Enron Scandal Essay

1475 words - 6 pages

Phoenix or vulture
after acquiring the rover group from british aerospace in 1994, german automaker bmw set about carving up the assets of the group :the land rover division was sold to ford motor company in the united states, and the reborn mini business was established as a subsidiary of bmw based in the uk. the remaining assets were sold as mg rover in 2000 after continued losses and declining market share. having recouped some of its purchase price with the land rover sale to ford for 1.8 billion, and with an expected contribution of positive revenue from the mini subsidiary,the assets of mg rover were sold for a nominal $20 in may 2000 to a group of businessmen led by ex-rover chief ...view middle of the document...

in april 2005,mg rover confirmed that it had received a 6.5 million 'stop gap' loan from the british government, but the funds proved insufficient to maintain the company as a viable operation,and it ceased trading on may 20,2005, with debts of 1.3 billion and a further 6000 jobs lost.

the closure of mg rover marked the end of british mass production of automobiles,but the story of mg rover was about to take a dramatic turn. with suspicions of poor financial management at the company ,the british government commisioned a report by the national audit office (nao) into the collapse of the company. that report,issued in march 2006,revealed that the seniour executives of the 'phoenix consortium ' (soon to be referred to as the 'phoenix four', had,along with chief executive kevin howe, received total compensation in the amount of 42 million over the 5 years in which the group operated mg rover. while the compensation (around 80 million) may be small by american bailout standards, the phoenix consortium had been welcomed as saviours of mg rover and had negotiated aggressive cost cuts based on its popularity and its commitment to rescuing britain's last volume carmaker.

the nao report prompted an investigation by the serious fraud office (sfo) over misuse of taxpayer funds (for the 6.5 million loan from the government). the investigation took four years to complete and cost the british taxpayers another 16 million on top of the 6.5 million loan that was now worthless. the sfo report concluded that the phoenix four had done a much better job of structuring their compensation and pension plans than they had of running the company,but found insufficient grounds for criminal prosecution.the phoenix four maintained their innocence throughout the investigation and condemmed the sfo report as 'a witch hunt against us and a whitewash for the government.

Questions

1)why would bmw sell millions of pounds of assets for 10 and lend the buyer an additional 427 million?
2)why would saic want to buy 70 percent of a company that was losing money for 1 billion?
3)with compensation packages already locked in,do you think the executives were committed to making the saic's or tata motor's deals work?
4)if mg rover had been successful in winning a 120 million loan from the government rather than a 6.5 million loan, would the outcome of the sfo investigation have been any different?
5)the phoenix four maintain they did nothing wrong. how would you defend their conduct from a business athics perspective?
6)what do you think the outcome should have been for the phoenix four?

selepas memperolehi kumpulan rover dari aero angkasa British pada tahun 1994, jerman pembuat bmw menetapkan tentang ukiran aset kumpulan: rover bahagian tanah yang telah dijual kepada syarikat motor ford di negeri-negeri yang bersatu padu, dan perniagaan mini dilahirkan semula telah ditubuhkan sebagai anak syarikat...

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