Bitterness as Rover rescue left to the locals

W ell, fancy that. Despite all the alarmist nonsense about the burning of taxpayers money and allegedly un-buckable economic realities, a deal has finally been done. Britain's car manufacturing industry will not now go to the wall at the end of the month. Not all of it, in any case.

Yet there was a hint of bitterness within the Phoenix camp yesterday. Former Rover chief executive John Towers has been given the chance to rescue the firm he used to run, but the man en couraging everyone to fly up out of the ashes clearly landed his deal in spite of the efforts of the government and with precious little help from the City of London.

This was a local rescue -- Midlands dealers, Midlands based managers, even a Midlands-based investment bank, Albert E Sharpe.

And as everyone was busy pointing out yesterday, this local, under-capitalised solution looks flimsy in the globalised world of car manufacturing, marketing and sales. Everyone other than those who were going to lose their jobs, that is.

Phoenix insiders say that, at times, the Labour government seemed to be actively working against this local proposal.

The allegations of political meddling and the complete inability to think laterally are not just being levelled at the Department of Trade and Industry and the beleaguered Stephen Byers. As for Britain's high street banks, they might want to be big, but they clearly don't want to have hefty exposure to the country's industrial heartlands.

The challenge for Mr Towers now is to leverage the goodwill of the Longbridge workforce and cut losses. He needs to stabilise market share, build credibility and then get on and forge an alliance with one of the industry majors.

Phoenix needs a partner that can help build the next generation of cars. In this, the new company stands a better chance than BMW, since the suspicion is that anyone the German car firm spoke to on the subject in the past always wanted a piece of BMW in return.

Having burnt around £4bn over the past six years, BMW has got off the hook in a much cleaner manner than it might have hoped.

Big four targeted


Of course, Britain's largest clearing banks have got other things on their corporate minds just now - such as the fact that the big four (Lloyds TSB, Barclays, HSBC and NatWest) are now under fire from the former building societies, who want a real piece of the majors' fabulous current account business.

Instead of the war of words inflicted on them by Don Cruickshank, the treasury's banking competition tsar, the clearers now have to contend with Abbey National and Halifax taking matters into their own hands, making pledges and launching products with the aim of luring all those lazy customers which it was presumed were more likely to divorce than move their money.

Given Mr Cruickshank's point that the big four have a grip on 80% of the current account market, Abbey and Halifax even sound virtuous. Both claim to make it as easy as possible for customers to move accounts, as they promise to do all the boring transfers of direct debits and standing orders for any customer who wants to move accounts, precisely one of the areas which caused Cruickshank so much angst.

Halifax also argues that it is countering another criticism hurled at the big banks who make money at each customer's expense - by taking their deposits and paying lowish rates of interest and then lending it back to them at higher rates. Its new Intelligent Finance service, Halifax claims, allows customers to make choices about whether to allow that to happen. But all these rigorous commercial declarations are not yet showing through in the mortgage banks' share prices. The City seems nonplussed.

One of the reason for this might be that it is far from clear what impact Halifax's new If bank will have on its existing customer base. The same is true of Abbey, which in addition to its new internet venture is promising to unveil a new branded bank (called cahoot) in the coming weeks.

Another is that the clearing banks themselves are unlikely to take such threats lying down. Lloyds TSB, criticised for being too slow to take to the internet, will today outline further details of its plans, while Barclays was yesterday declared as the world's fifth largest internet bank in one e-survey.

And there is also the problem of hype, causing investors to sell just as the news arrives. This clearly happened to Halifax yesterday, with its stock taking a pummelling on the day of a sleek presentation. Perhaps the market was looking for something more exciting than the five-product "money management system" unveiled.