To the knockers in the City, he's a sentimental mug. BMW, one of the world's top car producers, couldn't make a go of Rover. What makes John Towers, head of the Phoenix consortium of local businessmen which this week bought the loss-making company for a nominal £10, think he can do any better? With close ties to the West Midlands, he's let his heart rule his head. Emotions have got the better of economics. He will soon have to face up to the inevitable and close Longbridge, with all the painful social consequences that will entail.
The critics bark on and on. In a week which has also seen saw Ford announce 1,900 redundancies at Dagenham, once again blaming overcapacity in the European car market, the risks do appear to be very real. But if Towers shares some of these worries, he's keeping them well buried. After six weeks of determined silence, and now paraded as the saviour of Longbridge, he insists he would never have got involved in the deal if didn't believe Rover was a viable business proposition.
"I would never have entered into this had there not been a clear possibility of a better business process than that which had existed under the other proposal. If that was not possible, there was no point," he says, carefully. "The only obstacle in my way was my own feeling, having experienced a number of business sales and acquisitions, that we were too late."
Hard-nosed alternative
The "other proposal" involved the disposal of Rover to Alchemy, the hard-nosed venture capital group, which had begun talks with BMW in November, giving it a five-months start over Phoenix, which did not come to the fore until early April.
Doubtful of Rover's future as a mass market producer, Alchemy wanted to downsize the operation at Longbridge, making redundant up to 5,000 workers and selling many of the business' assets. Instead of a full range of models, Longbridge would in future produce low volume sports cars. Rumour suggests Alchemy was receiving the secret backing of some senior ministers and their advisers, who were sceptical of Rover's long-term future and wanted the bad news out of the way before the next election.
To the cynics, the Phoenix consortium's vision for Rover was almost romantic by comparison, seeking to preserve the company as a volume producer and the jobs that went with it. Under the Phoenix proposal all stakeholders in the business - workers, managers and dealers - would own part of the company. Alchemy was in the lead right up to the finishing line - when it withdrew after failing to get sufficient money from BMW to fund the redundancies. Sources in the West Midlands say Alchemy may also have been cheesed off by indications from the local council that it would not grant planning permission for a change of use of parts of the 400-acre Longbridge site.
With Alchemy out of the running, BMW was faced with two choices - either put Rover into receivership or do a deal with Phoenix. After initially appearing unenthusiastic, BMW appears to have decided that selling the assets to Phoenix for a nominal amount and "lending" it £575m for the acquisition was preferable to the uncertain costs and bad publicity associated with closure of a business in its biggest European market.
But BMW first had to satisfy itself that Phoenix had a credible business plan. Sources close to the financing of the Phoenix deal say that if the plan did not stand up to scrutiny and Longbridge went bust in a year or two, BMW was well aware that it might face legal action from creditors to recoup some of the £1.8bn that the company is expected to receive from the sale of Land Rover, hived off from the main business, to Ford.
BMW in pocket
As it is, BMW is reckoned to be coming out of the overall transaction in pocket because the sum total of Rover's net assets and the financial package that it has put together for Phoenix is around £1.2bn in value, less than it stands to get for Land Rover.
The net cash will not, however, compensate for the billion pounds worth of investment that BMW has poured into the company's engineering since acquiring it six years ago. The benefit of that will go to Towers and his partners.
Towers, chief executive of Rover before the BMW takeover, insists that despite all the bad publicity of the past few years it is making some very good cars. "It was not until the proposed deal between Alchemy and BMW was announced that people be gan to hear that the Rover 75 had been car of the year," he says.
His strategy of making a better fist of selling Rover cars than BMW is to leave the manufacturing processes unchanged and concentrate initially on recruiting a new management team and turning the cashflow positive by slashing overheads. "We're going to batten down the hatches, when we spend a pound it will give more than a pound's worth of value," says Towers. Redundancies will be limited to "less than a thousand, we hope".
To cut costs there will be no more attending expensive motor shows, which exist primarily for the benefit of motoring journalists and schoolchildren, neither of whom buy cars, no wasteful sponsorship of sporting events and air travel will be by scheduled flights rather than in the company's fleet of corporate jets.
"We have got some absolutely excellent cars and, without the need to support that huge overhead structure, the pricing position will be more sensible. You have still got that product, that premium engineering in the product, but you have got the ability to market at a more affordable price," says Towers.
No top-down approach
It's thought that the new sales and marketing strategy will involve devolving much more responsibility for pricing and advertising to the dealership network rather than a top-down approach.
Once overheads are under control, Towers plans to do "imaginative things" with existing platforms to develop new sports cars and sports saloons, aided by Nick Stephenson, special projects manager at Lola racing cars and a key member of the consortium.
Two or three months down the road it will be time to seek a partner to share the development costs of new platforms on which to build new vehicles. Excluding bodywork and interior fittings, platforms - the modern equivalent of a chassis - physically account for most of a new car and up to 70% of the costs.
Honda has been cited because of its past association with Rover but Towers says it is not necessarily the prime candidate.
Towers himself aims to gradually withdraw into a backseat role. "I have got quite a lot of other interests which mean that in the medium to long term I can't be a full time employee of this business. Nick and I will be acting joint managing directors ... but by the end of June we hope to gradually take on more of a non-executive role."
The still-to-be-named executive directors who will take over face a formidable challenge. They may benefit from a sympathy vote from a public, out buying Rovers in large numbers in April when deep discounts of of up to £2,000 brought customers into the showrooms. But Towers admits that a bargain basement pricing policy will not be sustainable in the long run. Ultimately, the company's survival will depend on economics and not emotions, which have been running high in the West Midlands in recent weeks. The workforce which gave Towers a rapturous reception at Longbridge on Tuesday will be hoping he has got his sums right.
