Powertrain kept MG Rover on the road

By JAMES QUINN
Updated:

 

THE Phoenix Four managed to stave off bankruptcy at MG Rover for at least four months by plundering the accounts of its successful engine-making division Powertrain, it has emerged.

The four - led by Phoenix Venture Holdings chairman John Towers - ensured MG Rover could keep trading longer than it otherwise would have done by racking up huge debts at Powertrain.

Powertrain creditor documents seen by the Mail show that the engine arm collapsed with debts of £127.6m - but £102m of that was owed by Rover.

Administrators estimate that it was losing £20m-£25m a month.

Rover accounted for 80% of Powertrain's sales and when it could not pay, Powertrain was forced into administration.

The documents reveal that 2004 was Powertrain's most successful year for at least five years. Draft accounts show it made a profit, after tax, of £15.2m in the year to December against a profit of £6.9m in 2003.

The latest revelation adds weight to the suggestion that MG Rover was trading while insolvent. The claim is being investigated by DTI-appointed inspectors Guy Newey and Gervase MacGregor.

Administrator PricewaterhouseCoopers said it had found no evidence to date of any malpractice by the Phoenix Four, but was working with the inspectors.

Powertrain creditors are likely to get at least 5p in the pound, while Rover's will get a 'nil or negligible' amount, says PwC.

Shanghai Automotive, which was originally bidding to launch a rescue venture with Rover, has submitted a bid for Powertrain. There is also a second party in the running.

Meanwhile MPs lambasted former Trade and Industry Secretary Patricia Hewitt for 'bringing forward' the collapse of Rover. Tory industry spokesman Charles Hendry said that the government's hands were 'not clean'.

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