Slump in MG Rover registrations overshadows £42m lease deal

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The Independent Online

MG Rover, the embattled car manufacturer, will today report a fresh slump in sales, taking the shine off a £42.5m sale and leaseback deal involving its Longbridge plant.

The company's UK registrations fell 27 per cent in December, following a 32 per cent slide in November, resulting in a 3 per cent decline in MG Rover's UK sales for 2003 to about 96,000.

The collapse in sales in the final two months of the year follows a barrage of adverse publicity over boardroom pay-outs for the four directors of Phoenix Venture Holdings, which bought the car maker from BMW for £10 four years ago.

News of the continued sales slump may overshadow an agreement MG Rover announced yesterday with the property developer St Mowden Properties to mortgage half the 475-acre Longbridge site in Birmingham. Under the deal, MG Rover has sold 228 acres of land including 4.25 million sq ft of buildings to St Modwen and will lease back the land for an initial rent of £3.6m a year with annual uplifts.

The lease will last up to 35 years with an option to renew after that, and covers the part of the Longbridge site devoted to car manufacturing.

Following the earlier £16.6m sale of 60 acres of surplus land to Advantage West Midlands for redevelopment as a high-technology park and retail and leisure facilities, MG Rover now owns less than 200 acres of the Longbridge site. Most of the land owned by MG Rover is occupied by its engine building division Powertrain.

Kevin Howe, chief executive of MG Rover, said the proceeds from the sale and leaseback deal with St Modwen would be ploughed back into its car business to help support product development.

He added that there were no plans to dispose of the 186 acres of land now occupied by Powertrain.

Phoenix Venture Holdings cut its losses in 2002 to £95m but within that the core MG Rover car manufacturing operation lost £111m. Mr Howe warned that while these losses could be sustained in the short-term, MG Rover must start to contribute positive results.

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