Recent press reports have (yet again) been generated about the re-buoy of the MG marque here in the UK, the most recent a day or so ago, regards the launch of production for the new MG6 fastback & saloon in Longbridge. It appears welcome news, but the pertinent question which must be asked is “to what degree is the report simply another premature good news story?”
Nanjing Automotive's acquisition of the MG name and assets in July 2005 struck a partial death-knell for the British motor industry. It went the same way as Rover Cars had done to Chinese counterpart SAIC (Shanghai Automotive Industry Corporation), which itself latterly absorbed state owned Nanjing in late 2007 and thus MG as part of a plan to re-unify what were common platforms as part of its search for scale and efficiencies.
[ NB. SAIC spans the vehicle sector value-chain both vertically and horizontally, from parts manufacturer to whole vehicle to distribution and retail, and similarly for trucks, buses and motorcycles, aswell as operating well known JVs with the likes of GM, VW, Bosch, Visteon and others, selling 2.72m units in 2009, and 3.58m units in 2010].
Such broad-based re-structuring of what had been British assets undertaken from China unsurprisingly to British eyes took time, given that SAIC's primary focus has been on its fast growing domestic market, and so the development of its pseudo-British Roewe brand as a near phonetically pronounced version of Rover to Chinese ears and eyes.
But during much of the intervening period the old industrial heartland of the Longbridge site and factory in Birmingham was dormant, unsure whether it was ripe for brownfield re-development as a residential area, whether to be re-dedicated as an eco-van production centre by a SAIC affiliated company, or indeed to be of mixed use: industrial, commercial and residential.
Interestingly and tellingly about its UK focus, SAIC's UK based holding company reports to the SAIC Motor Technical Centre in Shanghai, and its main remit thus far has been to create and manage its UK Technical Centre, which itself was a next-step strategic action from its Sino-UK development team between SAIC & Ricardo Engineering during the original 2005 asset 'lift & shift' to China and developing initial domestic models.
Many promises by Nanjing and then SAIC had been made over the intervening years about a re-emergence of full MG production, specifically of the TF sportscars which was reported as re-launched with Longbridge production in 2008, but actual production numbers have been minimal, the FT reporting approximately only 1000 sold to date, whilst the Autocar website forum highlighted in 2009 that in its best month it sold 65 units.
The forum highlights what many car enthusiasts believe: that with its lack of on-street visibility the new car was/is conspicuous by its absence, with a good portion of those apparently sold appearing on the used car market within one year of purchase at two-thirds the new sticker price. MG-Rover enthusiast forums have been abuzz with periodic promised developments, but yet to see true substance.
Thus the recent press release by MG UK is welcome, but will be taken with a pinch of salt by industry observers and enthusiasts.
The production of MG6 will reportedly consist of the import of Chinese fabricated body-shells and 400 line-side fitters will dress the body with components. But the released press photos viewed via the enthusiasts website mg-rover.org show little more than a few 'completed' MG6s and a picture of a team-signed car completed car. The photos of the Longbridge production area looks highly unconvincing, since there is little evidence of production 'ramp-up', all the accoutrements of 'ramp-up' production-line are absent.
There are none of the usual multi-coloured, multi-sized component bins that sit track-side from which fitters collect and fit individual parts. There is little evidence of facility and production line layout which accords different stage 'fitting stations' for various assembly phases, seen typically by bin clusters and over-head signage. And there are no line-side break-out areas of table and bench on which workers take a short (typically 15 minute) break.
Furthermore, whilst local assembly/'dress' of imported bodies would would befit the business model of a CKD operation, the body itself would typically arrive as a BIW (body in white), that is to say a fabricated shell that has been only first-primed, ie without its finished colour, since the long-distance shipment of colour-finished bodies is notoriously hazardous given the 'prang and dent' conditions of sea-shipping. Thus it would be the norm to ship an unpainted BIW, have any digs/dents re-worked at the assembly site and have the whole body painted at the same site that 'dress' takes place. Shipping painted bodies whilst unusual could be done, but raises the probability for a far harder re-working of paint-surfaces once the body has arrived.
Another oddity is to see that the painted body as pictured sits floor level on its own wheels. This again is an oddity since ordinarily the body as seen without windows or interior would sit in a travel-frame (ironically pictured behind) to give fitters easier access to the car, including wheel-hub assembly and steering geometry pre-setting before the wheels are attached. Thus the picture does not befit the operational line-side reality, and so looks to all intense purposed 'staged'.
Of course, the cars could be shipped from China on its wheels with all mechanical and geometries set, requiring only exterior and interior trim fitment, glass insertion and end of assembly quality checking / PDI. But if that were the case why are the travel-frames still pictured? They may be intended for greater latter-day volumes, but even that would then sit in direct contrast to the seeming build-model, and other factory items would also be present.
In short, the photos from the press release look unconvincing, and as such MG6 is in danger of simply being a short-lived production run as seen by the MGTF example. Of course SAIC will be trying to get the cost element of the MG6 business model right, especially after the lack-lustre experience of TF. Indeed the reality may be that it sees new MG6 as little more than a small-step in creating a beach-head in the UK and Europe and so may well be pointedly simply stage-managing the process of appearing to be in market via the Longbridge site and its apparent 40 dealer network, many of which are stalwart MG-Rover dealers from yesteryear.
