Tata Motors to pursue Rover guarantee

Tata Motors wants to pursue the guarantees that bankrupt British carmaker MG Rover's owners Phoenix Venture Holdings had given it for supplying Indica cars for the UK market.

After failing to strike a deal with China's Shanghai Automotive Industry Corporation, MG Rover recently filed for bankruptcy.

Consulting firm PriceWaterhouseCoopers was appointed to oversee the company's future after shutters were downed at the car company's factory at Longbridge in Birmingham, rendering a large number of people jobless.

India's largest bus and truck maker has also terminated the car export agreement with the British automobile company. At times, however, such agreements are valid even if a company is sold.

The Tata group, for example, is honouring agreements that the bankrupt Daewoo Motors had struck before the group took over the Korean company. An informed source said the agreement with Phoenix Venture Holdings contained guarantees that Tata Motors was now seeking to pursue.

It has been learnt that the value of the claims that Tata Motors has raised amount to less than £10 million (over Rs 82 crore), a figure that had been reported in the media.

However, the source declined to reveal the exact quantum of dues/damages the company is seeking or details of the guarantees provided by Phoenix Venture Holdings.

Tata Motors, the source added, has notified PriceWaterhouseCoopers that the agreement with MG Rover now stands terminated.

The source clarified: "It is important to clarify Tata Motors has not filed any claims on MG Rover. Tata Motors has notified PWC that the agreement with MG Rover is now terminated. The agreement with Phoenix Venture Holdings contains guarantees, which Tata Motors is now pursuing."

A Tata group spokesperson told Business Standard on Tuesday that Tata Motors did not want to comment on the matter.

Tata Motors had entered into an arrangement with MG Rover in 2002 to export 100,000 Indica cars over a five-year period. The Indicas were supposed to hit European roads under the City Rover brand name.

Tata Motors also had a distribution tie up with MG Rover -- the UK company was supposed to sell the Tata Safari and other vehicles in the UK.

According to the source, so far approximately 10,000 Indicas have been exported to MG Rover.

"The closure of MG Rover involves a loss of revenues for Tata Motors as it expected substantial revenues to come through this alliance. Tata Motors has also invested money in product development," the source explained.

MG Rover, a former British icon dating back to 1905, was sold to Germany's BMW AG in the 1990s before returning to British hands when it was sold to Phoenix Venture Holdings four years ago.

The company, which turned out 40 per cent of the cars bought in Britain in the 1960s, has not produced a new model since 1998 and accounted for only 3 per cent of the British car market when it went into bankruptcy.