Wednesday, July 27, 2005
LexisNexis(TM) Academic - Document
LexisNexis(TM) Academic - Document
Copyright 2005 The Financial Times Limited
Financial Times (London, England)
July 23, 2005 Saturday
London Edition 2
SECTION: NATIONAL NEWS; Pg. 6
LENGTH: 734 words
HEADLINE: Nanjing's purchase of MG Rover is just the start of its difficulties The Chinese manufacturer faces serious logistical, financial, legaland administrative challenges in its quest to turn the failed Longbridge carmaker into a success, writes James Mackintosh
BYLINE: By JAMES MACKINTOSH
BODY:
As Nanjing Automobile signed contracts to buy MG Rover, the failed carmaker, it marked the end of three months of complex bidding by the Chinese manufacturer against more than 100 interested buyers.
As Nanjing's advisers, left the London offices of Herbert Smith, their lawyers, after signing contracts last night their sense of jubilation was clear. But the challenges ahead may lead to a sinking feeling.
Even taking possession of the keys to the gates of Longbridge, Rover's sprawling Birmingham factory, is not easy: new contracts will have to be agreed with the security company manning the entrances.
At least Nanjing and Arup, the engineering consultancy advising it, will not have problems navigating the maze of production facilities at the site. Nanjing is also being advised by Nick Stephenson, deputy chairman of Phoenix Venture Holdings, which owned Rover until it went bust. It is also being helped by Qu Li, head of consultancy China Ventures.
After the first few days of administrative work securing telephone and utility connections and continuing maintenance contracts, the real job will be more difficult.
"Whoever wins the bidding, no production is going to start for at least a year," said a senior adviser to one of the bidders yesterday, before the deal's completion.
The first big problems that will be faced by Nanjing are moving production lines to China and raising funds to support the UK operations.
The logistical challenge is huge. Most of the engine production, which includes a foundry, plus two production lines including large, complex robots, must be shipped from a built-up area of Birmingham to eastern China. Then it will have to be reassembled, and made to work.
The financial challenge is also large. An investor must be found to take a majority stake in the UK business, which is likely to start work under management selected by Arup. Fraser Welford-Winton, head of Rover's engine business who led an unsuccessful management offer for MG, is seen as a likely candidate to run the business.
The UK business will have to be set up, possibly at a new site. It is unclear whether Nanjing will keep control of part of the Longbridge factory or move elsewhere in the West Midlands. But the plan is to build the MG TF sports car and the MG ZT saloon, and eventually to complete small and medium cars shipped as kits from China. UK employment could reach 2,000.
The main problems it will face with the production start-up are:
*Engineering: Nanjing will have to finish development work on the engines to meet new European emissions standards that come into effect next January. They will also have to test production lines to ensure they still function, even before shipping them to China.
*Purchasing: suppliers must be found for many components. Some, such as StadCo, which provided the body for the MG TF sports-car, have closed factories and may be unwilling to invest in facilities for a new Rover owner after losing millions when the company collapsed. Components may be bought from suppliers in Asia to cut costs. Shanghai Automotive Industry Corp estimated this could save Dollars 1,500 (Pounds 870) per car but it will add to delays, as safety-critical parts must be tested.
*Distribution: dealers, like suppliers, were owed large sums when Rover failed, and many have now moved to other brands or closed down. Finding high-quality outlets ready to tie their future to the new company could involve setting up a network of dealerships from scratch.
*Staffing: any buyer will rely on recruiting staff, initially engineers and managers, familiar with Rover and its facilities. But with production many months away, former line workers should not expect to start working for the new owner until next year, by which time many will have found new jobs.
*Intellectual property: one of the first people likely to be brought in by the buyer is a lawyer to defend Rover's designs. Design rights for the engines, Rover 25 small car and the 75 large saloon were sold to SAIC last year for Pounds 67m. Honda has removed or destroyed blueprints for structural parts of the Rover 45 mid-sized car, based in part on the old Honda Civic. The sportscar designs were transferred to SAIC by mistake this year. SAIC has promised "robust" action to defend its rights, which it says extend to the MG range. Nanjing and PwC, the administrator, believe most of the MG range was excluded from the deal.
