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LONDON (Reuters) - The collapse of MG Rover could cost the private sector and former employees more than 600 million pounds mainly due to a deficit in the company's pension fund, an official report said on Tuesday.

Parliament's Public Accounts Committee said the figure included an estimated deficit in the firm's pension scheme of 500 million pounds which may have to be met by the business-financed Pension Protection Fund.

More than 100 million pounds are also owed to UK-based trade creditors.

In analysing the breakdown of the company, the committee said the Department of Trade and Industry (DTI) had lacked a comprehensive plan on how to deal with the situation.

The decline of the company from 2000 and its collapse in April 2005 also cost the taxpayer some 270 million pounds, the report said.

MG Rover went into administration in April last year, a month before the general election, with the loss of 6,000 jobs.

It had been in talks with the Chinese auto group Shanghai Automotive Industry Corp (SAIC) over a possible tie up and in the week before it collapsed, the DTI provided a loan of 6.5 million pounds of public money in the hope a deal could be done.

At the time, the loan triggered accusations that it was politically motivated as MG Rover's West Midlands Longbridge plant was located close to three constituencies in which Prime Minister Tony Blair's Labour Party had only slim majorities.

PLANNING GAPS

The report said the DTI had been in a very difficult situation.

"In some respects it rose to the occasion -- for instance by arranging immediate support for former MG Rover employees," the committee's chairman, Edward Leigh, said. "But serious gaps in its planning were exposed.

"The truth is that it had never managed to get close enough to the company to develop comprehensive plans for this kind of scenario and found itself trying to catch up with a rapid developing situation."

In reaching its decision to provide a loan to MG Rover the DTI had to balance the risk that some, or all, of it might not be repaid against the chance that jobs could be saved.

Some 5.2 million pounds of the loan would probably have to be written off, the report said.

A DTI spokesman said the company had been reluctant to share detailed business plans or accept offers of help.

"We made timely, effective contingency plans for the company's collapse," he said. "Implementing that plan has helped over 4,400 former employees back into work and helped save over 2,500 jobs in the supply chain."

The report, which also praised the work of agencies for helping the local economy diversify and become less dependent on the carmaker, said some 2,000 former MG Rover and supply chain employees still have to find work.

Nanjing Automobile, the Chinese company that bought Rover last year, has said it hopes to restart production at Longbridge, making 15,000 cars a year, or just over 10 percent of pre-collapse output.

Source
reuters.co.uk

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