MG Rover Research Articles

Non-audit Engagements and the Creation of Public Value: Consequences for the Public Interest

In this article, we extend the research on the public interest to non-audit engagements performed by accounting firms and public accountants. Our thesis is that non-audit engagements, as private goods, require a distinct approach to the public interest than auditing. We suggest that a public value perspective can be used conceptually to provide substantial criteria for designing non-audit engagements conducive to public value creation and greater accountability. We illustrate the applicability and consequences of a public value perspective by analyzing and contrasting the decision of two judicial opinions deciding whether Deloitte and the lead partner of a consulting engagement failed to act in the public interest in engineering the sale of collapsed British carmaker MG Rover. We advocate for a significant change in ethical codes of conduct by defining public interest obligations, not only in terms of professional attributes, but also in terms of outcomes. Our approach also suggests a requirement regarding planning a non-audit engagement, including establishing a public value proposition detailing the planned nature of the engagement, and extent of the assessment of the intended public value creation. We discuss the aspirational function of codes of conduct to provide accountability other than in terms of technical output, and to maintain the legitimacy and purpose of the profession.

The West Midlands automotive industry: the road downhill

This article examines how the structure of the automotive industry in the West Midlands has changed since the 1970s. In the early 1970s the region accounted for about 60% of total car production in the UK. By 2008, this had dwindled to 18%. The discussion here will focus particularly on the most likely reasons for the decline in volume production and the area’s increasing reliance on relatively small scale luxury car production. The automotive industry was caught up in the general de-industrialisation that took place in the region since the mid-1960s prior to the economic crisis of the early 1980s, as well as suffering from the effects of increasing globalisation in the car industry itself. By 2008 the context for the sector had become the global financial crisis. Due to a lack of economies of scale and investment domestic firms such as British Leyland (BL) and Rootes became increasingly unable to compete in the market place despite restructuring and government intervention. Similarly, foreign direct investment (FDI) by firms such as Chrysler, Peugeot, BMW and Ford through a series of takeovers failed to restore prosperity and eventually all of them withdrew from the region. The outcomes have led to factory closures and a hollowing out of both the assembly and component sides of the industry, leaving the region heavily dependent on Jaguar and Land Rover (JLR) which was acquired in 2008 by the Indian conglomerate, Tata. This article assesses the reasons for the decline of the automotive sector in the West Midlands region by contextualising its growth and decline against that of the UK auto sector as a whole. Considerable emphasis is placed on the fates of a number of key firms in the region – the British Leyland Motor Corporation (BLMC), MG Rover, Rootes and Jaguar – with explanations offered for their respective failures.

Plant closures, precariousness and policy responses: Revisiting MG Rover 10 years on

With automotive plants being closed in Australia and western Europe, this article reflects on the employment status of ex-MG Rover (MGR) workers following the closure of the Longbridge plant in 2005. In particular, it draws on Standing's typology of labour market insecurity and uses a mixed-methods approach including an analysis of a longitudinal survey of some 200 ex-MGR workers, and in-depth interviews with ex-workers and policy-makers. While the policy response to the closure saw significant successes in terms of the great majority of workers successfully adjusting into re-employment, and with positive findings in terms of re-training and education, the paper finds significant challenges in terms of security of employment, income, job quality and representation at work years after closure. In particular, the paper posits that the general lack of attention to employment security at the macrolevel effectively undermined elements of a positive policy response over the longer run. This in turn suggests longer-term policy measures are required to address aspects of precariousness at work.

Plant closures and taskforce responses: an analysis of the impact of and policy response to MG Rover in Birmingham

This paper explores the socio-economic impacts and associated policy responses to the collapse of MG Rover at Longbridge in Birmingham. Critically, it attempts to move beyond a ‘standard’ taskforce narrative that emphasizes the role of the regional response. While recognizing that significant policy ‘successes’ were indeed evident at the regional level in anticipating and responding to the crisis, a wider perspective is required that situates this taskforce response in (1) a fuller understanding of labour market precariousness (that in turn mitigates some of its policy ‘successes’), and (2) more local perspectives that highlight the local impacts of closure, the role of the neighbourhood level officials and the third sector in mediating these. Taking this broader perspective suggests that longer-term, workers face a precarious situation and the need for policies to create and sustain ‘good quality’ jobs remains paramount. Adding in more local perspectives, a key lesson from the Longbridge experience for dealing with closures more generally is that the public policy responses must be: multidimensional in that they transcend narrow sector-based concerns and addresses broader spatial impacts; inclusive in that they build on a broad coalition of economic and social stakeholders; and long-term in that they acknowledge that adaptation takes many years. If anything, the Birmingham Longbridge experience demonstrates the difficulty of achieving such responses in the context of crisis where action is imperative and deliberation a luxury.

