MG Rover, the British car maker that was rescued from collapse in May last year, is on target to break even next year after more than halving its losses in the first eight months of operations.
The company, which was bought from BMW for a symbolic £10 by the Phoenix consortium, made an operating loss of £254m last year compared with a loss of £780m in its last full year under the German car maker's ownership.
MG Rover also announced a stronger-than-expected cash position with £329m of net cash in the business. This does not include the latest instalment of the £500m interest- free loan BMW is providing or the extra £65m that it handed over following the signing of completion accounts with MG Rover.
Kevin Howe, MG Rover's chief executive, said yesterday that it was on course to reduce operating losses this year to under £200m and make a small operating profit in 2002.
He also pledged that MG Rover would announce plans to launch a new medium-sized car to replace its Rover 45 and 25 models before the end of the summer. The car, which will go on sale in 2004, is likely to be based on the platform of the Rover 75.
The touring version of the Rover 75 and three new MG-badged versions of the 25, 45 and 75 – the ZR, ZS and ZT – go on sale later this month and are expected to boost sales for the year to around 180,000 cars.
Output is scheduled to rise to a little over 200,000 cars next year and then jump again when the new medium-sized car goes into production.
Mr Howe said: "When we took over the situation was pretty grim but from a standing start we have done better than we expected on all aspects of the business plan. We have sold more cars than we planned, lost less than we expected and have more cash in the company than we thought we would."
Mr Howe said that on an annualised basis, losses had fallen by £260m from the level of 1999 thanks to lower restructuring and interest charges and losses on second hand car sales. Tighter control of product development costs and sales and marketing budgets had also produced savings of £100m.
Including a "negative goodwill" element of £284m to reflect the discount to book value that the business was bought for, MG Rover made a pre-tax profit of £35m. Shareholders funds at 31 December 2000 were £28m.Reuse content