Heads or tails, Phoenix Four couldn't lose

The offer by the four directors of Phoenix Venture Holdings to put £10m of their "personal money" into the doomed rescue of MG Rover will have raised a wry smile among those who have witnessed the slow and agonising death rattle of this once proud car maker.

The offer by the four directors of Phoenix Venture Holdings to put £10m of their "personal money" into the doomed rescue of MG Rover will have raised a wry smile among those who have witnessed the slow and agonising death rattle of this once proud car maker.

For virtually every penny of that £10m would have been money the four men, led by the PVH chairman John Towers, have extracted from MG Rover in one way or another since they bought the business from BMW in May 2000 for a token £10.

In total, the Phoenix Four as they have become known, have made about £40m from their involvement while the car company itself has remained obstinately and heavily in loss.

The £40m represents a handsome return by any standards on the £60,000 of risk capital each of the men put up. Not only that, they received a dowry worth £500m from BMW when they acquired MG Rover and the sprawling 570-acre Longbridge car plant, made up of a £427m interest-free loan not repayable until 2049, and stocks of cars.

That £500m dowry has now all gone. Some of it, but only a tiny portion, was spent on investment into new models and makeovers of MG Rover's ageing stable of saloons.

In 2003, for instance, the latest year for which accounts are available, just £4.5m was spent on research and development.

The previous year, the figure was zero. Some of it was frittered away on expensive PR stunts for the company, such as MG Rover's bizarre decision to sponsor the Le Mans 24 hour race one year.

But the vast bulk of the money was used to pay the bills and prop up the company as revenues plunged and MG Rover began to run out of road.

In the year to the end of December 2003, the company lost £77m and its cash pile had shrunk to £124.7m. As the receivers from PriceWaterhouseCoopers study the books over the next few days, they will discover how little of that dowry is left and how big MG Rover's liabilities now are. The one cash pile that cannot be touched, however, is that amassed by Mr Towers and his fellow PVH directors - Peter Beale, Nick Stephenson and John Edwards. The estimate of £40m is made up from £25m in salaries and pension contributions, a further £10m loan note which they cashed in during 2003, plus the interest on the loan, and some £6m they have made from the winding up of MGR Capital - the car loans and financing arm of MG Rover.

Some estimates put the total amount of money made by the four directors as high as £100m. But to arrive at that figure it is necessary to make some generous assumptions about the value of certain assets left in the group, most notably the Powertrain engine business which, with the car assembly lines at Longbridge now idle, has just lost its biggest customer.

The criticism of the four men is not so much about the way they ran the car-making side of the business - no one fought harder than Mr Towers to try to pull off the rescue deal with China's Shanghai Automotive Industry Corporation. Rather, it is to do with the manner in which they hived off its profitable property, engine and car-leasing businesses into a master company, Techtronic, wholly owned by the four directors, leaving MG Rover's workforce and dealers with a stake in only the loss-making car manufacturing side of the business.

For instance, one of the MG Rover assets that transferred to the ownership of the four directors was Studely Castle, a grand 28-bedroom mansion set in 30 acres of Warwickshire countryside, which the company used as a conference centre.

Another, more substantial asset was Powertrain, the business which made engines for MG Rover but also for external customers such as Land-Rover, now part of the Ford group.

The Phoenix Four always argued the complex ownership structure they created was to give PVH maximum flexibility. They also maintained the £75m or so that PVH netted from the sale of most of the Longbridge site in a series of property deals between 2002 and 2004 was ploughed back into the car-making side of the business.

But that did not stop Martin O'Neill, the chairman of the Commons Trade and Industry Select Committee, from accusing the four of "financial sleight of hand" when they appeared before MPs in March last year. Nor did it prevent a senior BMW executive from branding them "the unacceptable face of capitalism" eight months later.

Perhaps the most bitter criticism of the four was the way they feathered their own nests through a £15m pension fund at the same time as the pension scheme for the workforce was plunging into deficit.

At the end of 2003, again the latest date for which there are figures, the scheme was in deficit to the tune of £67m.

It is also worth noting the parts, distribution, racing and leasing arms of PVH remain under the control of the four men.

BMW's £500m would probably have been better spent closing down Longbridge, topping up the pension fund and paying decent redundancy money to its 6,000 workers. As it turns out, only four of those employed there stand to walk away with anything.

EXECUTIVES IN THE FIRING LINE

JOHN TOWERS

The son of a vehicle maintenance engineer - and previously Rover chief executive, he is credited with building the car-making alliance with Honda - he received a hero's reception when he rescued Longbridge in May 2000 for £10. But the chairman of Phoenix Venture Holdings has been the focal point for accusations of corporate greed

JOHN EDWARDS

The owner of a main Midlands Rover dealership, Edwards of Banbury, he was so concerned about the dealer network he was first to jump on board Towers' bid for Rover when BMW decided to sell. Like the other founding directors, he invested £60,000 in MG Rover. They shared a £13m windfall and set up a £16m pension fund on top of their salaries

PETER BEALE

The finance director of Edwards of Banbury followed his boss, joining the Phoenix consortium as vice-chairman. When the four were accused of "financial sleight of hand" during the extraordinary public grilling by MPs on the Commons Trade and Industry Select Committee, Beale said their conduct was "a perfectly normal, almost textbook way of running companies"

NICK STEPHENSON

Previously worked for a small-scale sports car manufacturer, Lola Cars, and was an integral part of Towers' team during his days as chief executive of Rover, heading the product and design division. He flew to China last week to continue negotiations with the Shanghai Automotive Industry Corporation, in the hope of saving the £1bn deal