LONDON: Some 5000 former workers of British car company MG Rover that went bust will benefit from a 14-million-pound payout ordered by an employment tribunal in Birmingham. The workers had demanded eight-weeks worth of pay in lieu of redundancy notice, which they were legally entitled to.
Their case was fought by Transport and General Union (T&G) before the tribunal. T&G said the verdict proves that workers must become priority creditors and administrators should consult with unions before laying anyone off.
The payment has to be made by the government.
Meanwhile, the government's decision to put in cash in the collapsing company just before the last general election has created a controversy. It is now revealed that the payment of 6.5 million pounds was made by the department of trade and industry after a warning from administrator PricewaterhouseCoopers that it was "highly unlikely" the company would be sold as a going concern. The funds were made available in a bid to keep the company's 6,000 workers on for another week in the hope that a sale deal could be worked out.
Tony Lomas, one of the administrators, told the Financial Times newspaper that he was very skeptical that a deal could be struck with the Shanghai Automotive Industry Corporation (SAIC), and he refused to risk any more of the company's cash.
The government's action is being probed by the National Audit Office.
Lomas told the newspaper that the department of trade and industry refused to rule out a deal with SAIC when it handed over the cash.
When the company collapsed, it had 17.2 million in cash. PwC, as it took over as administrator, told the unions and the government that it would have to make most of Rover's workers redundant straight away as there was no likelihood of SAIC coming in to buy the company. The department then paid the amount to stave off redundancies for a week in the hope that the talks would be revived. Technically, it was a loan, which was expected to be repaid once the sale is through. SAIC ultimately did not get MG Rover, its rival Nanjing did.
Posted
on : Sat, 08 Oct 2005 08:35 GMT | Business News
By : Rob Davis
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