Industrial closure, regional development and local planning: Multiple narratives of change from the experience of Longbridge, Birmingham

This article provides a critique of the policy response to the closure, in 2005, of the MG Rover factory in Longbridge, Birmingham. To date, the Longbridge ‘narrative’ has been dominated by the work of the Labour Government’s MG Rover Task Force to secure the regional supply chain and support redundant workers. However, this represents a selective interpretation of the Longbridge experience. Important alternative narratives have been neglected, including the local impacts of closure, the role of front-line officials and voluntary and community groups in mitigating these, and future regeneration. The article considers these important issues and, thus, seeks to contribute to a more inclusive narrative of the Longbridge closure, the policy response to it and the lessons arising in light of the present crisis engulfing the European automotive industry. The article concludes that the nature and scope of the public policy response to industrial closure must be multi-level and multi-thematic in outlook and ensure investment in the resilience of local economy and society.

Planning for industrial closure: lessons from the experience of Longbridge, Birmingham

This article provides a case study of the policy response to the closure of the MG Rover car factory in Birmingham in 2005. This article records how this response evolved over time from one focused on regional industrial policy, built on a coalition of economic development actors and prioritizing the needs of redundant workers and the supply chain to one focused on local planning policy, built on a coalition of local planning authorities and the developer and prioritizing a broader range of local needs. Drawing on this experience, the article argues that the public policy response to plant closure must be multi-dimensional, inclusive and long term.

Globalisation as a driver of employment precariousness? the labour market status of UK auto workers four years after plant closure

In a context of globalisation and structural change, manufacturing workers in developed countries have been vulnerable to plant closure. This article presents the findings of a longitudinal survey examining the labour market status of ex-auto workers, formerly employed by MG Rover, four years after plant closure. In particular, issues of employment precariousness in terms of employment destinations are considered. The findings suggest that a majority of workers had found employment by April 2008. However, the subsequent experience of economic downturn had left most facing a fragile future on the labour market, suggesting a need for policy measures that go beyond reliance on a flexible labour market to address the inequities faced by workers in such situations.

Employment Outcomes and Plant Closure in a Post-industrial City: An Analysis of the Labour Market Status of MG Rover Workers Three Years On

This paper examines how the loss of 6300 jobs from the closure of MG Rover (MGR) in the city of Birmingham (UK) in April 2005 affected the employment trajectories of ex-workers, in the context of wider structural change and efforts at urban renewal. The paper presents an analysis of a longitudinal survey of 300 ex-MGR workers, and examines to what extent the state of local labour markets and workers’ geographical mobility—as well as the effectiveness of the immediate policy response and longer-term local economic strategies—may have helped to balance the impacts of personal attributes associated with workers’ employability and their reabsorption into the labour markets. It is found that the relative buoyancy of the local economy, the success of longer-run efforts at diversification and a strong policy response and retraining initiative helped many disadvantaged workers to find new jobs in the medium term. However, the paper also highlights the unequal employment outcomes and trajectories that many lesser-skilled workers faced. It explores the policy issues arising from such closures and their aftermath, such as the need to co-ordinate responses, to retain institutional capacity, to offer high-quality training and education resources to workers and, where possible, to slow down such closure processes to enable skills to be retained and reused within the local economy.

Private equity and the flight of the phoenix four-- the collapse of MG Rover in the UK

This paper explores the nature of the co-called ‘private equity business model’ (PEBM) and assesses its shortcomings, using the illustrative example of the role of private equity in structuring the finance and subsequent collapse of MG Rover, as the automotive industry has been a significant destination for private equity financing. The paper outlines the nature of the PEBM. It then details how the PEBM extracts value, before stressing how this can affect workers in a portfolio business. We argue that the emergence of the PEBM changes the basis of competitive rules in organizations and the running of erstwhile going concerns, necessitating a need for further regulation—particularly, how to secure wider stakeholder oversight without reducing the efficiency of PEBM concerns.