Of course getting the timing right for a fully fledged focus on the UK is critical, especially during this struggling economic period which could be variously argued as either opportunistic or problematic. But stage managing public and government perceptions has done little for SAIC's UK reputation thus far, and so could do more harm than good if there is indeed little substance to the PR blurb, as seems the case here.
The essential problem for SAIC's management of MG is that it wants to present itself as a re-born classic marque, a badge that sits perceptually mid-way between say the heritage of Morgan and technological slant of McLaren.
And indeed if MG UK were truly small scale and independent in ownership, or were of a skunk-works nature within SAIC (as MGF project was at Rover Group) it very probably could develop a successful typical niche car business model. Given the wealth of MG & MGF heritage it would have to resuscitate the previously resuscitated marque with true product and dealer focus, with latterly a bigger brother to MGTF which mimics an updated MG RV8 (not MG SV) so as to offer through 2 base cars with price-related variants, British counterparts to the European and Japanese 'personal' vehicles spanning Renault Wind to Porsche Cayman. That now all the harder to achieve with the abandoned production of MGTF.
But the SAIC parental pressure is to seize eventual scale and mass market penetration by offering MG badge 4-door 'family' cars, thus mimicking via an operational short-cut what is witnessed Rover Group to do in the late 1990s. The import difference being that Rover Group was arguably forced to do so (as it had previously with MG Maestro/Montego) due to group financial pressures, something SAIC does not face, instead export market ambition being its aim.
So the British management team have been stuck between 'a rock and a hard place', seemingly unable to access the China-focused resources (ie funds) to properly develop MG as a distinct sportscar company into the 21st century – so important for its once again lost credibility - instead pushed to create what is essentially a brand-led marketing platform for what will ultimately be mass-volume vehicles, which may or may not deliver MG brand and product values.
SAIC no doubt wants a 'British BMW' or 'UK Audi', but its (culturally-based) sensitivities about the timescale and methods for getting there are arguably unknowingly absent, thus investment-auto-motives suspects that since SAIC's takeover of MG Longbridge it has been a case of the 'fast-forward' Chinese pushiness that has served China so well at home ultimately clashing with the British team's cultural sensitivity to the brand and deep pyscho-dynamics of the UK car marketplace, these issues exacerbated by over-ambitious Chinese created business models and Chinese led cost controls that are possibly incompatible.
Yet it must also be remembered that for the Chinese foreign-shore ventures are very alien, and as such, by Chinese standards the social and business differences are huge, not only between the 'simplicity' and 'sophistication' of Chinese and European business approaches, but the innate difference between the consumer ferociousness for newness in a rapidly growing China, versus a far greater history of consumer experience in the economically stagnant Europe.
Thus the potential for differences in outlook and approach both strategically and operationally have been immense between MG UK and SAIC, and beyond the macro-picture complexities, may be a micro-part for MG's stilted and slow re-growth in the UK.
However, beyond the cultural issues, it must be noted that SAIC has focused its main efforts on the UK R&D function, creating its SAIC/MG UK based “Global Design Centre” as a twin to its main Shanghai R&D office. It role has been to assist SAIC develop spin-off variants from the Roewe 750 platform and devise an additional 4 correlated (AP12) platforms, with a parallel role of re-engineering previously Chinese market dedicated vehicles for greater UK/European acceptance – the stiffening of the MG6's suspension settings an example - but also spanning cosmetics and emissions issues.
As CarMagazine highlights the MG6 is a watershed car for not just SAIC but China per se given its role as its first proper step for export ambitions. It is a mileu of old and new, with use of the Rover 75's front sub-frame, a re-engineered 1.8L K-series engine and use of items like the old fuse-box, but of course much else, especially cosmetically, is necessarily new. The magazine's review liked the car in general but bemused its poor quality materials and fit & finish, something which MG Uk says will be bettered before launch, but realistically cannot be given the level of costly and time sapping re-engineering that would have to take place.
As a presentation tactic offering the launch car as a 1.8L Turbo makes sense, it evokes MG's sport spirit more than an atmospherically charged engine or diesel, and no doubt SAIC management see themselves as offering a European 'pony car' with 'muscle-car' intonations in a British wrapper. The overall product plan appears to be: 2011: 1.8T Hatchback (Fastback) and Saloon / 2012: 1.9D / 2013 1.9T, 2.5D, 2.5T / 2014 Facelift, Estate, 1.5D / 2015 1.5T, 2.5. And the 2011 pricing for MG6 is – S variant at £15,495, SE variant at £16,995, TSE variant at £18,995. (The MGTF still available with basic 135 car at £14,213, and stylepack variant at £14,800.
MG said the car would aim to compete with rivals’ similarly sized models such as the Skoda Octavia and Ford Mondeo and Focus. As such it replicates the pricing model that Rover-MG used at the turn of the 21st century, essentially pitched between different segments.
