Rover in the red again

Troubled car company MG Rover has driven into the red again, it was announced today.

Troubled car company MG Rover has driven into the red again, it was announced today.

The Midlands-based firm reported a £77 million loss for 2003, compared with a £95 million in 2002 - and warned of a bumpy road ahead.

Rover's parent company Phoenix Venture Holdings said losses had been reduced for a fourth successive year, but that worldwide vehicle sales has dipped by 2.4% compared with 2002.

Lower sales in 2004 together with the need to continue dealer recruitment in Europe would "make it impossible for the group to continue to reduce its losses", the company said.

Phoenix chairman John Towers, who, with other Midlands businessmen, took over the company from BMW in 2000, has faced criticism over the establishment of a pensions trust fund for directors and senior staff.

Today, Phoenix said the contribution to the trust fund, which was £12.95 million in 2002, was £3.58 million in 2003.

The company added that in 2002 the highest-paid director received £3.24 million and that in 2003 the top pay was £1.55 million.

It was also announced that Phoenix directors' salaries, including benefits, increased by 1.6% to a total of £2.2 million in 2003.

Phoenix Venture Holdings group chief executive Kevin Howe said: "In an increasingly challenging environment for the automotive industry, we have reduced the group's losses for the fourth consecutive year to a level that is now less than 10% of that in 1999, the last full year before we acquired the business from BMW.

"Our focus is now firmly on the future. We continue to invest in the development of the MG and Rover brands and to review our cost base as we work towards the planned collaboration with SAIC (Shanghai Automotive Industry Corporation) announced in June 2004."

Phoenix said today that in 2003, worldwide vehicle sales fell by 2.4% to 144,900, with a corresponding decline of 4.0% in turnover, compared with 2002.

It added that the gain in sales of large platform models and the TF sports car were more than offset by the decline in demand for the Rover 45 and MG ZS.

It had already been suggested that the Rover collaboration with Indian car-maker Tata was under strain.

Today, Phoenix said that the sales of the CityRover, which Tata is making for Rover, had "not yet reached planned levels because of a variety of issues including a delayed programme".

Phoenix went on: "We are currently undertaking with Tata a comprehensive review of the overall competitiveness of CityRover following the recent introduction of new challengers into this fiercely price-competitive sector of the market."

On the deal with SAIC, Phoenix said it was hoped that the joint venture agreement could be signed "early in 2005".

The Phoenix report to shareholders continued: "Once the SAIC agreement has been approved we can expect renewed confidence in the future of the Group and the continuation of MG Rover vehicle production both at Longbridge (in Birmingham) and elsewhere in the world."

It went on: "The latest 2004 models have been well received, but this has not translated into stronger sales because of changes taking place in the UK dealer network.

"Many MG Rover dealers have taken advantage of the new Block Exemption (new European rules allowing more dealers to sell cars) legislation to add further franchises.

"These dual franchise outlets now account for almost 60% of the network, however, they have achieved lower sales than the remaining solo dealers in 2004.

"The group is stepping up its dealer recruitment activities, both in the UK and abroad: in 2004 some 60 new continental dealers have joined MG Rover and the target is for a further 100 plus for 2005.

"The company looks forward to the new dealers raising sales both in the UK and on the continent."

The running of MG Rover was included in an inquiry into the motor industry earlier this year by the House of Commons Trade and Industry Committee.

The committee's chairman, Martin O'Neill, accused Mr Towers and Phoenix vice chairman Peter Beale of "financial sleight of hand".

But speaking at the Birmingham Motor Show in May this year, Trade and Industry Secretary Patricia Hewitt said: "Company directors who take big risks and achieve big success deserve big rewards."

The trade and industry committee's report earlier this autumn cleared MG Rover bosses of allegations of financial mismanagement and asset-stripping.

The report also rejected claims that Phoenix was secretly planning to close the Longbridge factory. But MPs warned that Phoenix had to be be more open about its business dealings.

In the report to shareholders today, Mr Towers said: "The (Trade and Industry) committee recognised the challenges we face and found our approach consistent with any other vehicle manufacturer."

Mr Towers said Rover currently operated final salary pension schemes for employees that were among "the most beneficial in UK industry" but were also a large expense for the company.

But he added that the Rover board wanted to carry on with this pension strategy and that "our long-term financial plans provide the necessary funds for this purpose".

It emerged that although the total remuneration for the highest-paid director fell from £3.24 million in 2002 to £1.55 million in 2003, the salary part of the overall package rose from £288,089 in 2002 to £817,486 in 2003.

The trust fund contributions made up £2.9 million of the 2002 total package, but only £620,000 of the 2003 package.