'The unacceptable face of capitalism'

The most senior BMW executive in Britain has launched an astonishing attack on the directors of MG Rover, describing them as "the unacceptable face of capitalism".

The most senior BMW executive in Britain has launched an astonishing attack on the directors of MG Rover, describing them as "the unacceptable face of capitalism".

The phrase was coined by Edward Heath in 1973 to describe the former Lonrho chief executive Tiny Rowland. But Jim O'Donnell, managing director of BMW (GB), said that nowadays it could equally apply to the five directors of Phoenix Venture Holdings, the parent company of MG Rover. Referring to the five men - John Towers, Peter Beale, Kevin Howe, John Edwards and Nick Stephenson - Mr O'Donnell said: "I think it is a disgrace that the Rover board pay themselves more that the board of BMW if you include pensions. It is the unacceptable face of capitalism."

Mr O'Donnell also questioned the amount of risk the Phoenix Five had taken when they bought MG Rover from BMW for a nominal £10 in May, 2000. They each put up £60,000 of risk capital and, in return, BMW injected £550m into the Longbridge-based car maker in the form of an interest-free loan repayable in 2049.

Last year the five Phoenix directors took home more than £16m, including salaries, pension trust contributions, loan note payments and other income even though MG Rover lost £89m. The highest-paid director was MG Rover's chief executive Kevin Howe, who received a total of £1.55m. Last year the board of BMW, led by its chairman Helmut Panke, received €10.7m (£7.5m) while the company made a profit of €3.2bn (£2.24bn). BMW does not disclose the pay of individual directors.

This is not the first time the Phoenix directors have been criticised over the amount they have taken out of MG Rover. Earlier this year, the chairman of the Commons Trade and Industry Select Committee, Martin O'Neill, accused Mr Towers and Mr Beale, respectively chairman and vice-chairman of Phoenix, of using "financial sleight of hand" to line their own pockets and failing to exercise good corporate governance.

Mr O'Donnell's outspoken attack came as fresh details emerged of inter-company payments between the various private businesses that the Phoenix directors own. Techtronic, the ultimate holding company used by Mr Towers and his fellow directors to acquire MG Rover, paid a £32.5m dividend to Phoenix Venture Holdings, even though it made an operating loss of £119m. Meanwhile, Phoenix Venture Holdings paid £11m of interest on the BMW loan back to Techtronic. Since 2000, it has received £70m in dividends and paid £40m in interest payments.

Separately, Mr O'Donnell claimed that new rules being imposed on the motor industry next year by the Financial Services Authority in line with a Brussels directive could force up the cost of car warranties by as much as a quarter.

The legislation, introduced in compliance with the Insurance Mediation Directive, means that car warranties must be classed as insurance policies. Therefore, dealers will have to be registered with the FSA and warranties will become liable to Insurance Premium Tax, VAT on the tax and whatever mark-up the insurance company puts on top, costing the car industry millions of pounds. The warranty, for instance, on a three-year old BMW3 series could go up from £510 to £637.50.

"I believe this is a case of the law of unintended consequences," he said. "What a farce, the FSA can now dictate who can and cannot service one of your cars."

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

The Jenrick Group: Night Shift Operations Manager

£43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...

SThree: Trainee Recruitment Consultant - LONDON

£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...

Day In a Page

Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect
Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all
The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there