you're quids in."
Fuzzy logic here.
If anyone can get a better return with cash, why buy the land in the first place? and lose or pay interest depending on how it's financed. The land is a permanent and appreciating asset, with a long term future, cash is not IMHO.
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MG Rover inherited the land rather than bought it.
Giving it more thought, perhaps this enables them to get rid of the older sprawling factories and concentrate their operation in a new purpose built facility. Maybe
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Are you sure that they have sold the whole of the Longbridge site? ISTR that they were going to sell part of it that wasn't much used.
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Apart from the capital return argument anything else, by selling the site now they may feel they can get more for it than they would in future if land prices have peaked and/or they needed to go into liquidation and there were no obvious uses for the site at that time.
I don't think that roughly 8% return on capital (assuming the price is fixed) is too bad a deal for MGR given MGR's current financial state and the risk involved in increased development costs if the company goes belly up.
While I'm unsure about MGR's overall financial security, I can see why this transaction could (rather than definitely would) make sense.
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The land is a permanent and appreciating asset, with a long term future, cash is not IMHO.
Great - so build a property business around it, get people to invest, make money, shower the investors with returns, and make people happy.
At the same time, run a world class car manufacturer, get people to invest, make money, shower the investors with returns, and make people happy.
But why do both in the same company? That just deters investors who want to put their money in one but not the other.
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Some questions.
Who is the Company that have bought the site ?
Who are its Directors I wonder ?
What would happen to the land if MGR went into liquidation (who would own the land) ?
Am I total cynic to fast forward ten years time and see acres of tightly packed shoeboxes with road names such as "Allegro Avenue"
"Marina Drive", "Edwardes Way" and "Red Robbo Close" ?
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Probaly they are setting up in India like everybody else.
After all they are already part of the way there with the new exciting City Rover.
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