However, whilst the new MG6 appears to tick all the specification boxes MG UK will have a hard time convincing the British public of the new 80% Chinese made vehicle offering, since for all its notional positives it has none of the basic charm of a true 2 door convertible or hardtop that befits the badge, nor is it even truly British made with evocations of MG craftsmanship, nor will it ultimately be of limited production series and so perceptually raised by its rarity in true niche car manner.
On the surface and on paper the SAIC business model of 'selling coals to Newcastle' with MG back to the British looks enticing: a massively re-structured cost-base using far cheaper Chinese sourced parts assembled by a cost-constrained UK labour force with a nominally legendary brand in a price competitive new era marketplace via 40 or so dealers. But as former Rover Group executives well recognised when MG and Rover was sold to the Chinese, both brands had lost their way by the late 1990s given the competence of German and Japanese competition in both dedicated sportscar and sporting saloon spheres, the natural 'affordable' and competent newcomer to this arena now seen with Hyundai's newest sub-brand 'Genesis'.
MG6 and its expected later smaller sibling MG3, and a reported MG5 (possibly the saloon MG6) will attract attention, but the question is who exactly will buy the cars when past MG enthusiasts will be dismayed by what are effectively badge-engineered cars whilst general new car buyers wanting a desirable will be drawn to the usual suspects. That leaves those who like the idea of the MG badge - wanting something different to the norm yet also affordable – but also critically typically meaning a 'provincial demographic' with shorter purse-strings.
Very similar to the buyers of other (diminished) fringe brands: ie Pontiac, Mercury, Oldsmobile etc, where the latter-day offerings were taken up by lower salaried females and price-keen older people grey market keen for apparent style at typically heavily discounted prices.
This was the arena in which MG and Rover played before their UK demise, and whilst perhaps a natural start-point for a Chinese owned company, having to grow from scratch, since it can afford to buy market share by swallowing such discounts given its nominally greater unit margins. But it could ultimately be a self-limiting opportunity for growth if the “wrong sort” are seen to be the typical new MG driver, and possibly the brand tainted forever; as was the case in the US.
This is why is was so so important to reclaim its origins, as MGF did in a contemporary manner in 1995. It is also the reason why investment-auto-motives believes that as an independent voice, SAIC would best serve itself by providing proper funds and culturally sensitive oversight to properly develop a parallel new sportscar line using UK design and engineering know-how, adding much needed character and gravitas and which acts as the brand's sporting and commercial hub.
In the critical role of 'Trade Ambassador' during this present era, Prince Andrew presented the 'Chinese Investor of the Year' Award 2010 to SAIC's Head of Strategic Planning, Mr Cheng Jinglei, for the Sino investment made thus far in Birmingham, thus adding to its trophy cabinet given the 2008 KPMG award for Chinese Inward Investment presented by Lord Digby Jones, ex-Trade Minister.
Critics might lambast such 'prescribed' awards but the truth is that such 'cultural oiling' is pertinent and necessary given the unavoidable, inadvertent cultural business frictions that exist at the operational level between China and British ways.
Yes, the £5m directed, as an addition to the the previous £40m FDI, may be a drop in the ocean compared to the massive Capex levels of the global auto-industry, but we must remember that China is still feeling its way through foreign markets and will rightly not be rushed. And equally it must know that FDI recipients at both government and enterprise levels will not allow themselves to be taken advantage of in the face of the massive “Sino-promise”.
But equally, FDI intent and reality cannot be stage managed, as seems the case relative to MG6 and Longbridge given the absence of critical factory equipment in the press photos.
[NB investment-auto-motives would be glad to be proven wholly wrong in this supposition].
Baby-steps then are in order in such UK-Chinese relations, and they may seem almost imperceptible given the size & scale of historic auto-activities at Longbridge.
But at a time when so many historic auto-brands have been lost, and today even SAAB* teetering on a cliff-edge, at least MG – though perhaps diminished in its character – still exists thanks to Sino funds, and efforts to maintain good international relations.
Cecil Kimber – MG's founder – built his first proper MG (called 'Old No. 1') dedicated to endurance and performance. It is an ideology that would be well remembered by MG's Chinese owners and British management developing the company into the future.
As 'Kim' knew proof of concept is everything to last the distance, a new unfudged, clearly directed and well-supported MG business model fundamental to do so.
Ultimately, investment-auto-motives believes, it may be the SAIC to publicly list MG on both Shanghai and London exchanges, maintaining a majority holding itself but also prompting institutionals and private buyers to buy a portion of what it hopes will be its European and Chinese success story.
In the football world many have bought their small but emotionally valuable parts of Old Trafford, Highbury, White Hart Lane etc, with Williams F1 doing likewise recently for both motorsport fans and investors seeking eco-tech exposure.
For SAIC, gaining a global profile for MG which is able to combines the 'counterbalances' of both brand-enthusiast and professional investor to separately buoy stock-price and enterprise value may well be the ultimate strategic goal.
To that end many in the West Midlands, the City and the Palace of Westminster, will chant "Long Live Longbridge".
