Wednesday, June 13, 2007

Great Satan Eyes Crown Jewels

Private equity executive
Keeping in touch with Ford's sale of Jag and Land Rover via BBC TV News means following developments through their evil capitalist prism. Naturally, the main angle is prospective job losses, with plenty of airtime for union leaders telling us that in France or Germany these jewels would be taken into public ownership.

Clearly that isn't going to happen, but there's another danger that's almost as serious. Because with no mainstream car company in the market for more cash guzzling English patients, the likeliest buyers are private equity Satanists.

So let's just remind ourselves what happened last time we were here, with MG Rover. Last year we blogged the NAO report into its final collapse. In no small measure it resulted from the DTI's hamfisted intervention five years earlier to stop private equity acquiring the firm:

"Back in 2000, the DTI (then under Bad-News Byers) was heavily involved in persuading BMW to sell MGR to the dubious Phoenix Consortium rather than Alchemy Partners. Why did they do that? Was it that thing about "facilitating partnerships" and "fresh thinking"? Or was it perhaps because they didn't like Alchemy's plans to downsize the company, and Byers/Blair didn't like the loss of marginal votes?

Sadly, when DTI then tried to do some follow-up "facilitation" with John Towers and his dubious Phoenix colleagues, they were given the bum's rush. All they could do over the next four years was to follow events in the press, and put together internal reports that "had not been subject to due diligence" (ie they'd just been cut and pasted out of the FT). Yet when eventually the company started to disintegrate they were only too willing to take MGR management at its word in terms of the life-saving Chinese deal being just around the corner. So they leant on other bits of government to help (including HMRC and FCO) and looked at relaxing their own operating rules so they could pump in yet more public funds.

And of course, as the PAC chairman pointed out, the £250m straight taxpayers loss identified by the NAO is really only the start. The MGR pension fund has a deficit of about £0.5bn, which will now fall on the new Pension Protection Fund (which conveniently became liable just TWO DAYS before the company went into administration). And it has been reported elsewhere that MGR creditors were owed a total of £1.3bn, most of which they will never see. None of these people will be thanking the DTI.

The overall conclusion is clear. If it hadn't been for political interference and DTI's hamfisted meddling, BMW would have sold to Alchemy in 2000. The company would then have been downsized pretty drastically to become a specialist sportscar maker. The downsizing would have been done in a properly planned, orderly manner, paid for by the company itself, not taxpayers. And the creditors would have been paid off. Even the pension fund deficit would have been less problematic because its equity investments were worth so much more in 2000.

And as the specialist producer of MG sportscars, the company would surely have had a much better chance of survival than the clueless fag-end of a defunct volume manufacturer. So a good chunk of the jobs would still be with us today."

With the current hysteria against private equity reaching Scargillite proportions, a replay is horribly possibly. Labour MPs are slavering for action- indeed after a heated session of the leftwing Treasury Select Committee discussing it yesterday, diminutive scouse fireball Angela Eagle literally bit a Tory MP in the leg.

Get your chequebooks ready.

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