Assets dispute threatens new model plans at Rover

Fears that MG Rover’s plans to remain a volume car producer are being stalled by a wrangle with former owner BMW over the value of the company’s assets.

Fears that MG Rover’s plans to remain a volume car producer are being stalled by a wrangle with former owner BMW over the value of the company’s assets.

Industry analysts fear the dispute will force Rover to divert money originally earmarked for new product development into operating expenses.

A figure of £741m was put on MG Rover’s assets when it was sold by BMW to the Phoenix Consortium for £10 in May. The deal included a £575m dowry from the German carmaker. More than 50,000 unsold cars worth £600m were also signed over to Phoenix, which it planned to use to secure a £200m loan from US bank First Union.

But differences between the two companies remain over the value of Rover stock, contract leases and assets at the Longbridge plant. Accountants will be appointed to resolve the matter and put an independent valuation on the company’s assets. It is expected to be at least two months before the matter is resolved.

In the meantime MG Rover will not be able to finalise its balance sheet or sign completion accounts with BMW. And it will also find it difficult to secure fresh lines of credit, say analysts.

Dr David Morris, dean of the Coventry Business School, said: ‘If they come out of this valuation worse than they reckoned at the time then a natural casualty is likely to be investment in the new models. They would be using the money to keep the business running rather than in new model development.’

MG Rover plans to produce four new models next year on its existing platforms at a cost of £100m. These are a Rover 75 estate and new MG versions of the 25, 45 and 75, and are part of the company’s bid to hit its volume production target of 200,000 cars a year. But it will need to replace its 25 and 45 platforms with one new one in the next few years.

Professor Garel Rhys, director of the Centre of Automotive Industry Research at the Cardiff University Business School, said: ‘The company needs a new 25/45 platform, ideally from a joint venture with someone, but they could also buy in an existing platform. But for this to happen, the company needs to be in a position of financial strength.’