Kevin Howe: A new dawn breaks in the East for the sole survivor of the British car industry

As MG Rover celebrates its 100th birthday, its boss tells Tim Webb of the overseas deals that could secure the future of the Longbridge plant

In the tiny museum at Longbridge, MG Rover's headquarters, a favourite saying of the late Lord Austin, whose company merged with Rover, hangs on the wall: "Most everything worthwhile is born of some dreamer's dream."

But BMW, MG Rover's former owner, clearly did not agree. In 2000 it ditched the carmaker, which was saved from closure by local businessmen who bought it from BMW for a nominal £10. As losses continued to mount, few people gave it much hope of survival in the cut-throat global industry. But last Thursday, as the company celebrated 100 years as a carmaker, signs of life were at last stirring at its Longbridge plant in the West Midlands.

A John Bull lookalike, complete with handlebar moustache and brown leather boots, was outside the main gatehouse greeting visitors. More importantly, MG Rover's new Chinese partners were also on site to talk with management and its owners about the joint venture that could secure the company's long-term future.

Meanwhile, in the boardroom, Kevin Howe, appointed chief executive of MG Rover in 2000, was giving The Independent on Sunday a rare insight into Britain's last remaining major independent carmaker.

"From a confidence and reputational point of view, the business was in a bad way," he recalls. "It had been dragged through a hedge backwards. There was a feeling that Rover had been abandoned. But the workforce was motivated and wanted to prove everyone - and especially BMW - wrong."

The upheaval - and the coverage by the press - did not help the company's image, he says. "The Rover brand was damaged by what happened to the business. It suffered at the hands of the press."

Howe has since worked at revitalising the brand. "Under BMW, Rover became associated with respectability and tradition, which was a strength. But somewhere along the line, technological innovation may have been left behind."

MG Rover - which incorporates the MG and Rover brands - launched a new series of MG sports cars in 2001. In 2002 it also launched a new version of its famous MGF roadster, synonymous with the MG brand. More recently, it has put two new, smaller cars on the market: the CityRover (a joint venture with Indian carmaker Tata) and Streetwise, a version of the Rover 25.

Some industry commentators have criticised the new cars for being too similar to previous models, but Howe says it is important to maintain the Rover look. "We have not pretended to people that they are brand new. We think there is a strength in an evolutionary approach." But he adds: "The new cars we are planning will be more radical than those under BMW."

In an industry where economies of scale count, he knows the business is too small to survive in its present form. In the year to May this year, 40,000 new MG Rover cars were registered in the UK (its main market), compared to 166,000 by Ford, according to the Society of Motor Manufacturers and Traders. Unlike the big players, which mass-produce in plants all over the world, MG Rover has only one plant at Longbridge and makes cars to order. Chris Bowen, director of operations, says: "We can't afford to have thousands of cars that we can't sell, sitting in fields. But it makes us more flexible because we manufacture to customers' specifications."

European carmakers face rising competition from Asian companies such as Tata which have lower production costs. "The industry is a huge ocean with great big waves," Howe says. "We are a little boat bobbing around. We are still floating but it gets harder every week. To remain prosperous you have to go to the emerging markets."

MG Rover is looking east for salvation. It signed a joint venture deal last month with China's state-owned Shanghai Automotive to add to its existing partnership agreements with Tata and Malaysia's Proton. MG Rover has not revealed what the agreement with Shanghai involves, but Howe denies, as some have claimed, that it will lead to MG Rover moving to China and closing Longbridge.

The terms have yet to be finalised but Howe says the deal could involve working with partners to source components, as well as sharing development costs, for example by swapping one newly designed car for another. It has been reported that MG Rover wants to build the replacement for its Rover 45 mid-range car in China, and build a people carrier, but Howe is tight-lipped: "Which cars we make will depend on how much money we have available and what our partners decide."

The deals will give MG Rover access to the Asian market where, Howe says, the Rover brand is strong. It will also increase its buying power and cut costs. MG Rover buys in all its components, leaving it at the mercy of suppliers to keep its factory lines rolling. Indeed, on Tuesday last week, a problem with its suppliers almost caused production to grind to a halt. If it were part of a wider network, for example with its Asian partners providing some components, this would be less likely to happen.

Recently, the new owners faced accusations of asset stripping over their restructuring of its business, having not helped matters by setting up a £13m executive pension fund. They reorganised MG Rover, separating the carmaking business from its valuable property, leasing and engine manufacturing subsidiaries. The thinly veiled implication was that they were preparing to take the money and run.

The episode obviously rankles with Howe. "We took a company which was in real trouble and losing lots of money," he says. "The business was so opaque that not even BMW knew how much money was being lost. The auditors would not allow it [asset stripping] even if we wanted to. People out there [workers on site] aren't even talking about it."

Peter Beale, one of the four directors of the Phoenix consortium that now owns MG Rover, pops into Howe's office and chips in: "If we had not [restructured] we would have lasted six to nine months. With the restructuring, if there is a disaster with one company, the others can carry on. The cash from the subsidiaries goes directly to MG Rover group.

"You can understand a trade union questioning whether it's value for money," he continues. "But I used all my personal assets to do this deal. I even had to borrow money. I have risked everything I've got."

Howe admits that the chances of MG Rover being bought by another big player again are slim. It must stand or fall on its own - with a little help from the Orient.

BIOGRAPHY

Born: 1961.

Education: HNC in business studies from Staffordshire University; MBA from the University of Warwick; honorary doctorate from Staffordshire University (July 2001).

1977-85: Various jobs at Michelin Tyres, first as apprentice, then as programmer, designer and analyst.

1985-89: Systems manager for General Electric in the United States.

1989-99: Managerial roles at Rover Group, including managing director of small and medium cars.

2000: Managing director of fan systems division at Rolls-Royce.

2000 to date: Chief executive of Phoenix Venture Holdings and MG Rover Group

Interests: Good food, fine wine, sport and fast cars.