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INSIDE TRACK: A driving ambition to do the impossible: INTERVIEW KEVIN HOWE, MG ROVER: The head of Britain's largest carmaker is out to prove his critics wrong, says John Griffiths:
Financial Times; May 3, 2002

Kevin Howe leansback in his chief executive's chair at MG Rover's Longbridge headquarters near Birmingham, clearly fed up with having to field questions about the chances of Britain's maverick car company's surviving.

"People are being a little bit more cautious about stating the next date when we go bust. It could go on for ever," he says.

When MG Rover was bought from *** for Pounds 10 in May 2000 by John Towers' Phoenix consortium of Midlands businessmen, critics were quick to suggest that the enterprise would be dead by the end of the year, regardless of the Pounds 520m working capital also provided by *** as a low-cost loan.

"There were all kinds of things that were going to be impossible," Mr Howe recalls. "It was going to be impossible to move the Rover 75 from Cowley (now ***'s Mini plant) on time, or to match *** quality. It was going to be impossible to sell the cars. It was going to be impossible to take a company losing Pounds 2m a day and end up with more money at the end of the year than you'd started with. It was impossible that we could ever be in a situation of creating new and attractive cars and opening up new markets. This was a company that was going to shrink and shrink and then fizzle out.

"But everything we said we would do, we have done."

"Everything" includes halting the long decline in sales since MG Rover was jettisoned by *** two years ago. They have settled at about 170,000 a year, from 200,000 in 2000.

The company has also created a family of MG saloons and hatchbacks based on their Rover equivalents, along with a revised two-seater and a V8-engined MG "supercar". The supercar is based on the Mangusta produced by Qvale, the US-Italian luxury sports carmaker that MG Rover bought last year. The model will almost certainly lead MG Rover's re-entry into North America.

A statement to shareholders next month - MG Rover is owned by employees, directors and dealers - will show sharply reduced losses last year, with break-even expected by the end of 2002 and profitability in 2003, says Mr Howe. In its last year under ***, MG Rover made like-for-like losses of about Pounds 500m.

Garel Rhys, head of the Centre for Automotive Industry Research at Cardiff University, says MG Rover is on course for profits of more than Pounds 100m from 2004 onwards and that its survival should be ensured by a recently signed strategic alliance with China Brilliance, the Chinese car group.

Other industry observers remain more sceptical about MG's future.

Mr Howe was called back to run MG Rover immediately *** was out of the door, early in 2000. Apart from a few months at Rolls-Royce, the aerospace engines group, Mr Howe had been with Rover since 1988, starting as a systems manager and eventually becoming managing director of small and medium cars.

A burly, hard-edged man, who is regarded more with wary respect than with unswerving loyalty by MG Rover's 6,500 workforce, Mr Howe says he has become used to the media's treating the group as a whipping-boy for all the UK's industrial ills.

Does he resent that, particularly now that MG Rover is at such a pivotal point in its resurrection? "Resentment is not quite right. But if what you say you're going to do actually occurs, and yet you remain the constant whipping-boy, you do think: 'why the hell do I bother?'"

What concerns Mr Howe most is the impact on employees, suppliers and customers. "They don't have the personal experience of how much of it is wrong, so they can't take the cynical view. Put yourself in an employee's place. They read one thing and they don't think they have a job. Then something else and they think it's OK. Then their wife reads something else on a Sunday morning and they think they're going to be out of work again."

No less irritating, Mr Howe says, is that the speculation over the company's future obscures the merits of the cars. "And yet the Rover 75 is the best in its sector."

As with many others at MG Rover, his anger lingers that the car on which so much of the company's future was staked should have had such a troublesome birth. Within hours of the 75's debut at the 1998 Birmingham motor show, Bernd Pischetsrieder, then ***'s chairman, was warning that Rover might not have a future because of poor productivity and adverse exchange rates.

Mr Pischetsrieder later admitted that, at the time, *** was at a critical phase of negotiations with Rover unions. "We needed a crisis, so we manufactured one," Mr Pischetsrieder told the FT.

Mr Howe recalls: "Nobody criticised the car; the reviews were excellent

Now, he maintains, "the Rover 75 is definitely back on people's choice lists and on fleet choice lists. All over the world the confidence factor (in the products) is returning. But they also want to know that the franchise they are dealing with and the future of the business (are) secure."

Mr Howe agrees that in the early stages of MG Rover's independence, the board saw the way forward as strategic collaboration with one of the car industry majors. As it turned out, none of the big groups was interested, at least on any terms MG Rover might have felt acceptable.

Instead, MG Rover has turned to China Brilliance. The alliance, insists Mr Howe, will give both partners the economies of scale and broad spread of products that will allow them to become viable long-term carmakers. "But there are lots of other projects going on which we can't talk about, and which are going to be further surprises over the next 12 months," he adds.

MG Rover's relatively small size also has its advantages, he insists, such as the ability to make rapid decisions. Most are taken by Mr Howe and a handful of top managers, avoiding committees or lengthy customer clinics. With every function, including sales and marketing and research and development, now moved to the company's Longbridge site, not a few key decisions have been made on the hoof - in some cases while standing in the central car park.

"But we are not being parsimoniously different. We are not camped out with the roof leaking. We spend good money; we have a visitor centre that anybody would be proud of. We are ripping the place apart at the moment to put in further investment," Mr Howe says. "What we are saying, which is very much in contrast to last year, is that there is no reason why as a corporate entity MG Rover should not enjoy ongoing independence."

Mr Howe shuns comparisons between MG Rover now and ***, which in the 1960s had a dire image as a maker mainly of bubble cars and was hovering close to bankruptcy. Nor does he envisage at some stage floating a resurgent MG Rover. "If you tried today to run this business publicly, to comply with the financial markets short-term, it wouldn't work. We have the freedom to make decisions on the basis of what we believe to be the long-term interest of the business - and to hell with the short-term optimum."

If Prof Rhys's predictions are borne out, Mr Howe says, he will be unconcerned about getting credit for saving what is now - even after MG Rover's shrinkage - by far the biggest remaining UK-owned carmaker.

"It doesn't bother me too much. But what does bother me is that as a nation we don't care about manufacturing itself much," Mr Howe says. "But we should care. There is a lot to care about. We can't one day wind up just giving each other financial advice. We have to make things and export them; that's the fundamental foundation of a successful economy. We certainly know that in the Midlands; it's a lot of what the Midlands is still all about."
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