Taskforce to ease plight of dealers with 'dumped' Rover cars

Fresh efforts will be made in the UK this week to ease the plight of MG Rover's dealer network amid claims that thousands of unwanted cars were "dumped" on retailers as the car manufacturer headed into crisis.

A meeting of the MG Rover taskforce dealer committee on Friday will look at ways of providing financial support for the sales network, which is facing losses of £25m. The chairman of the committee, Sir Digby Jones, has warned of a "second Longbridge" unless the crisis is tackled.

Sir Digby said yesterday that he was hopeful of a deal with Customs & Excise to defer VAT payments and allow dealers to claim VAT bad debt relief on unpaid warranty work.

It has now emerged that dealers are having to pay interest on cars they never ordered from MG Rover.

Alan Pulham, the head of the National Franchise Dealers Association, estimated 150 to 200 dealers had been affected in this way and that up to 4,000 cars were involved. The cars were allocated to dealers by MG Rover through Capital Bank, a part of HBOS.

Capital Bank then paid for the cars, helping boost MG Rover's cash flows, but charged dealers interest on the unwanted cars until they were sold. Sir Digby said he would appeal to HBOS's "reputation in the business community" to help ease the financial burden.

Meanwhile, Iran's largest car maker, Iran Khodro, ruled out buying production lines at Longbridge from the administrators, PriceWaterhouseCoopers.

- INDEPENDENT