MPs accuse owners of asset stripping AA motoring group

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The Independent Online

The private equity groups that own the AA motoring organisation are accused of "greed" and "blatant asset stripping" in a motion to be tabled in the House of Commons.

The groups, CVC and Permira, are planning to borrow about £500m on the basis of the AA's assets in order to pay themselves a dividend, it is understood. This would take the AA's total debt to £1.8bn, or some £278,000 per employee, according to the GMB general union.

News of the Early Day Motion, to be tabled by the Labour MP Gwyn Prosser, comes amid growing concern about the role played by private investors in British industry.

The Financial Standards Authority is investigating the private equity market to ensure it has sufficient regulatory powers to ensure "transparency and disclosure".

The motion by Mr Prosser, a GMB member, calls for a change in company law to prevent "speculators" enjoying the protection of limited liability. It points out that some 3,400 of the 10,000 staff have been made redundant, putting the remaining workforce under "excessive pressure". Some motorists had been abandoned at the roadside as a consequence, the motion says.

It expresses concern at the 30 per cent rise in membership fees while company profits doubled to £100m and says that the interests of customers and employees had been "jeopardised by the greed of venture capitalists like Permira and CVC".

Mr Prosser said that such private equity groups were "hollowing out" companies and burdening them with massive debt which had implications for employees' pensions. "They are here today and gone tomorrow and simply want to make a quick buck," he said.

Yesterday AA patrol staff were instructed to salute members at the roadside. The old practice was reinstated for 24 hours to mark the introduction of a new livery for the AA's vehicles.

Paul Maloney of the GMB said: "To double profits the AA are exploiting their workforce, fleecing their customers and generally reducing the service." The consumer watchdog Which? recently reported that the AA fell from first to third among motoring organisations when it came to response times.

An AA spokeswoman said Mr Prosser's motion "trotted out" the arguments of the GMB, but she refused to comment in detail about the allegations. "There are inaccuracies in their claims. Nobody has approached us for a response and that includes the MP. We are happy to have a reasoned conversation with Mr Prosser."

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