This case discusses the collapse of Britain’s last remaining major car manufacturer MG Rover in2005, and the subsequent loss of 6,500 jobs in the former industrial heartland of the West Midlands. The case traces the role played by the firm’s directors as well as overseas car companies in the Rover collapse and provides the opportunity to examine the nature of social responsibility and the relative responsibilities of governments and corporations for safeguarding employment. The name Longbridge stands for nearly a hundred years of British car manufacturing. The huge site near Birmingham in the West Midlands area has been the stage for many of the peaks and troughs of automotive history in the UK. Once the birthplace of the sporty, Austin Healey, the legendary Mini, and the practical Metro, the site has also been associated in the 1970s with industrial unrest and union militancy. More recently, the plant had started to become a virtual synonym for industrial downturn and decay, and the reversal in fortunes of the British car industry. It was a history with ups and downs, but the plant seemed to be in for a bright future when in 1994 BMW took Longbridge over from the British car manufacturer Rover. Despite suffering from under-investment, BMW saw the Rover takeover as a suitable means of expanding its range of models beyond the luxury segment that it had become famous for, into more medium-sized, family saloons that appealed to the mass market. However, during the first five years of its involvement in Britain, BMW invested more than £2.5bn (a3.8bn) in Rover, but productivity in the ageing facilities at Longbridge never reached competitive levels. Despite massive job cuts, and the introduction of more flexible work patterns, reports suggested that by 2000 BMW was running up annual losses of £880m (a13.2m) on the Rover investment, more than £2 million a day! Such losses had major impacts on BMW. As one of the smaller players in the international automotive industry, and under constant threat of hostile takeover bids itself, the company’s management got clear signals from its shareholders and from the financial industry that it had to either cure ‘the English patient’ (as Rover was now known back at head office in Munich), or get rid of it. By March 2000, BMW signalled that it was about to act. Amid uproar from unions, local communities, and the press, the UK secretary of state for trade and industry engaged in frantic shuttle diplomacy between London, Longbridge, and Munich to try and stave off BMW’s imminent withdrawal. However, despite offers of £150m (a230m) in government subsidies, BMW eventually announced it was going to pull the plug on Rover, to the despair of workers and the embarrassment of the powerless government. Whilst finding a buyer for the ailing car plant was never going to be easy, the Rover business was eventually sold in May 2000 to the ‘Phoenix Four’ consortium headed by former Rover CEO John Towers. To sweeten the deal and hasten their own exit, BMW agreed to sell Longbridge to the Phoenix group for a nominal ten pounds (a15), and even provided the group with a massive ‘dowry’ Part C Arguments for corporate accountability and citizenship emphasize the declining power of governments and the increasing power of multinationals. How would you assess the relative power of the main actors in the MG Rover case? Part D Who, if anyone, should take responsibility for preserving jobs at Longbridge – the company, its directors, the UK government, SAIC, the workers themselves? Or is unemployment such as this simply a ‘bitter pill’ that workers have to take in the face of industrial restructuring away from heavy industry in developed economies?
This case discusses the collapse of Britain’s last remaining major car manufacturer MG Rover in2005, and the subsequent loss of 6,500 jobs in the former industrial heartland of the West Midlands. The case traces the role played by the firm’s directors as well as overseas car companies in the Rover collapse and provides the opportunity to examine the nature of social responsibility and the relative responsibilities of governments and corporations for safeguarding employment.
The name Longbridge stands for nearly a hundred years of British car manufacturing. The huge site near Birmingham in the West Midlands area has been the stage for many of the peaks and troughs of automotive history in the UK. Once the birthplace of the sporty, Austin Healey, the legendary Mini, and the practical Metro, the site has also been associated in the 1970s with industrial unrest and
union militancy. More recently, the plant had started to become a virtual synonym for industrial downturn and decay, and the reversal in fortunes of the British car industry.
It was a history with ups and downs, but the plant seemed to be in for a bright future when in 1994 BMW took Longbridge over from the British car manufacturer Rover. Despite suffering from under-investment, BMW saw the Rover takeover as a suitable means of expanding its range of models beyond the luxury segment that it had become famous for, into more medium-sized, family saloons that appealed to the mass market. However, during the first five years of its involvement in Britain,
BMW invested more than £2.5bn (a3.8bn) in Rover, but productivity in the ageing facilities at Longbridge never reached competitive levels. Despite massive job cuts, and the introduction of more flexible work patterns, reports suggested that by 2000 BMW was running up annual losses of £880m (a13.2m) on the Rover investment, more than £2 million a day! Such losses had major impacts on BMW. As one of the smaller players in the international automotive industry, and under constant threat of hostile takeover bids itself, the company’s management got clear signals from its
shareholders and from the financial industry that it had to either cure ‘the English patient’ (as Rover was now known back at head office in Munich), or get rid of it.
By March 2000, BMW signalled that it was about to act. Amid uproar from unions, local communities, and the press, the UK secretary of state for trade and industry engaged in frantic shuttle diplomacy between London, Longbridge, and Munich to try and stave off BMW’s imminent withdrawal. However, despite offers of £150m (a230m) in government subsidies, BMW eventually announced it was going to pull the plug on Rover, to the despair of workers and the embarrassment of the powerless government. Whilst finding a buyer for the ailing car plant was never going to be easy, the Rover business was eventually sold in May 2000 to the ‘Phoenix Four’ consortium headed by former Rover CEO John Towers. To sweeten the deal and hasten their own exit, BMW agreed to sell Longbridge to the Phoenix group for a nominal ten pounds (a15), and even provided the group with a massive ‘dowry’
Part C
Arguments for corporate accountability and citizenship emphasize the declining power of governments and the increasing power of multinationals. How would you assess the relative power of the main actors in the MG Rover case?
Part D
Who, if anyone, should take responsibility for preserving jobs at Longbridge – the company, its directors, the UK government, SAIC, the workers themselves? Or is
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