'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
election 2015The 10 best quotes of the campaign
A caravan being used as a polling station in Ford near Salisbury, during the 2010 election
election 2015The Independent's guide to get you through polling day
David Blunkett joins the Labour candidate for Redcar Anna Turley on a campaigning visit last month
voicesWhat I learnt from my years in government, by the former Home Secretary David Blunkett
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Editor-in-chief - Financial Services - City, London

£60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Guru Careers: Management Accountant

£27 - 35k + Bonus + Benefits: Guru Careers: A Management Accountant is needed ...

Guru Careers: Project Manager / Business Analyst

£40-50k + Benefits.: Guru Careers: A Project Manager / Business Analyst is nee...

Day In a Page

General Election 2015: ‘We will not sit down with Nicola Sturgeon’, says Ed Balls

'We will not sit down with Nicola Sturgeon'

In an exclusive interview, Ed Balls says he won't negotiate his first Budget with SNP MPs - even if Labour need their votes to secure its passage
VE Day 70th anniversary: How ordinary Britons celebrated the end of war in Europe

How ordinary Britons celebrated VE Day

Our perception of VE Day usually involves crowds of giddy Britons casting off the shackles of war with gay abandon. The truth was more nuanced
They came in with William Caxton's printing press, but typefaces still matter in the digital age

Typefaces still matter in the digital age

A new typeface once took years to create, now thousands are available at the click of a drop-down menu. So why do most of us still rely on the old classics, asks Meg Carter?
Discovery of 'missing link' between the two main life-forms on Earth could explain evolution of animals, say scientists

'Missing link' between Earth's two life-forms found

New microbial species tells us something about our dark past, say scientists
The Pan Am Experience is a 'flight' back to the 1970s that never takes off - at least, not literally

Pan Am Experience: A 'flight' back to the 70s

Tim Walker checks in and checks out a four-hour journey with a difference
Humans aren't alone in indulging in politics - it's everywhere in the animal world

Humans aren't alone in indulging in politics

Voting, mutual back-scratching, coups and charismatic leaders - it's everywhere in the animal world
Crisp sales are in decline - but this tasty trivia might tempt back the turncoats

Crisp sales are in decline

As a nation we're filling up on popcorn and pitta chips and forsaking their potato-based predecessors
Ronald McDonald the muse? Why Banksy, Ron English and Keith Coventry are lovin' Maccy D's

Ronald McDonald the muse

A new wave of artists is taking inspiration from the fast food chain
13 best picnic blankets

13 best picnic blankets

Dine al fresco without the grass stains and damp bottoms with something from our pick of picnic rugs
Barcelona 3 Bayern Munich 0 player ratings: Lionel Messi scores twice - but does he score highest in our ratings?

Barcelona vs Bayern Munich player ratings

Lionel Messi scores twice - but does he score highest in our ratings?
Martin Guptill: Explosive New Zealand batsman who sets the range for Kiwis' big guns

Explosive batsman who sets the range for Kiwis' big guns

Martin Guptill has smashed early runs for Derbyshire and tells Richard Edwards to expect more from the 'freakish' Brendon McCullum and his buoyant team during their tour of England
General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

Miliband's unlikely journey from hapless geek to heart-throb

He was meant to be Labour's biggest handicap - but has become almost an asset
General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

On the margins

From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

'This is the battle of young Egypt for the future of our country'

Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

Why patients must rely less on doctors

Improving our own health is the 'blockbuster drug of the century'