The MG Rover closure and policy response: an evaluation of the Task Force model in the UK

In recent years there have been a number of high-profile plant closures in the UK. In several cases, the policy response has included setting up a task force to deal with the impacts of the closure. It can be hypothesised that task force involving multi-level working across territorial boundaries and tiers of government is crucial to devising a policy response tailored to people's needs and to ensuring success in dealing with the immediate impacts of a closure. This suggests that leadership, and vision, partnership working and community engagement, and delivery of high quality services are important. This paper looks at the case of the MG Rover closure in 2005, to examine the extent to which the policy response to the closure at the national, regional and local levels dealt effectively with the immediate impacts of the closure, and the lessons that can be learned from the experience. Such lessons are of particular relevance given the closure of the LDV van plant in Birmingham in 2009 and more broadly – such as in the case of the downsizing of the Opel operation in Europe following its takeover by Magna.

Gears up for a revival [automobile industry

A historic British car marque is undergoing a revival thanks to growth plans forged in China. Many said it could never happen but, almost three-and-a-half years after the collapse of UK car maker MG Rover, production resumed at the former Rover facility at Longbridge near Birmingham, UK. Now operating under the control of Chinese group Shanghai Automotive Industry Corporation (SAIC), the factory is slowly churning out a slightly revamped MG TF. Five hundred limited-edition vehicles are to be produced, with the first expected to hit the showrooms.

The impact of factory closure on local communities and economies: the case of the MG Rover Longbridge closure in Birmingham

Much of the recent literature concerned with the impacts of factory closure refers to closures occurring in the 1980s and 1990s and affecting heavy industry – coal, steel and shipbuilding. It also tends to focus on employment and labour market impacts assessed through the subsequent experience of workers made redundant following closures. It also tends to assume that these impacts are localized. Because of this much of the discussion of policy implications relates to the workers made redundant and to a very local economy. This paper refers to the closure of the MG Rover factory in Longbridge, Birmingham, UK. This closure was regarded as presenting a crisis for government and the local community. The paper responds to arguments in the research literature and explores the spatial and economic impact of the MG Rover closure in more detail. It complements other research which has focused on the experience of those made redundant in 2005 by referring to the loss of employment over a longer time period and identifying a wider impact spatially and socially. The paper draws upon different sources of evidence and concludes with a discussion of implications for policy and research.

Auto plant closures, policy responses and labour market outcomes: a comparison of MG Rover in the UK and Mitsubishi in Australia

This paper provides a preliminary comparative longitudinal analysis of the impact on workers made redundant due to the closure of the Mitsubishi plant in Adelaide and the MG Rover plant in Birmingham. Longitudinal surveys of ex-workers from both firms were undertaken over a 12-month period in order to assess the process of labour market adjustment. In the Mitsubishi case, given the skills shortage the state of Adelaide was facing, together with the considerable growth in mining and defence industries, it would have been more appropriate if policy intervention had been redirected to further training or re-skilling opportunities for redundant workers. This opportunity was effectively missed and as a result more workers left the workforce, most notably for retirement, than could have otherwise been the case. The MG Rover case was seen as a more successful example of policy intervention, with greater funding assistance available and targeted support available, and with more emphasis on re-training needs to assist adjustment. However, despite the assistance offered and the rhetoric of successful adjustment in both cases, the majority of workers have nevertheless experienced deterioration in their circumstances – particularly in the Australian case where casual and part-time work were often the only work that could be obtained. Even in the UK case, where more funding assistance was offered, a majority of workers reported a decline in earnings and a rise in job insecurity. This suggests that a reliance on the flexible labour market is insufficient to promote adjustment, and that more active policy intervention is needed especially in regard to further up-skilling.

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

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.

A tale of two regions: comparative versus competitive approaches to economic restructuring

In April 2004 Mitsubishi announced the closure of its Lonsdale plant in South Australia. Almost a year later, MG Rover went into administration, resulting in the immediate closure of its Longbridge plant just outside Birmingham, England. Both closures were expected to have a considerable impact on their regional economies through the loss of employment and associated economic activity. However, governments in Australia and England responded in significantly different ways: in England the focus was on competitive advantage through the modernisation of the auto cluster and the diversification of the regional economy into new, high-technology industries. In Australia, the national and state governments introduced policy responses based on the pursuit of comparative advantage. This paper compares and contrasts the two sets of government responses and examines the capacity of each to deliver long-term benefits to their affected communities.

