Thursday, 13 August 2009

Play The Wild Rover, No More

The track record of any Government interference in business is pretty grim but the affair of the so-called 'Phoenix Four' just about takes the biscuit.

Lord Mandelson had referred the whole affair to the SFO when he asked them to study the independent report which took four years to amass. The SFO has ruled that there is nothing worth investigating - which will no doubt inflame the Business Secretary as he was spitting blood over the whole affair.

But you reap what you sow. Not so long ago the whole 'Loans for Peerages' scandal blew away when the police were blocked in finding out what went on and the closer they seemed to get to the heart of the matter, the faster and more sternly were they rebuffed. Then we had the dealings of BAe in Saudi - where the Government intervened to stop the investigation on grounds of national security as US firms bayed for blood over the alleged bribes to get $multi-billion contracts. We had several futile and inconclusive 'independent' inquiries into Iraq and so perhaps it comes as no surprise that the SFO have snubbed Mandelson and found there is conveniently 'no case to answer to' in the sordid dealings surrounding MG Rover.

It was back in 2000 that MG Rover was sold to Phoenix by BMW for just £10 plus a £427m sweetener by the German company. The decision at the time to allow the sale for such generous terms to a group of 4 businessmen called Phoenix was in preference to a much more sensible bid which did include scaling back the workforce but at least all would have received substantial settlements in cash and pensions under the alternative scheme. Over the period between 200 and 2004, MG racked up £611m of losses yet when the company was to be sold to the Shanghai AIC the deal fell through and MG went into administration. Subsequently the assets were sold to Nanjing Automobile and the Phoenix Four somehow walked away with as much as £40m. MG is now back making cars at Longbridge, its spiritual home.

The Government in the form of the likes of Gordon Brown, Patricia Hewitt, the perennial loser in business, Stephen Byers and of course, the supreme goal-hanger, Tony Blair, thought they had 'done good' when they greased the wheels for the BMW-Phoenix deal. Subsequently, they allowed the Phoenix Four to run the business into the ground amassing the losses, more than £1billion of debt and a massively inflated pension deficit before departing with plenty of cash themselves leaving creditors high and dry. There are echoes of modern day banks but at least the bankers have kept their jobs while the workers got sacked - the Phoenix Four simply survived to do it all again.

The embarrassment to the Government contained within the independent report due to be published next month will be high. It was a sorry tale of poor judgement at best and gross negligence at worst while there was more than a whiff of dodgy, if criminal dealings, on the part of the Phoenix Four. Why Mandelson referred the matter to the SFO is a mystery.

He was clearly 'sure of a case to answer to', wasn't he? Or was it designed to embarrass his Labour colleagues to show them just how powerful he is? Or, indeed, was it an attempted payback for all those years in imposed political wilderness in Brussels where he had to amuse himself by billing plenty of expenses and getting his back scratched by oligarchs in return for favours?

But it is perhaps more apposite that Mandelson is still struggling over a car industry bail out. Claiming success on the scrappage scheme which came several quarters too late even though Germany and France had shown success instantly with their schemes, Mandelson has dithered over what to do with the car industry since his bold announcements on how he would sort out a £2.3bn scheme back in February - since then around £180,000 has been spent on scrappage as mountains of cars litter the factory holding areas, unsold.

It seems more of political muscle-baring in a vain attempt to empathise with a very disenfranchised car workforce who literally live each day as if it were their last in terms of a job. They have been in limbo since the turn of the year and it must gall them that when the banks needed saving there were several knee jerk reactions which paid little attention to cost implications and liabilities which wiped away the mess but created an even bigger long term problem in the process. Yet, even today he has dithered over offering guarantees on the potential Jaguar Land Rover deal - despite his pretty words about it being a priority industry. The car industry was set to stew in the mess created by the credit crunch and recession.

Thankfully, Jaguar Land Rover found its own way forward as the time lapse between talk and action by the Government was far too long for a desperate business to wait amidst all the pretty posturing by people like Mandelson.

So has Mandelson, fresh back from hob-nobbing with his clique of incredibly wealthy friends, suddenly been touched by the plight of the very people who put him in power - workers - or is it just one of his political games, using a nasty report to threaten and terrorise his colleagues, showing off his new omni-powerful role in the Government?

Jaguar Land Rover has got on with its own saving and attracted new money in ensuring the saving of nearly 15,000 jobs and a new, eco-friendly flagship model to lead its way to the future. All that without the famous Mandelson effect. Let's face it, his new found friends are not in the car industry and he dropped Deripaska like a stone when the Osbourne-snitching occurred, so saving the car industry was never his priority. Damaging his friends certainly is - look out Gordon, beware the mouth you fed.

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