THE Phoenix Four — John Towers and three friends — were hailed as saviours when they took control of the renamed MG Rover in May 2000.

Five years later those same “white knights” were being vilified as the “unacceptable face of capitalism” by BMW’s most senior executive in Britain, Jim O’Donnell. BMW had sold Phoenix the company for £10. What happened?

The answer appears to be simple. Phoenix had £1 billion of someone else’s money; it would lose £200m a year but it could not sell the company for three years because of various payback clauses. The strategy was, therefore, to survive for three years and then race against time, in the two remaining years, to offload the business.

When that final race began, China was a natural destination. It needed to develop its motor industry. It needed intellectual property and brands. Phoenix had both and needed a partner quickly.

The first port of call was Brilliance China, chaired by Yang Rong, one of the most ambitious of China’s would-be motor moguls. Phoenix managed to extract about £20m from Brilliance but Yang soon fell out with the powers that be and was forced to go on the run. Goodbye Brilliance.

Throughout 2003 Rover’s Nick Stephenson, another of the four along with Peter Beale and John Edwards, toured China’s other main carmakers ending up, early in 2004, with Shanghai Automotive Industry Corporation (SAIC). The Chinese group had the right resources. It was a genuine mass producer, churning out more than 750,000 vehicles a year.

SAIC knew Rover wasn’t the world’s greatest marque, but it had two models with potential, the 25 and the 75. SAIC saw the 25, despite its age, as a suitable model for low-cost manufacture in China and export to southeast Asia. The 75 was even more attractive; it was fairly new, and the only Rover to have been designed by BMW. It therefore presented a unique opportunity to secure intellectual property rights derived from the BMW gene pool.

There was also the Powertrain engine and gearbox plant, which despite its longevity represented serious technology for SAIC. Finally, there was distribution. Phoenix’s European distribution network offered SAIC access to western markets.

From the outset, SAIC never had any intention of buying all of MG Rover, nor of taking control of Longbridge with all its liabilities. It only ever envisaged a technology-acquisition deal — the 25, 75 and Powertrain — and joint ventures whereby the two companies would develop replacements for the 45 and the 25.

Under the acquisition plan, the 25 production line and the engine lines would be shipped to Shanghai. After that, no more 25s and K-series family engines would be made at Longbridge. Versions of the 75 would be made in Birmingham and Shanghai, meaning 2,500 job losses from Longbridge’s 6,000-strong workforce.

In 2004 SAIC sent a team of almost 50 people to Britain for discussions and to carry out due diligence. It did not take them long to see Rover urgently needed money. In August, Phoenix and SAIC signed what was intended to be an interim deal. SAIC agreed to pay Rover £67m in two tranches, £37m up front and another £30m in December. In return, SAIC gained intellectual-property rights to the 25, 75 and the engine range.

SAIC soon found problems. For example, the money Rover was supposed to be using to contribute to development costs was actually going to staunch its spiralling cash outflows. So desperately did Rover need the cash that, well before December, it was asking the Chinese to make the second payment. For over a year, MG Rover had been offloading assets in order to generate cash. As Tony Lomas, one of the PWC administrators, later put it, “[this was a business] running to stand still”.

Nevertheless, the Chinese kept talking.

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