The four directors at the centre of the MG Rover collapse could walk away from the wreckage of Britain's last big independent car manufacturer with millions of pounds of extra cash, The Independent on Sunday can reveal.
Amid mounting anger last night among more than 5,000 workers facing redundancy, it emerged that the so-called "Phoenix Four" directors, led by John Towers, are the biggest creditors to MG Rover. This means that the directors, who have already made about £40m from the company after buying it for £10 each, will have the largest claim to any proceeds raised from the sale of the carmaker's assets, PricewaterhouseCoopers, the administrator, confirmed.
With union officials branding them "morally bankrupt", and one minister saying the directors should personally contribute to redundancy packages, the disclosures last night inflamed the mood of those being made redundant.
"We have been stabbed in the back," said one worker outside the plant. "How can the company not have been making money? It should be investigated." Patricia Hewitt, the Trade and Industry Secretary, yesterday ordered an inquiry into the transfer of money and assets between MG Rover and the Phoenix directors' other companies. She also called for the directors to make a personal contribution towards supporting the workforce, saying: "Where entrepreneurs take a risk they should be entitled to big rewards. But that is not what we are talking about here. The company has not been a success and it was virtually given to them by BMW."
The dispute over the Phoenix Four's financial affairs intensified on Friday, 24 hours after MG Rover collapsed after 100 years of car making. The closure followed the decision earlier this month by the Chinese company Shanghai Automotive Industry Corporation to pull out of plans to form a joint venture with MG Rover because of concerns the Longbridge-based company would go bust. Up to 20,000 more jobs could also be lost among MG Rover's suppliers in the Midlands.
The original loan from BMW is repayable in 2049. The businessmen repackaged the loan via a separate holding company and reloaned it to MG Rover under a separate arrangement at a commercial rate of interest. MG Rover, which went into administration on 8 April, must pay the loan back to the directors' holding company now, although it is unlikely to receive anywhere near the £427m due.
Sir Brian Nicholson, who is leading the investigation, will focus on what the four businessmen did with the £427m interest-free loan which they received from BMW.
The directors last night hit back at suggestions of accounting irregularities. Their statement said: "The suggestion that a black hole of £400m or any other accounting irregularity could exist in a business which has been the subject of not only annual audit by Deloitte & Touche but, over the past years, has been examined by a Trade and Industry Select Committee, finance experts from the trades unions and most of the large accounting firms in the UK is ridiculous.
Mr Towers said: "Some of the calculations I have seen do not even include closing stock and asset figures. This is a simple issue of addition and subtraction that even a child of seven could cope with and it is extremely disappointing that so-called business experts chose to get it so wrong."
Peter Beale, the Phoenix chairman, said: "Our accounts have already been the subject of intense scrutiny over the last five years and we will continue to work openly with any appointed body."Reuse content