Dealing with strategic change: a trio of automotive industry closures in the West Midlands

Abstract This paper looks at the public policy response to dealing with strategic change in the case of a trio of automotive industry closures in the West Midlands, the outcome of restructuring in the auto industry. It shows that what is essentially a reactive response is related to the scale of the closure and the character of the closure. Falling sales and exchange rate volatility, plus production inefficiency, led to Jaguar moving production from Coventry to Castle Bromwich in Birmingham. Neither the scale of job loss at Browns Lane, nor the impact on the supply chain, was as great as it was at Peugeot's Ryton factory when production was moved to a low labour cost location in Slovakia. In the case of MG Rover, its long‐term failure to develop new models, among other factors, saw MG Rover being sold to Nanjing Auto and its machinery shipped to China. A Task Force swung into action to deal with the loss of 6000 jobs and the loss of business to firms in the supply chain. Its budget was bigger than in the case of the other two closures. However, it is not only the difference in public policy response that is of interest, but also the challenge the closures pose for the understanding of structural change. While the classic reasons for closure are to be found in the closures, in the aftermath Ford is continuing to shed its European acquisitions. This questions the process of capital concentration. The loss of production capability to the West Midlands also blows wide the auto cluster in the West Midlands and makes it more likely that we can see a merging filiere developing in the ever‐changing geography of production. Copyright © 2008 John Wiley & Sons, Ltd.

Globalization and restructuring in the auto industry: the impact on the West Midlands automobile cluster

Abstract This paper examines the form of the auto cluster in the West Midlands in the context of the structural changes unfolding in the industry. These 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 assembly operations towards lower‐cost locations. Add in recent exchange rate volatility and maintaining manufacturing operations, and the West Midlands cluster has become increasingly challenging for firms and policy‐makers, as witnessed by recent plant closures at MG Rover, Jaguar and Peugeot. The paper considers to what extent public policy can assist, suggesting that policy needs to do all it can to retain capacity whilst also helping firms to use their competencies and to apply them in new ways. These will have to be in higher value added activities such as engines and drivetrains, R&D, consultancy and in other sectors such as the growing aeronautics industry. Copyright © 2007 John Wiley & Sons, Ltd.

Wilting plants [automobile industry

Car plants in Britain face an uncertain future, with the potential for more large-scale job losses. The conclusion comes in the report "Success and Failure in the UK Car Manufacturing Industry" published in March 2007 by MPs on the Commons Trade and Industry Select Committee. The report is the result of an inquiry launched by the MPs in the wake of the Ryton and MG Rover announcements that they factories are going to close down. The report concludes that Ryton and Ellesmere Port shared common factors that led to job losses. But, as well as ageing and inflexible plants, supply chain problems and labour costs, the committee identifies an underlying issue for UK car-making - one that will not come as any surprise to the industry - the excess production capacity in areas of the world (including western Europe) where demand is stagnant or falling. Other varied and complex bases for the conclusion are described.

Financing MG Rover Through Bankruptcy: Some Risk Financing Lessons

The current study delves into the post-loss financing options MG Rover (MGR) could have used, in addition to the UK government bridging loan, before its collapse in 2005. An examination of the pre-bankruptcy state of MGR was carried out, and it confirms the existence of high security holder agency costs arising from debt overhang and adverse selection problems. In addition, the findings show that due to steep private information costs and negative trend in earnings, the use of equity, debt, government loans and contingent financing as post-loss funding vehicles was not an optimal financial decision in markets where capital is rationed. In this case, the existence of both trade debt and legacy costs made it difficult for potential investors to assess the full value of MGR's assets, before debt retirement. Issuing low priced risky securities would have imposed a net loss on existing securities and made them unattractive to investors. A conclusion reached is that the only way of addressing post-loss risk financing problems at MGR was either through issuing securities whose value was least sensitive to revelation of ultimate information or through bankruptcy which is what they rightly did.

Brand survival

PurposeReviews the latest management developments across the globe and pinpoints practical implications from cutting‐edge research and case studies.Design/methodology/approachThis briefing is prepared by an independent writer who adds their own impartial comments and places the articles in context.FindingsRecent years have witnessed the demise of well‐known brand names, such as Woolworth and Kmart in the USA, the jewellery chain Ratners and the department store chain Allders in the UK; the explosion and self‐destruction of “dot com” brands; the car brands MG Rover and Oldsmobile; the accountants Arthur Andersen; energy provider Enron; and telecommunications MCI. The reasons for their demise may be many and varied. However, they nonetheless demonstrate that visually recognizable brands can virtually disappear overnight.Practical implicationsProvides strategic insights and practical thinking that have influenced some of the world's leading organizations.Originality/valueThe briefing saves busy executives and researchers hours of reading time by selecting only the very best, most pertinent information and presenting it in a condensed and easy‐to‐digest format.