The unacceptable face of capitalism

2004

The five directors of Phoenix Venture Holdings, the company that bough MG Rover from BMW for only £10, have been slammed by BMW's UK boss as "the unacceptable face of capitalism".

Speaking at BMW's annual press dinner in London, Jim O'Donnell, managing director of BMW (GB), said that the conduct of the five Phoenix directors was "disgusting".

"I think it is a disgrace that the Rover board pay themselves more that the board of BMW if you include pensions. It is the unacceptable face of capitalism," he said.

Last year MG Rover lost £89m, its third consecutive loss, while sales this year are slumping even further as buyers shun its dated product line-up.

Nevertheless, the Phoenix five paid themselves a total more than £16m, including adding an additional £3.6m in their pension fund to bring it up to a total of some £16 million.

The additional payment amounted to more than a third of the value of the £13.1 million in contributions made to the rest of the company's 6,500 employees.

The board of BMW, which made a profit of £2.24bn, were paid £7.5m in 2003.

Phoenix bought MG and Rover from BMW for a nominal £10 in May 2000. But it also received a £550 million interest-free loan from the German car giant in order to make the business viable.

"The directors have utilised the situation for their own benefit," Mr O'Donnell said.

"BMW gave them a real opportunity for £10," he added. "From the German point of view we wanted to make sure we had given the company a chance. I don't think they have taken that chance."

The Phoenix directors have since claimed that the deal represented a huge risk because they each invested £60,000 to do the deal.

But Mr O'Donnell said: "What is the risk? As far as I am aware, they did not risk a lot. If a private equity group acted like this. they would get slammed in the press."

A Phoenix spokesman said: "We would obviously disagree with Mr O'Donnell's comments.

"But we have commented on this so often that we have to get to the point where we are not going to comment anymore."