The Fall of MG Rover
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Case Details:
Case Code : BSTR166
Case Length : 16 Pages
Period : 1975-2005
Organization : MG Rover
Pub Date : 2005
Teaching Note :Not Available
Countries : UK
Industry : Auto and Ancillaries
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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Three Decades of Trouble
MG Rover had been facing problems since the 1970s and,
according to industry analysts, the company's collapse was inevitable. The
non-materialization of the deal with SAIC struck the final blow to the already
troubled automaker. In the 1970s, the BLMC had been caught in a financial mess
and faced severe labour problems. The British Government had to step in and
rescue it. In 1994, BMW played the savior by taking over Rover as it posted
heavy losses under the British Aerospace management...
The 1970s - Nationalization
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Both LMC and BMH had flourished separately till the mid-1960s. During that
period, these car manufacturers together employed 250,000 workers and Longbridge
was one of the biggest car factories in the world. With highly successful
automobile brands like Triumph, Austin, Land Rover and Morris, the duo produced
nearly 40 per cent of the cars sold in the UK.
However, problems began to surface after the merger of LMC and BMH into BLMC in
1968. BLMC began to face problems due to competition among its own models. This
resulted in a product range that was full of duplication...
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The 1980s - Privatization
After nationalization, BLMC was known as British Leyland and from 1978 onwards,
BL. Though nationalization rescued BL from total collapse, the financial
position of the company did not show any major improvement.
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BL failed to produce new and improved models and the internal competition
between its models continued.
For instance, 'The Mini' sold in millions of units but never made much money
for BL because of its high production costs. Similarly, models such as
'Triumph' and 'Rover' competed directly with each other. Moreover,
consumers' preferences were rapidly changing as they bought new foreign cars
produced by manufacturers in France, Germany, Japan and South Korea... |
Domestic sales were fast declining and BL could not sell its models abroad either. The company continued to rely heavily on the government for financial support; between 1975 and 1984, a total of £3.5 billion was injected into the company to keep it afloat.
The workers were unhappy under the Government's management and BL often faced industrial disputes. Due to industrial action, which severely hampered business in 1977, the company manufactured 250,000 cars less than its full production capacity.
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