Ian Griffiths
Wednesday April 13, 2005
The Guardian

More than a sixth of the 65,000-strong fleet of unsold MG Rover cars bequeathed by BMW to the so-called Phoenix four saviours of Longbridge five years ago have disappeared from the company’s public records, the Guardian has learned.

Some 11,000 cars, worth about £90m, went missing in 2002 from MG Rover’s parent company’s analysis of progress on winding down the car stockpile it inherited from BMW.

Kevin Howe, the chief executive brought in by the Phoenix four Midlands businessmen to run the car company they bought from BMW for £10 in 2000, inexplicably reduces his running total of the stockpile by 11,000 vehicles in his 2002 review of the year.

Each year Mr Howe offers an explanation of the company’s cash position. Each year a reduction in the vehicle stock pile bequeathed by BMW is cited as an important contributor to cash flow.

In his review in the 2001 accounts of Phoenix Venture Holdings (PVH), the private company controlled by the Phoenix four which owns the MG Rover car company, Mr Howe explains that cash flow benefited from: “a further reduction in vehicle pipeline stock, (dealer and company stock) from 41,000 to 34,000”.

A year later, in his review of 2002, Mr Howe says that the company’s cash position has again benefited from “the significant reduction in its finished vehicle inventory which has fallen by 8,000 units from 23,000 units at December 2001 to 15,000 units at December 2002.

But the sudden change in Mr Howe’s figure for finished stock at December 31 2001 from 34,000 to 23,000 units is not explained in the accounts or the chief executive’s statement.

The company was not able to explain the reason for the discrepancy or the wherabouts of the missing 11,000 cars. The difference between the two figures could be easily explained by accounting, disclosure or classification technicalities. But PVH was last night unable to shed any light on the confusion.

“The company is standing by the figures which have been published in the shareholders report,” a spokesman said, refusing to elaborate further.

The BMW bequest of 65,000 finished vehicles to the Phoenix four was an important element of the deal which saw them hailed as saviours of a car company which is now languishing in administration.

As Mr Howe regularly points out, the rundown of the stockpile has represented a significant contribution to the company’s finances.

Stocks were attributed a fair value of £533m when the car business was acquired from BMW in May 2000.

The value of finished goods had fallen to £385.5m by the end of 2000 when, according to Mr Howe, the stockpile had fallen to 41,000 units.

In the year ended December 31 2003, the last year for which accounts have been published, Mr Howe reveals that finished vehicle stocks had almost halved during the year to 7,600 units.

In the PVH accounts for that year a value of £285m is attributed to finished goods and goods for resale. However, in the MG Rover Group accounts for the same period the value attached to finished goods is £166.6m.

Mr Howe has said, in his yearly chief executive’s statements, that the cash from running down the stockpile has been an important contributor to cash flow, which has been largely applied to fund the car company’s mounting losses.

However, he has also pointed out the importance of a £427m interest free loan handed to MG Rover’s new owners in three tranches by BMW as part of the sale of the car company.

The loan and the stockpile of cars were the main components of the BMW dowry for MG Rover which amounted to more than £1bn.

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