LOAD-DATE: July 22, 2005
Copyright 2005 The Financial Times Limited
Financial Times (London, England)
July 23, 2005 Saturday
London Edition 2
SECTION: NATIONAL NEWS; Pg. 6
LENGTH: 734 words
HEADLINE: Nanjing's purchase of MG Rover is just the start of its difficulties The Chinese manufacturer faces serious logistical, financial, legaland administrative challenges in its quest to turn the failed Longbridge carmaker into a success, writes James Mackintosh
BYLINE: By JAMES MACKINTOSH
BODY:
As Nanjing Automobile signed contracts to buy MG Rover, the failed carmaker, it marked the end of three months of complex bidding by the Chinese manufacturer against more than 100 interested buyers.
As Nanjing's advisers, left the London offices of Herbert Smith, their lawyers, after signing contracts last night their sense of jubilation was clear. But the challenges ahead may lead to a sinking feeling.
Even taking possession of the keys to the gates of Longbridge, Rover's sprawling Birmingham factory, is not easy: new contracts will have to be agreed with the security company manning the entrances.
At least Nanjing and Arup, the engineering consultancy advising it, will not have problems navigating the maze of production facilities at the site. Nanjing is also being advised by Nick Stephenson, deputy chairman of Phoenix Venture Holdings, which owned Rover until it went bust. It is also being helped by Qu Li, head of consultancy China Ventures.
After the first few days of administrative work securing telephone and utility connections and continuing maintenance contracts, the real job will be more difficult.
"Whoever wins the bidding, no production is going to start for at least a year," said a senior adviser to one of the bidders yesterday, before the deal's completion.
The first big problems that will be faced by Nanjing are moving production lines to China and raising funds to support the UK operations.
The logistical challenge is huge. Most of the engine production, which includes a foundry, plus two production lines including large, complex robots, must be shipped from a built-up area of Birmingham to eastern China. Then it will have to be reassembled, and made to work.
The financial challenge is also large. An investor must be found to take a majority stake in the UK business, which is likely to start work under management selected by Arup. Fraser Welford-Winton, head of Rover's engine business who led an unsuccessful management offer for MG, is seen as a likely candidate to run the business.
The UK business will have to be set up, possibly at a new site. It is unclear whether Nanjing will keep control of part of the Longbridge factory or move elsewhere in the West Midlands. But the plan is to build the MG TF sports car and the MG ZT saloon, and eventually to complete small and medium cars shipped as kits from China. UK employment could reach 2,000.
The main problems it will face with the production start-up are:
*Engineering: Nanjing will have to finish development work on the engines to meet new European emissions standards that come into effect next January. They will also have to test production lines to ensure they still function, even before shipping them to China.
*Purchasing: suppliers must be found for many components. Some, such as StadCo, which provided the body for the MG TF sports-car, have closed factories and may be unwilling to invest in facilities for a new Rover owner after losing millions when the company collapsed. Components may be bought from suppliers in Asia to cut costs. Shanghai Automotive Industry Corp estimated this could save Dollars 1,500 (Pounds 870) per car but it will add to delays, as safety-critical parts must be tested.
*Distribution: dealers, like suppliers, were owed large sums when Rover failed, and many have now moved to other brands or closed down. Finding high-quality outlets ready to tie their future to the new company could involve setting up a network of dealerships from scratch.
*Staffing: any buyer will rely on recruiting staff, initially engineers and managers, familiar with Rover and its facilities. But with production many months away, former line workers should not expect to start working for the new owner until next year, by which time many will have found new jobs.
*Intellectual property: one of the first people likely to be brought in by the buyer is a lawyer to defend Rover's designs. Design rights for the engines, Rover 25 small car and the 75 large saloon were sold to SAIC last year for Pounds 67m. Honda has removed or destroyed blueprints for structural parts of the Rover 45 mid-sized car, based in part on the old Honda Civic. The sportscar designs were transferred to SAIC by mistake this year. SAIC has promised "robust" action to defend its rights, which it says extend to the MG range. Nanjing and PwC, the administrator, believe most of the MG range was excluded from the deal.
LOAD-DATE: July 22, 2005
# posted by Eastlaw @ 12:52 AM 
