Phoenix Trust may not rise from the ashes of Rover as DTI plans new probe

Trustees worry that the assets left for the car maker's workers may be worthless
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Concern is growing that the trust being set up for MG Rover's 5,500 redundant workers by the Phoenix Four, the former owners of the bust car maker, could be worthless.

Concern is growing that the trust being set up for MG Rover's 5,500 redundant workers by the Phoenix Four, the former owners of the bust car maker, could be worthless.

The three independent trustees who will administer the fund - called the Phoenix Trust - have also hired lawyers to study the proposals before signing up to the scheme, which could happen in the next few days.

The Transport and General Workers Union (T&G), which represents many of the workers, is planning to put forward a fourth trustee.

But the T&G's regional secretary, Gerard Coyne, said: "We are only prepared to put someone forward once we are comfortable with the motives of the Phoenix Trust. We have to make sure it is vetted."

The news comes as the Secretary of State for Trade and Industry, Alan Johnson, is expected to launch a fresh probe into the financial affairs of the MG Rover on Tuesday.

The Phoenix Four have promised to transfer all their remaining assets relating to MG Rover, including the Studley Castle conference centre, from the carmaker's former parent company, Phoenix Venture Holdings (PVH), into the trust. According to John Towers, former MG Rover chairman, these assets could be worth between £10m and £30m.

But a spokesman for PVH admitted the trust could be worthless if creditors, owed £1.4bn by MG Rover, make successful claims against the parent.

"The value of the assets depends on how aggressive creditors are at claiming money," he said. "There are no guarantees." The Phoenix Four will not retain any assets relating to MG Rover, he stressed, and any proceeds from their claims against the car maker would also be paid into the trust.

Another spokesman said it was normal for lawyers to consult on business proposals. "The trust is above board. PVH is keen to maximise as much as possible for workers."

The trustees are also not clear how much the trust will be worth. One of the trustees, who did not want to be named, said: "It's difficult to work out. We do not know how valuable the assets will be."

Once the trust is set up, the trustees will decide what to do with the assets and how to distribute them.

MG Rover's administrator, PricewaterhouseCoopers, is examining bids for the whole of the business, as well as for parts of it such as the MGTF sports car division. If MG Rover is bought outright by one company, then an option is to pledge the trust's assets to help support large-scale car production at the Longbridge site.

The expected announcement by Mr Johnson that the DTI will launch a new probe into MG Rover follows the conclusions of an earlier investigation by Sir Bryan Nicholson, the chairman of the Financial Reporting Council. He concluded that "a number of questions" remain unanswered about the collapse of the car maker. There is no evidence of wrongdoing on the part of any of the Phoenix Venture Holdings directors.

It is understood that Mr Johnson is considering two options. First, he could ask the DTI's Companies Investigation Branch to look into the affair. This team has the power to investigate over 50 potential offences under the Companies Act and can search companies' premises and seize documents.

Second, Mr Johnson could call on a QC, who would work with a partner of an accountancy firm, to lead the probe. This method has been employed for high-profile company investigations, such as the Maxwell affair and the collapse of Transtec. However, such investigations are protracted and critics say that that the decision to farm out the work is often politically motivated.

A leading company lawyer said: "The official reason the Government will give is that it needs a different set of skills and resources for the investigation. The unofficial reason is that they want to distance themselves from the investigation."