Rover heads for last chance saloon

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The Independent Online

The future of Rover and 9,000 of its workers was thrown into fresh turmoil yesterday when BMW warned that it could close the Longbridge plant within a month.

The stark threat from the German car giant came in the wake of the decision of the venture capital group Alchemy Partners to pull out of negotiations to buy the ailing company. In yet another twist in the Rover saga, Alchemy withdrew unexpectedly from talks, citing "contractual problems" over the huge redundancy costs and other liabilities that BMW wanted to hand on.

Stephen Byers, Secretary of State for Trade and Industry, was battling last night to safeguard the jobs at Britain's biggest factory as the German company agreed to new talks with the rival Phoenix consortium. Amid criticism of the Government's handling of the affair, Mr Byers gained a commitment from Werner Samann, BMW board director and head of Rover Cars, that the bid would be given serious consideration and talks would begin within days.

Mr Byers spent most of yesterday locked in talks with Professor Samann and John Towers, the former Rover executive who is leading the Phoenix bid. Crucially, BMW told Mr Byers that it was prepared to provide Phoenix with all the financial information that had previously been made available only to Alchemy.

The end of the "exclusivity agreement" with Alchemy opens the way for Mr Towers to raise the necessary multi-million-pound backing. However, some government insiders expressed caution about the consortium's bid, warning that the Department of Trade and Industry would not agree to a massive injection of state funds to help bail it out.

When the news first broke at Longbridge of the demise of the Alchemy bid, workers reacted with delight at having seen off the venture capitalists and their threat of large-scale job losses. But within hours the mood had changed as BMW warned that it would close the whole plant unless it was presented with a viable buyer by the end of May.

BMW said it was unable to reach agreement with Alchemy because of "certain conditions of contract", believed to be the massive cost of financing 5,000 planned redundancies and pension liabilities. The company made clear that closure of Longbridge was now a clear option, although it would pursue "alternative routes".

Jon Moulton, the senior Alchemy partner who was due to sign a deal with the German company yesterday, revealed that talks had broken down at 6pm on Thursday. "I'm afraid I'm not optimistic of another sale. I think closure is a very likely option, which is something of a tragedy," he said.

Mr Moulton said the German company was ready to offer very little more than statutory severance terms. Yet in an agreement negotiated with BMW an average Rover worker would receive £30,000 in severance pay.

Under the plan put forward by Alchemy to produce a limited number of MG-badged vehicles at Longbridge, the redundancy bill was therefore likely to be around £150m.

Alchemy claimed BMW tabled a number of extra demands on Thursday that made the deal impossible. It remains possible that the venture capitalists might resurface, having withdrawn as a negotiating ploy.

John Hemming, the West Midlands computer millionaire backing the Phoenix consortium, said he was confident the bid would succeed. "There is now a window of opportunity," he said.

Union leaders argued that Longbridge had been given a lifeline - although there was now just a month left to save the 50,000 jobs in the West Midlands that are thought to be dependent on the plant. Sir Ken Jackson, general secretary of the Amalgamated Engineering and Electrical Union, said: "We now have a month to save Longbridge. BMW must pull out all the stops to save the plant."

In a statement, the DTI said that BMW's announcement provided a new opportunity for a viable future for Longbridge, which might provide more jobs than under the Alchemy deal. "Our efforts over the next few weeks will be directed towards achieving a successful outcome which will serve the interests of the workers at Longbridge and the wider community in the West Midlands," it said.

Richard Burden, the Labour MP for Birmingham Northfield whose constituency covers Longbridge, called on BMW to look seriously at the Phoenix bid, but warned: "It is a very dramatic development, but we have seen throughout this saga that one thing has been said and then another thing has been done," he said.

Angela Browning, the Tory trade and industry spokeswoman, blamed Mr Byers personally for failing to get involved at an earlier stage.