MG Rover to shut early for Christmas as UK sales plunge

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The Independent Online

MG Rover is to stop car production for Christmas three days early, meaning that its Longbridge plant in the West Midlands will stand idle from next Tuesday.

The move, for what the company described as stock-taking, follows a slump in sales last month when MG Rover sold a third fewer cars than in November last year, reducing its share of the UK market to 2.5 per cent.

A spokesman maintained that the stock check had been planned. But suppliers are becoming increasingly concerned at the way production and sales at MG Rover have fallen after adverse publicity about the pay deals its directors have awarded themselves.

Last month the company was forced to cease production for a five-day period to allow for "stock re-balancing". There were more cars in dealers' forecourts than they could sell.

MG Rover said that despite the bad publicity, sales for the first 11 months of the year were "broadly in line" with last year. This is true in the UK where MG Rover sold just under 90,000 cars up to the end of November. But overseas sales have fallen sharply and the company is expected to sell 135,000-140,000 cars at best this year compared with worldwide sales of 148,500 last year and 240,000 in 1999, the last full year of BMW's ownership.

The slide in sales is particularly worrying because the company's new small car, the CityRover made by Tata of India, is just going on sale. MG Rover hopes to sell at least 30,000 of the cars in the next 12 months.

Tony Parr, the managing director of the component supplier AP Smith, told BBC radio news that the early closure was "fairly worrying" adding: "It has an effect on us that is quite significant."

The directors of the Phoenix consortium, a group of West Midlands businessmen who bought MG Rover from BMW in 2000, have been criticised over the creation of a £13m trust fund that will benefit themselves and their families.

They have also been attacked over a £10m loan note which the directors awarded themselves in return for transferring 60 per cent of the company to employees and dealers even though they paid just £10 for the company and inherited a £500m dowry from BMW.

Controversial land deals and a transaction which allowed the Phoenix directors to separate MG Rover's profitable finance arm from its loss-making car manufacturing operations have also been criticised. MG Rover lost £95m last year while its pension fund has a £73m deficit.

MG Rover has now agreed to allow a union finance chief to examine its financial structure and accounts to allay fears among the 6,500 workforce that the business is being asset-stripped.