Rover and out? Globalisation, the West Midlands auto cluster, and the end of MG Rover

Abstract

This paper sets the scene for this Policy Studies special issue on plant closures by outlining the form of the auto cluster in the West Midlands, the nature of structural changes unfolding in the industry, and the decline and eventual collapse of MG Rover (MGR). Structural changes highlighted include: greater pressure on firms to recover costs when technological change has been intensifying, driving up the costs of new model development; increased international sourcing of modular components; and a shift of final assembly operations towards lower cost locations. All of these make maintaining mature clusters such as the West Midlands more challenging for firms and policy makers. The paper then looks at ‘what went wrong’ at MGR. Given long-run problems at the firm and its inability to recover costs, BMW's sale of the firm in 2000 left MGR virtually dead on its feet, and by 2002/2003 it was clear to many that the firm was running out of time. Whilst recognising that the firm's demise was ultimately a long-term failure of management, the paper also looks at other contributing factors, including government policy mistakes over the years, such as the misguided ‘national champions’ approach in the 1950s and 1960s, a failure to integrate activities under nationalisation in the 1970s, a mistaken privatisation to British Aerospace in the 1980s, and a downside of competition policy in ‘allowing’ the sale to a largely inappropriate owner in BMW in the 1990s. The considerable volatility of sterling in recent years hastened the firm's eventual demise.